Pfizer�s yield of 4.9% approaches the historic sector highs, as a 5% dividend yield has been a reasonable limit since 2002. We expect Pfizer�s dividend payments to increase from today�s levels, by 7% annually through 2009. We also note that key recent launches of internally developed franchises have had meaningful commercial success, including Lyrica, Sutent and Chantix. The Lipitor patent hole remains a daunting challenge. That said, the market implied growth (2013-2017) of -2% shows that the market is already anticipating difficulties filling this gap...
KEY RISKS: Key risks to our view include patent risk, lower than expected sales, unforeseen safety issues with marketed products, reimbursement and manufacturing constraints, and development risk. We note that Pfizer has received a �non-final rejection� of its re-issuance of the 2011 Lipitor patent. We expect Pfizer to continue to work with the FDA to seek reissue and our model assumes that Pfizer prevails. Our DCF analysis points to $1-2/share valuation difference if the patent life runs only to 2010.
How can revenues not keep falling indefinitely? PFE has no pipeline, suffers increasingly from competition, faces further regulation & has no pricing power.
Some of these problems are sector-wide, but at least other pharmas have pipelines.
Drug companies live & die by research, having to come up with entire new product lines every 15 years, since it takes time to market approved new drugs. PFE has gotten by on acquisitions. Now it's paying the price.