Pfizer expected to have staying power Impotence drug Viagra , strong slate of other remedies seen boosting worldwide revenue
MARIAN STINSON
03/12/99
The Globe and Mail
Metro
Page B12
Viagra , the love potion in the headlines this week after receiving Canadian regulatory approval, will help to boost worldwide revenue this year for U.S. pharmaceutical powerhouse Pfizer Inc.
But how much room is there for the stock price to continue its stellar performance, from its current price of $140.62 (U.S.), after trading in a range of $86 to $141 over the past 52 weeks?
Plenty, according to some analysts, because of a strong pipeline of new remedies soon to come on the market, even though revenue growth from Viagra will tail off soon.
Pfizer launched Viagra , the oral medication for erectile dysfunction, in the United States last April, and since then it has been approved in 50 countries. By year-end, worldwide sales reached $788-million -- $236-million in the final quarter alone.
Viagra is a less invasive treatment for impotence than the needles, pumps and other techniques used to stimulate blood flow in the penis. The remedy is expected to be on sale through Canadian pharmacies within three weeks, after passing labelling requirements. But some consumers have been buying it for months through U.S. stores and on the Internet. The pills cost $12 (Canadian) to $13 a tablet here plus dispensing fee.
In the United States, 200,000 physicians have written seven million prescriptions for more than three million men, making it one of the most successful drugs ever introduced there.
But sales quickly peaked and flattened in the United States to $130-million (U.S.) in the final quarter after satisfying the initial pent-up demand, said Neil Sweig, an analyst with Southeast Research Partners.
He forecasts worldwide sales this year reaching $1.2-billion, enjoying a surge as Viagra reaches new markets such as Japan, where it recently received approval.
"It's a $64,000 question what happens next," he added. But Pfizer's new products coming on the market over the coming months are likely to take up the slack as Viagra sales plateau.
Celebrex, a new anti-inflammatory drug developed by Monsanto Co. and marketed by Pfizer and G.D. Searle & Co., is expected to be another winner, Mr. Sweig predicted. The medication for osteoarthritis, rheumatoid arthritis and other types of pain is no more effective than other pain killers currently available, but has the huge advantage of being much safer, with lower chances of gastro-intestinal toxicity and bleeding. However, other companies will be bringing similar products to the market.
Mr. Sweig's earnings estimate for Pfizer is $2.50 a share this year, in line with the consensus, and $3.05 a share next year, slightly above consensus.
But the lofty valuation on Pfizer stock -- 55 times this year's earnings estimate -- means it trades at a greater premium than all other drug companies. As a result, he rates the stock a "hold."
Larry Smith, an analyst with Sutro and Co. in New York, said Pfizer's fundamentals are excellent, but its price-to-earnings ratio is very high. Despite its strong surge in price in the past year, it will outperform the market this year, he predicted. He estimates earnings this year of $2.52 a share and $3.15 in 2000.
He shares Mr. Sweig's view that Viagra sales will be flat in the United States compared with last year, but introductions in other countries will boost worldwide revenue for the drug to $1.1-billion this year.
But a strong pipeline of other products, including insulin in a form that is inhaled, keeps the stock on the buy list for many portfolio managers, Mr. Smith said. "The only issue is how much you pay."
The stellar performance of the stock over the long haul accounts for this favoured status. In the past year it has posted a total return of 62 per cent, compared with 23.2 per cent for the S&P 500. But in the past five years it has been a consistent star, posting an annual average compound return of 59.5 per cent, while the S&P climbed by 25 per cent.
During the fourth quarter, revenue shot up 26 per cent from a year earlier to $3.86-billion. Profit for the three months was $711-million or 56 cents a share, up 42 per cent from the previous year.
For the full year, profit was $2.6-billion or $2.08 a share, up from $2.07-billion or $1.65 a year ago. Revenue was $13.5-billion, compared with $11.1-billion.
Pfizer Canada, which has headquarters in Kirkland, Que., has about 1,000 employees, 130 of them in the manufacturing operations in Arnprior, Ont. Viagra pills initially will be imported to Canada from France but eventually will be made here.
Bottom Line
Although Viagra sales may not continue to grow by leaps and bounds over the long term, other new products could take up the slack. But the high price of the stock makes it an expensive purchase, even though earnings are expected to rise.
PFIZER INC.: VITAL STATISTICS
Head office: New York, NY Telephone: 212-573-2323 NYSE symbol: PFE, $(U.S.) Business: Research-based global health care company.
Share values
Trailing 12-month earnings per share $1.54
Trailing 12-month PE ratio 90.83
Annual dividend 24cents
Dividend yield 0.55%
52-week high $140.62
52-week low $85.87
Last close $140.62
Change from previous +$1
1-year total return 61.85%
59-month average annual return 61.67%
Top mutual fund holdings
% of total market value, as of Dec. 31,* as of Feb. 26
AIM GT Global Health Care Class 7.2
AIM Global Health Sciences 7.1
First Canadian Gbl Sci. & Tech 4.6
Green Line Health Sciences 4.8
Ethical North American Equity 4.8
2AIM American Premier 3.7
Standard Life U.S. Equity 3.4
AGF American Growth Class 3.4
Talvest Value Line US Equity 3.4
MD U.S. Equity 3.3
Source: Bloomberg Financial Services; Datastream: Globe Information Services |
