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Pfizer Inc.’s (PFE - Free Report) third-quarter adjusted earnings per share came in at 61 cents, a penny below the Zacks Consensus Estimate of 62 cents.
The pharma giant’s earnings were 2% above the year-ago quarter as inclusion of Hospira operations, a lower tax rate, and a lower share count offset higher costs.
Revenues missed expectations. Pfizer posted revenues of $13.05 billion, lower than the Zacks Consensus Estimate of $13.10 billion but up 8% from the year-ago period.
Hospira, Cancer Drugs Help Sales
While currency movement cut Pfizer’s third quarter revenues by 2% ($224 million), operational growth was 10% ($1.2 billion) driven by inclusion of Hospira sales. Hospira added $1.13 billion to sales.
Pfizer’s standalone business (excluding the impact of foreign exchange and legacy Hospira operations) recorded revenues of $11.92 billion, up 3% year over year on an operational basis. The impact of Anacor (Jun 2016) and Medivation (Sep 2016) acquisitions was immaterial in the quarter.
The top line growth was driven by inclusion of Hospira sales and the strong performance of key products like Ibrance (breast cancer), Lyrica (neuropathic pain) and Xeljanz (rheumatoid arthritis), all primarily in the U.S., as well as Eliquis, which offset lower sales of the Prevnar/Prevenar 13 vaccines franchise.
International revenues were flat at $6.5 billion. Meanwhile, U.S. revenues grew 17% to $6.5 billion.
Segment Discussion
From the second quarter of 2016, Pfizer reorganized its reporting segments to: Pfizer Innovative Health (IH) and Pfizer Essential Health (EH).
While Pfizer Innovative Health (IH; formerly the Innovative Products business) sales grew 9% from the year-ago period to $7.3 billion, Pfizer Essential Health (EH; formerly the Established Products business) sales recorded year-over-year growth of 7% to $5.7 billion.
Pfizer IH revenues were driven by continued strong momentum from Ibrance in the U.S., strong operational growth from Eliquis globally and Lyrica, Chantix/Champix, and Xeljanz, primarily in the U.S. This was partially offset by an expected decline in Prevnar 13 for adults revenues (down 3%) in the U.S. and lower revenues of Enbrel (down 17%) in key European markets due to biosimilar competition. Pfizer has exclusive rights to Amgen Inc.’s (AMGN - Free Report) blockbuster rheumatoid arthritis (RA) drug Enbrel outside the U.S. and Canada
Prevnar revenues declined in the U.S. due to the “high initial capture rate” of the eligible adult patient population following Prevnar-13’s successful 2014 launch, which resulted in a smaller remaining “catch up” opportunity in the third quarter compared to the year-ago quarter.
The 2015 expiration of the collaboration agreement to co-promote Rebif in the U.S. also impacted revenues.
EH revenues benefited from the inclusion of legacy Hospira operations that was partially offset by the loss of exclusivity and associated generic competition for products like Zyvox as well as Lyrica in most developed Europe markets.
Consumer Healthcare revenues declined 2% to $798 million. Global Oncology revenues increased 41% to $1.1 billion with performance being driven by Xalkori and Ibrance. Global Vaccine revenues rose 1% to $1.6 billion. Pfizer recorded biosimilars revenues of $83 million.
Pfizer has plans to launch Inflectra, a biosimilar version of Johnson & Johnson(JNJ - Free Report) / Merck & Co., Inc.’s (MRK - Free Report) blockbuster drug Remicade, in the U.S. in late November. Inflectra is the first and only biosimilar monoclonal antibody (mAb) therapy and only the second biosimilar to be approved in the U.S.
Adjusted selling, informational and administrative (SI&A) expenses grew 8% to $3.53 billion during the quarter. Adjusted R&D expenses rose 9% to $1.9 billion.
Discontinuing Bococizumab
In a separate press release, Pfizer announced its decision to discontinue development of its pipeline candidate, bococizumab, a PCSK9 inhibitor due to an “evolving treatment and market landscape for lipid-lowering agents”. Bococizumab was being evaluated for the treatment of hyperlipidemia and prevention of cardiovascular events. Bococizumab was in a phase III program for LDL-C (bad cholesterol) reduction.
2016 Earnings Guidance Cut
The company raised its R&D expense guidance to account for discontinuation of the bococizumab program. The bococizumab discontinuation is expected to hurt adjusted earnings per share by 4 cents.
R&D expenses are now expected in the range of $7.8 to $8.1 billion compared with $7.4 billion - $7.8 billion previously.
Adjusted earnings per share are now expected in the range of $2.38-$2.43 per share compared with $2.38 - $2.48 expected previously.
Pfizer, however, raised the lower end of the revenue guidance. Revenues are expected in the range of $52 billion - $53 billion in 2016 compared with $51 billion - $53 billion previously.
Pfizer expects SI&A spend of $14.2 to $14.7 billion compared with $13.7 billion - $14.7 billion previously.
Pfizer’s third quarter results missed expectations. The decision to discontinue bococizumab and the resultant cut in earnings guidance hurt investor confidence, sending shares down more than 2% in pre-market trading.
Nonetheless, we believe that while Pfizer continues to face headwinds in the form of genericization, unfavorable currency movement and the expiration of a few co-promotion agreements, new product sales, contribution from Hospira, cost-cutting efforts and share buybacks should help the company achieve its guidance.
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Pfizer (PFE) Q3 Earnings Lag; Cuts View, Sheds Bococizumab
Pfizer Inc.’s (PFE - Free Report) third-quarter adjusted earnings per share came in at 61 cents, a penny below the Zacks Consensus Estimate of 62 cents.
The pharma giant’s earnings were 2% above the year-ago quarter as inclusion of Hospira operations, a lower tax rate, and a lower share count offset higher costs.
Revenues missed expectations. Pfizer posted revenues of $13.05 billion, lower than the Zacks Consensus Estimate of $13.10 billion but up 8% from the year-ago period.
Hospira, Cancer Drugs Help Sales
While currency movement cut Pfizer’s third quarter revenues by 2% ($224 million), operational growth was 10% ($1.2 billion) driven by inclusion of Hospira sales. Hospira added $1.13 billion to sales.
Pfizer’s standalone business (excluding the impact of foreign exchange and legacy Hospira operations) recorded revenues of $11.92 billion, up 3% year over year on an operational basis. The impact of Anacor (Jun 2016) and Medivation (Sep 2016) acquisitions was immaterial in the quarter.
The top line growth was driven by inclusion of Hospira sales and the strong performance of key products like Ibrance (breast cancer), Lyrica (neuropathic pain) and Xeljanz (rheumatoid arthritis), all primarily in the U.S., as well as Eliquis, which offset lower sales of the Prevnar/Prevenar 13 vaccines franchise.
International revenues were flat at $6.5 billion. Meanwhile, U.S. revenues grew 17% to $6.5 billion.
Segment Discussion
From the second quarter of 2016, Pfizer reorganized its reporting segments to: Pfizer Innovative Health (IH) and Pfizer Essential Health (EH).
While Pfizer Innovative Health (IH; formerly the Innovative Products business) sales grew 9% from the year-ago period to $7.3 billion, Pfizer Essential Health (EH; formerly the Established Products business) sales recorded year-over-year growth of 7% to $5.7 billion.
Pfizer IH revenues were driven by continued strong momentum from Ibrance in the U.S., strong operational growth from Eliquis globally and Lyrica, Chantix/Champix, and Xeljanz, primarily in the U.S. This was partially offset by an expected decline in Prevnar 13 for adults revenues (down 3%) in the U.S. and lower revenues of Enbrel (down 17%) in key European markets due to biosimilar competition. Pfizer has exclusive rights to Amgen Inc.’s (AMGN - Free Report) blockbuster rheumatoid arthritis (RA) drug Enbrel outside the U.S. and Canada
Prevnar revenues declined in the U.S. due to the “high initial capture rate” of the eligible adult patient population following Prevnar-13’s successful 2014 launch, which resulted in a smaller remaining “catch up” opportunity in the third quarter compared to the year-ago quarter.
The 2015 expiration of the collaboration agreement to co-promote Rebif in the U.S. also impacted revenues.
EH revenues benefited from the inclusion of legacy Hospira operations that was partially offset by the loss of exclusivity and associated generic competition for products like Zyvox as well as Lyrica in most developed Europe markets.
Consumer Healthcare revenues declined 2% to $798 million. Global Oncology revenues increased 41% to $1.1 billion with performance being driven by Xalkori and Ibrance. Global Vaccine revenues rose 1% to $1.6 billion. Pfizer recorded biosimilars revenues of $83 million.
Pfizer has plans to launch Inflectra, a biosimilar version of Johnson & Johnson(JNJ - Free Report) / Merck & Co., Inc.’s (MRK - Free Report) blockbuster drug Remicade, in the U.S. in late November. Inflectra is the first and only biosimilar monoclonal antibody (mAb) therapy and only the second biosimilar to be approved in the U.S.
Adjusted selling, informational and administrative (SI&A) expenses grew 8% to $3.53 billion during the quarter. Adjusted R&D expenses rose 9% to $1.9 billion.
Discontinuing Bococizumab
In a separate press release, Pfizer announced its decision to discontinue development of its pipeline candidate, bococizumab, a PCSK9 inhibitor due to an “evolving treatment and market landscape for lipid-lowering agents”. Bococizumab was being evaluated for the treatment of hyperlipidemia and prevention of cardiovascular events. Bococizumab was in a phase III program for LDL-C (bad cholesterol) reduction.
2016 Earnings Guidance Cut
The company raised its R&D expense guidance to account for discontinuation of the bococizumab program. The bococizumab discontinuation is expected to hurt adjusted earnings per share by 4 cents.
R&D expenses are now expected in the range of $7.8 to $8.1 billion compared with $7.4 billion - $7.8 billion previously.
Adjusted earnings per share are now expected in the range of $2.38-$2.43 per share compared with $2.38 - $2.48 expected previously.
Pfizer, however, raised the lower end of the revenue guidance. Revenues are expected in the range of $52 billion - $53 billion in 2016 compared with $51 billion - $53 billion previously.
Pfizer expects SI&A spend of $14.2 to $14.7 billion compared with $13.7 billion - $14.7 billion previously.
PFIZER INC Price, Consensus and EPS Surprise
PFIZER INC Price, Consensus and EPS Surprise | PFIZER INC Quote
Our Take
Pfizer’s third quarter results missed expectations. The decision to discontinue bococizumab and the resultant cut in earnings guidance hurt investor confidence, sending shares down more than 2% in pre-market trading.
Nonetheless, we believe that while Pfizer continues to face headwinds in the form of genericization, unfavorable currency movement and the expiration of a few co-promotion agreements, new product sales, contribution from Hospira, cost-cutting efforts and share buybacks should help the company achieve its guidance.
Pfizer carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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