Research -

PFIZER

Updated Oct 25, 2002

Years	Q1-Q3 2002	Dec 2001	Dec 2000	Dec 99	Dec 98	Dec 97	Dec 96	97-01 5-yr Annual Growth
Sales (Bn US$)	25.2	32.3	29.4	27.2	23.2	19.0	17.0
Sales Growth %	9	10	8	18	22	12		14
Net Income (excl special items, Bn US$)	6.7	8.3	6.5	5.2	4.6	3.0	2.7
Special items, Bn US$		-1.8	-2.8
Earning Growth %	15	28	25	13	53	10		25
Net Profit Margin %	27	26	22	19	20	16
Gross Margin %	86	84	83	80	79	78
Operating Income (Bn US$)	8.7	11.1	8.7	7.0	4.4	4.0	3.6
Operating Income Growth	12	27	24	59	10	10		23
Return on Equity %
R&D (Bn US$)	3.7	4.8	4.4	4.0	3.3	2.5
R&D / Sales %	15	15	15	15	14	13
EPS	1.07	1.31	1.02	0.82
EPS Growth %	17	28	24

* Results are come from ongoing operations excluding special items and merger related costs.
Pfizer's EPS projections:      2002 - $1.58
Price: US$ 31.9                 (Oct 25, 2002)
P/E:              25                  (based on EPS $ 1.30, the average of 3 years: 2000, 2001 and 2002(projected) )

Profile

- The world's largest pharmaceutical compaany after merger with Warner-Lambert in 2000
- Revenues in 2001 is $32 billion
- the company expects to have compound annual EPS growth of 15% for 2003 and 2004.
- drugs account for about 90% of the revenue and the balance is from animal health and consumer products
- it has the largest sales force among the leading drug makers
- products are in 3 major areas: heart disease, infectious disease and central nervous system disorders.
- stock code: PFE

Is it in a great potential market which could lead to a sizable increase in sales for at least several years? Does it have a strong demand? How big is the market?

1. The aging population in developed countires and the growing middle class in newly developed countries provide a very steady growth in the demand of health care products. The health care industry itself will have a good expansion in long term.
New discovery of better drugs could create more demand.
2. After the merger, Pfizer is the market leader in the area of heart diseases, which is the number one killer in all diseases.
3. The company has one of the best product pipeline in the drug industry. About 4 new drugs are expected to launch in the coming 2 years. Annual sales would be about $1 billion each.

Is it a monopoly-type business?

Same as other drug makers, the products are well protected by patents. Each big pharma is actually operating at various restricted market segments and has limited competition. Most of Pfizer's drugs are market leaders in their specific areas and have patents from 2004 - 2013. Therefore its earnings in these years could be more predictable. Its profit margin and growth would be relatively guarenteed.

What makes the company different from its competitors? How does the company sustain its competitive advantages?

1. The major competition among drug makers is their product development. After merger with Warner-Lambert, it has become the largest drug company in the world. It has the largest amount of money being spent on R&D. This gives them a great advantage on the drug development over its competitors.
What makes Pfizer become the top leader in Pharmaceuticals is their emphasis on R&D. Their R&D expenses is about 15% of its revenues, much higher than the 10% in Merck. Therefore it has a strong pipeline of drugs under research which ensures their future growth. Besides, its research department is very market oriented. That is why its drugs are mostly best selling products in those big markets with huge demand.
2. In biotech area, it has alliance with Inhale and wholly owns a subsidery Agouron. Pfizer will also benefit from the development of biotechnology.

Does the company have worthwhile profit margin?

Its profit margin is about 16-22%, which is better than 15-17% in Merck.

Major Products on the Market

Trade Mark	Q1-Q3 2002 Sales Bn$	2001 Sales Billion US$	Target	Q1 2002 % Change	2001 % Change	Remarks
Lipitor	5.7	6.4	Lower Cholesterol	+24%	+28%	46% in the US market share
Norvasc	2.8	3.6	Anti-Hypertension	+6%	+7%	The best selling medicine for hypertension
Zoloft	2.0	2.4	Depression	+14%	+11%
Zithromax	0.9	1.5	Antibiotic	-2%	+9%	2nd largest antibiotic
Viagra	1.2	1.5	Male Impotence	+13%	+13%	Most widely prescribed for erectile dysfunction
Neurontin	1.6	1.7	Anticonvulsant - for brain disorders	+27%	+31%
Diflucan	0.8	1.1	Anti-fungal	+3%	+5%	The world's leading prescription anti-fungal medicine
Alliance (Celebrex, Aricept & Bextra)	1.1	1.4	Rheumatoid Arthritis	+16%	+19%	Collaborated with Pharmacia, Celebrex is #1 prescribed arthritis drug
Zyrtec	0.8	1.0	Allergy	+15%	+42%
Geodon	0.14	0.15	General anxiety, schizophrenia, mostly in young people	+29%		Launched in Sweden & US in 2001

All have patent protection from 2004 -2013.

Other Products:
Consumer Products: $ 5.3 billion (+0%)
Animal Health: $ 1.0 billion (-3%)

Major Development Products

Trade Mark	Disease	Status	Remarks
Relpax	Migraine headache	received approvable letter from FDA	Approx. 240 million people suffering in the world
Vfend	Serious fungal infections	Launched in Aug 2002
Exubera (Inhaled Insulin, Biotech drug)	Diabetes		Collaborated with Aventis & Inhale
Pregabalin	Pain & psychiatic disorder	planned to file in 2002

Inhaled Insulin and Relpax are expected to have $1 billion annual sales each. Vfend would be near $1 billion.

Useful Links
www.pfizer.com www.fool.com www.multex.com

How does it make money?

Does the management have a determination to continue to develop products that will further increase total sales when the growth potentials of currently attractive product lines have largely been exploited?

What makes the company different from its competitors? How does the company sustain its competitive advantages?

How effective are the company's research and development efforts in relation to its size?

Does the company have an above-average sales organization?

Does the company have worthwhile profit margin?

What is the company doing to maintain or improve profit margin?

Does the company have outstanding labor and personnel relations?

Does the company have outstanding executive relations?

Does the company have depth to its management?

How good are the company's cost analysis and accounting controls?

Does the company have a short-range or long-range outlook in regard to profits?

Will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will dilute existing shares?

Does the management talk freely when things are going well, but "clam up" when troubles and disappointments occur?

Does the company have a management of unquestionable integrity?