COMAPNY DESCRIPTION:
Pfizer is an American multinational pharmaceutical company with its head office in New
York. It is one of the largest pharmaceutical companies in the world. It is listed on the
New York stock exchange and is a component of Dow jones industrial average. In
December 2018 they tied up with GlaxoSmithKline. This company produces medicine
for wide range of medical discipline. This company has made second largest
pharmaceutical settlement with United States department of justice. As of December 11,
2019, the stock price of Pfizer is 38.24 USD which is a decrease from the previous
days. There is also a revenue decrease of 4.65% from its last quarter.
Top Three challenges faced by Pfizer are
Major health system changes. The most significant risk for Pfizer is the ultimate
and complete change of healthcare in the US.
Slowing sales for top drugs. Sales for Pfizer’s top drugs could slip even if there
aren’t huge changes in the US healthcare system.
Significant pipeline setbacks.
HISTORY:
Pfizer was founded by Charles Pfizer and his cousin Charles F. Earhart in 1849 who
has German American ancestry. They initially set up their factory in Brooklyn and rose
to fame with their citric acid production in the 1880’s. by 1906, its sales were totaled at
$3.4 million. Due to a scientific discovery in 1919 and investing in their self-production of
the discovery of penicillin, Pfizer supplied most of the penicillin during the world war 2.
When penicillin became inexpensive, they discovered more antibiotics and maintained
their sales in 1950. Then they entered the animal division by 1959. With their launch of
anti-inflammatory medicine in 1980, they entered the billion market in sales.
The past decade was a great growth for the company due to its mergers. In 2003, the
company acquired Esperion therapeutics for 1.3 billion and Meridica in 2004. They have
also acquired Vicuron pharmaceuticals, Idun and Angiosyn for $1.9 billion, $300 million
and $525 million respectively. In 2006, it sold its consumer healthcare unit for $16.6
billion to J and J.
Pfizer makes Fluconazole drug for free in countries where the prevalence of HIV/AIDS
is more than 1%. It is given for free to the Non-Governmental organizations in
developing countries. In 2012, Pfizer and the gates foundation agreed upon a joint effort
to provide affordable access to Pfizer’s long-lasting contraceptive,
Medroxyprogesterone acetate, to more than 3 million women in developing countries.
MARKET SEGMENTS:
In 2018 Pfizer announced that it would be reorganizing into 3 separate units which are
Innovative medicines, Lower margin off patent drugs and Consumer healthcare. Pfizer
is also organized into primary care, specialty care, oncology, emerging markets,
established products, consumer healthcare, nutrition, animal health and capsugel.
Now Pfizer is led by three business lines; Pfizer Biopharmaceuticals group, Consumer
Health care business and Upjohn business.
Biopharmaceutical Group: innovative medicine business which includes
innovative health care but not consumer line.
Upjohn: off patent branded and generic established medicines business.
Consumer Healthcare business: over the counter medicine business now
combined with GSK consumer healthcare business.
FINANCIAL ANALYSIS:
Balance sheet (Exhibit A) of 2017 and 2018 have been considered for the analysis.
Dollars in Millions:
There has been a 2% decrease from year 2017 ($1,342) to 2018 ($1,139) in
terms of current assets.
Cash and cash equivalents have decreased from $18,650 to $17,694 for the
same period.
There has been a 5% increase in the inventory amount.
$9,725 revenue has been obtained by assets held for sale.
The total current assets for the year 2018 were $49,926 and for 2017 were
$41,141.
Including other non-current assets like property, plant and equipment, goodwill,
intangible assets etc. the total assets for the year 2018 is $159,422 which is
lesser that 2017 revenue, that is $171,797.
Current liabilities of Pfizer have increased from the previous year. In 2017,
current liabilities were $30,427 and in 2018, they have increased to $31,858.
But long-term debt has decreased from $33,538 in 2017 to $32,909 in 2018.
Non-current liabilities were $69,714 in 2017 and they were decreased to $63,806
in 2018.
Due to this significant decrease in non-current liabilities, the total liabilities have
been decreased from $100,141 to $95,664 from 2017 to 2018.
Table A
Balance sheet 2018 2017
Cash and Cash Equivalents $ 1,139 1,342
Total Current Assets 49,926 41,141
Non-current assets 109,496 130,656
Total Assets 159,422 171,797
Current Liabilities 31,858 30,427
Noncurrent liabilities 63,806 69,714
Total Liabilities 95,664 100,141
Total Equity 63,758 71,656
Liability and Shareholder’s 159,422 171,797
Equity
Income Statements of 2017 and 2018 for the statement of income (Exhibit 2)
analysis:
Sales revenue of the year 2017 was $52,546 and 2018 was $53,647. This
revenue has been earned from the consumer healthcare products.
Cost of revenue has shown a slight increase from $11,240 to $11,248 from 2017
to 2018.
This increase is shown in gross income where 2017 and 2018 incomes were
$41,306 and $42,399 respectively.
Total expenses were $27,650 for 2017 and $28,358 for 2018.
Based on these revenue and expenses, the total Net operating income/expense
is $13,656 for 2017 and $14,041 for 2017.
The net income before interest was $21,355 for 2017 but decreased to $11,188
in 2018.
The final net income after taxes and after interest is $21,307 in 2017 and
$11,152 for 2018.
Table B
2018 2017
Sales Revenue $ 53,647 52,546
Cost of Revenue 11,248 11,240
Gross income 42,399 41,306
Total expenses 28,358 27,650
Net operating 14,041 13,656
income/expense
Net income before 11,188 21,355
interest
Net income 11,152 21,307
Income statement for statement of cash flow (Exhibit 3) analysis (Dollar in Billions):
Based on the operating activities like net income, depreciation, deferred taxes
and funds from the operations, the net operating cash flow for the year 2017 was
$16 and for the year 2018 was $15.823.
Based on the investing activities, taking into consideration the capital
expenditure, net assets from acquisitions, purchase/sale of investments and
other sources, the net investing cash flow was recorded as $4.74 loss and a
profit of $4.52.
Based on the financing activities like total cash dividends paid, change in capital
stock, reduction of debt and other sources, the net financing cash flow was a loss
of $13.362 in 2017 and loss of $20.444 in 2018.
Table C
Cash Flow 2018 2017
Net operating cash 15.823 16.8
flow
Net investing cash 4.52 -4.74
flow
Net financing cash -20.444 -13.362
flow
RATIO ANALYSIS:
Various ratios like profitability, liquidity and operating are used to understand the
company on a deeper level.
Profitability ratios:
These ratios are the financial metrics used to measure the company’s earnings relative
to its revenue, operating costs, balance sheets and shareholder’s equity. These ratios
also show how well the companies use their existing assts to generate profit and value
for shareholders. Higher ratio results are generally more favorable and should be used
to compare with other companies for better emphasis.
Operating Margin:
It is the percentage of sales left after covering additional operating expenses. It
indicates how much of each dollar of revenues is left over after both costs of goods sold
and operating expenses are considered. Operating margin of 2017 was 25.99% and
2018 was 26.17%.
Table D
Operating Margin 2018 2017
Operating income 14,041 13,656
Total operating revenues 53,647 52,546
Operating Margin 26.17% 25.99%
Return on Assets:
ROA Is a financial ratio that shows the percentage of profit a company earns in relation
to its overall resources. It is net income divided by total assets. It tells us how effectively
an organization is taking earnings advantage of its base of assets.
Table E
Return on Assets 2018 2017
EBIT (Earnings before 11,188 21,355
interest and taxes)
Total assets 1,59,422 1,71,797
ROA 7.02% 12.43%
Return on Equity:
It is a measure of financial performance calculated by dividing net income by
shareholders equity. Because shareholders equity is equal to a company’s assets
minus its debt, ROE could be thought of as the return on net assets.
Table F
Return on Equity 2018 2017
EBIT 11,188 21,355
Total Equity 63,407 71,308
Return on Equity 17.64% 29.95%
Liquidity Ratios:
A liquidity ratio is a financial ratio that indicates whether a company’s obligations when
they become due. It includes current ratio, quick ratio, days cash on hand, D/E ratio,
times interest earned, days in accounts receivables and fixed asset turnover.
Current Ratio:
This ratio measures a company’s ability to pay short term obligations or those due
within one year. It tells investors and analysts how a company can maximize the
currents assets on its balance sheet to satisfy its current debt and other payables.
Table G
2018 2017
Current assets 49,926 41,14
1
Current liabilities 31,858 30,42
7
Current ratio 1.576 1.352
Quick Ratio:
This ratio is a financial ratio used to gauge a company’s liquidity. It is also called as an
acid test ratio. The quick ratio compares the total amount of cash and cash equivalents
+ marketable securities + accounts receivable to the amount of current liabilities.
Table H
2018 2017
Cash and cash 1, 1,342
equivalents 139
Short term investments 17, 18,650
694
Net receivables 8, 8,221
025
Total 26, 28,213
858
Current Liabilities 31, 30,427
858
Quick Ratio 0.84 0.93
Days Cash on Hand:
It is the number of days that an organization can continue to pay its opening expenses,
given the amount of cash available.
Table I
2018 2017
Cash from operating 11,188 21,355
expenses
Cash from Op/days in 31 59
period
Cash and cash 1, 1,342
equivalents 139
Days cash on hand 37.16150082 22.94017094
D/E Ratio:
Debt to equity ratio is calculated by dividing a company’s total liabilities by its
shareholder equity.
Table J
2018 2017
Total Liability 95, 1,00,141
664
Total Equity 63, 71,656
758
D/E ratio 1.397524283
1.50
Times Interest Earned:
Times interest earned or interest coverage ratio is a measure of a company’s ability to
honor its debt payments.
Table K
2018 2017
EBIT 11, 21,355
188
Interest Expense 1, 1,270
316
Times Interest Earned 8.501519757 16.81496063
Days in Accounts Receivables:
It is the number of days that a customer invoice is outstanding before it is collected.
Table L
2018 2017
Accounts Receivables 8, 8,221
025
Net credit sales 53, 52,546
647
Ratio 0.150 0.156
Period 365 365
Days in Accounts 54.600 57.105
receivables
Fixed Asset Turnover:
It is the ratio of sales to the value of fixed assets. It indicates how well the business is
using its fixed assets to generate sales.
Table M
2018 2017
Net Sales 53, 52,546
647
Fixed Assets 13, 13,865
385
Accumulated 16, 16,172
depreciation 591
Subtracted value 3, 2,307
206
Fixed Asset turnover 16.73331254 22.77676636
Operating Ratios:
This ratio shows the efficiency of a company’s management by comparing the total
operating expense of a company to net sales. For Pfizer company I have used access
to medicines (global programs and commercial transactions to increase access to IT,
top 21 global burdens of disease addressed by products and pipeline) and Supply chain
environmental sustainability goals as the key performance indicators.
BUSINESS CAPITALIZATION:
The top four mutual fund holders of Pfizer shares own almost 7% of the company. The
Vanguard Total stock market index is the top mutual fund holder of Pfizer shares with
2.8%. the four major mutual fund holders of Pfizer have all posted three-year annualized
gains of 12% or better.
Take into consideration Exhibit A, the company has equal liabilities to be covered by the
assets. PFE has increased its debt from US$41b to $47b which includes long term debt.
Cash and short-term investments stand at US$12b to keep the business going.
Additionally, they have produced US$16b in last 12 months, resulting in an operating
cash debt ratio of 33% showing that the debt is covered by operating cash.
As per 12/11/2019, the market price of Pfizer stock is 38.22 USD. This number is lower
than its competitors. Novartis has a stock price of 93.04 USD while GlaxoSmithKline
has 46.29 USD.
Market capitalization of Pfizer as per date is 211.51b USD while Novartis is at 235.1b
USD and GlaxoSmithKline is at 230.96b USD. This indicates Pfizer’s performance level
with its competitors.
As of 12/11/2019:
Open 38.37
High 38.57
Low 38.20
Market capitalization 211.51b
P/E ratio 13.38
Dividend yield 3.77%
Prev Close 38.49
52-week high 44.90
52 week low 33.97
Stocks Beta is 0.65 for 3 years.
Market Segmentation:
Pfizer Business Line of Activities:
Pfizer is a huge and top 10 pharmaceutical companies, where the income is achieved
from various segments. Their global portfolio includes revenue from Medicines and
Vaccines and little extent by alliance revenues. Two biggest commercial operations are
Pfizer Innovative Health (PIH) and Pfizer Essential Health (PEH).
From the Biopharmaceuticals line which is the major revenue source for Pfizer, there
have been profits in some and losses in some. There is a decline in operational growth
than previous year which includes decline of growth from key brands like Ibrance,
Eliquis, Prevnar etc. there has been recent losses and expected loss from brands.
Table N
Products 2018 revenue 2017 revenue
Viagra 274 850
Lyrica 3,852 3,901
Zyvox 62 103
Relpax 90 176
Vfend 106 150
Tygacil 25 45
Pristiq 71 133
Now Pfizer is led by three business lines; Pfizer Biopharmaceuticals group, Consumer
Health care business and Upjohn business.
Biopharmaceutical Group: innovative medicine business which includes
innovative health care but not consumer line.
Upjohn: off patent branded and generic established medicines business.
Consumer Healthcare business: over the counter medicine business now
combined with GSK consumer healthcare business.
The products through which we can see revenue of Pfizer Innovative Health are
Xeljanz, Eliquis, Lyrica, Prevnar Family, Enbrel, Lipitor, Ibrance and other OTC drugs.
Pfizer essential health includes Viagra, Zyvox, Sutent, Norvasc and Premarin Family
and Celebrex.
Pfizer invests in R&D fields like Inflammation and Immunology, Internal Medicine,
Oncology, Rare Diseases, Vaccines and Biosimilars.
Important Business Initiatives in the past year:
Sale of Hospira Infusion systems net assets to ICU Medical, Inc where pre-tax
losses of $55 million was observed.
Acquisition of AstraZeneca’s small molecule anti-infective business for $1,040
million including cash paid and fair value.
Acquisition of medivation, Inc for $14.3 billion cash.
Research and Development fund with Nova quest co-investment fund.
Table O
Segment 2018 2018 2017 2017
international international
Innovative $19.0 billion 14.5 18.5 13.0
health
Essential health 6.4 13.9 7.6 13.6
Pfizer total 25.3 28.3 26.0 26.5
Growth in Market:
Table P
(Millions of Worldwide US International
Dollars)
Continued growth $2,815 1,150 1,664
from Key brands
Growth from 217 417 69
biosimilars
Growth in 107 26 81
consumer Health
care
Growth from 195 158 37
recently launched
products
Decline in Market:
Table Q
(Millions of Worldwide US International
Dollars)
Lower revenues 572 572 -
for total Viagra
Decline from Peri- 558 188 371
LOE products
Impact from SIP 504 589 +86
portfolio
Impat from LEP 436 592 +156
portfolio
Lower revenue 350 - 350
for Enbrel
Lower revenues 100 13 88
from hemophilia
portfolio
Impact on 97 64 33
Financial results
from sale of HIS
Pfizer corporation is massive and successful. To maintain that position, we can go
through some SWOT analysis of the company to see its position.
Table R
Valuation Pfizer Abbott Labs Allergen J&J
Ratios
Price to 18.50 64.01 - 23.22
Earnings
Price to next 17.83 62.36 - 28.94
year
expected
earnings
Price to 4.89 24.24 - -
earnings
growth
Price to 14.74 41.53 - 17.94
operation
profit
Price to sales 3.85 4.96 3.82 4.35
Price to book 3.25 4.97 0.93 5.94
value
Financially, Pfizer is doing considerable work. Its debt has increased from US $41 billion
to US $47 Billion (including long term debt). Additionally, US $16 billion were produced
from operations. This resulted in 33% debt to operating cash ratio, showing that the
company can pay its debt. With current liabilities of US $29 Billion and current assets
level of US $45 Billion, their current ratio is 1.54, which is considered reasonable for
pharmaceutical companies. Pfizer in all is a highly leveraged company.
As per the quarterly report of 2019, Pfizer reported a profit of 30% by demand of its
brands Ibrance, Eliquis and Xeljanz. It reported that the net income rose to $5.05 Billion
or $0.89 in share.
Pfizer has the biggest market share in the world of pharmacy. It has 5.5% of world
pharmaceutical market and is predicted to forfeit 1.2% of global market by 2024. The
global market is expected to be led by swiss pharma giants, Novartis and Roche,
together with Pfizer, with almost identical markets.
COMPETITOR ANALYSIS:
2019 Final Update:
Pfizer is an American multinational pharmaceutical company with its head office in New
York. It is one of the largest pharmaceutical companies in the world. It is listed on the
New York stock exchange and is a component of Dow jones industrial average. Pfizer
has been and still is a pharmaceutical giant. It is expanding its market and has the
biggest share in the prescription drug world. It has considerably increased its debt and
profits as well from the past years.
By the third quarter of 2019, revenue of $12.7 Billion, reflection operational decline by
3% was seen.
9% operational growth from Biopharma (primarily driven by Ibrance, Xeljanz,
Eliquis and 15% operational growth in emerging markets.
26% operational decline from Upjohn.
Third quarter reported diluted EPS of $1.36, primarily driven by a gain associated
with the completion of the consumer healthcare JV transaction with GVK.
Results for 2019 (till date):
Table S
$ in millions except 2019 2018 change
per share amounts
Revenues $ 12,680 13,298 -5%
Reported Net 7,680 4,114 87%
Income
Reported Diluted 1.36 0.69 98%
EPS
Adjusted Income 4,214 4,580 -8%
Adjusted Diluted 0.75 0.77 -2%
EPS
Acquisitions and divestitures completed in the first nine months of 2019 impacted
financial results in the periods presented. References to operational variances pertain to
period-over-period growth rates that exclude the impact of foreign exchange.
Table T
$ in millions 2019 2018 % change
Total Operational
Biopharma $ 10,108 9,422 7% 9%
Upjohn 2,195 3,036 28% 26%
Consumer 377 839 55% 54%
Healthcare
Total $ 12,680 $ 13,298 5% 3%
Total update 2019:
Table U
Revenues $51.2 to $52.2 billion
Adjusted cost of sales (%) 19.3% to 19.8%
Adjusted SI&A expenses $13.5 to $14.0 billion
Adjusted R&D Expenses $7.7 to $8.1 billion
Adjusted other income/Deductions Approximately $200 million of income
Effective tax rate on adjusted income Approximately 16.0%
Adjusted Diluted EPS $2.94 to $3.00
Pfizer has announced positive data for their 20 valent vaccines, and they have entered
into a worldwide exclusive licensing agreement with Akcea Therapeutics for their new
drug. The operational improvement primarily reflects the mentioned improved revenue
outlook as well as an improved outlook for adjusted cost of sales as a percentage of
revenues, driven by a more favorable product mix than previously anticipated.
Product developments were observed in
1. Bavencio (avelumab)
2. Braftovi (encorafenib) and Mektovi (binimetinib)
3. Ibrance
4. Vyndamax
5. Xtandi
On July 31, 2019, Pfizer and GlaxoSmithKline (GSK) completed a transaction that
combined the two companies’ respective consumer healthcare business into a Joint
Venture (JV), operating under the GSK consumer healthcare name.
On July 30, 2019, Pfizer announced the successful completion of its acquisition of Array
Biopharma Inc.
