Pfizer 2009 3rd-qtr earnings beats forecasts, but sales weaken

Global pharmaceutical behemoth Pfizer reported higher third-quarter 2009 profit as aggressive cost-cutting offset a negative foreign exchange impact and declining sales of drugs, including those facing competition from cheaper generics. Nevertheless, the figures from the company, which is now even bigger with the consummation of its acquisition last week of fellow US drug major Wyeth (The Pharma Letter October 16), still beat consensus forecasts.

The firm posted a net profit of $2.88 billion, or 43 cents per share, in its last pre-merger quarter, compared with a profit of $2.28 billion, or 34 cents per share, a year ago. Excluding items, Pfizer earned 51 cents per share, exceeding analysts' average expectations by 3 cents, according to Thomson Reuters I/B/E/S.

Sales for the quarter fell 3% to $11.6 billion. Revenues were unfavorably impacted by around 5% due to foreign exchange, and were favorably impacted by 2% due to an adjustment in the third quarter of 2008 for product returns.
US turnover, which accounted for 41% of total revenues in the quarter, came in at $4.8 billion, a decrease of 2% compared with the year-ago quarter. International sales fell 4% to $6.8 billion, reflecting 5% operational growth and a 9% unfavorable foreign exchange impact.

Sales of Pfizer's mega-blockbuster cholesterol lowerer Lipitor (atorvastatin) declined 9% globally to $2.85 billion in the third quarter, with US sales down 12%. The product, which is facing increased competition from cheaper generic rivals, is slated to lose exclusivity in 2011.

Sales of epilepsy drug Lyrica (pregabalin) rose 5% to $708 million. Turnover of Chantix (varenicline), an oral nicotinic partial agonist for smoking cessation, dropped 15%, primarily because of safety concerns surrounding it. On July 1, 2009, Pfizer announced that the US Food and Drug Administration required it to add a black-box warning to the Chantix label. This is expected to further impact sales of the drug. 

Raises 2009 guidance

With the completion of the $68 billion acquisition of Wyeth on October 15, the company raised its 2009 guidance. It expects to end 2009 with revenues in the range of $49.0 billion-$50.0 billion, compared to the previous guidance range of $45.0 billion-$46.0 billion. Pfizer expects earnings in the range of $2.00-$2.05 per share, up from the earlier guidance of $1.90 to $2.00.

Commenting on the results, analysts at Zacks Equity Research said that, by adding Wyeth's lucrative vaccines and animal and consumer products, as well as traditional medicines such as the blockbuster antidepressant Effexor (venlafaxine), Pfizer aims to compensate for the drop in revenues that will arise with the loss of exclusivity of the $13 billion-a-year Lipitor.

Pfizer expects the combined companies to realize synergies of about $4 billion by 2012. The deal is expected to be accretive to earnings by the second full year following closing. Roughly one-half of the savings are expected to come from Selling, General & Administrative costs with the balance coming from Research & Development.

The combined entity aims to improve its bottom line by shutting offices and factories, resorting to job-cuts and undertaking other cost-cutting measures, the Zacks analysts note. Pfizer intends to cut approximately 15% of the combined workforce. The combined entity should employ roughly 110,000 workers once the cuts have occurred, they say.

'Sell,' says TheStreet.Com

Meantime, saying it is 'going against the grain,' TheStreet.Com is telling investors to sell Pfizer stock, pointing out that its sales for the quarter were weak, with very little hope of improvement, and its earnings were only boosted by cost cutting. The stock was volatile: it was up 2.5% in pre-market trading and 0.7 % higher at $18.10 in late morning trading on the New York Stock Exchange, well off its earlier high of $18.4, but closed the day just 0.3% improved at $17.93.