Summary
Pfizer is currently trading at a ~20% discount rate, when taking into account discounted cash flows as well as a multiples analysis.
Current estimates of a -5% annual revenue growth over five years are not supported by pipeline outlook.
In conjunction with these medium-term bearish estimates, Pfizer is still trading at a discount.
Decaying Sales of Older Drugs
The pharmaceutical that saw the largest decline in revenue over 2017 was Enbrel, which decreased by nearly half a billion dollars in revenue (a 16% loss of drug-specific revenue). This drug combats forms of Arthritis such as Rheumatoid and Psoriatic Arthritis and is marketed outside of the US and Canada. The competition that Enbrel has faced from biosimilars, that have emerged in the European market, are the cause of this downturn. This shrinkage in growth will not continue at the same magnitude, which will alleviate some of the downward pressure on Pfizer Inc.'s revenue growth. This is due to certain insurers and pharmacy benefits managers preferring biosimilars to previously branded products and vice versa. The initial hit on revenue will be largest over the next year, but the shrinkage will begin to wind down.
