Shares of Pfizer (NYSE:PFE) gained 20.5% in 2018, according to data from S&P Global Market Intelligence, while its industry was getting hammered. The iShares U.S. Pharmaceuticals ETF tanked 8.8% last year. Here's how America's largest pharmaceutical company outperformed its peers by a mile.
In a nutshell, Pfizer outdid the industry average in 2018 because investors are finally convinced this is no longer the same company that tried to buy AstraZeneca for $106 billion in 2014. For one thing, CEO Ian Read stepped down last year. But investors have other reasons to be optimistic: Smarter, smaller acquisitions since the failed bid for the British pharma are beginning to pay off, and Lyrica's patent expiration this June is the last big one until 2026.
In 2015, the company spent $17 billion to acquire Hospira, the largest supplier of sterile injectables and owner of several high-profile biosimilars. Biosimilars have gotten off to a rocky start, to say the least, and Hospira's troubled manufacturing facilities were still frustrating the FDA and causing a shortage of certain sterile injectables across the country in the second half of 2018. Despite a totally botched execution, and warehouses full of products it can't sell, Hospira businesses kicked in $4.5 billion in sales during the first nine months of the year. If Pfizer ever gets the troubled facilities it acquired up to scratch, this segment could be enormous.
The $14 billion purchase of Medivation also showed signs of success with two big approvals last year. Xtandi earned a label expansion in January to treat all castration-resistant prostate cancer patients, not just those with tumors that have already spread. In October, Talzenna earned approval to treat a large, genetically defined group of newly diagnosed breast cancer patients.
Talzenna is an easy-to-swallow tablet that significantly outperformed standard first-line chemotherapy during clinical studies. Look for a successful launch in 2019 that could begin adding $1 billion in annual revenue to Pfizer's top line by the end of the year.
In 2019, Pfizer could also launch a sorely needed new treatment for people people who inherit a faulty transthyretin gene that ends up causing heart damage. Tafamidis could give the company another blockbuster in a separate field, which means the next round of patent cliffs might be a little more spread out than last time.
Check out the latest Pfizer earnings call transcript.