Replies to post #113840 on Biotech Values

[flatlander_60048]

Let me see Pfe with shrinking Revs and R&D cuts at a PE of 9 or NVS with double digit rev growth and a 1.5% increase in R&D and a PE of 10. I'll take NVS but you can argue that they both are way undervalued. Both will benefit from the emerging market tailwind. NVS also benefits by being more diverse with better growth from Alcon, biogenerics and vaccines.



FL

[biomaven0]

PFE will phase out drug development in allergy, respiratory, urology, tissue repair, and internal medicine

So what partnered programs will be on the chopping block? Note that this will not always be bad - recall OSIP.

Peter

[DewDiligence]

Correction: PFE’s 4Q10 year-over-year growth in emerging markets was 38% (not the 25% stated in #msg-59431699).

[jq1234]

PFE was +5.5% today, which I think is the biggest 1-day up move PFE has had since it prevailed in the Lipitor patent suit several years ago.

PFE went up slightly more than 5.5% when it reported 2nd qtr 2010 result on Aug 3, 6 month ago.

[mcbio]

As part of the cost-cutting maneuvers announced today, PFE will phase out drug development in allergy, respiratory, urology, tissue repair, and internal medicine.

Interesting. This news probably then spells an end to PFE's partnership with RIGL for R343, the inhaled Syk inhibitor in Phase 2 for asthma. But, I'm not sure such news would have a big effect on RIGL since the stock is already relatively beaten down IMO and the key story for RIGL is of course fostamatinib in Phase 3.

[mcbio]

As part of the cost-cutting maneuvers announced today, PFE will phase out drug development in allergy, respiratory, urology, tissue repair, and internal medicine.

Need to re-visit this one more time Dew. ; ) Presumably pain drugs wouldn't be covered in any of the above categories (namely 'internal medicine' as that strikes me as kind of a broad category) would they? Just thinking about the partnership ICGN has with PFE for its sodium channel pain drug and wondering if it could be on the chopping block.

[DewDiligence]

PFE sells Capsugel business unit for $2.4B in cash:

#msg-61690988

The cash proceeds from this deal will allow PFE to increase share buybacks above the $5B authorization announced in February (#msg-59431699), which is IMO the best use of PFE’s capital. (I.e. PFE’s balance sheet still has plenty of room to add leverage.)

Absent the $750M annual revenue from the Capsugel unit, PFE has adjusted its 2011 and 2012 revenue guidance by a corresponding amount: the new ranges are $65.2-$67.2B in 2011 and $63.0-65.5B in 2012, the first full year after Lipitor goes generic.

PFE’s revenue from emerging markets was only a small portion of the total in 2010 ($2.4B), but it is growing at a very rapid clip (#msg-59590951).

There is not change in non-GAAP EPS guidance on account of the Capsugel deal: the ranges remain $2.16-2.26 in 2011 and $2.25-$2.35 in 2012 (#msg-59431699).

[DewDiligence]

Musings on PFE’s valuation:

PFE kept non-GAAP EPS guidance for 2011-2012 unchanged following today’s 2Q11 report. The ranges are as follows:

2011: $2.16-2.26
2012: $2.25-$2.35

The midpoint of the 2012 range represents a P/E of only 8x. Hence, investors must be thinking that either: i) the 2012 EPS range won’t be met; or ii) there will be negative EPS growth in the period starting in 2013. I don’t think either i) or ii) will come to pass, so it follows that I consider PFE a pretty good buy at the current price.

As has been stated ad nauseam (e.g. #msg-59590951), PFE is a strong beneficiary of The Global Demographic Tailwind. PFE’s 2Q11 sales in emerging markets had an annualized rate of about $13B, which is roughly 20% of PFE’s overall sales. 2Q11 sales in emerging markets grew strongly year-over-year despite the loss of patent protection in some countries on such key brands such as Lipitor and Viagra.