) posted second quarter earnings of 62 cents per share, well above
the Zacks Consensus Estimate of 55 cents and 5% above the year-ago
earnings. Despite the loss of exclusivity of certain products and
the unfavorable impact of currency fluctuation, earnings were
boosted by cost reduction, productivity initiatives and a lower
Revenues fell 9% to $15.1 billion, slightly above the Zacks
Consensus Estimate of $15.0 billion. Loss of exclusivity impacted
second quarter 2012 revenues by $1.8 billion or 11% compared with
the year-ago period.
Including one-time items, second quarter earnings from
continuing operations increased 31% to 42 cents.
The Quarter in Detail
While foreign exchange cut second quarter revenues by $451
million or 3%, operational factors impacted revenues negatively by
$977 million or 6%.
International revenues declined 5% to $9.3 billion, mainly due
to the unfavorable foreign exchange impact. Meanwhile, US revenues
declined 15% to $5.7 billion. US revenues were hit by the loss of
exclusivity of Lipitor in November 2011.
Biopharmaceutical products delivered second quarter revenues of
$13.1 billion, down 10%. While the Primary Care, Specialty Care and
Oncology units in the Biopharmaceutical segment recorded a decline
in sales, Emerging Markets and Established Products posted an
increase in sales.
The Primary Care unit recorded a 32% decline in revenues, which
came in at $4.0 billion. A change in reporting for Lipitor and
other genericized products affected Primary Care revenues by about
$2.0 billion or 34% year-over-year.
Lyrica continued to perform well with sales coming in at $1,035
million, up 14%. Oncology product, Sutent, posted sales of $319
million, up 8%. Wyeth legacy products like the Premarin family and
Enbrel posted sales of $274 million and $988 million,
Specialty Care segment sales declined 5% to $3.5 billion. The
Prevenar franchise, which performed well in Japan and Australia,
saw flat sales in the US and lower sales in developed Europe as
most patients have already been vaccinated.
A change in the method of reporting Vfend, Geodon and Xalatan
revenues also affected revenues - from January 1, Pfizer started
including Vfend, Geodon and Xalatan revenues as a part of the
Established Products unit. The change in reporting for these and
other genericized products affected Specialty Care revenues by
about $265 million or 7% year-over-year.
Meanwhile, the launch of generic versions of branded Pfizer
products and the inclusion of Lipitor revenues contributed to the
16% increase in Established Products revenues, which came in at
$2.7 billion. The deal with
) regarding the sale of an authorized generic version of Lipitor
also had a favorable impact on revenues.
Lipitor 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 fall 78.9% to $296 million in
the US. Generic competition increased as multiple players like
Dr. Reddy's Labs
) launched their generic versions of Lipitor.
The second quarter saw Emerging Markets record an 8% growth in
revenues which came in at $2.6 billion. The timing of government
purchases in Turkey and Brazil and strong performance in countries
like China, and Russia drove revenues.
Both the Animal Health (up 3% to $1.1 billion) and Consumer
Healthcare (up 8% to $768 million) segments recorded an increase in
revenues. The strong performance of the global livestock and
companion animal portfolios drove Animal Health results.
Consumer Healthcare revenues benefited from the Ferrosan
Consumer Health and Alacer Corp. acquisitions.
Selling, informational and administrative (SI&A) expenses
fell 18% to $3.9 billion during the quarter. R&D expenses fell
19% to $1.7 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.
Maintains 2012 Guidance
Pfizer maintained its earnings and revenue guidance for 2012.
Pfizer expects earnings of $2.14 - $2.24 per share on revenues of
$58 - $60 billion. The Zacks Consensus Estimate currently stands at
$2.20 per share on revenues of $59.7 billion.
Pfizer maintained its R&D guidance of $6.5 - $7.0 billion.
Pfizer intends to focus on those disease areas which represent
higher potential. Pfizer also reiterated its SI&A spend
guidance of $16.3 - $17.3 billion.
The company intends to buy back shares worth $5 billion in 2012.
Pfizer has bought back shares worth $3 billion through July 30.
The company remains on track where the sale of its Nutrition
business and the separation of the Animal Health business are
concerned. Pfizer expects to file a registration statement with the
Securities and Exchange Commission (SEC) by mid-August for an
initial public offering (IPO) of up to a 20% ownership stake in
Zoetis, the stand-alone Animal Health company. Pfizer expects to
complete the IPO in the first half of 2013.
Neutral on Pfizer
We currently have a Neutral recommendation on Pfizer, which
carries a Zacks #3 Rank (short-term Hold rating). While near-term
earnings will be driven by cost cutting efforts and share
repurchases, longer-term growth will depend on the success of drug
MYLAN INC (MYL): Free Stock Analysis Report
PFIZER INC (PFE): Free Stock Analysis Report
DOCTOR REDDYS (RDY): Free Stock Analysis Report
WATSON PHARMA (WPI): Free Stock Analysis Report
To read this article on Zacks.com click here.