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Closing In on Year End and Reviewing Pfizer as an Investment

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Part 7
Closing In on Year End and Reviewing Pfizer as an Investment PART 7 OF 10

Interesting Trend Developing for Pfizer’s Pneumococcal Franchise

Prevnar 13 franchise

Approved by the FDA on February 24, 2010, for infants and children up to 17 years of age, as well as for adults above 50 years of age on December 30, 2011, Pfizer’s (PFE) Prevnar 13 is a vaccine administered to prevent pneumococcal disease.

On July 12, 2016, the FDA further expanded Prevnar 13’s label and approved the use of vaccine for adults in the age group of 18–49 years. This approval has made Prevnar 13 the only pneumococcal vaccine that can be used across the entire lifespan of an individual.

Interesting Trend Developing for Pfizer&#8217;s Pneumococcal Franchise

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The Centers for Disease Control and Prevention notes, “Prevnar 13®, or PCV13, is a vaccine that covers 13 pneumococcal serotypes, which cause the majority of pneumococcal infections. PCV13 replaced the previous version of Prevnar®, known as PCV7, which included 7 pneumococcal serotypes.”

According to Medical News Today, “Pneumococcal disease is an infection caused by the Streptococcus pneumoniae (S. pneumoniae) bacterium, also known as pneumococcus. Infection can result in pneumonia, infection of the blood (bacteremia/sepsis), middle-ear infection (otitis media), or bacterial meningitis.”

Wall Street analysts estimate that Prevnar’s sales in 2016 will reach ~$6.1 billion, which would be a year-over-year (or YoY) decline of about 2.8%. In 2015, the Prevnar franchise accounted for ~12.8% of Pfizer’s total revenues. Similar to other pharmaceutical players such as Merck (MRK), Sanofi (SNY), and GlaxoSmithKline (GSK), Pfizer is a prominent player in the vaccine segment.

Declining demand

After the recommendation of the Advisory Committee on Immunization Practices (or ACIP) for using Prevnar 13 in adults aged 65 years of age and above, the vaccine has been administered to approximately 40% of this population segment in the US. The remaining 60% of the market is proving to be a challenge for the company.

Additionally, since the vaccine is to be delivered only once during a lifetime, there is a limited growth opportunity left in this population segment. Pfizer expects that the vaccine sales in 2016 will be slightly lower than those witnessed in 2015.

As a future growth strategy, Pfizer has planned to focus on other population segments as Prevnar has been approved to be used across the lifespan of an individual. However, the company believes that it would require ACIP recommendations to effectively penetrate into the new segments.

The low demand in the US is being partially offset by purchases from Gavi and Vaccine Alliance to be provided in emerging markets. Additionally, an increase in the number of recommendations and successful completion of reimbursement discussions can further enable Prevnar to penetrate into multiple international markets.

If Prevnar can recoup the majority of its lost revenues from international markets in the future, it may boost Pfizer’s share price as well as that of the iShares Core High Dividend ETF (HDV). Pfizer makes up about 5% of HDV’s total portfolio holdings.

In the next article, we will analyze prospects of Pfizer’s Inflammation & Immunology (or I&I) drug, Enbrel, for 2016.

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