Pfizer announced Thursday that third-quarter net income dropped 14 percent versus the year-ago period to $3.2 billion, mainly as a result of the loss of patent protection on Lipitor. Overall sales slipped 16 percent to just under $14 billion, missing analyst estimates of approximately $14.6 billion.
Sanford C. Bernstein & Co. analyst Timothy Anderson noted that the sales miss was due to foreign currency exchange rates that trimmed 4 percent. "Like many others in the third quarter, Pfizer was weak at the revenue line, missing (forecasts) by 5 percent," remarked Jefferies analyst Jeffrey Holford. "However, better-than-expected operational efficiencies in manufacturing and a lower-than-expected tax rate rescued earnings to an in-line result," he added.
CEO Ian Read noted that the results "reflect continued product losses of exclusivity, most notably Lipitor in all major markets." Quarterly sales of the drug, which faced its first full quarter of generic competition, plunged 71 percent year-over-year to $749 million, with revenue from the product in the US dropping 87 percent to $192 million. Read suggested that 2012 is the "peak year" for the negative impact of patent expiries, accounting for about $8 billion in lost revenue. He said the impact of exclusivity losses should lessen over the next three years, accounting for about $3.5 billion to $4 billion annually.
The company noted that quarterly sales of prescription drugs fell 18 percent to $12.1 billion, although Read said that "despite a challenging and dynamic environment, worldwide revenues from many of our key medicines, including Enbrel, Celebrex and Lyrica, continued to grow." Sales of Lyrica rose 8 percent year-over-year to just over $1 billion, while revenue from Celebrex increased 5 percent to $676 million, with both products benefiting from "strong" growth in developed markets. However, sales of Enbrel slipped 7 percent to $893 million, and revenue from Prevnar 13 dropped 14 percent to $868 million. Pfizer noted that sales of the vaccine were lower in the US and developed countries of Europe, where it is sold as Prevenar 13, as the "paediatric catch-up dose opportunity" of the prior-year period was no longer available. The company also cited "minimal" demand in adults for the vaccine.
Read added that during the quarter, Pfizer "continued to perform well in emerging markets, most notably in China." The company noted that despite revenues growing 6 percent operationally in emerging markets, sales slipped 2 percent on a reported basis year-over-year to $2.4 billion as a result of the strong US currency.
Looking ahead, chief financial officer Frank D’Amelio said "given our financial performance to date, we are narrowing the ranges for certain components of our 2012 financial guidance." The company indicated that sales for the full year are expected to be between $58 billion and $59 billion, from a previous estimate of $58 billion to $60 billion. In addition, earnings are predicted to be between $1.30 and $1.38 per share, lifted from an earlier range of $1.21 to $1.36 per share.
D’Amelio added that the board "has authorised a new $10 billion share repurchase programme" once the $11.9-billion sale of the nutrition business to Nestlé has been completed, which is expected in the next few months. D’Amelio noted that the new share buyback is in addition to the $4.1 billion remaining under the current scheme, through which Pfizer has so far repurchased approximately $5.9 billion worth of shares. Anderson remarked that the new buyback programme was "not a surprise."
Pfizer also disclosed Thursday that the third quarter included a charge of $491 million for an agreement-in-principle with the US Justice Department to resolve an investigation into past marketing of Rapamune by Wyeth, which the company acquired in 2009. The government has been investigating allegations that Wyeth promoted the drug for unauthorised uses and paid kickbacks to doctors.
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