Pfizer:: Rating: Buy; Target Price: Rs1,810; Centrum

Rating: Buy; Target Price: Rs1,810; CMP: Rs1,372; Upside: 31.9%



Wyeth’s performance strong



We maintain Buy rating on Pfizer with a target price of Rs1,810 based
on 19xJune’16E EPS of Rs95.0. Though Pfizer’s Q1FY15 results were
lower than our expectations, the combined results with Wyeth were in
line with our FY15 estimates. Pfizer reported flat revenues due to
NPPP effect and the absence of Animal Health Care (AHC) business
during the quarter. The company’s EBIDTA margin improved by 330bpsYoY
to 23.4% due to overall reduction in costs. The reduction in equity
capital due to the merger with Wyeth will improve EPS.  The merged
company will have 14 strong brands and better bargaining power. Key
risks to our assumptions are stiff competition from other domestic
players and lower growth of its major brands.

$ Flat Revenues due to absence of AHC business: Pfizer reported flat
revenues of Rs2.66bn due to the absence of AHC sales. The pharma
segment (90% of revenues) grew by 9.9%YoY to Rs2.40bn from Rs2.18bn in
line with the industry growth of ~9.8%. The company’s revenues were
impacted by the price reduction of its major CVS brand Amlogard
(amlodipine besylate) which went under price control. The expected
annual hit would be ~Rs150mn. The AHC segment had nil revenues against
Rs193mn. We expect the company to report higher revenue growth in FY15
due to price increase of its products in April’14.

$ Good margin improvement: Pfizer’s EBIDTA margin improved by
330bpsYoY to 23.4% from 20.1% due to overall reduction in costs. The
company’s material cost declined by 190bps to 30.7% from 32.6% due to
the change in product mix and absence of low margin AHC business.
Personnel expenses declined by 40bps to 18.8% from 19.2% due to the
re-structuring of the sales force. Other expenses declined by 100bps
to 27.1% from 28.1%. We expect improvement in Pfizer’s margin from
economies of scale and better bargaining power due to the merger.

$ Net profit declines by 18%YoY: Pfizer’s net profit for the quarter
declined by 18%YoY to Rs462mn from Rs565mn due to lower sales growth,
lower other income and higher tax rate. Pfizer’s other income declined
by 67%YoY to Rs101mn from Rs305mn. Its tax rate went up to 34.0% from
31.1%. Pfizer is a debt-free, cash rich company and paid interim
dividend of Rs360 per share (3,600%) in December’13. We expect
superior performance for the merged company with strong brands and
price increase in April’14.

$ Recommendation and key risks: At the CMP of Rs1372, Pfizer trades at
19.1x FY15E EPS of Rs71.8 and 15.2x FY16E EPS of Rs90.5 and 12.7x
FY17E EPS of Rs108.0.  We maintain Buy rating on the scrip with a
target price of Rs1,810 based on 19x June’16E EPS of Rs95.0 with an
upside of 31.9% from CMP. We expect the merged company to report
better performance due to its strong brands and higher bargaining
power. Pfizer continues to be our top pick in the pharma sector. Key
risks to our assumptions are stiff competition from other domestic
players and lower growth of its major brands.



Thanks & Regards

Pfizer - Event Update - Internal Corporate Restructuring - positive :Centrum

Rating: Buy; Target Price: Rs1,600; CMP: Rs1,141; Upside: 40.2%



Internal Corporate Restructuring - positive



We maintain Buy rating on Pfizer with a price target of Rs1,600 due to
positive developments on  internal corporate restructuring. Two
subsidiaries of Pfizer Inc, US, Pfizer Investments Netherlands BV
(PIN) and Pfizer Corporation, Panama (PCP) will transfer their
respective holdings in Pfizer India to Pfizer East India BV,
Netherlands (PEN). The transfer of PIN holding will be done at Rs1,537
per share against the CMP of Rs1,141. PCP's holding will be
transferred as a gift for no consideration. This is a consolidation
step of Pfizer India's holdings before the proposed merger with Wyeth.
 Key risks to our estimates are slowdown in the domestic pharma market
and delay in merger with Wyeth.

$ Corporate restructuring: In this internal corporate re-structuring,
PIN will transfer 8.81mn shares (29.52% of its holding) in Pfizer
India to PEN at Rs1,537 per share. Similarly, PCP will transfer 9.38mn
shares (31.42% of its holding) to PEN as a gift for no consideration.
After these transfers, PEN will hold 18.19mn shares (60.94% of
holding) to consolidate its position in Pfizer India. The acquirer PEN
and sellers PIN and PCP are ultimately held and controlled by Pfizer
Inc, US. The proposed transaction will take place on or after 28th
February'14. The transfer price of Rs1,537 has been arrived at from
the weighted average market price of Rs1,340.72 for a period of 60
trading days preceding the date of issue of notice.

$ Fair valuation ratio: The recommended share swap ratio of 10 shares
of Wyeth for 7 shares of Pfizer is fair to minority shareholders of
Wyeth.  The valuation methodology is based on market values, trading
multiple and discounted cash flow (DCF). The ratio has been arrived at
after considering the payment of interim dividend. Pfizer has paid
interim dividend of Rs360 per share and Wyeth Rs145 per share. Interim
dividends were paid on 13th December'13. Hence, the shareholders of
both companies have benefitted.

$ Parent's holding to decline: The parent company Pfizer Inc, US
currently holds 70.8% in Pfizer India and 51.1% in Wyeth India. As per
the recommended swap ratio the parent company's holding would come
down to 63.9%. The merged company will have 2.9%MS in the domestic
pharma market and will rank second among MNC pharma companies after
Glaxo SK Pharma. The merged company will have a combined field force
of 2,320. Of these 2,000 will be from Pfizer (including 675 for Wyeth)
and 320 from Wyeth.

$ Valuations and key risks:  We expect this internal corporate
restructuring to help consolidate the parent company's holding in
Pfizer India.   We expect the merged company to report consistent
performance due to strong growth of its thirteen major brands and
strong field force in the domestic market. We have valued the stock at
18xDec'15 EPS of Rs88.9 and arrive at a target price of Rs1,600 with a
40.2% upside from CMP. Key risks to our estimates are slowdown in the
domestic market and delay in merger with Wyeth.



Thanks & Regards

--
--

Pfizer - Wyeth Merger :Centrum

Rating: Buy; Target Price: Rs1,530; CMP: Rs1,605; Upside (ex-interim.div.) 22.9%





Set to derive synergies of merger



We maintain Buy rating for Pfizer with a price target of Rs1530 (excl.
interim div. of Rs360) from Rs1640 due to the announcement of merger
with Wyeth. We expect the merged entity to rank second among the MNC
pharma companies with MS of 2.9% in the domestic pharma market. The
merged entity will have 13 brands in the top 300 and will be able to
attract the best talent. We have revised our FY14 and FY15 EPS
estimates based on the merger ratio of 7:10. Our target price is based
on 18x Sept’15 EPS of Rs84.8. Key risks to our estimates are slowdown
in the domestic pharma market and lower demand for the company’s
products.

Pfizer - Q1FY14 results update - Centrum

Strong margin improvement
Pfizer’s revenues and EBIDTA for Q1FY14 were marginally below our
expectations but net profit was in line. The company reported a growth of
10%YoY in revenues, 430bps in EBIDTA margin and 56%YoY in net profit
before EO items. As per AIOCD data, Becosules, Magnex and Minipress-XL
reported over 20% growth. The company has re-structured its marketing
function based on therapeutic categories leading to an improvement in
EBIDTA margin. Pfizer is unlikely to get majorly impacted by the New
Pharma Pricing Policy (NPPP) as seven of its eight major brands will be
outside price control. The company has cash per share of Rs480. We have a
Buy rating for the scrip and revised target price from Rs1,397 to Rs1,494
(based on 17x FY15 EPS of Rs87.9).
Moderate Revenue growth: Pfizer reported 10%YoY growth in revenues from
Rs2.43bn to Rs2.66bn in Q1FY14. The company’s pharma business was flat at Rs2.18bn.
Pfizer Animal Pharma Private Ltd (PAPPL) revenues grew by 865%YoY from Rs20mn to
Rs193mn. Other operating income including from services grew by 25%YoY from
Rs228mn to Rs286mn.
Strong margin improvement: Pfizer’s margin for Q1FY14 grew by 430bps from 12.5%
to 16.8% due to the decline in personnel and other expenses. Its material cost
increased by 280bps from 29.8% to 32.6% of revenues due to the change in product
mix and an increase in imported material cost with the depreciation of the rupee.
Personnel cost declined by 170bps from 24.2% to 22.5% due to the restructuring of the
marketing function. Other expenses declined by 540bps from 33.5% to 28.1% of
revenues. Personnel cost for the quarter included VRS of Rs 89mn against Rs14mn.
Excluding VRS, EBIDTA margin would have grown by 700bps from 13.1% to 20.1%.

On a growth path Pfizer :: Centrum

On a growth path
Pfizer’s results for Q4FY13 were better than our expectations. The company reported a growth of 3%YoY in revenues, 60bps in EBIDTA margin and 20%YoY in net profit before EO items. Sales growth was 19% on like-to-like basis due to the divestment of Animal Healthcare (AHC) business during the year. Pfizer is a cash rich, debt-free company with cash/share of Rs480. The company has declared Rs12.5 per share as regular dividend and Rs20.0 per share as special dividend from the divestment of AHC business, giving a dividend yield of 3%. We have a Buy rating for the scrip and a revised target price from Rs1,290 to Rs1,397 (based on 17x Sept’14 EPS of Rs82.2).

Sales growth lower: Pfizer reported 3%YoY growth in revenues from Rs2.73bn to Rs2.82bn in Q4FY13. Pharma business revenues (84% of total) grew by 10%YoY from Rs2.16bn to Rs2.37bn. Pharma growth was in line with the industry growth of ~11%. Its services and other business (16% of revenues) grew by 120%YoY from Rs201mn to Rs441mn. The AHC business posted no revenues against Rs354mn earlier. On a like-to-like basis, sales growth was 19%YoY.

Margin improves: Pfizer’s margin for Q4FY13 improved by 60bps from 18.6% to 19.2% of total revenues due to the decline in other expenses. Its material cost declined marginally by 10bps from 33.4% to 33.1% of net sales. Personnel cost increased by 420bps due to increase in manpower and annual increments. Other expenses declined by 460bps from 35.3% to 30.7% due to rationalisation measures.

Pfizer, Q3FY13 Result Update :: Centrum

Disappointing results
Pfizer reported disappointing results for Q3FY13, showing a decline of 5%YoY in revenues, 370bps in EBIDTA margin and 11%YoY in net profit before EO items. The sales growth of the pharma segment was 1% due to slower growth of four key brands, Corex, Becosules, Gelusil and Dolonex. The introduction of new products in the domestic market is likely to drive growth. We have a Buy rating for the scrip with a revised target price at Rs1,290 (based on 17x FY14E EPS of Rs75.9) with an upside of 16.9%.

Slow domestic growth: Pfizer reported 5%YoY decline in total revenues from Rs2.70bn to Rs2.57bn due to slower growth of the pharma business and divestment of AHC business. The pharma business (86% of revenues) grew by 1%YoY from Rs2.18bn to Rs2.20bn. AHC revenues were ‘nil’ against Rs340mn. The services business grew by 100%YoY from Rs183mn to Rs366mn.

Margin under pressure: Pfizer’s EBIDTA margin declined by 370bps YoY from 19.3% to 15.6% mainly due to the increase in personnel cost. Material cost declined by 30bps from 30.5% to 30.2% of revenues due to the change in product mix with the absence of AHC products. Personnel cost grew by 340bps YoY from 17.8% to 21.2% due to increase in field force and revision in salaries. Other expenses grew by 40bps from 32.5% to 32.9% due to higher marketing expenses.

Margin improves Pfizer results Q2FY13: :: Centrum

Margin improves
Pfizer results for Q2FY13 were in line with our expectations. The company
reported 7%YoY decline in revenues, 500bps improvement in EBIDTA margin
and 19%YoY growth in net profit despite lower growth of pharma business.
The sales growth of pharma segment was flat due to slower growth of four
key brands namely: Corex, Becosules, Gelusil and Dolonex. The introduction
of new products in the domestic market is likely to drive growth. We have
revised the rating from Neutral to Buy and maintained the target price at
Rs1,325 (based on 17x FY14E EPS of Rs77.9) with an upside of 16.9%.
Slow domestic growth: Pfizer reported 7%YoY decline in total revenues from
Rs2.90bn to Rs2.69bn due to slower growth of the pharma business and
divestment of AHC business to its 100% subsidiary. The pharma business (89%
of revenues) was flat at Rs2.40bn. AHC revenues were ‘nil’ against Rs326mn.
The services business grew by 60%YoY from Rs177mn to Rs283mn.
Good margin improvement: Pfizer’s EBIDTA margin improved by 500bps
YoY from 17.9% to 22.9% due to overall decline in expenses. Material cost
declined by 140bps from 34.7% to 33.3% of revenues due to the change in
product mix with the absence of AHC products. Personnel cost declined by
50bps YoY from 17.4% to 16.9% due to lower incentives to field staff and
credit of Rs40mn from the retirement scheme. Other expenses declined by
320bps from 30.0% to 26.8% due to lower ad spend and lower new product
launches.

Pfizer India - Riding the brandwagon; Initiating with a Buy :: anand rathi,

Pfizer India
Riding the brandwagon; Initiating with a Buy
Continued support from a strong parent and brand equity are Pfizer’s
backbone. Focus on expanding branded generics business in emerging
markets and higher productivity on account of field force addition in
past two years are key growth drivers, going forward. Further, the
company’s strong cash position is sure to give it enough leverage to
grow the inorganic way. Thus, we initiate coverage on Pfizer with a
Buy rating and price target of `1,518.

Pfizer :Slower sales growth affects results :Centrum

Slower sales growth affects results
Pfizer results for Q1FY13 were lower than our expectations. The
company reported 7%YoY decline in revenues, 270bps decline in
EBIDTA margin and 41%YoY decline in net profit due to lower growth
of pharma business and the divestment of animal healthcare (AHC)
business. The sales growth of the pharma segment was 4%YoY due to
slower growth of three key brands. The introduction of new products
in the domestic market is likely to drive growth. Pfizer is a debt free
company with cash per share of Rs300. We have revised the rating
from Buy to Neutral with a target price of Rs1,325 (based on 17x
FY14E EPS of Rs77.9) with an upside of 4.9%.
Slow domestic growth: Pfizer reported 7%YoY decline in total revenues from
Rs2.61bn to Rs2.43bn due to the slower growth of pharma business and
divestment of AHC business to a 100% subsidiary. The pharma business (90% of
revenues) grew by 4%YoY from Rs2.10bn to Rs2.18bn. AHC revenues were ‘nil’
against Rs315mn.
Margin under pressure: Pfizer’s EBIDTA margin declined by 270bpsYoY from
16.0% to 13.3% due to the rise in personnel cost and other expenses. Material cost
declined by 280bps from 32.6% to 29.8% of revenues due to the change in product
mix and the absence of AHC products. Personnel cost increased by 100bps YoY
from 22.3% to 23.3% due to lower sales growth. Other expenses were up by
450bps from 29.1% to 33.6% due to the additional expenses of Rs15mn related to
the contract field force and brokerage of Rs20mn related to the new office.

PFIZER INDIA : Target 1,771 :: Anand Rathi

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PFIZER INDIA                                          Price  1230                                                                                          Target 1771

Company Description

~ Company Description

Pfizer is a subsidiary of Pfizer Inc. US the worlds largest pharma giant. Its business segments include pharma, & services. The pharma business comprises of manufacturing and trading of bulk drugs and formulations and also includes rendering of marketing services. The animal health business has a presence primarily in the large animal health and poultry market segments, and also includes rendering of marketing services. The services - clinical development operations primarily include conducting clinical trials, new product development and undertaking comprehensive data management for new drug development. Pfizer`s product portfolio includes therapeutic classes from vitamins supplements and nutritionals to antibiotics and cardiovasculars.

Investment Argument

~Brand Equity

~Strong Product Portfolio

~Increasing Penetration

~Strong Parent support

~Wyeth merger with Pfizer could be potential trigger

~Business Segments

~Valuation & Key Trigger

  

Valuation & Key Trigger

Pharma major Pfizer Ltd (India) has approved setting up of a new subsidiary as part of plans to hive off the company's animal health business. The board has approved the incorporation of a wholly owned subsidiary in Maharashtra "with a view to spin off its animal health business to such entity as a pre-step to subsequent sale to a wholly-owned subsidiary of Pfizer Inc.

This process is a part of a global internal re-organisation, taken up by its parent Pfizer Inc in July 2011, under which it was reviewing strategic alternatives for its global animal health business.

American media reported in July 2011 that Pfizer is officially looking to sell or spin off its animal health and nutritional units and they appointed JP Morgan & Morgan Stanley to explore the opportunities and expected to complete the sale in 24 months time frame. (http://dealbook.nytimes.com/2011/07/07/pfizer-puts-animal-health-and-nutrition-businesses-on-the-block/)

An independent Global research firm has valued Pfizer Animal Health Division is likely to fetch $14 billion to $18 billion in a sale which is almost 3.5 to 4 times of its FY11 sales ($ 4184mn). Indian Animal division of Pfizer India has sales of $ 23.34 and which gives the business value of $ 93.368mln (Rs. 4668.4 mn).

On a valuation matrix stock is trading at EV/EBIDTA of 11.54 (1yr. Fwd. basis) while peer group is trading around 16-18 range. Pfizer is in process of launching different generic drug in a country which will boost top line and bottom line going forward. We valued the company based on 18x and arrived a price target of Rs. 1771 which is 44% upside from current level.

Globally animal division OPM is 48% while India’s animal segment OPM is around 12-16% while pharma business OPM is more than 20%. Wyeth merger and sales of animal division can be key catalyst for the stock.

Thanks & Regards

Biocon: Biocon-Pfizer deal off :: Kotak Securities PDF Link

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http://www.kotaksecurities.com/pdf/indiadaily/indiadaily14032012.pdf


Biocon: Biocon-Pfizer deal off
` Recap of the deal signed in October 2010
` Near-term financial impact may be limited only if there is no change in
revenue recognition policy
` Pfizer - an important partner for Biocon
` Downgrade to ADD (was BUY); TP Rs280 (Rs380 earlier), 14X FY2013E
(16X earlier)

Q3FY12 Result Update Pfizer Buy Target Price: Rs1,483 ::Centrum

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Q3FY12 Result Update

Pfizer

Buy

Target Price: Rs1,483

CMP: Rs1,224

Upside: 21%

Lower sales growth, better margins

Pfizer’s Q3FY12 numbers were below our expectations due to 4%YoY sales growth. The company’s EBIDTA margin improved by 70bps and net profit grew by 11%YoY. Pfizer has realigned its marketing team with the addition of 200 MRs from Wyeth and created a new marketing team for the diabetes segment. The recently introduced insulin brands are doing well in the domestic market. Pfizer has established a 100% subsidiary to hive off its animal healthcare (AHC) business in line with the global re-structuring of AHC business.  We reiterate Buy with a target price of Rs1483 (based on 19x FY13 EPS).

m  Lower sales growth of pharma division: During the quarter, Pfizer reported 4%YoY growth in total revenues from Rs2.61bn to Rs2.71bn due to lower sales from the pharma division. The results are strictly not comparable as the previous quarter ended Nov’10. Pharma sales (81% of revenues) grew by 6%YoY from Rs2.06bn to Rs2.18bn. AHC sales (12% of revenues) grew by 13%YoY from Rs302mn to Rs340mn. However, clinical services (7% of revenues)  revenues declined by 27%YoY from Rs249mn to Rs183mn.

m  Margin improves by 70bps: Pfizer reported 70 bps YoY improvements in EBIDTA margin from 18.5% to 19.2% mainly due to the decline in material cost and other expenses. Its material cost declined by 240bps YoY from 32.8% to 30.4% of total revenues due to the change in product mix. Its personnel cost increased by 270bps YoY from 15.1% to 17.8% of total revenues due to the addition of field force and transfer of 200 MRs from Wyeth. Pfizer’s other expenses declined by 100bps YoY from 33.6% to 32.6% due to improvement in productivity of field force. The company’s net profit grew by 11%YoY from Rs436mn to Rs483mn due to margin improvement & rise in other income.

m  Good upside from insulin products: Pfizer has successfully launched two insulin brands in the domestic market. The company sources these products from Biocon. Pfizer has created a dedicated field force for the anti-diabetic segment and has plans to launch more products in this segment. It is also giving a thrust to its hospital business and rural marketing.

m  Growing in line with the market: As per IMS MAT-November’11, Pfizer grew by 14% in line with the market growth of 14%. Eight of the company’s products appear in the list of top 300 brands in the domestic market. Pfizer’s Lyrica and Claribid grew by 28% and 37% respectively in the domestic market.

m  Hives off AHC business:  In line with the international re-structuring to focus on pharma business, Pfizer has created a 100% subsidiary to hive off its AHC business. The AHC business contributes around 12% to the consolidated revenues.

m  Merger with Wyeth: In line with the international merger, Wyeth would merge with Pfizer in India. The merged company would rank 9^th in the domestic market and 4^th among MNC pharma companies in India. The merged company would have 13 products in the top 300 products (8 from Pfizer and 5 from Wyeth).

m  Reiterate Buy: We have maintained our EPS estimates for FY12 and for FY13.  We expect the company to benefit from good growth of its brands, launch of new products in the domestic market and expected merger of Wyeth. At the CMP of Rs1224, the stock trades at 18.8x FY12E EPS of Rs65.2and 15.7x FY13E EPS of Rs78.0. We reiterate Buy with a target price of Rs1483 (based on 19x FY13E EPS).

Thanks & Regards, 

Pfizer Ltd Growth trajectory intact - Maintain Accumulate :Emkay,

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Pfizer Ltd

Growth trajectory intact - Maintain Accumulate

ACCUMULATE

CMP: Rs1,325                                        Target Price: Rs1,574

---

n     Decent performance by Pfizer with a) Revenue up by 11% QoQ to Rs2.9bn, b) EBIDTA up by 23% QoQ to Rs516mn and c) PAT increased by 14% QoQ to Rs470mn

n     Pharma revenue growth on a like-to-like basis was at 13% led by volume increase (9-10% growth) and price increase (3% growth)

n     The company has launched insulins for diabetic patients from Biocon’s portfolio in the Indian market. We expect stronger traction from this opportunity going ahead

n     On back of good growth in formulations business & launch of Biocon’s Insulin, we maintain our target price of Rs1574 (20x FY13 EPS of Rs78.7) on the stock

Pfizer's branded generics: Would the end be as strong as the beginning?:: Credit Suisse

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● Pfizer India has significantly stepped up launch of branded
generics (products sourced from other Indian peers) now with total
launches expected to almost double this year compared to 20
launches in the last year. Even next year, Pfizer hopes to maintain
a similar launch rate. In 2Q12, Pfizer launched 11 branded
generics vs four launches in 1Q12.
● These launches are part of Pfizer’s strategy to fill portfolio gaps in
the existing therapies (such as anti-infectives and CNS) and also
to enter new therapies such as anti-diabetes (already entered oral
form through branded generics and insulin through Biocon).
● Pfizer has been more aggressive than GSK Pharma on both
number of launches (GSK aiming at 3-5 branded generics launches
per year) and on pricing. As discussed in CS sector report on 18-
Oct-11 ‘Stay the course,’ we do not view impact of MNCs expansion
as a near-term risk for larger Indian firms and the impact should be
offset/diluted by market share gains from smaller companies. Our
discussions with doctors suggest that they at least take 1-2 years to
switch medicines in chronic therapies.
● Sun should report a strong 2Q12 quarter as Hospira in its results
mentioned yesterday that price erosion on Taxotere has been only
55% vs CS assumption of 70% (vs 45% in the Jun-11 quarter). Our
published net profit expectation for the quarter is Rs4,714 mn.

Pfizer Ltd Sustainable growth trajectory - Maintain Accumulate ::Emkay

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Pfizer Ltd

Sustainable growth trajectory - Maintain Accumulate

ACCUMULATE

CMP: Rs 1,471                                       Target Price: Rs 1,574

---

n     Decent performance by Pfizer with a) Revenue up by 16%* to Rs2.6bn, b) EBIDTA up by 16%* to Rs419mn and c) APAT increased by 16%* to Rs412mn

n     Pharma revenue growth was better than industry growth led by volume increase (11% growth) and price increase (3% growth)

n     Anti-infective segment grew below industry rate at 12.5% due to increased competition from peers. The company has added 300 people across its 2 new divisions - CNS & Diabetes

n     On back of good growth in formulations business & launch of Biocon’s Insulin in the coming quarters, raise the target price to Rs1574 (20x FY13 EPS of Rs78.7). Maintain Accumulate

Biocon : increase PT to Rs430, maintain BUY. says Kotak Securities

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Biocon monetizes its insulin portfolio, out licensing of oral insulin awaited.
Biocon capitalizes its first-mover advantage worldwide in biosimilar insulin through a
strategic deal with Pfizer. Upfront payment of US$200 mn does not surprise us given
that Biocon (1) sells biosimilar insulin across emerging markets (10-14% of Biocon’s
sales) and is in lead globally in commercializing in developed markets (has started Phase
III in EU, potential launch date, 2012E) and (2) will remain responsible for development
costs. While launch of insulin in EU is some time away, we believe payments linked to
Pfizer’s sales across developing markets are not likely in FY2012E due to time required
for registration. We believe out licensing of oral Insulin is a strong near-term stock
trigger. We increase PT to Rs430, maintain BUY.


Pfizer gets worldwide commercialization rights to Biocon’s insulin portfolio
As per the deal, Pfizer attains worldwide commercialization rights to Biocon’s insulin portfolio.
Pfizer will have exclusive rights globally; however, in certain markets such as Germany, India and
certain developing markets, Pfizer will have co-exclusive rights. According to Pfizer, Biocon was
selected as a partner due to (1) first-mover’s advantage in biosimilar insulin with products being
sold across emerging markets, (2) Biocon is in the lead globally in bringing biosimilar Insulin to
market across developed markets, and (3) manufacturing scale. According to Pfizer, Biocon has
adequate capacity for Pfizer’s global supplies for next five years. Pfizer expects to commercialize
Recombinant Human Insulin in Europe in 2012 followed by US in 2016.
With Biocon in the lead globally in insulin, upfront payment of US$200 mn does not surprise us
Upfront payment of US$200 mn does not surprise us given that Biocon (1) is in the lead globally in
biosimilar insulin. Biocon is conducting phase III trials for Recombinant Human Insulin in EU and
phase I in US with possible launch date of 2012 in EU and 2016 in US, (2) has two products in
market—human insulin in emerging markets and Glargine in India and two insulin products in
development, and (3) will remain responsible for clinical development, regulatory approval and
supply of products. However, while this payment is not linked to any milestone, we believe it will
be staggered over FY2011-12E. In addition, Biocon will also get payments of up to US$150 mn
and payments linked to Pfizer’s sales across markets worldwide.
We add cash/share to PT, maintain BUY with PT of Rs430, out licensing of oral insulin awaited
While launch of insulin in EU is still some time away, we believe payments linked to Pfizer’s sales
across developing markets is not likely in FY2012E due to time taken to register products. We
believe out licensing of oral Insulin post completion of Phase III trials in India (expected early 2011E)
is a strong near-term stock trigger. We leave our estimates unchanged, add cash/share to our PT.
We maintain BUY with PT of Rs430 (was Rs400).

Religare on Pfizer: Heading for a stronger & sustainable growth trajectory

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Pfizer Ltd
Heading for a stronger & sustainable growth trajectory
We initiate coverage on Pfizer India (PFIZ) with a BUY and a Sep ’11 target
price of Rs 1400 (25% upside). Despite its strong parentage, PFIZ has been
unable to record robust growth in the past. However, to boost growth and
increase penetration in the Indian market, it has spruced up its sales force
sizably. This move, we believe, will benefit PFIZ immensely, given its strong
brand building capabilities. Field force expansion and new product launches
would push up growth rates to 17-19% over the next two years (from flat
growth in CY07-CY08 and 11-13% in CY09-CY10). Also, EBITDA margins,
which are currently under pressure, are likely to expand 350bps over this
period as the sales force becomes more productive. Overall, we estimate a 20%
earnings CAGR, and thereby higher return ratios, over CY10-CY12E.
Valuations, at a PER of 14.1x CY12E are attractive. This apart, when its merger
with Wyeth materialises, PFIZ will corner a rank in the top10 slot domestically.
Expect 18% CAGR over CY10-CY12: Since the last few quarters, PFIZ has
consistently increased its field force (added over 1,000 people). This is likely to
aid a growth of 18%/21% in its core pharma business (87% of sales in CY10) in
CY11/CY12 against 12-13% in the past two years. Overall, we estimate 18%
revenue CAGR over CY10-CY12E.
Margin recovery ahead: Over CY08-CY10, PFIZ is likely to report 12% higher
revenues but 29% higher staff costs. However, an improving product mix would
limit the margin contraction to 260bps. We estimate the margin profile to
improve in sync with rising staff productivity.
Expect 20% earnings growth, higher return ratios over CY10-CY12: Higher
revenues and margins would enable PFIZ report a 20% earnings CAGR over
CY10-CY12. Also, an improvement in operating performance would increase its
return ratios from 15.6% to 17.4% over this period.
Attractive valuations; Buy: The stock is currently trading at a PER of 17.5x/14.1x
CY11E/12E earnings. These valuations are attractive, given the positively shifting
growth trajectory. Our target price of Rs 1400 is based on 18x Sep ’12 earnings,
a 22% discount to the sector lead GlaxoSmithKline Pharma (GSK), given PFIZ’s
lower return ratios. PFIZ’s target multiple is also at a 12% discount to its
historical trading mean.
Key risks: a) Higher competition in the domestic market. b) Regulatory hurdles. c)
Higher loans/advances to a privately held group company. d) High concentration
risk (two products generate ~30% of sales) e) Higher product launches by parent
through privately held companies.

Emkay: Pfizer Ltd Downgrade earnings estimates

Pfizer Ltd

Downgrade earnings estimates; Maintain Hold

Hold

CMP: Rs 1,093                                       Target Price: Rs 1,100

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n     Pfizers Q3CY10 performance was disappointing except on sales front with a) Revenue of Rs2.4bn (in-line), b) EBIDTA of Rs523mn (est. Rs557bn) and c) APAT of Rs435mn (est. Rs478mn)

n     Lower other income, higher employee cost and one time professional fees impacted operating profitability

n     Tweak earnings by 5% each for CY10/11E. Maintain Hold