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Biotech / Medical : PFE (Pfizer) How high will it go? -- Ignore unavailable to you. Want to Upgrade?

To: BigKNY3 who wrote (7475)	4/21/1999 8:42:00 PM
From: BigKNY3	Read Replies (2) \| Respond to of 9523

SMARTMONEY.COM: Is There Life After Viagra ? By Stacey L. Bradford 04/21/1999 NEW YORK (Dow Jones)--What goes up, must come down. Even when you're talking about Viagra . Ever since April 15, when Pfizer (PFE) announced that sales of its blockbuster impotence drug were slowing, investors have been running from the stock in droves. It hasn't helped that another potential blockbuster - an arthritis treatment called Celebrex - has been associated with 10 deaths. And the general market shift toward cyclical stocks such as Caterpillar (CAT) has caused weakness in all drug stocks. But the Viagra news is what really spooked investors. And even with a small rebound over the past two days to 123 3/8, Pfizer shares are still 17% off their 52-week high of 150 1/8 logged on April 12. If you ask us, it has all the signs of a classic market overreaction. Let's review the evidence. First and foremost, Viagra is not as important to the company's overall health as you might think. Yes, the drug receives a lot of hype and that buoys the stock price. And, yes, it has had remarkable growth. But it's not Pfizer's most important product. In fact, Viagra contributed only $193 million, or 5.3%, of Pfizer's total $3.6 billion in first-quarter revenue. The great bulk of the company's sales come from drugs with far less name recognition. "The company is incredibly strong, excluding Viagra ," says James Keeney of ABN AMRO. Consider Norvasc. Sales of the world's leading cardiovascular drug grew 23% to $703 million in the first quarter. Then there's Zithromax, an industry-leading oral antibiotic, which grew by 44% to $441 million over the same time period. Pfizer's strategy of making alliances with other drug companies and copromoting their products is also going great guns. Lipitor, a cholesterol-lowering drug produced in association with Warner-Lambert (WLA), is currently receiving 45% of all new U.S. prescriptions for this condition. And Aricept, which is used to treat Alzheimer, is receiving more than 98% of new prescriptions related to this disease. Eisai, a Japanese drug company, is the partner on that one. Pfizer also has one of the biggest drug pipelines in the industry, with a total of 60 chemical compounds in development. Nine new products are expected to be launched over the next three to four years and two should be out on the market this year: Replax, a treatment for migraines, and Tikosyn, which treats abnormal heart rhythms. Analysts expect these two drugs alone to contribute $415 million in new revenue in 2000 and $680 million in 2001. Celebrex, which was developed by Monsanto (MTC), could possibly be a problem for Pfizer. The company helped launch the new antiarthritis drug in the first quarter and it was quickly associated with 10 deaths. Its still unclear if there is a direct cause-and-effect relationship. And the drug is receiving more than 330,000 U.S. prescriptions weekly. But even if it was taken off the market because of future developments, Pfizer could absorb the loss. As for Viagra , sales were bound to slow sometime. Launched in April of 1998, it is considered one of the most successful new drug launches in history. It 's demand curve has been unique - what other drug (legal, that is) has attracted so much business among perfectly healthy people who don't really need it? More than 9 million prescriptions have been written for more than 4 million patients in the U.S. alone and now analysts think the sales will settle into a more sustainable range. ABN Amro's Keeney expects about 40% of those people to continue using Viagra on a regular basis. Given that Pfizer still trades at 47 times projected 1999 earnings, compared to 27 for the S&P 500 and multiples in the mid-30s for the rest of the drug industry, it's hard to argue that the stock is cheap. But Pfizer's earnings are projected to grow more quickly - 22% over the next three to five years - than either the S&P average (6%) or the drug industry average (midteens). And it helps that the company is in the middle of a $5 billion share-repurchase program. The bottom line is that Pfizer's fundamentals remain strong even if the stock has weakened. Don't count on it to languish for long. For more information and analysis of companies and mutual funds, visit SmartMoney.com at smartmoney.com.