Pfizer (NYSE:PFE) delivered one of its strongest performances in a long time last year. Its stock jumped more than 20% in 2018, handily beating the broader market indexes. The big pharma company capped off the year with a solid fourth quarter that beat Wall Street estimates.
But Pfizer also disappointed investors with its 2019 guidance. The drugmaker's executives spoke a great deal about its priorities for this year and the future in Pfizer's Q4 earnings conference call on Tuesday. What might be ahead for Pfizer over the next three years? Here's what investors can expect.
A tough 2019
Don't look for Pfizer to grow this year. And that applies to both the top and bottom lines. The midpoints of Pfizer's revenue and earnings guidance for 2019 actually reflect slight decreases from the company's 2018 results. Pfizer CFO Frank D'Amelio explained why: a $2.6 billion headwind from products that have lost or soon will lose exclusivity, and a $900 million negative impact from foreign exchange rates.
There's no question that 2019 will be a tough year for Pfizer as it deals with the loss of exclusivity for its blockbuster drug Lyrica. On the bright side, though, the company should still manage to deliver a flat year-over-year performance despite huge headwinds, thanks to a strong lineup of drugs including Ibrance, Eliquis, and Xeljanz.
Pfizer should also make progress this year on key fronts that set the stage for future success. Several regulatory approvals could be handed down in 2019. The most important of these is the expected FDA approval in July of tafamadis in treating transthyretin amyloid cardiopathy. Pfizer also expects to report results from key late-stage clinical studies of promising pipeline candidates, including pain drug tanezumab and its JAK1 inhibitor for treating atopic dermatitis.
Another tough year in 2020
New Pfizer CEO Albert Bourla acknowledged in his comments during the Q4 earnings call that 2020 would also be a tough year. Bourla said the impact of the loss of exclusivity (LOE) for Lyrica will continue to hurt Pfizer into next year.
Pfizer probably won't provide guidance for 2020 until next January. However, the consensus is that the drugmaker will see flat earnings growth again next year. D'Amelio stated that Pfizer will "need to work our way through 2020" as it copes with the loss of exclusivity for Lyrica, adding later that 2020 will be "a challenging year."
But Pfizer could begin to see some improvement in the second half of 2020. Bourla mentioned "the pivotal moment that is happening after the June-July of 2020" -- an allusion to when year-over-year comparisons should look better because Lyrica loses exclusivity in June 2019.
A terrific turning point in 2021
2021 is a different story altogether. D'Amelio said Pfizer expects to generate solid revenue growth and even stronger earnings growth beginning in a couple of years. He called 2021 as "an inflection point in the rhythm of the business."
There are several reasons 2021 will be a terrific turning point for Pfizer. The negative impact of products that have lost exclusivity will decline sharply. D'Amelio even referred to 2021 as the start of an "LOE free" period. Pfizer's pipeline, which Bourla said the company views as its "greatest pipeline ever," should deliver several new drugs with blockbuster potential.
In addition, Pfizer's already-approved drugs should spread their wings even more by 2021. Ibrance's next growth phase should stem from use as adjuvant therapy in treating breast cancer. Prostate cancer drug Xtandi should pick up momentum in earlier treatment settings. Emerging markets, particularly China, should boost business for Pfizer's Upjohn subsidiary, which focuses on off-patent branded and generic medicines.
Patience should pay off
Pfizer appears to have a pretty good strategy to move past its current challenges. Could the big drugmaker make a significant acquisition to jump-start growth even before 2021? Bourla said Pfizer would "never say never." However, he also stated that a large deal could derail Pfizer from executing on its strategy.
Bourla thinks Pfizer's job right now is to "stay the course." He's confident that the company's products and pipeline candidates will deliver solid growth within the next couple of years. In the meantime, Pfizer plans to continue rewarding shareholders with a growing dividend.
Investors wanting immediate growth probably won't be attracted to Pfizer. But for those who are willing to wait a couple of years, and receive a dividend yielding over 3.5% along the way, patience should pay off.