3 Reasons Pfizer Inc. (PFE) Could Be Set To Move Upwards

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Pfizer Inc. (NYSE:PFE) and the pharmaceutical industry have been on a downward trend after  the recent debate on the ways to control the price of prescription drugs has taken center stage, following the outcry by patients, as well as, insurance firms. However, despite such fears the company likely has better times ahead in the coming months. For a long time, the company has not seen growth in its top line due to the expiry of patents for some of its major drugs apart from the absence of new drugs to deliver revenue meeting the declines. Now, the company is on the verge of merging with Allergan plc Ordinary Shares (NYSE:AGN) though some skeptics find some troubles ahead in the merger coming through. Whether the merger is on or not, the company has solid prospects to provide gains to its investors.

Ibrance – The Game Changer

As far as Pfizer Inc. (NYSE:PFE) is concerned, there could be a number of reasons to push for a bull case. During the last conference call, the company’s Chairman and CEO, Ian Read, placed his bet on three products, i.e. Ibrance, Eliquis, and Xeljianz, to fuel its growth. Aside from that, the company’s dividend yield is also healthy at 4.1% with the average dividend growth of 9% in the last five years.

However, the game changer could be Pfizer Inc. (NYSE:PFE)’s Ibrance, which has already been on the market for over a year now. Most recently, the FDA has granted an ‘accelerated approval’ to its Ibrance to treat advanced metastatic breast cancer. The regulator’s decision to grant breakthrough therapy status was due to the preliminary clinical proof that the drug might provide a significant enhancement compared to the available treatments. Also, the FDA approved expanded use of Ibrance in a wider range of women as it was supported by Phase 3 PALOMA-3 study results in combination with Fulvestrant. The company’s product has seen tremendous growth even in its early life cycle. While the revenue from the product matched analysts’ estimations in the fourth quarter, it was way ahead in the preceding third quarter. The response appears to be a positive one and could be a good revenue generator for several years to come.

The Importance Of Cancer Drug

In the United States, breast cancer was regarded as one of the deadly diseases, which was the second reason.  One in eight women in the United States could develop omnipresent breast cancer during a women’s lifetime. About 231,840 new invasive breast cancer issues were predicted to have been diagnosed in women in 2015 alone. Of those, 40,290 were reported as deaths. In the current year, medical fraternity expects it to increase 6.4% or 14,820 fresh cases. Again, 0.4% increase is expected in the breast cancer deaths this year. There is another estimation, which suggests that about 246,660 fresh cases of invasive breast cancer can be recorded among the American women with 40,450 deaths.

Pfizer Inc. (NYSE:PFE)’s Ibrance drug gets importance for two primary factors. One was the fight against breast cancer, and the other was the response. For instance, participants who have taken Ibrance along with Letrozole lived for 20.2 months compared to 10.2 months witnessed in patients who got only letrozole. The key factor was the disease did not progress. The recent approval for expanded use is shot in the arm for the company. That is because the expanded use meant the target audience gets enlarged. That would translate into a bigger revenue generation since the product was already a hit.

Revenue Generation

The third reason is the bet on Ibrance. Pfizer Inc. (NYSE:PFE) has already tasted the success of it when the product delivered $230 million revenue in the third quarter. That exceeded the analysts’ predictions of $195 million. The fourth quarter witnessed 37% sequential growth to deliver $315 million revenue. That clearly indicated that more and more physicians were prescribing the drug and that translated into more patients using the drug. Aside from that, it also indicated a favorable response from the patients on the ‘quality of life’. For the full year, the product achieved $723 million revenue, and $718 million came from the United States alone.

The drug has given some hopes to Pfizer Inc. (NYSE:PFE) that the company could report operational revenue growth in the current year. Its CFO, Frank Amelio, indicated that global oncology revenues jumped 61% operationally fueled by Ibrance. Street analysts bet that Ibrance would deliver revenue of $1.93 billion in the current year, which meant YOY growth of 167%. That apart, the company’s sales growth for Ibrance is predicted grew 65.8% to $3.2 billion next year and 31.3% uptick in 2018 to $4.2 billion. The key factor is that physicians have embraced Ibrance as a standard of care in the United States in the first-line setting since it was launched only a year ago.

Other Factors

Aside from the cancer drug, Pfizer Inc. (NYSE:PFE) stands to gain from Xejanz, which witnessed 70% growth in revenue to $523 million in 2015. These apart, the merger with Allergan plc Ordinary Shares (NYSE:AGN) will be beneficial to it. One significant gain would be in the company’s tax rate. Currently, the American company pays a tax rate of 25% whereas the British firm pays only 4.8%.  The company also has a $5 billion share buyback program to boost its EPS.

Conclusion

Pfizer Inc. (NYSE:PFE)’s Ibrance has the potential to deliver a significant percentage of revenue in the upcoming years. That would add to the current year’s EPS estimations. Apart from that, its dividend yield is healthy at 4.1%. The merger provides more opportunities for upside potential. In every possible way, the stock is poised to move up.

Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.

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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