How Pfizer Inc. (PFE)’s Numbers Will Be Affected by Loss of Exclusivity?

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Pfizer Inc. (NYSE:PFE) is one of the pharmaceutical companies that remains challenged for top line growth. That is primarily because of the loss of exclusivity of drugs following the expiry of the patents. This results in a generic version of the drug available at a much cheaper price. For instance, its cholesterol drug, Lipitor, enjoyed strong sales while it was exclusive. The moment it lost patent protection, its revenue has been declining. The company is looking to achieve growth through acquisitions.

Key Points

Pfizer Inc. (NYSE:PFE) still have some new products that are really doing well. For instance, its Prevnar family witnessed 41% YOY growth in sales to $1.306 billion. Similarly, its Lyrica advanced 3% to $1.19 billion of revenue. On an operational basis, both recorded 48% and 10% uptick respectively.

The company continues to experience negative impact from foreign currency impact. The unfavorable impact from the currency translation will continue to impact its quarterly numbers.

However, there were number of drugs that witnessed YOY drop due to fall in exclusivity. Apart from Lipitor, other drugs like Enbrel, Zyvox, Norvasc, Sutent, Premarin family, and Celebrex witnessed a drop of 17%, 15%, 9%, 10%, 7%, and 67% respectively in the March quarter. The trend is not likely to have reversed in the second quarter too. However, the drug maker appeared to have passed the biggest losses of the exclusivity. During the next few quarters, the impact would likely diminish.

Clinical Programs

Pfizer Inc. (NYSE:PFE) is said to be having about 88 programs in clinical development stage. Aside from that there are thirty programs in the final stage of development for registration. These were critical for the company to get some exclusivity to generate more revenue after the products get the regulatory approvals.

The company has executed a fresh distribution model for its drug, Enbrel, in the Great Britain. The drug maker indicated that it did not see any impact from biosimilars to REMICADE. The pharmaceutical firm has spent 16% more for its Research and Development costs to $1.877 billion in the March quarter.

M&A

The drug maker indicated that it was open to any deal as long as it adds value irrespective of the size. Management appears to be biased towards M&A deals that would add value in the immediate term to compensate the loss of growth in the top line. It remains in line for completing the Hospira, Inc. (NYSE:HSP) deal during the second half of the current year.

The American firm also has the capacity of striking another deal without bothering to wait for Hospira transaction to close. The CEO believes that the current valuations in the biotech sector were ‘a bit buoyant’.

Tax Inversion

Pfizer Inc. (NYSE:PFE) said that the changes in new planned tax laws would make it difficult for anyone to realize any value from indulging in a tax inversion. Also, the company appeared to be not ready for any split up since big acquisition might impact the potential split timeline.

The foreign exchange holds the key to any revision in the full year outlook, whether lower or higher.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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