Jefferies sees a weaker than expected revenue performance for Pfizer Inc. (NYSE:PFE) in Q1'17. With subpar revenue and EPS CAGRs of 3% and 7%, respectively (2016A-2021E), Jefferies expects that management will step up business development to potentially include larger M&A deals, with BMY the most logical fit in Jefferies’ view. However, management may do well to wait for clarity on the NSCLC opportunity for BMY, which should come in H2'17.
After updating for recent prescription trends, FX movements and business activity, including a $5bn accelerated share repurchase in early February 2017, Jefferies’2017E-2021E revenue estimates have been raised by up to 1% and Jefferies’ EPS estimates during the same period have changed by +1% to -2%.
Jefferies’ Q1'17E EPS estimate of $0.67 is in line with consensus, while its revenue estimate of $12.76bn is c3% below consensus of $13.12bn. The firm’s Q1'17E Prevnar franchise sales of $1.31bn (-13% YoY) are below consensus of $1.45bn, driven by lower US sales (JEFe $825m; Cons. $1.03bn). Jefferies reminds investors that c$390m of Q1'16A sales were from sales in adults, which included significant one-time catch-up vaccinations. Jefferies’ Q1'17E Ibrance sales estimate of $690m is above consensus of $666m, based on strong Q1'17 TRx growth (+37% YoY) and a 6% US list price increase. The firm’s FY 2017E EPS of $2.58 is modestly above consensus of $2.55 and within the guidance range of $2.50-$2.60.
Phase III ARCHER 1050 read out for dacomitinib in 1L EGFRm NSCLC imminently; Retacrit (biosimilar Procrit) AdCom on May 25; PIII EMBRACA readout for talazoparib in BRCAm mBC in Q3'17E; PIII JAVELIN Gastric 300 readout for avelumab in 3L gastric cancer in Q4'17.
Jefferies forecasts revenue and EPS CAGRs of 3% and 7%, respectively, between 2016A-2021E held back by LOEs including Lyrica, Viagra, Pristiq, Enbrel and Chantix. Investors expect significant M&A either through a series of small to mid sized deals, or one larger one to boost growth. The firm continues to favour Bristol-Myers as a consolidation target for Pfizer, but after its positioning in NSCLC is clarified through various read outs in 2017. Jefferies sees the US Viagra (Dec'17) and US Lyrica (Dec'18) patent expiries as the key drivers for M&A, which the pipeline seems insufficient to offset.