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Pfizer Inc. Message Board

  • chrt13 chrt13 Aug 11, 2007 3:51 AM Flag

    LLY's 2011Zyprexa expiry vs. PFE's Lipitor expiration


    It cannot be underestimated just how much the media is responsible for PFE having such a discounted valuation to its big American peers. Take LLY for example which is expected to have 2009 earnings per share of $4.16 versus $2.51 for Pfizer. With respect to those 2009 estimates, LLY at $57.16 has a 13.7 multiple versus only 9.6 for PFE. That's a full 30% valuation discount for PFE.

    So what does LLY have that Pfizer doesn't? Well, first of all, LLY has their biggest drug Zyprexa (schizophrenia) losing patent protection in late 2011 around the same time that PFE loses Lipitor. Here is a blurb about Zyprexa from an article today:

    The patent for Eli Lilly & Co's (up $0.00 to $58.40, Charts, Fortune 500) Zyprexa (which totaled $2.3 billion in the first half of 2007) is slated to expire in 2011.

    Zyprexa grossed $2.3B for LLY in the first half of 2007 while Lipitor grossed $6.1B for PFE in the comparable period. Because Lipitor sales are so much greater, the media focuses only on that one while pretty much leaving LLY and Zyprexa alone.

    But PFE is a much much larger company - grossing $23.6B in first-half 2007 revenues versus only $9.2B for LLY. In percentage terms, Zyprexa was 25.0% of LLY's first-half revenues versus Lipitor being 25.8% of PFE's first-half gross.

    In other words, Zyprexa is virtually the same to LLY that Lipitor is to Pfizer - only you don't see this from the media. LLY though has some other big drugs losing expiration in the 2010-2012 period so overall in those three years they have drugs accounting for 43% of 2006 gross losing patent protection versus "only" 38% for Pfizer.

    So I ask again why PFE should be at a 30% valuation discount to LLY with respect to estimated 2009 numbers when LLY will lose even a higher percentage of revenues in 2010-2012 than PFE does? Also, PFE has such an unbelievably favorable patent expiration schedule post-Lipitor that they will grow earnings faster in those years than any other big American pharma including of course LLY. And to boot, PFE has a much stronger balance sheet and they pay a 4.8% dividend compared to only 3.0% for LLY.

    What goes for LLY also goes for BMY and its later 2011 expiration of Plavix, the world's second-biggest-selling drug. Due largely to that expiry, BMY has drugs accounting for 35% of 2006 revenues expiring in 2010-2012, almost the same as PFE's 38%.

    But at $28.82 and estimated 2009 earnings of only $1.90 per share, BMY's multiple with respect to 2009 estimates is 15.2 versus a mere 9.6 for PFE. And yet BMY will lose almost the same percentage of revenues to 2010-2012 expiries as PFE and after 2012 PFE will grow earnings faster.

    This isn't at all logical but logic goes out the window when the media focuses on Lipitor expiring and gives the likes of LLY and BMY a free ride on their equally-important drugs losing patent expiration the very same year that Lipitor does.

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    • > "there are some safety concerns regarding diminished lung capacity and and underlying longer-term cancer speculation."

      Of course chrt13 will say that this is completely "out of the blue," and that no one could have ever suspected there might be a cancer risk.

    • > But if the next six months continue similar to the last, it is dead.

      Looks like you over-estimated, it only took two months!

    • From WSJ:

      "Patients need to insert packets of powder into the device measured in three or nine milligrams -- not the units doctors are used to."

      Where was Pfizer's vaulted Marketing people when this decision was made.

      One thing is clear, while the device was certainly less than optimal, Pfizer's lack of marketing expertise in the Insulin market, combined with their over-confidence in their Marketing exptertise based on success in other areas, contributed to this failure.

      If Pfizer had realized that they were not the Gorilla, but rather the Pygmy, in the insulin market they would have had a better chance. Maybe this failure will be sobering and convince them they have son "learnin'" to do.

    • > If a smaller, more-stylish inhaler can be developed, Exubera could still prove to be a reasonable-selling product.

      Or not.

      "Mr. Kindler added that Pfizer is canceling plans to develop a next-generation inhaler. Pfizer declined to make executives available for an interview."

    • Here is an excerpt from your recent post:

      Will MRK have as favorable a late-stage pipeline as PFE will by the end of 2009? Does MRK have anywhere near as favorable a patent expirations schedule as PFE has post-Lipitor?

      I and everyone else on the PFE board other than perhaps you are interested in one and only one statistic, the PFE stock price. Over the last two years the stock prices of pharmas such as MRK and SGP have increased over 50% while during the same time the PFE stock has dropped. That's the only thing that counts to us. We are interested in 'late-stage pipelines' amd 'favorable patent expirations' only by how they effect the bottom line, the stock price, and not by the smooth sounding words. In spite of spending 8 million dollars a year in the research and development of new drugs, PFE has gone nowhere other than coming up with two gigantic flops, torcetrapib and Exubera. The analysts and stockholders are not enticed by rosy depictions of 'late-stage pipelines' and 'favorable patent expirations'. They are interested only in results. Gardasil, Januvia, and Vytorin are evidently regarded as more valuable products than Lyrica, Chantix, and Sutent. Evidently the analysts and stockholders have more confidence in MRK than PFE in spite of the Vioxx issues, and that is the reason why the MRK stock price is more than twice that of PFE. The way for PFE to turn it around is to actually bring to market drugs from its 'late stage pipelines' that Americans need and want. No more 'wordsmithing'. What we need are some good concrete results. Your words and statistics do not count and a case in point is when you predicted on this board how well PFE was going to do in its last earnings report. That was a flop also.

    • Putting down Mrk, won't help Pfe's PE. I've expained it at length. Ignoring the explanations rather than dealing with them is intellectually dishonest.

      Do you disagree that there should be a Kindler discount to PE until and unless the market trusts him to deliver? If so, why?

      Same re all the other Pfe distinctive factors I have listed.

      When a company like Mrk who was left for dead after the first Vioxx loss by people like Cramer who predicted all time lows does all kinds of right things, it gets the benefit of the doubt going forward. This means a higher PE than Pfe which missed the quarter and has an untested CEO who has expressed no vision about how to deal with replacing major revenue losses (Hint: you don't do it with assumed price increases, at least if you want the market to approve). Pfe is unliked presently with good reason. I come to this conclusion as a long but not one who has lost perspective. Pfe will come back, but my guess is that it will take a new CEO and a major, well-received acquisition before it happens.

    • > I have not read anything from Pfizer that indicates that they recognize the issue or can fix it. It seems simple to make it smaller better but it may not be. <

      They are aware of it and undoubtably have been aware of it since day one. Obviously smaller is better, and the device is made as small as is practical with the technology currently available. I have no doubt that when Motorola made the first cell phone they knew the size was incovenient and would have loved to have come out with a RAZR phone on Day one.

      The clear issue is to keep the ratio of particles to air such that the particles stay in suspension and the person does not sneeze or have other issues inhaling the mixture. Currently this requires a rather large mixing chamber to create the appropriate dispersion.

      Now, perhaps nano particle technology or more precise aerosol technolgy will allow for a reduction in size, but there is a cost of being first to market. The first generation PDA was called the Newton and failed. But subsequent PDAs were sucessful.

      Now that Pfizer is starting DTC advertising there may be some hope for Exubera. Remember, inhaled insulin is primarily a patient-driven demand, as most doctors are wary of such new technology and feel injected insulin is a more precise method of dosing. Additionally there are some safety concerns regarding diminished lung capacity and and underlying longer-term cancer speculation. The only advantage a doctor can see in exubera is potentially better patient compliance, and compliance is always a tough sell to most doctors.

      Additionally, the insurance companies dislike it as it is more expensive.

      Conclusion? The only way it becomes a success is via patient-driven demand, with the patients proactively raising the topic with their doctors. And the new DTC advertising may do this.

      So the enxt six months will tell the tale... if the DTC works and NRx's start growing at an accelerated rate, it might turn out to be an OK product. But if the next six months continue similar to the last, it is dead.

    • <<<the monstrosity of a delivery system seems to be a big issue. If a smaller, more-stylish inhaler can be developed, Exubera could still prove to be a reasonable-selling product.>>>

      That would be nice if it can be done and the sales launch can be resurrected! Unfortunately I have not read anything from Pfizer that indicates that they recognize the issue or can fix it. It seems simple to make it smaller better but it may not be.

      Getting the exact amount of insulin into the body may take that monstrosity or a needle. I have zero expertise in this area. I am not a doctor BUT I did stay at a Holliday Inn once.

    • Respected management, no major failed drugs that have not been replaced, no miss in Q2. That's what other companies have for starters. You have completely failed to deal with these differences and just keep posting consensus estimates. In the abstract, they tell you nothing about what Pfe's PE should be. Maybe if Mrk has nothing new in the pipeline, its PE will decline in a year. I keep telling you 2 separate things and I won't repeat them again:

      1. Pfe is inferior to other big pharma companies in terms of perception of an appropriate PE for the above reasons.

      2. EVEN IF there were no differences, as there are, you assume that Pfe's PE should rise to Lly's and Mrk's. It is just as likely that the other companies' PE should fall.

      IF Torcetrapib were still expected to be approved, and if Exubera had lived up to expections even minimally, and if the street had confidence in Pfe's CEO, I am confident that the PE would be higher. But that's not where we are, plus there has been no demonstration that a major acquisition is coming. So Pfe has become a "show me stock" ahead of the Lipitor expiration.

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