Buy Pfizer Inc. (PFE): Oncology Catalysts and Strong Fundamentals

Pfizer Inc. (NYSE:PFE) is moving this month after Morgan Stanley gave a bullish rating to the stock, citing decent valuation and chances of growth. Morgan’s analyst David Risinger increased his price target for Pfizer to $39 from $35. He also upped his rating for the stock to “Overweight” from “Neutral”. The analyst said breast cancer drug Ibrance is the top growth catalyst for Pfizer, as its competitors are under pressure due to safety issues. He also likes the stock due to M&A possibility and the benefits following a tax reform in the US.

Pfizer Inc. (NYSE:PFE) is expecting Ibrance sales to come in at $5 billion-$6 billion by the end of 2020, while sales are then expected to surge to $11 billion in 2023.

But Pfizer isn’t totally relying on Ibrance. Two of the most important projects Pfizer is working on are Phase 3 trials of PALLAS (a cancer drug), and of a standard endocrine therapy. Pfizer’s overall pipeline looks strong. The company’s CFO recently said that out of 30 anticipated approvals, Pfizer expects that 15 have a potential to be blockbusters. Investors are bullish on Pfizer’s strength in the oncology market. Pfizer expects Xtandi (prostate cancer drug) to be a blockbuster. As of the end of 2015, Oncology market value reached $107 billion. With several strong products and growth prospects, Pfizer Inc. (NYSE:PFE) is all set to gain value.

Analysts also think that the Wall Street is underestimating the growth prospects of Ibrance. Sales of Ibrance increased by a whopping 67% in the second quarter. The treatment still has a very little presence outside the US, where breast cancer is spreading swiftly. Novartis’ Kisqali was challenging in the start but the drug has now lost steam due to reports of massive side effects.

Analysts think that the Street’s concerns of patent expiration of Ibrance and Eliquis are overblown. Pfizer Inc. (NYSE:PFE) has had dealt with Loss of Exclusivity (LOE) issues in the past. But the company is slowly narrowing its losses due to patent expirations. This year, Pfizer is expected to lose about $3.5 billion due to LOE, and $2 billion per year through 2020 starting from 2018. The loss due to the LOE problem will decline to just $1 billion in 2021.

Pfizer Inc. (NYSE:PFE) is up over 9% since the start of the year. The stock has a dividend yield of over 3.5%, which is impressive when compared to the company’s peers.