Pfizer (PFE) recently entered into an agreement to acquire Ergonex Pharma’s terguride, which is being studied in a mid-stage trial to treat pulmonary arterial hypertension (PAH). We also note that terguride has orphan drug status in both the US and European Union. The drug is currently approved in Japan for the treatment of hyperprolactinemia.
While Pfizer gains exclusive global rights (other than Japan) to commercialize terguride, it will be responsible for the completion of the ongoing phase II trial. Meanwhile, Ergonex will be eligible to receive milestone payments and royalties on sales of the drug.
Pfizer is looking to strengthen its pipeline, which has become a necessity as the company is facing patent expiration for many of its leading products. Products like Lipitor, Caduet, Detrol/Detrol LA, Lyrica, Aricept, Tygacil and Zyvox are all facing patent challenges.
Our biggest concern is the Lipitor patent expiry which in 2010. Lipitor contributed almost 23% to the top-line in 2009. As such, the entry of generic versions of the product will have a significant impact on the company’s financials.
With the acquisition of Wyeth in 2009, Pfizer is looking to become a more diversified health care company with a stronger presence in emerging markets. Additionally, the company is also aiming at driving growth through licensing deals and collaborative agreements. Based on these factors, we are Neutral on the stock.
Pfizer is also looking towards cost-cutting initiatives to drive bottom-line growth. The company has been undertaking massive restructuring and cost-cutting measures for the past few years. Additionally, given the huge potential in the Asian market, management aims to increase its Asian market share from 4% to 6% by 2012 and expand China operations from 110 cities to more than 650 cities.
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