Pfizer Earnings Preview: What We Are Watching

Pfizer ( PFE ) missed consensus estimates in Q4 2016, and we expect that the continued challenges facing the company's mature drug portfolio will offset new drug growth when it reports Q1 earnings on May 2. The key products to watch out for include Prevnar, cancer drug Ibrance, rheumatoid arthritis drug Xeljanz and blood thinner Eliquis. Apart from this, we'll keep an eye on the ramp up of Inflectra, which is a biosimilar version of J&J's Remicade in the U.S. However, judging by Remicade's performance in the first quarter, we believe that the ramp up is likely to be slow.

Our price estimate of $33 for Pfizer is roughly in line with the market.

The primary near term issue for Pfizer is that sales of its flagship vaccine Prevnar are likely to remain under pressure. In the fourth quarter of 2016, the vaccine's revenue declined nearly 33% in the U.S. because of fewer adult vaccinations. This prompted Pfizer to forecast that Prevnar's sales are likely to remain flat or decline slightly in 2017. This could be a challenge for the company as the pneumococcal vaccine accounts for nearly $10 billion in annual revenue.

On the plus side, we expect strong growth in cancer drug Ibrance's sales. The drug grew nearly 17% sequentially in the fourth quarter of 2016, and we estimate its peak sales to be around $4 billion. Its EU approval in December 2016 is likely to help it sustain its momentum in the first quarter, and recent FDA approval for expanded use can be a meaningful add-on going forward. Apart from Ibrance, we expect Eliquis to continue its momentum as well. However, the drug's growth is likely to come down meaningfully from the 88% figure we saw last year. Eliquis has become the top prescribed anti-coagulant among cardiologists in 12 markets globally, and is giving tough competition to market leader Xarelto in the U.S. The drug's marketing rights are shared between Pfizer and Bristol-Myers Squibb. The latter recently released its first quarter earnings, and saw its share of Eliquis' sales increase by nearly 50%. We also expect Xeljanz will show reasonably strong growth considering recent approvals.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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