Free Pharmaceutical Sales Resume by rgq65570

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									The Pharmaceutical
Industry
Presented to Geoffrey Poitras
Bus 417
Thursday, March 16, 2006
Agenda
 Industry Analysis   Sarah Vefghi
 Merck               Richard Li
 Aventis             Nicole Yau
 Pfizer              Taraneh Ahrabian
Industry Analysis
Market Leaders, Regulatory
Bodies, Industry-wide Issues,
and Future Trends
Typical Value Chain of a
Pharmaceutical Product using
Biotechnology
 Discovery of             Marketing of
 the Product               the Product
Top Ten Companies
In Terms of Market Capitalization

   Pfizer                       182.15 B
   Johnson & Johnson     180.88 B
   GlaxoSmithKlein              141.87 B
   Roche Holding                135.28 B
   Novartis                     128.65 B
   Sanofi-Aventis               122.80 B
   Astra Zeneca           75.70 B
   Merck                          72.71 B
   Eli Lilly & Co.        64.67 B
   Wyeth                          62.78 B


Source: Yahoo Finance
Top-Selling Drugs, 2004
(US Only)
   Lipitor (Pfizer)                         $7.7B
   Zocor (Merck)                            $4.6B
   Prevacid (Abbott Laboratories)           $3.8B
   Nexium (AstraZeneca)                     $3.8B
   Procit (Ortho Biotech)                   $3.2B
   Zoloft (Pfizer)                          $3.1B
   Epogen (Amgen)                           $3.0B
   Plavix (Bristol-Myers Squibb)    $3.0B
   Advair (GlaxoSmithKlein)                 $2.9B
   Zyprexa (Eli-Lilly)                      $2.8B

Source: IMS health
Top-Selling Drugs, 2004
(Global)
   Lipitor (Pfizer)                            $12.0B
   Zocor (Merck)                               $ 5.9B
   Plavix (Bristol-Myers Squibb) $ 5.0B
   Nexium (AstraZeneca)                 $ 4.8B
   Zyprexa (Eli-Lilly)                  $ 4.8B
   Norvasc (Pfizer)                     $ 4.8B
   Advair (GlaxoSmithKlein)             $ 4.7B
   Erypo (Ortho Biotech)                $ 4.0B
   Prevacid (Abbott Laboratories)       $ 3.8B
   Effexor (Wyeth)                      $ 3.7B

Source: IMS health
       Therapeutic Class Breakdown
         Cholesterol: Sales in the US in $ thousands

Rank          Drug         2005          2004          2003          2002          2001

Class total                $16,010,920   $15,592,602   $13,894,757   $12,496,154   $11,006,308

1             Lipitor      $8,399,533    $7,746,955    $6,804,854    $6,116,171    $5,165,850

2             Zocor        $4,381,611    $4,597,781    $4,399,563    $4,099,135    $3,500,183

3             Pravachol    $1,724,129    $2,001,587    $2,035,540    $1,793,978    $1,549,669

4             Crestor      $830,150      $609,045      $53,853       *****         *****

5             Lovastatin   $261,616      $192,146      $165,777      $84,267       $5,686
    Therapeutic Class Breakdown
    Cont…
              Proton Pump Inhibitors/Stomach Acid (US sales, $
              thousands)
Rank            Drug         2005          2004          2003          2002          2001

Class Total                  $12,852,128   $12,717,451   $13,020,888   $11,469,581   $9,927,509

1               Nexium       $4,352,092    $3,789,754    $3,074,833    $1,944,948    $507,313

2               Prevacid     $3,784,552    $3,854,954    $4,070,358    $3,582,523    $3,457,069

3               Protonix     $2,377,496    $2,374,994    $1,865,819    $1,168,755    $660,851

4               Aciphex      $1,247,670    $1,329,731    $1,296,022    $1,025,522    $738,163

5               Omeprazole   $543,432      $679,786      $1,204,521    $91,771       *****
    Theraputic Class Breakdown
    Cont…
              Antidepressants (US sales only, $ thousands)

Rank           Drug            2005          2004          2003          2002          2001

Class Total                    $12,501,029   $13,389,505   $13,170,384   $11,622,163   $11,421,888

1              Zoloft          $3,084,635    $3,149,054    $2,912,770    $2,582,327    $2,254,131

2              Effexor XR      $2,572,845    $2,612,375    $2,135,076    $1,535,200    $1,090,440

3              Lexapro         $2,104,152    $1,761,198    $1,003,054    $99,383       *****

4              Wellbutrin XL   $1,483,816    $1,060,680    $124,452      *****         *****

5              Cymbalta        $667,345      $80,702       *****         *****         *****
Sales Data


  Sales in prescription drugs increasing
     Up 5.4% in 2005 from 2004
     Sales of $251.8B
  Generic Growth up 20.6% during 2005



  Source: IMS health
 2003 Pharmaceutical Sales by
 Region
World Audited      2003 Sales    % of Global    % Growth
Market             ($ billion)    sales ($)    (constant $)

North America         229.5         49%           11%

European Union        115.4         25%            8%

Rest of Europe        14.3           3%           14%

Japan                 52.4          11%            3%

Asia, Africa and      37.3           8%           12%
Australasia

Latin America         17.4           4%            6%


TOTAL               $466.3         100%            9%
New Drug Development
The New Drug Approval Process
The FDA
   Government regulatory body for the industry

   Imposes requirements on product testing, safety, effectiveness,
   and marketing of pharmaceutical products

   Monitors for proper manufacturing and labeling standards

   Also responsible for food, medical devices, and cosmetics
   products

   The FDA approval does not mean a product is harmless
Source: fda.gov, prev presentation
New Drug Application
The FDA
  FDA reviewer’s key decisions:
     “Whether the drug is safe and effective in its proposed
      use(s), and whether the benefits of the drug outweigh the
      risks.
     Whether the drug's proposed labeling (package insert) is
      appropriate, and what it should contain.
     Whether the methods used in manufacturing the drug and
      the controls used to maintain the drug's quality are
      adequate to preserve the drug's identity, strength, quality,
      and purity.”

  Source: www.fda.gov
Drug Approval Process
  Average of 10 - 15 years and $800 million - $1 billion to nurture
  a drug from initial discovery to market
Process:
      Academic and Laboratory Research

      Testing done on animals

      Phase 1: Drug given to a small number of healthy people to test
       its safety

      Phase 2: Drug administered to 100 or more people with the
       disease that it was intended to treat

      Phase 3: Rigorous testing done on larger groups of ill patients

      FDA Review – Approval/Disapproval

   Source: www.fda.gov (and prev. presentation)
Pre Clinical Tests
The beginning of the drug approval process
To see the potential effects on humans, tests are
performed on:
    Isolated tissues
    Cell Cultures
    Animals


Company decides whether to put the drug into the
human testing process, based on the marketability of
the product, their financial situation
On average, only one compound in a thousand will
actually make it to human testing
The IND Filing

 The goal is to provide pre-clinical data of sufficient quality
 to justify the testing of the drug in humans
 FDA has 30 days to review the Investigational New Drug
 (IND) application
 Must be filed annually until the completion of clinical
 testing
 At this time patents are usually applied for; patents last
 generally for 20 years
 About 85% of all IND applications move on to begin clinical
 trials
 If they succeed, 20% chance of the product making it to
 the market
Phase I
  Duration: 1 to 3 years
  Sample size: less than 100 patients
  Test on: Healthy volunteers
  If passed this Phase, chances of the product
  reaching to the market will be 30%
  Begins to analysis and develop the drugs
  safety profile
  How the drug is absorbed, metabolized and
  excreted
Phase II
  Duration: 2 years
  Sample size: 100 – 300 patients
  Test on volunteers who suffer from the
   disease
  Upon passing this Phase, chances of the
  product reaching to the market will be 60%
  To evaluate the drug's safety and assess side
  effects
  Establishes the optimal dosage of the drug
Phase III
 Duration: 3-4 years
 Sample size: >1000 patients
 Test on volunteers who suffer from the disease
 If passed this phase, chances of the product reaching
 to the market will be 70%
 Verifies the drug’s effectiveness in its intended use
 Assessment of long term effects
NDA Filing

  Upon desirable results from Phase III, New Drug
  Application (NDA) will be submitted
  NDA contains data supporting the efficacy and safety
  of the drug
  Approval can take 2 month to several years, but on
  average, it takes around 18 to 24 months
  Drugs are subject to ongoing review, making sure no
  adverse side effects appear from the drug.
  After FDA’s approval, the drug can be marketed and
  distributed
Patent
   Generally last 20 years
   Since most companies file for patent during pre-clinical trials,
   usually the patent is only good for another 10 years or so after it
   gains FDA approval
   What can be patented
     Product
     Method

     Use



   Examples
     DNA and RNA sequences

     Proteins, enzymes, antibiotics

     Antibodies, antigens

     Micro-organisms, cell lines, hybrids
Key Points about the Clinical
Process
  To bring a drug through all phases of the clinical
  trial process, it costs around:
      $800 M - $1 B
      10-15 years

  Key factors that determine the quality of a
  company's pipeline:
    one or more successful products on the market

    a large pipeline of candidate drugs with some in
     late-stage
    enough cash to fund the development of their
     new drug candidates
Drug Discovery Process
Drug Approval in Canada
   Health Canada is in charge of new drug
   approval
       Works “in tandem” with FDA
   Manufacturer must file New Drug Submission
   (NDS)
   Two generation reproduction studies are
   needed
   Notice of Compliance granted if NDS is
   satisfactory
Source: ctv.ca
Facts and Figures
Advertising Costs

  $1.3B spent on magazine advertising last
  year

  $2.4B spent on cable and television network
  last year
Research and Development
Costs

  $ 39.4B spent on R&D in 2005 by
  PhRMA members
     Up from $37B in 2004
     Up from $2B spent in 1980
Generic Drug Sales
Prescriptions
Industry Market Capitalization


Healthcare Industry        2558.25 B


Major Drug Manufacturers   1060.70 B


Source: Yahoo Finance
Industry Ratios
Major Drug Manufacturers and the Healthcare Sector



       Healthcare Sector:
 P/E       ROE%   DIV. YIELD   LT DEBT TO   PRICE TO   NET      PRICE TO
                               EQUITY       BOOK       PROFIT   FREE CASH
                                            VALUE      MARGIN   FLOW

 18.82 13.24 1.57              0.01         12.16 8.94 -49.27
Troubles the Pharmaceutical
Industry is Facing
Patent Expiration

   2006: Patents expire on $17 billion in sales
   for prescription drugs

   Expected loss of $25 billion in sales over the
   next three years for “blockbuster” drugs

   Expected loss of $40 billion expected in total

Source: IMS health
Patent Exposure
Patent Protection
   However, drugs may have several patents

       Specific   delivery method
       Specific   product/molecule
       Specific   manufacturing process
       Specific   medical indication
          How molecules react
       Specific Combination
          Fixed dose/combination of several molecules

Source: www.southcentre.org
Drug Backlash
  People needing medical attention are
  increasingly rejecting manufactured
  drugs
     Push towards more natural healing
      methods to avoid unpleasant side-effects
     Natural Healing is growing and becoming
      big business
  Food is being used as a substitute for
  medication
Substitutes for Drugs -
Examples
 Dark chocolate is being pegged as the
 next new thing to combat blood pressure
 and prevent heart problems – could it
 replace Aspirin?
 Cherries and berries are being used by
 many elderly people with mild arthritis
 rather than joint medication
Drug Substitutes cont…
  Olive oil, fish oil, and flax seeds are
  being used to treat high cholesterol
  “Cleansing” methods involving apple
  juice and olive oil are being used to
  pass gallstones
     Surgery – and the subsequent medication
      needed – are being shoved aside
Image Issues
  Pharmaceutical companies depend on
  ailments to succeed
     This can create an image problem, as
      patients have become far less trusting
  Pharmaceutical companies are being
  accused of withholding potentially
  valuable preventative and alternate
  healing information from patients
Pricing Problems
  American Association of Retired Persons disagreeing
  with price increases:
  Prices up 7.1% for brand-name drugs in 2004
     inflation was only 2.7%
  Lipitor could increase price by 5% next year
  From 1999-2004, Drug prices increased by 35.1% on
  average; inflation was only 13.5%
  Generic drug prices increased only 0.5% in 2004
     More competition



  Source: Ad Med News
Safety Issues
  People worry about side-effects of
  drugs
     Example: Accupril, a blood pressure
      medication, may cause kidney disease
      and/or failure
  Patients worry than side-effects may be
  worse than the original problem being
  treated
Safety Issues cont…


   The Vioxx crisis sent the Pharmaceutical
   Industry into a tailspin
       There are questions as to whether or not patients
        can ever trust that their medications are safe.
   The Industry is now left to recover from a
   “Case of Bad PR”



Source: Businessweek.com
Drug Instructions

  There are worries that people who are
  immigrants (and therefore speak different
  languages) or who are illiterate cannot
  properly read instructions
  Taking drugs improperly can lead to the drug
  not being effective or worse: overdose
     Side-effects can be magnified
     Immediate Death may result

  Source: msn.com, Does Intelligence Really Matter?
Drug Instructions Cont…

  Around 300,000 adverse drug effects take place each
  year in US hospitals alone
  Many undesirable drug effects are preventable
  FDA will introduce new prescription drug instructions
     Known in industry as “Package Inserts”
     First revision in 25 years

  Source: www.phrma.org
Generic Growth

    Generic prescriptions grew from 33% in 1990 to 54%
    in 2004
    Global generic sales estimated to grow from $29
    billion in 2003 to $49 billion in 2007
    Ave. brand-name drug price: $84.21
    Ave. generic drug price: $30.56
        Generic manufacturers retain $5 more in profits


Source: IMS health
Trends
Aging Population:
Baby Boomers
  This could be a new opportunity for the
  Pharmaceutical Industry
     Baby boomers will be needing more
      medical care, including medication
     Baby boomers want to continue living full,
      active lives into old age, and there is room
      for the Pharmaceutical Industry to help
      them
Market
Arthritis
  46 million adults (non-institutionalized) in the U.S. (2003)
  21% of adults (non-institutionalized) in the U.S. (2003)
Cancer
  23 million suffering worldwide. Estimated of 1.37 million people in the US were
   diagnosed with cancer in 2005
  about 1 in 3 lifetime risk; 38% of women and 43% of men
  The average cost of cancer treatment is well over $100,000 per person.
  Estimated $280 billion spent on treatment drugs for cancer annually. More than
   $100 Billions in US
Diabetes
  Estimated 18.2 million people in the United States, or 6.3% of the population
   (2005)
  165 million cases worldwide (2003)
  $132 billion spent in direct and indirect costs in America (2002)
Heart Disease
  25 million adults in the US
  Heart disease and stroke cost US around $214 billion annually. ($115 billion
   direct) (2002)
Weight Loss Drugs

  FDA panel recently approved an over-
  the-counter fat-blocking drug
     Manufactured by GlaxoSmithKlein
     Is not a “magic bullet” – users will still
      need to control what they eat
        Potential for misinterpretation by patients
Weight Loss Drugs cont…
   The Pharmaceuticals track record for “magic”
   diet pills is quite poor
       Fen- Phen – a very, very dangerous diet drug that
        needed to be pulled off the shelves brought the
        dangers of diet pills to light
   However, if a truly safe, “magic bullet”-type
   diet drug were produced, it would most likely
   become the best-selling drug of all time


Source: Dr. Andrew Weil, Eating Well for Optimum Health
Bottling Food
  To keep up with the “natural healing”
  trend, many companies are making pills
  out of foods with healing properties
     This is good for patients who cannot eat
      the actual food to due allergies,
      sensitivities, or taste issues
     Purity of pill can be an issue; it is important
      to read labels carefully
North America vs. Europe
Market Cap Trends
   Pfizer dropped from 205.1B in 2004 to
   182.15B as of early 2006
   Roche has risen from 87.4B to 135.28B in the
   same amount of time
   European Pharmaceutical Companies are
   putting much more emphasis on Research
   and Development – not so with North
   American firms

Source: The National Post, Financial Post, January 21, 2006
Ethical Issues with Drug Testing
 SFBC International Inc. is the largest private
 centre for drug testing in North America
 US senate is cracking down on SFBC
    Questions as to whether or not they are truthfully
     reporting methodologies and results of clinical trials
    Questions as to whether or not they are truthfully
     reporting their financials
Ethical Issues cont…
  The Miami-Dade County Unsafe Structures
  Board has also cracked down on the SFBC
     They are giving them a chance to correct “defects”
      at their facility in Miami
  There was fear that there is a lack of safety
  and integrity over their testing methods
     Participants may have been subject to unsafe and
      dangerous situations


  Source: Bloomberg.com
Does the SFBC’s Problem
Really Impact the Industry?
  It is forcing people to think about the
  way their over-the-counter and
  prescription drugs are being tested
  Bloomberg.com is covering this in an
  ongoing report titled “Big Pharma’s
  Shameful Secret” – putting a less-than-
  flattering spotlight on the industry
In Summary…
 What to look for in a pharmaceutical
 company
     Promising new drugs in the pipeline
     Patents on existing “blockbuster” drugs
        Patents on the drug itself
        Patents on the development, delivery
     Success and track record of existing drugs
Mission statement
  To provide society with superior products and
  services by developing innovations and
  solutions that improve the quality of life and
  satisfy customer needs, and to provide
  employees with meaningful work and
  advancement opportunities, and investors
  with a superior rate of return.
Company Overview
  a global research-driven pharmaceutical company
  dedicated to putting patients first. Established in
  1891, Merck discovers, develops, manufactures and
  markets vaccines and medicines to address unmet
  medical needs. The company devotes extensive
  efforts to increase access to medicines through far-
  reaching programs that not only donate Merck
  medicines but help deliver them to the people who
  need them. Merck also publishes unbiased health
  information as a not-for-profit service
Management Committee
 Richard T. Clark, CEO and president, Merck & Co., Inc., 2005; (1972)
 David W. Anstice, president, Human Health-Asia Pacific since 2005 (1974)
 Marcia J. Avedon, Ph.D., senior vice president, Human Resources since 2003(2002)
 Willie A. Deese, president, Merck Manufacturing Division since 2005(2004)
 Kenneth C. Frazier, senior vice president and general counsel since 1999 (1992)
 Peter S. Kim, Ph.D., president, Merck Research Laboratories (MRL) since 2003 (2001)
 Judy C. Lewent, executive vice president and chief financial officer since 2005 (1980)
 Adel A.F. Mahmoud, M.D., Ph.D., chief medical advisor, Vaccines and Infectious Diseases,
 Merck Vaccine Division (MVD) since 2005 (1998)
 Margaret G. McGlynn, president, Merck Vaccine Division (MVD) since 2005 (1983)
 J. Chris Scalet, senior vice president, Global Process and Services, and Chief Information
 Officer since 2006
 Bradley T. Sheares, Ph.D., president, U.S. Human Health since 2001 (1987)
 Per Wold-Olsen, president, Human Health - Intercontinental since 2005 (1973)
Executive Compensation
Company Statistics

   Market Capitalization: $77.07 Billion

   Total Sales Worldwide: $22.01 Billion

   Total Shares Outstanding: 2.2 Billion

   Stock price: $35.23 (March 15, 2006)

   Total employee hired worldwide: 61,500 (Dec
   2005)
   --approximately 31,900 employed in the US
    Geographic Revenue Segments
                                   Revenues by Region (2003-2005)

                      25000.0

                      20000.0                                       All Other Countries
Millions of Dollars




                      15000.0                                       Japan

                      10000.0                                       Europe,Middle East and
                                                                    Africa
                       5000.0                                       United States

                          0.0
                                2005       2004        2003
                                           Year
Revenue Drivers
        Major Products I

                              Zocor
#2 selling cholesterol drug in the world

Zocor reduces cholesterol by blocking an enzyme in the liver
helps produce cholesterol

$4.4 billion sales worldwide (2005)
-drop 16% from $5.2 billion in 2004
-represent 20% of the company revenue
-lost patent in Canada and some European countries (2003)

Will lose patent in US (June 2006)
-expect a huge sales decline
-only $2.3 to $2.6 billion for 2006
            Major Products II
                        Fosamax
Most prescribed osteoporosis medicine in the world

Inhibits bone removal by osteoclasts (cells that break down
bone material)

$3.2 billion sales worldwide (2005)
-14.5% of total sales

Will lose patent in US (Feb 2008)
-expect a huge sales decline after that time
     Major Products III
                    Cozaar / Hyzaar
High blood pressure drug

Cozaar is a angiotensin II antagonists (AIIAs)

Angiotensin is a hormone that causes blood vessels to narrow

Cozaar is 2nd most prescribed AIIA in US and the top-seller in Europe

Hyzaar, Cozaar and a diuretic, removing water from the blood and lessens blood
pressure

$3 billion sales worldwide (2005)
- 8% increase over 2004
-13.6% of total revenue
        Major Products IV
           Singulair

Drug for chronic asthma and relief of
symptoms of allergic rhinitis

$3 billion sales worldwide (2005)
 - 13% increase over 2004
 - 13.6% of total sales
             Joint Ventures
 Sanofi-Aventis S.A. in 1997
(provide pharmaceuticals and vaccines for animals)




 Sanofi Pasteur S.A. in 1994
(develop and market vaccines in Europe)



-
Johnson & Johnson in 1989
(develop and market nonprescription medicines for U.S. consumers)
Joint Ventures II

  Astra AB (Astra) in 1982
 (develop and market Astra products in US)
 -Equity income of $833.5 million in 2005, $646.5 million in 2004

  Schering-Plough in 2000
 (develop and market new prescription medicines in the cholesterol management and respiratory
   therapeutic areas in US)
 -Equity income of $570.4 million in 2005, $132.0 million in 2004

  H. Lundbeck A/S in 2004
 (Exclusive development and commercialization of a sleep disorder drug )

  Bristol Myers Squibb in 2004
 (jointly develop clinical and marketing strategy for a diabetes drug)
Acquisitions & Divestitures

 Increased ownership of Banyu from 51% to 99.4%,
 costing $1.5427 billion (2003)
  -Japan is the world’s second largest pharmaceutical market
  -Banyu is one of Japan’s top 10 pharmaceutical companies
  -strengthens Merck’s position in Japan


 Acquired Aton Pharma (2004)
  -privately-held biotech
  -novel treatments for cancer and other serious diseases
Acquisitions & Divestitures II
Medco Health Spin-Off(2003)
-Medco: high volume, low margin mail-order pharmacy
-Merck shareholders get 0.1206 share of Medco per Merck
  share


Sold its 50% stake in J&J/MSD Europe
to J&J for $244 million
 -continue to benefit through royalties
 - regain the rights to potential future products that switch
   from prescription to over-the-counter status in Europe
New Corporate Strategy
  Called “Merck’s Plan to Win”

  Developed by more than 200 of Merck’s
  senior managers

  Announced on Dec 15, 2005
       Merck’s Plan to Win
 Focusing the research and development
 efforts on nine priority disease areas
-Nine disease areas: Alzheimer’s disease, atherosclerosis, cardiovascular
 disease, diabetes, novel vaccines, obesity, cancer, pain and sleep
 disorders


-Become acknowledged leader in treating or preventing disease by
    1) building scientific leadership in these areas
    2) pursuing acquisitions and licensing opportunities that help
       their work in the labs
    Merck’s Plan to Win
completely redefining discovery and
development process

-redefining our research and development model

-increasing the productivity of our pipeline

-use the most advanced scientific techniques to
 improve our rates of success throughout the R&D
 process
Current R&D Pipelines
R&D Expenditures
          Merck’s Plan to Win
    create a new commercial model to provide all the customers the
    right information, at the right time, in the right way
- more information resources through easily accessible channels
    1) Internet 2) health professionals

- two products per sales representative
     1) focused and more value

- A more targeted consumer education

-   expect to reduce the company’s US spending per brand by 15%-20%
     within next 5 years
  Merck’s Plan to Win
Emerging pharmaceutical markets

- build a long-term leadership position
  in those markets

- double the sales in those markets to $2
Billion
    by 2010
        Merck’s Plan to Win
create a lean and flexible cost
structure
- includes all general and administrative processes, global
  commercial processes, product development and lifecycle
  management process and developing partners to which
  they can outsource non-core activities

 eg. sell or close five manufacturing sites and two preclinical
 sites and cut 7,000 positions world-wide by the end of 2008
RISK Factors
   Vioxx
$2.5 Billion annual sales in 2003
 -#1 arthritis and acute pain medicine outside the US
 -#2 in the US

Use >18months will cause heart attack and stoke

Voluntarily withdraw worldwide (Sep 30, 2004)

share price dropped from $45.07 to $33.00(one day)

$27 billion in market cap was erased
Vioxx
 9,650 Vioxx liability lawsuits has been filed (Dec 31, 2005)

 19,100 plaintiffs has involved (Dec 31, 2005)

 The company spent $285 Million in legal defense during 2005

 Increase the reserve amount to $685 Million for legal fees
 through 2006 and 2007 (Dec 2005)

 Unpredictable outcomes in lawsuits, substantial damages, fines,
 criminal penalties
Patents’ Expiration
Other Risk Factors
  Failure in developing and acquiring commercially successful
  products
    - decline in sales of Zocor and fosamax needs
       new pipeline

   Failure in regulatory approval

  Competition from other products
  1) More efficiency 2) price pressure

  Unexpected future changes in government laws and regulations
Financial Results
Financial Highlights
Key Ratios
Stock Chart (6 Months)
Stock Chart (3 Years)
Stock Chart (5 Years)
Statement of Income
Balance sheet (Part I)
Balance sheet (part II)
Statement of Cash Flows (Part I)
Statement of Cash Flows (Part II)
Summary
Pros
• lots of cash
• Maybe cheap
Cons
• Reletively inexperienced core managements
• Tons of lawsuits against Vioxx
• Weak pipeline
• Unpredictable corporate restructuring
• Key revenue drivers near expiration
• Foreseeable intense products’ competition
Recommendation



    SELL
Company Overview
Headquartered in Paris, France
# 1 in Europe, # 3 worldwide in the
pharmaceutical industry
Present in more than 100 countries
throughout the 5 continents.
5,3% Market share
Total number of shares: 1,401,306,569
Capitalization (€): 105,238,126,592
 as of 3/2/ 06
History
  Formed in Aug 20, 2004 when Sanofi-
  Synthelabo merged with Aventis
  Sanofi- Synthelabo was formed in 1999
  when Sanofi merged with Synthelabo
  Aventis was formed in 1999 when
  Rhone-Poulenc S.A. merged with
  Hoechst Marion Roussel
Management
  Chairman and CEO: Jean- FranDeputy
  Compensation paid: € 2.74 million
  Granted 740,000 stock options
  Senior Executive VP: Gerarad Le Fur (02-08)
  Compensation paid: € 1.73 million
  Granted 377,000 stock options
  Executive VP : Hanspeter Spek
  Senior VP : Jean-Claude Armbruster, Gilles Brisson, Pierre
  Chancel, Gilles Lhemould, Helnz -Werner Meler, James
  Mitchum, Christian Lajoux, Marie-Helene Lalmay, Jean-Pierre
  Kerjouan, Oliver Jacquesson, Nicole Cranois
  CEOG Finance: Jean-Claude Leroy
  Shareholder Relations: Pierre-Michel Bringer
  Investor Relations: Sanjay Gupta
Note: 4,185,530 options granted -> senior management
   7 Therapeutic Areas
Cardiovascular: Aprovel® Avapro®
 Function: anti -hypertension
Thrombosis: Plavix® Lovenox® Clexane®
 Function: anticoagulant
Oncology: Taxotere® Eloxatine®
 Function: Cancer treatment
Metabolic Disorder : Lantus ® Amaryl®
 Function: Insulin for diabetes
Central Nervous system : Stilnox®/ Copaxone®
 Function: Insomnia, reduce frequency of relapse
Internal medicine : Allegra® Ketek ® Telfast®
 Function: Anti- infectives
 Vaccine
  Major Revenue Drivers
   Products      sales Q4 05   Q4 05 %   Sales FY 05   FY 2005 %
   Lovenox         € 572         9%        € 2143       13.80%
   Plavix          € 518       16.90%      € 2026       20.20%
   Taxotere        € 425       15.50%      € 1609       12.80%
   Eloxatin        € 423       19.50%      € 1564       30.60%
Stilnox/Ambien     € 430       19.10%      € 1519       10.60%
   Allegra         € 160       -58.50%     € 1345       -9.10%
    Lantus         € 345        45%        € 1214       47.50%
   Tritace         € 285         4%        € 1009       2.40%
  Copaxone         € 256       24.90%       € 902       13.90%
   Aprovel         € 231       13.20%       € 892       0.70%
   Amaryl          € 135       -28.60%      € 677       23.80%
   Actonel          € 89       18.70%       € 364       4.60%
  Depakine          € 80       2.60%        € 318       18.40%
    Xatral          € 91       24.70%       € 328       -2.10%
   Nasacort         € 72       -5.30%       € 278        14%
    Total          € 4112      6.80%       € 16188      16.80%
Selected Key Products
Lovenox – treatment for thrombosis
Selected Key Products
Lantus: 24 hr insulin for metabolic disorder
(blockbuster drug for Sanofi-Aventis)
Revenue by business segment &
Geographic area




    Cardiovascular/Thrombosis: 39%
    Central Nervous System: 29% ; Oncology: 11%
    Internal Medicine: 18% ; Others: 3%
Business Strategy
   Ambitious research to ensure sustainable
  growth ( R&D investments)
  Innovation for basic medicines and vaccines
  Global Presence to ensure growth
  Mobilized resources
Recent Event
  Filed lawsuit with Procter & Gamble against Roche and
  Glazosmithkline for misleading advertising about the
  osteoporosis medication (Boniva)

  Start of hearings of motion for preliminary injunction in
  the Allegra" patent infringement case. Oct27,05

  Entered into an agreement to transfer its rights of
  Exubera, an inhaled human insulin, to Pfizer. Alliance
  formed in 98, jointly developed Exubera (human insulin)
Alliance with . .
  Roche in 2006 , will develop shikimic acid by
  fermentation for Tamilflu supply chain

  Pfizer in 98, jointly developed Exubera (an inhalation
  device for recombinant human insulin)

  Bristol-Myers Squibb in 97, jointly developed anti-
  hypertensive agent: Aprovel/Avapro/Karvea

  Procter & Gamble in 97, jointly developed Actonel,
  treatment and prevention of osteoporosis .
Growth 04-05
Strongest Performance Products
in 05
New Product launch in 2005
Risk Factors
  Integration of the Sanofi-aventis and Aventis
- diverted management’s focus from other strategic
  opportunities.
  Incurred substantial debt in acquisition of Aventis.
- (16 billion at Dec2004)
  Depend on US market
- US market is dominated by major US companies
- Exchange rate risk : €/$
- Potential changes in health care policies in US
  Foreign exchange rate risk
- particularly sensitive to movements in €/$,
 £/$ and ¥/$
       R&D portfolio (Cpd in
       development)
                                              Pre-     Phase I   Phase   Phase IIb   Phase   Total
                                            clinical              IIa                 III


Cardiovascular                                 5         3         2        4          1      15
Thrombosis                                     4         1         1        3          1      10
Central Nervous
                                              10         6         3        2          7      28
System
Oncology                                       7         4         3        1          4      19
Metabolic
                                               4         4         3        2          1      14
Disorders

Internal Medicine                              9         6         4        2          1      22

Vaccines                                       9         2         4        4          2      21
                        Total                 48         26       20        18        17     129
R&D portfolio updated on January 31, 2006
2005 consolidated Income Statements
Consolidated Balance Sheet 1
Consolidated Balance Sheet 2
Cash Flow Statement 1
Cash Flow Statement 2
Benchmark Stock Indices
French pan-sector index - CAC 40
European pan-sector indices
- Dow Jones Euro Stoxx 50
- FTS Eurofirst 100, FTS Eurofirst 80
European pharmaceutical index
- Dow Jones Stoxx Pharma
American pan-sector indices
- NYSE International 100,
- NYSE World Leaders
         5 Years Stock Comparison




GSPC – S&P 500 IXIC – NASDAQ   Dow - DJI
One Year Stock History
Three Years Stock History
Financial Ratios - Price Ratios

                Sanofi - aventis Industry

   P/E                       16         N/A

   P/S                     3.88         3.58
   P/BK Value              2.35         3.36
Financial Ratios ..

                       Sanofi-Aventis         Industry

   Debt/ Equity                     0.16            0.29
   Current Ratio                        0.8          1.6
   Quick Ratio                          0.5          1.1

   Interest Coverage                                 2.9
                       N/A
   Leverage Ration                       2           2.2
   Bk Value/ Share                 19.12           10.69
Financial Ratios - Investment
Returns

 Investment Returns (in%)   SNY     Industry

 ROE                         14%
 ROA                        6.9 %       -0.7 %
                             12.1
 ROC                                    -1.2 %
                               %

 β=    0.75
DIRECT COMPETITOR COMPARISON

                      SNY          LLY          MRK       PFE          Industry

Market Cap            120.52B       64.74B       77.32B   191.01B       279.14M
Employ-ees             96,439       42,600       63,000   106,000            126
Qtrly Rev Growth      38.80%        6.40%        0.30%     -8.90%         28.30%
Revenue                34.10B       14.65B       22.01B    51.30B        26.41M
Gross Margin          74.85%       76.28%       76.61%    83.77%          81.78%
EBITDA                 12.81B        4.39B        9.28B    20.92B         -5.95M
Operatin Margins      32.09%       24.91%       26.62%    29.90%         -27.75%
Net Income              7.58B        2.00B        4.63B     8.09B        -12.26M
EPS                         2.83     1.813        2.105         1.09        -0.35
P/E                     15.91            31.6      16.8     23.82                 25
PEG (5 yr expected)         1.38         1.84      5.03         2.39         1.29
P/S                         3.54          4.4      3.49         3.72         7.35
Analysis from financial
statements
Dividend Rate = 0.78
Dividend Yield = 1.7 %
Payout Ratio = 29%
Dividend: 2003: €1.02 2004: €1.2
          2005: €1.52
Net sales:    + 9.3 %
EPS :         + 25.7% (18.2% in 2004)
Adjusted EPS: +25.7% at €4.74
( average number of shares: 1,336.5 m)
Analysis from financial statements 2
  Operating income:    +18.7% at €9,072 m
  (33.2% of net sales)

  Adjusted net income : + 26.1% at €6,335m

  Net Profit Margin:   € 18.56

  LT Debt: €4,750 (€8,654 in 2004)
 Analysis from financial statements 3

  Gross margin ratio : + by 1.2 points in 2005
- Strong sales, favorable product mix,
  purchasing efficiencies

  R&D Expenses : + 2.0% (€ 3,961 million)
- Discontinuation of some R&D collaborations
  and impact of pre-acquisition restructuring
  program
DCF Valuation
  ROE = 14% ; b = 29%
  => g = ROE * (1-b) = 0.0994

  => D(1) = 0.78 ( 1+ 0.0994) = 0.8575
Assume WACC = 12%
  DDM = D1/ (k – g) = 41.62
Recommendation




            HOLD
 French GAAP VS US GAAP
                US GAAP                        French GAAP

License                                        License
                Revenue
income                                         income

Government
                selling& general expense       cost of gd sold
levies


Require financial disclosures in US GAAP
Classification difference : eg Exceptional items and
                            intangible assets
Mission Statement
 Mission
    We will become the world's most valued company to patients,
     customers, colleagues, investors, business partners, and the
     communities where we work and live


 Purpose
    We dedicate ourselves to humanity's quest for longer, healthier,
     happier lives through innovation in pharmaceutical, consumer, and
     animal health products
Line of Business
  Pfizer Inc. is a research-based, global
  pharmaceutical company.

  It discovers, develops, manufactures
  market leading prescription medicines
  for humans and animals as well as
  many of the world’s best known
  consumer healthcare products.
Company Statistics
Market capitalization: US$191.31 billion
Average Volume (3 months): 33,466,600
Employees (worldwide): 106,000
Annual R&D expenses as a % of revenues: 14.5% in 2005
Largest markets: North America, Europe and Japan
Stock symbol: PFE (NYSE)
Stock price: US$25.95 ( closing price as of March 15, 2006)
52 week Range: 20.27 -29.21
Number of outstanding common shares: 7.53 billion
Dividend Yield: 0.81 (3.12%)
P/E: 23.59
Pfizer Performance in one
Year
Officers
 Henry A. McKinnell (1972), Chief Executive Officer (12th CEO in
 Pfizer’s history)
 David Shedlarz (1976), Chief Financial Officer, Executive Vice Chairman
 Karen Katen (1974), Executive Vice President, Vice-Chairman of Health
 Care
 John LaMattina (1977), Senior Vice President, President of Pfizer Global
 Research and Development
 Peter Corr (2000), Senior Vice President of Science and Technology
 (from Warner-Lambert)
 Yvonne Jackson (2002), Senior Vice President of Human Resources (from
 Compaq)
Executive Stock Options
Major Acquisitions
 Pharmacia
    Deal completed in April, 2003
    US$55.97 billion
       Identifiable intangible assets: US$37.07 billion
       Goodwill: US$21.40 billion
    Financing
       Issuance of 1.8 billion shares of Pfizer common stock (≈29%
        dilution)
       180 million options on Pfizer common stock
       6,000 shares of Pfizer Series A convertible perpetual preferred stock
        (convertible into approximately 15.5 million shares of Pfizer
        common stock)

 Warner-Lambert
    Deal completed in June, 2000
Geographical Division of
Revenue



 100%

 80%

 60%                         All other countries
                             Japan
 40%                         US

 20%

  0%
        2005   2004   2003
Sources of Revenue
by
Therapeutic Area
                                Cardiovascular and
               9%               metabilic diseases
         2%                     Central nervous system
                                disorders
     3%
                                Arthritis and pain
     5%

                          44%   Infectious and
    6%
                                respiratory diseases
                                Urology

   11%
                                Oncology


          5%                    Opthamoology
                    15%
                                Endocrine disorders
Major Products I
 Lipitor
    Treatment for elevated LDL cholestrol level
    best-selling pharmaceutical product in the world
    Worldwide sales of $12 billion in 2005
       An increase of 12% compared to 2004
       Accounts for 39% of all lipid-lowering prescriptions
       More than 2.5 times its next competitor

    But Lipitor performance has slowed down
       Slowdown in lipid-lowering market
       Increased competition:
              April 2006: US generic prevastitin (Prevachol)
              June 2006: generic simvastatin (Zocor)
Major Products II
 Norvasc
    World’s most-prescribed branded antihypertensive
     therapy
       4th best-selling drug in the world

    Worldwide sales of $4.34 billion in 2003
       9.60% of total company sales

    Sales increased by 5% in 2005
       Patent expirations in many EU countries
       Maintains exclusivity in Canada, US, Japan, and
       Australia
Major Products III
 Zoloft
    Most- prescribed anti-depressant in US
    #10 best selling drug in the world
    Loses market exclusivity in US in June 2006
    Since Feb 2005 Pfizer follows FDA rule of
     including a Black-Box warning that anti-
     depressants elevate the risk of suicidal thinking in
     children and adolescents
Suspension of Bextra
The market for pain- relievers changed since
withdrawal of Vioxx in Sep 2004
In April 2005 FDA decided the increased risk
of rare but serious skin reactions from Bextra
require it to be withdrawn from market
This suspension cost Pfizer $1.2 billion
One major reason for declined revenues in
2005
Filings in 2006
  Pfizer has completed 17 filings for
  approval of new medicines since 2001,
  11 of which are approved and on the
  market
Patent Expirations
          Drug   Expiration Year   Annual Sales (2005)   % of Total Sales
Zithromax          2005                     2025               4%
Zoloft             2006                     3,256             6.7%
Norvasc            2007                     4,706             9.6%
Zyrtec             2007                     1,338             2.6%
Aricept            2010                       346             0.7%
Lipitor            2010                    12187              24%
Xalatan            2011                       623            1.25%
Viagra             2012                     1,645             3.8%
Detrol             2012                       544            0.92%
Celebrex           2013                     1,730              4%
Xalacon            2015                     1372              1.5%
Genotropin         2015                       481             1.1%
Lyrica             2013                      291              0.7%
Total                                                         61%
Research & Development
Expenditure
 9,000,000.00
 8,000,000.00
                             7,684,000
 7,000,000.00
 6,000,000.00    7,442,000          7,131,000

 5,000,000.00
                                            5,176,000
 4,000,000.00
 3,000,000.00
 2,000,000.00
 1,000,000.00
        0.00
                Dec-05 Dec-04 Dec-03 Dec-02 Dec-01 Dec-00 Dec-99 Dec-98 Dec-97
Major Drugs in the Pipeline
LATE STAGE Development
HIV/AIDS (FDA fast-track
desig.)                     Maraviroc UK-427,857 a mechanistically unprecedented CCR-5 inhibitor
Schizophrenia & Bipolar     asenapine a 5HT2/D2 antagonist
Disorder                     (co-development with Akzo Nobel’s Organon healthcare unit
Malaria Treatment           Zithromax/ chloroquine
Atherosclerosis             Lipitor/torcetrapib a combination to elevate HDL cholesterol and lower LDL
Lung Cancer Treatment       PF-3512676 a toll-like receptor 9 agonist for non-small lung cancer
Cancer                      edotecarin a next-generation topoisomerse inhibitor for cancer
Cancer*                     SU-11,248 a novel angiogenesis inhibitor
COPD/ASTHMA                 roflumilast a novel anti-inflammatory agent distinct from existing treatments
Diabetes                    Exubera an inhaled insulin system
HIV/AIDS                    capravirine a novel antiviral compound active against resistant strains of HIV
Insomnia                    indiplon a unique non-benzodiazepine GABA modulator
Macular Degeneration*       Macugen a novel anti-VEGF therapy
Neuropathic
Pain/Epilepsy/Generalized
Anxiety Disorder            pregabalin a neurologic agent develoepd by Pfizer
Pipeline Expansion
  Pfizer's pipeline continues to grow and
  now consists of 235 total projects:
      including 152 novel compounds and 83
      product enhancements.


  Pipeline is now 8 percent larger than at
  the end of 2004
Torcetrapib/atorvastatin
  Combines torcetrapib (a CEPT inhibitor to raise HDL)
  with Lipitor
  Continues in Phase 3 clinical trial
  Cardiovascular disease remains #1 killer worldwide
  with a residual risk of 60 to 70%
  Pfizer’s goal to prove increasing HDL and decreasing
  LDL can reduce this risk far beyond today’s possible
  treatments
  Torcetrapib/Atorvastatin Clinical Trial Program is the
  Largest Ever Conducted by Pfizer: 25,000 Patients
  Enrolled in Studies Underway Around the World
Key Drivers in 2006
Prospects for 2006/07
  Pfizer Anticipates Sustained Growth of Existing Medicines
  and Increasing Contribution from Next Generation of
  Innovative Medicines

  Pfizer to launch six new medicines in 2006; anticipates
  excellent prospects for Sutent, Exubera, Champix
  Delivering on industry's broadest pipeline, Pfizer expects
  to file five new medicines in 2006-07:
     maraviroc for HIV/AIDS
     torcetrapib/atorvastatin for cholesterol management
     asenapine for schizophrenia
      ticilimumab for cancer and a licensed compound
Strategy to Build Shareholder
Value
  "This is a time of transformation for Pfizer and our industry," said Hank
  McKinnell, Pfizer chairman and chief executive officer.

  Productivity Enhancements

      The Adapting to Scale initiative will continue to produce substantial cost
       savings while creating a more efficient company.

  Initiatives to Enhance Shareholder Value

      Focused on three important initiatives to leverage cash flow:
         increasing our dividend payout and yield
         purchasing shares
         changing Pfizer's business portfolio, including the recently announced decision to
           explore strategic alternatives for Pfizer Consumer Healthcare (PCH).
Source: Pfizer website
Broad-Based Strategy for Success
in Evolving Global Marketplace
   R&D productivity gains driving pipeline expansion with 235 total
   projects and planned adjusted R&D expense* of $7.8 billion in 2006
   Pfizer establishing leadership in new areas of biologics and oncology;
   2006 biologics revenues of $1.5 billion expected; oncology pipeline
   has 22 mid- and early-stage candidates
   Pfizer demonstrating value of its medicines to payers through
   compelling pharmacoeconomic data; excellent formulary access
   achieved in U.S. Medicare market
   While reducing worldwide plant network from 93 to 66, Pfizer
   manufacturing investing in new technology and capacity for next
   generation of medicines
Financial Forecast Highlights:
Building Shareholder Value
   2006 Reported Diluted EPS expected to be $1.52 to $1.56

   2006 Revenues and Adjusted Diluted EPS* of about $2.00, expected to be comparable
   to 2005 including negative impact of stock-option expensing and foreign exchange

   Revenue growth expected to resume in 2007 as growth from new and in-line medicines
   more than offsets impact of loss of exclusivity

   High single-digit average annual growth anticipated in 2007-08 Adjusted Diluted EPS*

   2006 cash flow from operations expected to exceed $16 billion; continued strong growth
   in cash flow from operations anticipated over the planning period to more than $19
   billion by 2008

   Company evaluating strategic options for Pfizer Consumer Healthcare business
The Adapting to Scale Initiative
Adapting to Scale focuses on
    enhancing R&D productivity
     optimizing the field force
     consolidating our network of manufacturing plants
    optimizing the procurement of goods and services.
will continue to produce substantial cost savings
while creating a more efficient company.
Adapting to Scale Initiative Cost-
Savings
    Latest News
March 14
  Pfizer Clinician: "First Data to Show that there are Important Differences in Raising
  HDL Cholesterol Levels with Torcetrapib and Atorvastatin Depending on Whether
  it is Dosed in the Morning or Evening"

     TNT Trial Investigator: "The TNT Sub-Analysis Suggests that HDL Cholesterol
     May Also Provide Important Therapeutic Benefits that May Result in Further
     Reductions in Cardiovascular Risk"

Feb 21
   Pfizer Receives FDA Approval for Eraxis to Treat Candidemia, a Potentially Life-
   Threatening Bloodstream Infection

Feb 7
   Pfizer to Explore Strategic Alternatives for Consumer Healthcare Business

`    The objective of the review is to unlock the value of the business for Pfizer
     shareholders at a time when market valuations are attractive for large, high-quality
     consumer businesses
Performance in 2005
  Substantially impacted by loss of exclusivity in
  US of
      Difucan
      Neurontin
      Zithromax

  Suspension of Bextra sales
  Uncertainty related to Celebrex
  Collectively reduced Revenue by $5.7billion
  compared to 2004
Performance 2005 cont’nd
Total Revenue decreased by 2% to $51.3 billion
from 2004
Revenue reduction due to loss of exclusivity by
44%
These four products presented 7% as compared
to 13% of total revenue in 2004
63% decline in revenue from suspension of
Bextra sales and uncertainty about Celebrex
But portfolio of patent-protected products
includes 4 of 25 best-selling pharmaceutical
products with six market leaders in their
therapeutical area
Costs and Expenses
Cost of sales increased 13% in 2005 and decreased 21% in 2004 while
   revenues decreased 2% in 2005 and increased 17% in 2004.

   Cost of sales in 2005 compared to 2004 increased as a result of:

   unfavorable geographic, segment and product mix, and adverse

   changes in production volume, among other factors, which reflect the
   loss of U.S. exclusivity for certain pharmaceutical products
   the uncertainty regarding the selective COX-2 inhibitors
   • $124 million related to implementation costs of our new AtS
   productivity initiative
    $73 million in write-offs of inventory and exit costs related to
   suspension of sales and marketing of Bextra.
Cost & Expenses cont’d
  Cost of sales in 2004 (which includes legacy Pharmacia’s product portfolio for
  the entire period) compared to 2003 decreased as a result of:

  impact of purchase accounting in 2003, which reflected the incremental charge
  of $2.7 billion from the sale of inventory
  acquired from Pharmacia, adjusted to fair value
   merger-related cost savings
   favorable product mix

  partially offset by:
  higher product costs attributable to legacy Pharmacia products;
  and
  the unfavorable impact of the weakening of the U.S. dollar
  relative to many foreign currencies.
                                   ROE                                                                       FCF per share

      60.00                                                                   1.00
      50.00                                                                   0.80
      40.00
                                                                              0.60
Roe




      30.00                                                           ROE
                                                                              0.40                                                        FCF per share
      20.00
      10.00                                                                   0.20

       0.00                                                                   0.00
              Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec-                       Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec-
               96   97   98   99   00 01     02   03   04   05                -0.20    96 97 98 99 00 01 02 03 04 05




                                                                                                               P/E Ratio
                                 D/E Ratio

                                                                              90.00
0.70
                                                                              80.00
0.60                                                                          70.00
0.50                                                                          60.00
0.40                                                                          50.00
                                                                  D/E Ratio                                                                    P/E Ratio
                                                                              40.00
0.30
                                                                              30.00
0.20                                                                          20.00
0.10                                                                          10.00
0.00                                                                           0.00
        Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec-                             Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec-
         96   97   98   99   00   01   02   03   04   05                               96 97     98 99     00 01     02 03     04 05
                                %Sales to Industry
                                                                                                                             %Pre-Tax Profit Margin to Industry

180.00
160.00                                                                                   160.00
140.00                                                                                   140.00
120.00                                                                                   120.00
100.00                                                                                   100.00
                                                               %Sales to Industry
 80.00                                                                                                                                                                                      %Pre-Tax Profit Margin
                                                                                          80.00
 60.00                                                                                                                                                                                      to Industry
 40.00                                                                                    60.00
 20.00                                                                                    40.00
  0.00                                                                                    20.00
          De     De   De   De   De   De    De    De       De                               0.00




                                                                                                  Dec-96
                                                                                                           Dec-97
                                                                                                                    Dec-98
                                                                                                                             Dec-99
                                                                                                                                      Dec-00
                                                                                                                                               Dec-01
                                                                                                                                                        Dec-02
                                                                                                                                                                 Dec-03
                                                                                                                                                                          Dec-04
                                                                                                                                                                                   Dec-05
          c-     c-   c-   c-   c-   c-    c-    c-       c-
          96     97   98   99   00   01    02    03       04




                                                                                                                                R&D Expense as a % of Revenue
                                          Profit Margin
                                                                                               17.50
         40.00                                                                                 17.00
         35.00                                                                                 16.50
         30.00                                                                                 16.00
         25.00                                                                                 15.50                                                                                        R&D Expense as a % of




                                                                                           %
         20.00                                                           Profit Margin         15.00                                                                                        Revenue
         15.00                                                                                 14.50
         10.00
                                                                                               14.00
                                                                                               13.50
          5.00
                                                                                               13.00
          0.00



                                                                                                           Dec-97
                                                                                                                    Dec-98
                                                                                                                             Dec-99
                                                                                                                                      Dec-00
                                                                                                                                               Dec-01
                                                                                                                                                        Dec-02
                                                                                                                                                                 Dec-03
                                                                                                                                                                          Dec-04
                                                                                                                                                                                   Dec-05
                 Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec-
                  96 97 98 99 00 01 02 03 04 05
Gordon Growth Model
  DPS1 = $0.76(1+0.0821)= $0.822
  Dividend payout ratio b= 42%
  Assume WACC k= 10%
  P/E= 23.59 = b*(1+g)/(k-g)
                 g= 8.21%
         DDM: DPS1/(k-g) = $45.92
     For 2005, Pfizer’s pharmaceutical peer group consisted of the following companies:
               Abbott Laboratories, Amgen,AstraZeneca, Bristol-Myers ,Squibb Company, Eli Lilly     and
     Company, GlaxoSmithKline, Johnson & Johnson, Merck and Co., Schering-              Plough
     Corporation and Wyeth (New Peer Group).
Prior to that, Pfizer’s pharmaceutical peer group :
               Abbott Laboratories, Baxter International, Bristol-Myers      Squibb Company,
               Colgate-Palmolive Company, Eli Lilly               and Company, Johnson & Johnson,
     Merck and Co., Schering-Plough Corporation, and Wyeth (Old Peer Group).
The Fisher Approach
  Functional Factor
    Superior R&D
    Leader in 6 therapeutical areas



  People Factor
    Educated and experienced management



  Essential Investment Characteristic
    Strong competitive position

    Prospective cost-saving movements



  The Price of the stock
    12.6 % below 52 week high and 28 % above 52 week low

    High P/E ratio
Recommendation
 Excellent long-time management team
 Very Strong prospective cost-saving
 improvements
 Promising products in pipeline
 Strong R&D
 Extensive financial resources


              BUY

								
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