As Pfizer (PFE) faces the expiration of its patent on Lipitor and no likely blockbuster announcements in the near-future, the stock could be stuck in a holding pattern, writes Barclays analyst C. Anthony Butler in downgrading the stock to Equal Weight from Overweight.
“Through year’s end, we foresee limited potential for upside surprises from R&D catalysts,” he writes. “Top-line data from [arthritis pill] Tofacitinib to be presented at ACR has already been released, and there may be greater risk for negative surprises from a safety perspective.”
In the longer term, Pfizer could have the most trouble among its peers at rebounding from the loss of the patents.
“During the post-”cliff” period of FY15E-20E, we project that Pfizer’s top line and EBIT do recover but they do so at the slowest pace among peers (1.0% in top-line CAGR and 1.4% for EBIT). PFE’s pharma business would be unlikely to recover to the top-line levels of 2010 in the next decade despite the potential successes of Eliquis, Xalkori, and other late-stage assets. At a dividend yield of 4.4% (lower than that of Eli Lilly (LLY), Merck (MRK), and Bristol Myers Squibb (BMY)), and with limited near-term upside and a long-term decline of the core business, we are less confident of the stock’s potential for outperformance heading into Lipitor’s expiry.”
“Through year’s end, we foresee limited potential for upside surprises from R&D catalysts,” he writes. “Top-line data from [arthritis pill] Tofacitinib to be presented at ACR has already been released, and there may be greater risk for negative surprises from a safety perspective.”
In the longer term, Pfizer could have the most trouble among its peers at rebounding from the loss of the patents.
“During the post-”cliff” period of FY15E-20E, we project that Pfizer’s top line and EBIT do recover but they do so at the slowest pace among peers (1.0% in top-line CAGR and 1.4% for EBIT). PFE’s pharma business would be unlikely to recover to the top-line levels of 2010 in the next decade despite the potential successes of Eliquis, Xalkori, and other late-stage assets. At a dividend yield of 4.4% (lower than that of Eli Lilly (LLY), Merck (MRK), and Bristol Myers Squibb (BMY)), and with limited near-term upside and a long-term decline of the core business, we are less confident of the stock’s potential for outperformance heading into Lipitor’s expiry.”