Here are the comments from individual investor magazine website. iionline.com.
There are 4 comments since November 18. I will post each separately.
WARNER-LAMBERT
BUSINESS: Pharmaceuticals maker
WHY WE LIKE IT: A new emphasis on drug development has delivered two blockbusters and will add to the company's steady slow-growth business.
FINANCIAL ANALYSIS: Nine-month revenue was up 25%, boosted by a doubling of sales of cholesterol drug Lipitor. Earnings grew 42%.
OUTLOOK FOR 1999: New antidepressant should help boost earnings 32%, to $1.92 a share.
It's not just the relief of Rolaids, which many investors surely craved this past summer, that has made their maker, Warner-Lambert, a Wall Street darling. Under the direction of chairman and CEO Melvin Goodes for the past 10 years, the maker of such well-known consumer products as Listerine, Chiclets, Trident, and Certs has been beefing up its pharmaceutical research division, and that has spelled p-r-o-f-i-t-s. Two new Warner-Lambert drugs—Lipitor for cholesterol reduction, and Rezulin for diabetes—are on a roll.
The entire pharmaceutical industry has been doing well, but Warner-Lambert, once a laggard, has been the fastest-growing U.S. drug firm. The company has been developing drugs since 1881, mostly over-the-counter cold remedies and personal-hygiene products. In 1970, with the acquisition of Parke, Davis & Co., it got more involved in prescription pharmaceuticals. Shuttling a drug though the Food and Drug Administration approval process can take as long as 12 years, but Warner-Lambert is finding the large payoff is worth it. Earnings have accelerated, from $740 million on $7 billion in sales in 1995 to $870 million on $8.2 billion in sales in 1997, but the biggest jump came in 1998. In the third quarter, earnings increased 46%, to $0.35 a share, beating expectations by a penny.
Much of the recent growth can be attributed to Warner-Lambert's stunning success with Lipitor, which was approved in December 1996. Before Pfizer's Viagra hit the market in April, Lipitor was considered the best new drug launch ever. Rezulin also has been a winner for Warner-Lambert, and should add about $740 million in sales in 1998. Other medications currently on the market are Neurontin, which is for epilepsy, and Accupril, which treats hypertension and was recently found to greatly reduce the reoccurrence of heart disease in patients who had bypass surgery. But Lipitor has been the blockbuster. According to CIBC Oppenheimer analyst Mara Goldstein, "This drug has taken its market by storm, leaping to a 42% share without one print ad to consumers." Thanks to Lipitor, Warner-Lambert was able to add $2 billion in revenue in 1998. In one year it effectively doubled the business of Warner-Lambert's pharmaceutical division, which now accounts for more than half of company revenue. "There's some concern that Lipitor could have been a flash in the pan," says Goldstein, "but Lipitor has a long way to go, and the company has good marketing skills."
Goodes says he wants the company to depend on Lipitor for no more than 20% of total revenue, which means producing another blockbuster drug is high among his priorities. One in the pipeline is Celexa, a Prozac-like antidepressant that is nearing launch, whose 1998 sales are projected at $50 million, but could reach $500 million in 2001, according to Goldstein.
Although the stock, at a recent $74, trades at high multiples—51 times 1998 estimates of $1.46 a share and 39 times 1999 estimates of $1.92—the valuation seems warranted given forecasted growth of 32% in 1999, reliable earnings from its well-known consumer products, and management's record of producing a high return on equity. Considering its projected growth rate, analyst David F. Saks at Gruntal & Co. thinks Warner-Lambert is the best value among large drug manufacturers. He thinks shares could rise 33%, to $98, in the next 12 months.
—Dave Lindorf |
