Pfizer (PFE, Financial) announced a halt on all its vaccines sales operations in China. This was after an import license for one of its top selling treatments did not get renewed.
China is the world’s No. 2 drug market. The medical opportunities outweigh those in Brazil, India and Russia combined. Even in light of this, drug manufacturers have found difficulties obtaining the proper approvals for selling medication in the country. Many pharmaceutical executives say this is due to overburdened regulators adding red tape to the importing of drugs into the Chinese market.
Only vaccine
According to Reuters, Pfizer spokeswoman Trupti Wagh said, “Based on a careful assessment of this situation, we have decided to cease our vaccines’ commercial operations in China at this time, effective immediately.” There was no clear framework in place, but Wagh assures the public, Prevenar 13 will return to the market in some form with approval from Chinese regulators.
The vaccine’s name is Prevenar, and this is the only vaccine sold by Pfizer in the Chinese market. The Chinese fast-growing healthcare market is extremely attractive for global drug manufacturers, medical technology and hospital developers who are all vying for that slice of the medical bill that will touch $1 trillion by 2020.
While the pause on its vaccine business is immediate, this move has no consequence on its other operations in the country. Pfizer’s global revenues from the Prevenar bracket of products was $4.5 billion last year, an increase of 12% compared to 2013, according to Pfizer’s annual report. The annual report also highlighted ‘strong operational growth’ in the country.
Potential in the market
There is a rising concern in the medical industry of it being difficult to get medication approved owing to China’s rigid drug approval processes.
Prevenar helps prevent pneumococcal disease, an infection that could lead to illnesses such as pneumonia and meningitis. According to Pfizer’s Wagh, this drug is the only vaccine approved to treat children below the age of 2 for pneumococcal disease in China.
According to a report, a year ago, Pfizer was trading at a much higher level with the gross profit margin measuring in at 82.73%. Regardless of Pfizer’s high profit margin, the stock has managed to drop from the same time in 2014. Despite Pfizer’s mixed results from its gross profit margin, their net profit margin of 9.36% is much favorably compared to the rest of the industry’s average.
Analysis
Despite certain setbacks in the market, Pfizer Inc. has been given a BUY rating across the board. Being one of the most aggressive advertisers in the global healthcare segment, coupled with a high brand value and dedicated consumer base, Pfizer’s stock is one of the attractive bets to stay invest in and a must-have in any investment portfolio aiming high growth for the investor. Pfizer’s strengths lie in its largely solid financial position with reasonable debt levels, good valuation levels, sharp rise in stock value in the last 12 months and expanding profit margins. The company’s sub-par growth in net income can be outweighed by the above strengths.
