Wyeth's product portfolio to boost Pfizer growth

Though Pfizer India’s results for the quarter ended March came lower than estimates, its prospects remain strong, feel analysts.

The multinational pharmaceutical company, known for brands such as Corex, Becosules and Dolonex, is likely to see growth driven further by Wyeth’s product portfolio as they merge. Analysts expect at least four to five products delivering double- digit growth.

The 10 per cent increase in prices for non-NLEM (New List of Essential Medicine) products and 6.2 per cent rise in prices for products under NLEM make analysts such as Ranjit Kapadia at Centrum Broking more upbeat on the earnings growth. The restructuring of marketing and rationalisation of the field force is helping reduce costs and adding to margins. In this backdrop, the merged entity (Pfizer and Wyeth) is likely to report superior performance, he feels.

 While Kapadia has a target price of Rs 1,630, based on 18 times the FY16 earnings per share, the one-year consensus target price for the stock from Bloomberg estimates is Rs 1,371, up 11 per cent on the current price of Rs 1,248.

Pfizer’s revenues for the quarter at Rs 252 crore, almost flat on a year-on-year (y-o-y) as well as a sequential basis, were lower than the consensus estimate of Rs 294 crore from Bloomberg. Under the new drug pricing policy, Pfizer’s anti-hypertensive Amlogard brand, one of the key ones in the category, came under price control. Analysts expect the annual impact on revenue at Rs 15 crore. However, the drug in the NLEM also came for price revision by 6.2 per cent last month.

There is also a ramp-up in volumes as doctors shift to prescribing premium brands, now reasonably priced. On the operating side, the company is benefiting from cost rationalisation, as employee costs (Rs 38 crore) reduced by 18.2 per cent y-o-y during the quarter. Thus, Ebitda at Rs 72.9 crore came better than Bloomberg estimates of Rs 65.4 crore and margins at 26.6 per cent were much better than the year-ago quarter’s 19.5 per cent.  Net profit was down 3.7 per cent y-o-y to Rs 56 crore due to higher interest, tax and depreciation, and lower than the Rs 59.7 crore in the Bloomberg consensus estimates.

  As Pfizer’s own brands continue to do well, the synergies with Wyeth’s portfolio are likely to boost growth further. Pfizer’s  Becosules, Dolonex and Minipress XL brands saw growth of 33.1 per cent, 15.1 per cent and 21 per cent, respectively, in the 12 months ending March. They’re likely to continue the pace of growth. Wyeth’s corticosteroid brand Wysolone saw good growth of 9.2 per cent and will do better, as will others in the segment, helped by volumes despite coming under price control, feel analysts.  The trade related issues are now resolved and the growth momentum in FY15 is likely to be better. Analysts estimate the Prevenar 13 vaccine sold directly to hospitals contributing Rs 200 crore to revenue. Kapadia feels Corex, Becosules, Gelusil, Prevenar 13 and Minipress XL are likely to deliver double-digit growth.

The combined entity of Pfizer and Wyeth will be a formidable entity in India. If Pfizer gets to consolidate further, getting the AstraZeneca portfolio as is being suggested by news reports, the boost can be more. AstraZeneca’s oncology, respiratory, cardio and vascular portfolio complements well to the Pfizer-Wyeth one. If Pfizer is able to get the AstraZeneca portfolio, the combined entity will become the second largest MNC in the country, just behind Glaxo.