for over a month:
Note that this overly optimistic report, like all PFE's analysts, addressed the issue that Alan finds so cheerful, ie PFE's earning prospects post-Lipitor, 2010-15.
For a more recent but still too optimistic analysis:
It's impossible to predict five years out, given all PFE's innumerable uncertainties, but here's my own pro forma best case guesses, based on 2015 sales of $67 billion (almost certainly far too high), profit margin of 27% (also optimistic, being higher than MRK's guess for near future, after cost savings from SGP deal) & share count down to 7.8 billion, for then EPS of $2.23.
Government price controls & increasingly severe generic competition, among many other issues, make for a powerful current against which PFE must swim.
Boy, have the terms of this debate ever shifted toward the bears since Sep 2009, with all PFE's continued pipeline failures!
DEBATE BULL/BEAR MARKET’S VIEW/OUR VIEW
Can Pfizer grow
• Bull case: Pfizer can begin to grow because
most major patent expirations will be reflected in
2012 earnings and the company will benefit from
new product introductions and emerging
• Bear case: Pfizer will not be able to grow
earnings between 2012-2015 due to continued
patent expiration pressures (including Celebrex
in 2014) and limited new product potential given
poor R&D engines at Pfizer and Wyeth.
• Leading indicators: Phase II and III pipeline
progress; future external transaction activity.
• Market’s view: Consensus expects
additional cost cutting beyond 2012
plus financial levers to drive modest
• Our view: We model 2015 EPS of
$2.42, up 4.5% CAGR from $2.12 in
2012. We are assuming modest
revenue growth and financial leverage
(higher interest income and share
repurchase). Please reference our
detailed modeling explanations toward
the beginning of this report. Where we
could be wrong: There could be
downside to our assumptions if
Pfizer’s pipeline disappoints or if
Pfizer’s future transaction activity does
not yield incremental financial
IMO, $67 billion for 2015 is pie in the sky. Everything would have to go PFE's way, which just doesn't happen when a company's stock has been in a downtrend since 1999, with a dismal record of pipeline failure & suffering from increased regulation & competition.
This looks more reasonable: $57 billion X .25 margin / 7.8 billion shares = $1.83 EPS.
Best case scenario would be $62 billion X .27 margin / 7.8 billion shares = $2.15 EPS.
What really gets me is that after analysts like MS get through with everything, what they have come up with just isn't logical - it doesn't at all pass muster in that regard. Take for example their earnings projections for 2012-2015:
$2.12 for 2012
$2.29 for 2013
$2.37 for 2014
$2.42 for 2015
2013 is still a year of very heavy patent expiration losses. The big patent losses of 2011 and 2012 won't have worked their way through the system yet and therefore, I'm not expecting to see much in the way of gains from 2012. However, MS is showing an 8% year-over-year gain and for me, that's just WAY too optimistic.
However, 2014 should be a golden year for Pfizer. First of all, there will be all of those millions of new Obamacare enrollees. Then, 2014 has almost no patent expiration losses. Only Celebrex - but that isn't until December and then only domestically. Losses to expiries in 2014 from the 2011 and 2012 losses of exclusivity should be far less in 2014 than 2013.
So how can MS show such muted earnings gains in 2014 - just HALF of the 2013 percentage? Where is the LOGIC there?
The 2015 estimate of theirs is completely out to lunch. A 2% earnings gain only for 2015? Are you kidding me? That means that if they weren't projected to be buying back about 3% of their shares, they would per MS actually have an earnings DECLINE in 2015. An earnings DECLINE just because they lose Celebrex and Zyvox? With Pfizer so much larger of a company now, drugs expiring that comprise 5% of the gross don't cause earnings growth to completely disappear. Not with all the ramp-ups from the then-recently introduced drugs, the hordes of boomers turning 65, the big overseas expansion and the like.
The finished product isn't worth the paper that it's printed on.
If I thought that if Pfizer didn't buy back stock in 2015 that it would actually earn LESS money than in 2014, I'd sell out immediately and take my lumps.
It's just asinine for MS to assume that because Celebrex and Zyvox are losing exclusivity that if PFE wasn't buying back shares they would earn less money in 2015 than 2014.
But that's just what MS is telling you in projecting that 2015 earnings will only rise from $2.37 to $2.42 despite the buyback of shares.
"First of all, there will be all of those millions of new Obamacare enrollees."
lol, the gov delayed DTV for 3 years cuz they couldn't get 'couch potatoes' to shell out 40 bucks for a tv converter, imagine the mess when mandatory health insure payments come due
Billed as the greatest leap forward in since the conversion to color, the switch to digital TV this year was made a matter of law in 2005.
4/24/2005 5:16:55 PM ET
Depending on the outcome of discussions in Congress, television as we know it may end at exactly midnight Dec. 31, 2006.
That’s the date Congress targeted, a decade ago, for the end of analog television broadcasting and a full cutover to a digital format ...New Year’s Eve 2006 probably looked as safely distant as the dark side of the moon. But now that date is right around the corner and Congress and the FCC are struggling mightily to figure out what to do.
The debate over when to throw the switch is a strange brew of big money, high technology, homeland security and a single, unanswerable question: just how angry are the couch potatoes going to be?
February 2, 2009
The U.S. House of Representatives is expected to complete congressional action Wednesday on a bill that would delay for four months the nation’s conversion from analog to digital television broadcasts. No, this isn’t a story from last week that got republished by accident. No, this isn’t a joke. Yes, this is Déjà vu all over again.
Morgan Stanley has had below-consensus earnings estimates and targets for as long as I have been involved in this investment.
But even MS is showing post-Lipitor profit margins after taxes of 29% or so. You won't see the 29% directly but what you WILL see is pre-tax margins in the 40 to 41% range and then tax projections of 29%.
Just you saying that margins of 27% are "conservative" sure doesn't make it so. MS sees 29% margins, Catherine Arnold sees 30% margins and Kindler sees 30% margins.
If 2015 revenues were $67B and margins were 30%, net dollar income would be $20.1B. Based on perhaps 7.5 billion shares outstanding at that time, EPS would be at $2.68. My own estimate for 2015 is $2.80 as I think that Pfizer will do better than $67B in revenues that year after factoring in the new Obamacare enrollees and the paucity of patent expirations.
What makes you think that Obamacare will exist in 2015?
You expect GOP takeover of House in 2010, Senate & White House in 2012, so Obamacare will be gone before it ever kicks in in 2013.
High drug prices in the US were justified by pharma companies' finding new medicines. Their pipelines have all run dry, so not only will price hikes be minimal in future, but voters will probably demand ever lower prices.
The whole 20th century pharma model is broken beyond repair, as your betters have correctly been telling you all during this century.
Those estimates were made before PFE lowered 2012 targets.
How conveniently your highly selective memory forgets things.
With Lipitor gone, why should PFE's margins be higher than MRK's, which on current consensus EPS & revenue estimates will be 26.38% for 2011.
As every year since you went nuts on PFE, MS & all other analysts have been humiliated by their always preposterously optimistic estimates, although of course never as ludicrously ridiculously pie in the sky as yours.
MS' from ten months ago are typical.
Since then, PFE has lowered its estimates & has endured yet more of its traditional annual raft of pipeline failures.
As a result, its Sep 2009 "estimates" have proved just as hilariously over-optimistic as in every other year, while still of course being infinitely more realistic than your usual pipe(line) dreaming.
I don't seem to see a lot of commentary from you about this table which Zack's reproduces from Pg. #9 of the annual 10-K:
Product Revenues in 2009 U.S. Basic Product Patent
Effexor/Effexor XR $520 million 2008
Aricept $432 million 2010
Lipitor $11,434 million 2010
BeneFIX $98 million 2011
Xalatan $1,737 million 2011
Geodon $1,002 million 2012
Viagra $1,892 million 2012
Detrol $1,154 million 2012
Celebrex $2,383 million 2014
Zyvox $1,141 million 2015
Lyrica $2,840 million 2018
Chantix $700 million 2020
Sutent $964 million 2021
This table means EVERYTHING to Pfizer investors. Because it shows that after the September 2012 expirations of Detrol and Geodon, there are just three drugs totalling $6.4B in 2009 revenues (less than 10% of what 2010 company-wide revenues will be) losing patent protection clear through to the end of the decade.
That's just UNBELIEVABLE for there to be such a small percentage over a period of longer than seven years.
Earnings are free to grow apace - unhindered by the raft of expiries that has held earnings in check since 2004.
There is absolutely NO other big pharma out there like this - with revenues from just 10% of company-wide sales losing patent protection during the period of seven long years.
How incredible for Zack's to have this table in plain sight and yet all they do is talk about the raft of big expiries in 2011/2012 while completely ignoring the Years of Relative Freedom From Expirations that comes immediately thereafter.
How can they be this blind?
With PFE's lowering of its 2012 & out year estimates, followed by pipeline failure after failure this year, MS' new targets & estimates would be much lower.
Your own guesses strike me as unrealistically optimistic, unless PFE suddenly starts getting new drugs approved.
As per my discussion with Hotpanera, I feel there is a good chance that US drug prices will not just suffer lower hikes, but actually be cut, as in Europe, both from government action & stiff competition.
A more reasonable expectation, IMO, barring Bapi approval would be sales around $57 billion in 2015, with 25% margin & your 7.8 bln shares (333 million bought back at average price about $15 or $5 bln), which seems possible, for "adjusted" EPS of $1.83.
Pfizer and the other drugmakers will be hiking domestic prices by 7% to 9% a year as far as the eye can see.
There is absolutely nothing to stop them and they will certainly be hiking more than usual to make up for having to halve the doughnut hole, pay new industry fees and make more Medicare price cuts to government.
With the pharmas expecting lackluster growth the next few years because of the patent cliff, they sure don't have to worry about being labeled fat cats.
You are a fool if you don't think that domestic prices are going to be hiked big-time.