This should be a very interesting year for Wyeth ( WYE). The Madison, N.J., drugmaker could hear from the Food and Drug Administration on as many as six new products ranging from a kidney-cancer drug to a treatment for schizophrenia. The first word should come sometime this month, when the FDA is expected to rule on the antidepressant Pristiq. "Wyeth has an impressive portfolio of drugs and has built a decent research pipeline over the last several years," says Brandon Troegle, an analyst for the research firm Morningstar in a recent review of the company. "While we aren't incredibly enthusiastic about any particular drug, the breadth of the pipeline is significant." Wall Street has taken notice of Wyeth's prospects. Three months ago, it received eight buy recommendations and 12 hold ratings, according to Thomson Financial data. Now 12 analysts say buy the stock and seven have hold ratings. Until any new drugs contribute significant new sales, Wyeth will continue to rely on old favorites -- the pneumococcal disease vaccine Prevnar, Enbrel for rheumatoid arthritis and other diseases, the antidepressant Effexor XR, and Protonix, for severe heartburn -- to carry much of the load. Clearly, the full profit potential of new products won't be reflected this year, or even next year. New drugs could produce "pretty substantial" sales, says Jason Napodano of Zacks Investment Research. A best-case sales scenario "could set the stage" for accelerated growth in 2009 and 2010, says Napodano, who has a hold rating and a $55 price target.
Analysts polled by Thomson First Call expect this year's earnings per share to be $3.49, excluding special items, up almost 10% from their 2006 forecast. They say 2007 sales should be $21.6 billion, about 6% above last year's estimate. Wyeth will issue fourth-quarter and full-year 2006 financial results on Jan. 30. Analysts predict a fourth-quarter EPS of 71 cents and sales of $5.1 billion. Napodano says Pristiq will help Wyeth maintain a healthy depression-treatment franchise. He says clinical trials indicate that Pristiq is "on par" with Effexor XR in terms of safety and effectiveness even though "Pristiq is not a major breakthrough." He also believes Pristiq could produce $1 billion a year in sales by 2010 because treating depression is a big market. At the same time, patients respond differently to antidepressants, even those in the same drug class, meaning there's room for a newcomer. Part of Wyeth's strategy is to find many uses for a single compound, and Pristiq is at the top of the list. The ingredient in the drug, desvenlafaxine succinate, also is being tested as a treatment for fibromyalgia and nerve pain. In April, the FDA is expected to rule on a version of Pristiq for treating symptoms of menopause. If the FDA approves these three other uses, they could eventually add another $1 billion in annual sales, Napodano says.
However, certain Wyeth products won't reach the market until the FDA signs off on a company plan to fix manufacturing issues in Puerto Rico, says Herman Saftlas of Standard & Poor's. Even if the agency approves the new drugs, Wyeth can't make or sell them until the problems are corrected. "I expect the issues to be resolved this year," he says. Wyeth says it is "working cooperatively" with the agency, adding that that it has "taken a number of steps" to comply with FDA recommendations. It predicts the problems could be resolved early in 2007. "We cannot exclude the possibility that these issues will result in further regulatory action or delays in the approval of new products or release of approved products manufactured at the Guayama, Puerto Rico, facility," Wyeth said in a Nov. 6 filing with the Securities and Exchange Commission. New drugs to be made at the plant include Pristiq and Lybrel, an oral contraceptive designed to eliminate menstrual periods. Still, Saftlas says Wyeth's earnings growth "has the potential to be in the top tier of the Big Pharma sector." Saftlas has a buy rating and a price target of $58. Saftlas and Napodano doubt that two major legal issues will cause significant financial worries in the future. Diet-drug litigation costs involving Pondimin and Redux appear "to have been capped," says Saftlas. Wyeth has taken charges of $21.1 billion since the drugs were withdrawn in 1997 to defend and settle lawsuits. It had a litigation reserve balance of $3.1 billion as of Sept. 30.
Both analysts described as "manageable" the potential costs of lawsuits that claim that Wyeth's Premarin and Prempro -- for treating symptoms of menopause -- can increase the chances of developing health problems. The lawsuits are based on research that found hormone-replacement therapy raised the risk of heart attack, stroke, breast cancer or blood clots in the legs. Approximately 5,000 lawsuits had been filed as of Sept. 30 Wyeth has won one trial and lost another, but the latter verdict was overturned after a judge declared a mistrial.