Pfizer Inc.
(
PFE
) posted third quarter earnings of 53 cents per share, a penny
above the Zacks Consensus Estimate but 12% below the year-ago
earnings. Results were hit by the loss of exclusivity of certain
products and the unfavorable impact of currency fluctuation.
Revenues fell 16% to $13.9 billion, well below the Zacks
Consensus Estimate of $14.6 billion.
Including one-time items, third quarter earnings from
continuing operations fell 10% to 43 cents.
The Quarter in Detail
While foreign exchange cut third quarter revenues by $699
million or 4%, operational factors impacted revenues negatively
by $1.9 billion or 12%.
International revenues declined 14% to $8.3 billion, mainly
due to the unfavorable foreign exchange impact and the loss of
Lipitor exclusivity. Meanwhile, US revenues declined 18% to $5.6
billion. US revenues were hit by the loss of exclusivity of
Lipitor in November 2011.
Biopharmaceutical products delivered third quarter revenues of
$12.1 billion, down 18%. While the Primary Care, Specialty Care,
Emerging Markets and Oncology units in the Biopharmaceutical
segment recorded a decline in sales, Established Products posted
an increase in sales.
The Primary Care unit recorded a 39% decline in revenues,
which came in at $3.6 billion. A change in reporting for Lipitor
and other genericized products affected Primary Care revenues by
about $2.4 billion or 40% year-over-year. Lyrica continued to
perform well with sales coming in at $1,036 million, up 8%.
Specialty Care segment sales declined 10% to $3.4 billion. The
Prevenar franchise put in a disappointing performance especially
in the US and developed Europe as most patients have already been
vaccinated. The segment was also impacted by about $260 million
or 7% due to the genericization of Xalatan in developed Europe in
January 2012 and Geodon in the US in March 2012.
Meanwhile, the launch of generic versions of branded Pfizer
products and the inclusion of Lipitor revenues contributed to the
7% increase in Established Products revenues, which came in at
$2.4 billion.
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 87% to $192
million in the US. Generic competition increased as multiple
players like
Mylan
(
MYL
) and
Dr. Reddy's Labs
(
RDY
) launched their generic versions of Lipitor.
The third quarter saw revenues from Emerging Markets decline
2% to $2.4 billion. The Animal Health segment also recorded a 2%
decline in revenues which came in at $1 billion.
Consumer Healthcare sales increased 2% to $780 million
benefiting from the Ferrosan Consumer Health and Alacer Corp.
acquisitions.
Selling, informational and administrative (SI&A) expenses
fell 15% to $3.7 billion during the quarter. R&D expenses
fell 4% to $1.9 billion. Pfizer made a $250 million payment to
AstraZeneca
(
AZN
) to obtain the exclusive global over-the-counter rights to
Nexium. 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.
Outlook Narrowed
Pfizer tightened some aspects of its 2012 outlook. The company
now expects earnings of $2.14 - $2.17 per share on total revenues
of $58 - $59 billion. Earlier, the company was expecting earnings
of $2.12 - $2.22 per share on revenues of $58 - $60 billion.
Pfizer now expects SI&A spend of $16.3 to $16.8 billion (old
guidance: $16.3 to $17.3 billion) and R&D spend of $7.0 to
$7.25 billion (old guidance: $6.75 to $7.25 billion). The Zacks
Consensus Estimate currently stands at $2.20 per share on
revenues of $59.4 billion.
Pfizer also announced a new $10 billion share buyback program
which will be effective following the sale of the Nutrition
business to Nestlé in the next few months. The new buyback
program is in addition to the existing $4.1 billion buyback
program.
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 development. The company's pipeline needs to deliver given
the Lipitor loss of exclusivity and the upcoming loss of
exclusivity on additional products in the next few years.
ASTRAZENECA PLC (AZN): Free Stock Analysis
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MYLAN INC (MYL): Free Stock Analysis Report
PFIZER INC (PFE): Free Stock Analysis Report
DOCTOR REDDYS (RDY): Free Stock Analysis
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