Pfizer's New Drugs Offset Generic Competition

In the quarter, total sales increased operationally by 2% (excluding acquisitions and divestitures), a rate at which we expect the company to continue growing for the next three years. Cancer drug Ibrance continues to post strong year-over-year gains, but is slowing sequentially, likely due to increased competition from Novartis and emerging competition from Eli Lilly. Despite the growing competition, we still expect the drug will double from its current sales, driven by increased penetration in Europe and the likely expansion into the adjuvant setting in 2020. Pfizer’s second-largest drug Lyrica (neurology indications) posted a solid gain of 11%, which we believe was supported by a price increase that should likely continue, as limited competition exists for the drug. The recent approval of a longer-lasting version of Lyrica should help fend off generic competition until late 2020 in the U.S. Pfizer’s leading product Prevnar 13 slightly declined as the firm continues to lap the tough comparison of the one-time surge of U.S. adult vaccinations, owing to the expanded indication in this population. However, the European rollout in the adult setting should help to offset the declines in the U.S. Further pressuring the top line were inventory work-downs for erectile dysfunction drug Viagra (generics are expected in late 2017 in the U.S.) and biosimilar competition to immunology drug Enbrel, trends we expect will continue into 2018.

In the backdrop of minor sales gains, Pfizer continues to improve efficiencies, with cost of goods sold and operating expenses declining by 4%. We expect this leverage to continue as Pfizer further rationalizes its cost structure.

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