With Viagra and Lyrica fading, analysts downgrade Pfizer due to mounting challenges

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Credit Suisse downgraded Pfizer from outperform to neutral on Friday.

Having failed twice to complete an inversion in recent years, Pfizer is in a bit of a precarious position, at least according to analysts with Credit Suisse. On Friday, the firm downgraded its rating for the pharma giant, citing a few weak points in its business going forward.

ED drug Viagra is coming off patent later this year, while nerve pain treatment Lyrica will follow at the end of next year, Credit Suisse analyst Vamil Divan wrote in a Friday note. Sales for blockbuster pneumococcal vaccine Prevnar 13 are on a slide, and breast cancer med Ibrance’s growth is slowing, he added.

Together, Viagra and Lyrica brought in $4.2 billion in the U.S. last year. Credit Suisse lowered Pfizer’s rating from outperform to neutral on Friday.

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Knowing all of this, Pfizer has made moves to “boost its inorganic growth” through takeouts of Anacor and Medivation, but drugs brought in from those moves won’t offset existing problems, according to Credit Suisse.

Eucrisa, picked up in the $4.5 billion Anacor buy and approved last year to treat atopic dermatitis, is “too small to move the needle in the near-term,” according to Credit Suisse.

Pfizer purchased Medivation for $14 billion last August, beating out rival pharma Sanofi and picking up blockbuster cancer med Xtandi. But Xtandi “is facing reimbursement challenges as well as the threat of generic versions of key competitor Zytiga” from Janssen, the analysts wrote. Lower-priced generics for Zytiga would hurt Pfizer’s pricing power in the field.

The company’s Medivation purchase followed much larger failed pursuits at AstraZeneca in 2014 and Allergan in 2016.

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Credit Suisse analysts predict Pfizer will continue to scout M&A options, but “small to midsized deals may not be significant enough to move the needle.” Further, they said, “other factors may need to be sorted out before” Pfizer can try for another large deal.

Writing in a Forbes op-ed Thursday, Pfizer CEO Ian Read made the argument that U.S. companies need a more competitive tax code to level the playing field with global rivals. Potential tax policy changes and uncertainty in Washington, D.C., are among the reasons biopharma execs have largely held off on major M&A this year.

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Down the line, Credit Suisse analysts wrote that they see “interesting” programs in the company’s pipeline, but value from those assets isn’t expected in the near term. Divan and company are “more bullish than most on the potential” from the company’s vaccine pipeline, but he pointed out that data on the company’s S. aureus shot aren’t expected until the second half of next year, while its C. diff vaccine is just starting phase 3 testing.