) posted fourth quarter earnings of 50 cents per share, 3 cents
above the Zacks Consensus Estimate and the year-ago earnings of 47
cents. Revenues, however, fell 4% to $16.7 billion, in-line with
the Zacks Consensus Estimate. Despite a decline in revenues, a
lower share count and cost control helped earnings increase from
the year-ago period.
Full-year earnings came in at $2.31 per share, 4% above the
year-ago earnings and 3 cents above the Zacks Consensus Estimate.
2011 revenues increased 1% to $67.4 billion, above the Zacks
Consensus Estimate of $66.9 billion.
Including one-time items, fourth quarter earnings fell 47% to 19
The Quarter in Detail
While foreign exchange favorably impacted fourth quarter
revenues by $157 million or 1%, operational factors impacted
revenues negatively by $765 million or 5%. International revenues
increased 3% to $10.4 billion, reflecting 1% operational growth and
a 2% favorable foreign exchange impact. Meanwhile, US revenues
declined 12% to $6.3 billion.
Biopharmaceutical products delivered fourth quarter revenues of
$14.1 billion, down 6%. All units in the Biopharmaceutical segment
posted a decline in sales.
The Primary Care unit recorded an 8% decline in revenues.
Despite favorable currency movements and strong performances by
products like Celebrex, Lyrica, Pristiq and Spiriva, Primary Care
revenues fell due to the genericization of Lipitor and Caduet in
Nov 2011. Generic competition for Lipitor, Caduet and Aricept
impacted revenues by $775 million or 13%. King legacy products
boosted revenues by $93 million, or 2%.
Lipitor, which posted revenues of $7.6 billion in the first nine
months of 2011, was hit hard by the loss of exclusivity in the US.
Despite making significant efforts to reduce the impact of generic
competition, Pfizer saw Lipitor sales falling 42% to $816 million
in the US after facing just a month of generic competition.
International sales fell 3% to $1.2 billion, with total sales
falling 24% to $1.9 billion in the fourth quarter. Caduet sales
fell 26% to $103 million.
The Specialty Care segment reported strong growth of Prevenar 7
in Japan and Enbrel in most developed markets. Total revenues,
however, declined 5% to $3.8 billion. This was mainly due to the
impact of the loss of exclusivity of Vfend and Xalatan in the US in
February and March 2011, respectively.
Moreover, Prevnar 13 sales in the US were also impacted as a
fewer number of patients received the catch-up dose. Generic
competition impacted Specialty Care segment revenues by about $205
million or 5% in the fourth quarter of 2011.
Meanwhile, the loss of exclusivity and increased competition for
Effexor XR, Protonix and Zosyn in the US contributed to the 5%
decline in Established Products revenues which came in at $2.3
billion. The loss of US exclusivity of the above-mentioned products
impacted revenues by $208 million, or 9%.
Sales of oncology product Sutent increased 7% to $317 million.
Wyeth legacy products like the Premarin family and Enbrel posted
sales of $256 million and $925 million, respectively.
The fourth quarter also saw Emerging Markets performing below
expectations with sales declining 4% to $2.3 billion. Performance
was affected by several factors including unfavorable currency
movement, increasing pricing pressure, changes in institutional
purchase patterns in Turkey and Brazil, currency devaluation in
Venezuela and the loss of exclusivity of Lipitor in Brazil and
Mexico in 2010.
Both the Animal Health (up 13% to $1.1 billion) and Consumer
Healthcare (up 8% to $817 million) segments recorded a growth in
revenues. The addition of King's Animal Health products and
strong performance in the global livestock portfolio drove
Animal Health results.
Growth in the Consumer Healthcare unit was driven by the
non-recurrence of the temporary voluntary withdrawal of Centrum in
Europe in the third quarter of 2010 and increased sales of core
brands like Advil, Caltrate and Robitussin.
Nutrition revenues grew 22% to $598 million thanks to favorable
currency movements, higher demand for premium products, new product
launches and overall strength in China, Hong Kong and Middle
Pfizer reiterated its intention to evaluate strategic
alternatives for its Animal Health and Nutrition businesses. An
announcement should be made between July 2012 and July 2013. Last
year, Pfizer had sold off its Capsugel unit to
Kohlberg Kravis Roberts & Co L.P
Selling, informational and administrative (SI&A) expenses
fell 6% to $5.3 billion during the quarter. R&D expenses fell
17% to $2.3 billion. Pfizer remains committed to its
cost-containment efforts and should realize cost savings due to
workforce reductions, actions taken with the R&D portfolio, as
well as savings from a smaller physical footprint.
2012 Guidance Revised
Pfizer cut its earnings and revenue guidance for 2012 in order
to reflect changes in foreign exchange rates from mid-October 2011
to mid-January 2012. Pfizer now expects earnings of $2.20 - $2.30
per share on revenues of $60.5 - $62.5 billion. Earlier, Pfizer was
expecting to earn $2.25 - $2.35 per share on revenues of $62.2 and
$64.7 billion in 2012. The Zacks Consensus Estimate currently
stands at $2.29 per share.
Pfizer maintained its R&D guidance of $6.5 - $7.0 billion.
Pfizer intends to focus on those disease areas which represent
higher potential. However, the company reduced its SI&A spend
to $17 - $18 billion (old guidance: $17.5 - $18.5 billion).
Lower R&D spend and share buybacks should help drive
earnings. Pfizer expects to buy back shares worth $5 billion in
2012 under its current $10 billion share buyback plan.
We currently have a Neutral recommendation on Pfizer, which
carries a Zacks #3 Rank (short-term Hold rating).
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