Pfizer's low PE is just a reflection of the the very poor image that investors and analysts have of the company's R&D department. It is very true that the crackdown in the FDA makes it very tough to get new drugs approved and all of the major pharmas are experiencing problems in this regard. However Pfizer's drug approval record is particularly abysmal when you factor in that its R&D department is funded to the tune of $9 billion dollars a year for developing new drugs. This money has essentially been wasted and furthermore the entire investment community knows this. Image is everything and quite frankly Pfizer's R&D image stinks. Until this image can be turned around with demonstrated development of new, useful drugs that the American public needs, the Pfizer stock price will continue to languish and deservedly so.
PFE was a much smaller company just seven years ago before they bought PHA. They sure weren't spending $9B a year on research before that. It's well known that it can easily take ten years to get a brand new compound on the market from inception - so not a penny of the expanded R & D would have resulted in even one new drug yet.
PFE simply didn't have much of a pipeline eight years ago and that's why they bought PHA in the first place - they knew that the big, clustered patent expirations were right around the corner.
Pfizer had a limited number of late-stage compounds but even so, with normal luck they would have had their fair share of FDA approvals even in the very tough FDA environment following Vioxx.
But horrific bad luck reared its ugly head. It started with insomnia drug I(ndiplon. For whatever reason, the discovering company didn't want Pfizer to have any part in the testing process or the FDA submission. They just wanted Pfizer to pay the bills for the testing. So they made the unforgiveable mistake in Phase III testing of not being able to decide on which dosage they wanted to market. So they tested three or four dosages and NO dosage was tested sufficiently enough for the FDA's liking and they issued a Letter of Non-Approval. Would experienced Pfizer have ever made that kind of a mistake? But they had absolutely no say in the matter with Indiplon. It also didn't help that a major insomnia drug at the time that had been on the market for a decade suddenly started resulting in bizarre symptoms like zombie-like next-day driving and binge sleep-eating.
Exubera was another product where the luck was unbelievably bad where the new head of the Amnerican Diabetes Assn. single-handedly provided the cover for insurers to deny reimbursement.
If even one of these products makes it, the perception of Pfizer's research would be entirely different.
But does this kiod of bad luck really hnave anything to do with the probabilities of success of Pfizer's current late-stage pipeline?
Many analysts wouild say yet. For me though, it's an EMPHATIC no. Abd uf tge OE is unusually low because of improper percenptions, I will take full advantage of it knowing that these kind of ridiculous perceptions won['t last forever.