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The New York-based Pfizer is desperately seeking to boost its product pipeline as the company, like several other pharma majors, continues to face more generic competition as moneymaking drugs lose patent protection. The company lost U.S. exclusivity for blood pressure drug Norvasc in March 2007 and the U.S. exclusivity for the popular allergy drug Zyrtec in January 2008. It has also recently lost U.S. exclusivity for oncology product Camptosar. The company will lose protection on cholesterol drug Lipitor in 2011. Pfizer has responded by cutting costs, including layoffs and plant closures.
Second Quarter Results
The company's profit for the second quarter rose to $2.78 billion, or $0.41 per share, from $1.27 billion, or $0.18 per share, in the prior-year quarter.
The company attributed the profit growth primarily to lower restructuring charges, and savings generated from cost-reduction initiatives, the positive impact of foreign exchange and favorable income tax adjustments. These were partially offset by higher in-process research and development expenses associated with the acquisitions of Serenex, Inc. and Encysive Pharmaceuticals Inc. The company said its earnings per share were also positively impacted by the full benefit of its purchase of $10 billion of its common stock last year.
Excluding one-time items, adjusted net income climbed 26% to $3.70 billion from $2.94 billion a year ago, while adjusted earnings per share rose 31% to $0.55 from $0.42 last year. On average, fourteen analysts polled by First Call/Thomson Financial expected the company to report earnings of $0.54 per share for the quarter.
Quarterly revenues increased 9% to $12.13 billion from $11.08 billion in the previous-year quarter, and beat analysts' consensus estimate of $11.46 billion. The positive impact of foreign exchange increased revenues by about 7%, the company noted.
The company's peer Merck & Co. Inc. (MRK | Quote | Chart | News | PowerRating) reported a 5% increase in its profit for the second quarter despite a decline in sales, as costs and expenses decreased for the period. The company reported a net income for the second quarter of $1.77 billion, or $0.82 per share, up from $1.68 billion or $0.77 per share in the second quarter of 2007. On a non-GAAP basis, excluding restructuring charges, the third largest U.S. drug maker reported earnings of $0.86 per share for the second quarter. Sales slipped 1% to $6.05 billion from $6.11 billion reported last year.
Pfizer's Pharmaceutical revenues for the second quarter rose 9% to $11.1 billion, while Animal Health revenues increased 13% to $713 million.
In the U.S., revenues declined 2% from a year ago to $4.8 billion, mainly due to the loss of U.S. exclusivity for Zyrtec, which Pfizer ceased selling in late January 2008, and for cancer drug Camptosar in February 2008. Meanwhile international revenues climbed 18% to $7.4 billion.
Restructuring charges and acquisition-related costs for the latest quarter were $569 million, down 46% from $1.05 billion in the same period last year.
Commenting on the results, Jeff Kindler, Chairman and Chief Executive Officer of Pfizer said, "We are pleased with the financial results we delivered this quarter, which were driven in part by the solid performance in our Pharmaceutical and Animal Health businesses. Many of our key products continued to perform well both in the U.S. and international markets, including Lyrica, Celebrex, Viagra and Geodon, as well as Lipitor in the face of a highly competitive statin market."
During the quarter, the company repurchased about $500 million, or 26.4 million shares, of its common stock.
Segmental Results
Pharmaceutical revenue for the quarter increased 9% to $11.05 billion, and was helped by the favorable impact of foreign exchange. Revenue from in-line and new products climbed 16% from the same period last year to $10.28 billion. Loss of U.S. exclusivity of Norvasc, Zyrtec and Camptosar collectively resulted in a revenue decline of 39% compared with the year-ago period.
Sales of cholesterol drug Lipitor increased 9% from the previous-year quarter to $2.98 billion. The company noted that favorable impact of foreign exchange increased Lipitor revenues by about 6%. the U.S., Lipitor revenues increased 1% compared with the prior-year quarter, while revenues from international markets rose 18% due to the favorable impact of foreign exchange of 13% and operational growth of 5%.
Sales of Lyrica, used for treatment of chronic, widespread pain conditions, surged 52% to $614 million, driven by strong efficacy as well as high patient and physician satisfaction in managing nerve pain associated with diabetes and nerve pain after shingles, the U.S. approval for the management of fibromyalgia in June 2007, and an advertising strategy focused on increasing both Lyrica and fibromyalgia awareness as well as the favorable impact of foreign exchange. In the U.S., Lyrica revenue rose 55% to $335 million, while international revenues grew 48% to $279 million.
Celebrex revenues increased 23% to $589 million, driven by the continued educational and promotional efforts supporting the risk-benefit proposition of the medicine and the favorable impact of foreign exchange. Celebrex revenue in the U.S. increased 22% to $416 million, while international revenues grew 27% to $173 million. Celebrex is used in treatment of osteoarthritis and rheumatoid arthritis.
Sutent revenues surged 45% to $211 million. In the U.S., Sutent revenues in the U.S. declined 2% to $60 million, while international revenues rose 80% to $151 million. The drug is used for the treatment of advanced kidney cancer and gastrointestinal stromal tumors.
Revenue for Chantix, known as Champix outside the U.S., increased 3% from a year ago to $207 million. In the U.S., revenues for the smoking cessation drug declined 35% to $109 million due to the recent updates to the Chantix U.S. label to include additional safety information, and certain external events relating to the drug. International revenues more than doubled to $98 million.
Animal Health
Revenue for the segment increased 13% to $715 million, driven by favorable impact of foreign exchange, which increased revenues by about 8%, in addition to strong global livestock and companion animal product performance.
Year-To-Date Results
Pfizer's net income for the six months increased to $5.56 billion, or $0.82 per share, from $4.66 billion, or $0.66 per share a year ago. Adjusted net income for the period increased to $7.80 billion, or $1.15 per share, from $7.75 billion, or $1.10 per share in the previous-year period.
Revenue for the half-year period improved 2% to $23.98 billion from $23.56 billion in the same period last year.
Outlook
Pfizer reaffirmed its earnings and revenue outlook for fiscal year 2008 based on year-to-date performance and outlook for the remainder of 2008. The company continues to expect fiscal year 2008 reported earnings in a range of $1.73-$1.88 per share and adjusted earnings in a range of $2.35-$2.45 per share. In the previous year, the company's reported earnings were $1.17 per share and adjusted earnings were $2.18 per share.
Wall Street analysts have a consensus earnings estimate of $2.35 per share, with expectations ranging between $2.29 and $2.40 per share.
In addition, the company reiterated its outlook for full-year revenue in a range of $47.0 billion-$49.0 billion, compared to 48.2 billion reported in the previous year. Analysts expect revenues of $48.00 billion for the year 2008.
Pfizer said that it continues to make progress on its target to reduce absolute adjusted total costs by at least $1.5 billion to $2.0 billion at the end of 2008 compared to 2006, on a constant currency basis.
Stock Quote
In Wednesday's regular trading session, PFE is trading at $18.94, up $0.59 or 3.22% on a volume of 25.94 million shares. The stock has been trading in a range of $17.12-$25.71 in the past 52 weeks.
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