It has been about a month since the last earnings report for Pfizer (PFE Quick QuotePFE - Free Report) . Shares have lost about 3.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Pfizer due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Pfizer Q2 Earnings Top, Sales Hurt by Coronavirus, View Up

Pfizer reported second-quarter 2020 adjusted earnings per share of 78 cents, which beat the Zacks Consensus Estimate of 64 cents. Earnings however declined 2% year over year due to lower revenues and higher R&D costs.

Revenues came in $11.80 billion, which marginally missed the Zacks Consensus Estimate of $11.88 billion. Sales declined 11% from the year-ago quarter on a reported basis. On an operational basis, excluding the 2% negative impact of currency, revenues declined 9% year over year hurt by business disruption and reduced doctor visits in the United States amid the coronavirus pandemic. Second-quarter revenues included a net negative impact of approximately $500 million, or 4%, due to COVID-19.

Overall, higher sales of some key brands in Pfizer’s Biopharmaceuticals group were offset by revenue decline in the Upjohn segment and sales lost due to the spin-off of the Consumer Healthcare (CHC) unit.

Importantly, excluding the spin-off of the Consumer Healthcare (CHC) unit, second-quarter revenues declined 3% operationally.
In the quarter, new prescriptions for some drugs and of vaccination rates for most vaccines slowed in certain markets, including the United States due to reduced patient visits to doctors amid COVID-19-related mobility restrictions & limitations. Its sales and marketing activities were hurt significantly in the United States in the quarter due to widespread restrictions on in-person meetings with doctors. However, some of Pfizer’s medicines —- Prevnar 13/Prevenar 13 in international markets and certain sterile injectable products — saw increased demand due to COVID-19.

International revenues declined 8% to $6.4 billion. On an operational basis, international sales declined 4% in the quarter. U.S. revenues declined 15% to $5.4 billion.

Adjusted selling, informational and administrative (SI&A) expenses declined 17% (operationally) in the quarter to $2.8 billion due to decreased sales and marketing activities due to the COVID-19. Adjusted R&D expenses rose 4% to $1.9 billion.

Segment Discussion

Pfizer Biopharma sales grew 4% on a reported basis (up 6% an operational basis) from the year-ago period to $9.8 billion. In the Biopharma group, the revenue growth was led by higher volumes as net price had a negative impact of 2% on the segment’s growth. Higher sales of brands like Eliquis, Ibrance, Inlyta and Vyndaqel/Vyndamax and higher biosimilars revenues drove this segment’s sales growth. Weaker sales of Prevnar 13/Prevenar 13 in the United States, Chantix in the United States and Enbrel internationally offset the increase.

Within the Biopharma group, Oncology revenues increased 20% (on an operational basis) to $2.65 billion. Vaccine revenues however declined 6% to $1.25 billion. Internal Medicine rose 4% to $2.3 billion. The Inflammation & Immunology franchise declined 3% to $1.15 billion. The portfolio of Rare Disease rose 34% to $681 million. Hospital sub-segment’s sales were flat at $1.8 billion. The Hospital segment comprises Pfizer’s global portfolio of sterile injectable and anti-infective medicines.

Pfizer’s Upjohn group’s sales declined 32% on a reported basis (31% on an operational basis) to $2 billion mainly due to U.S. loss of exclusivity of Lyrica.

Performance of Key Drugs

Ibrance revenues rose 9% year over year to $1.35 billion as consistent CDK class market share growth in the United States offset the impact of pricing pressure in certain European markets. The pricing pressure will continue to hurt international Ibrance revenues in the second half of 2020.

Xeljanz sales rose 5% to $635 million as higher volumes were offset by higher rebating from new commercial contract, which resulted in a lower net price. While U.S. revenues were flat, international sales rose 20%.

Inlyta revenues were $195 million in the quarter, up 89% driven mainly by 120% growth in the United States. U.S. sales gained from increased uptake, resulting from FDA approvals granted in 2019 for the combination of Inlyta plus Bavencio and Inlyta plus Keytruda in first-line treatment of advanced renal cell carcinoma patients

Global Prevnar 13/Prevenar 13 revenues declined 2% to $1.12 billion. Prevnar 13 revenues declined 22% in the United States due to slowdown in vaccination rates amid COVID-19-related mobility restrictions & limitations. Prevenar 13 revenues rose 18% in international markets driven by significantly increased adult uptake as people developed more vaccine awareness amid the COVID-19 pandemic.

Enbrel revenues declined 16% to $337 million due to continued biosimilar competition in key European markets as well as in Japan and Brazil.
Eliquis alliance revenues and direct sales rose 19% to $1.27 billion driven by continued increased adoption in nonvalvular atrial fibrillation as well as oral anticoagulant market share gains. However, lower prices and COVID-19-related unfavorable wholesaler buying patterns hurt Eliquis’ sales somewhat in the second quarter. Xalkori sales rose 7% to $138 million. Xtandi recorded alliance revenues of $266 million in the quarter, up 32% year over year. Sutent sales declined 13% to $209 million. Chantix sales declined 14% to $235 million in the quarter due to expected lower demand from infrequent patient visits to doctors.

Importantly, new drug Vyndaqel/Vyndamax recorded sales of $277 million in the quarter compared with $231 million in the previous quarter, driven by strong performance in the United States. However, Pfizer saw a slowdown in new diagnosis in the quarter as fewer patients visited doctors amid the mobility restrictions.

Braftovi and Mektovi, which Pfizer acquired following its acquisition of Array BioPharma in 2019, recorded sales of $36 million and $32 million, respectively in the second quarter of 2020.

Total biosimilar revenues were $289 million, up 36% year over year driven by 120% growth in oncology biosimilars. Inflectra/Remsima recorded sales of $150 million globally, up 1% year over year. New biosimilar product, Retacrit, a biosimilar of Epogen and Procrit, recorded $87 million of revenues in the quarter versus $89 million in the previous quarter.

In sterile injectables, global revenues increased 4% operationally to $1.24 billion and U.S. revenues increased 14% operationally driven by increasing demand due to the COVID-19 pandemic and as Pfizer’s manufacturing recovery efforts started taking shape. Pfizer saw an increase in demand for its sterile injectable products utilized in the intubation and ongoing treatment of mechanically ventilated COVID-19 patients.

In the Upjohn segment, sales of key drug Lyrica declined 70% to $349 million due to multi-source generic erosion. Viagra sales declined 15% to $94 million due to generic competition. However, sales were strong in China in the second quarter. Upjohn revenues in China grew 17% operationally driven primarily by Lipitor and Norvasc.

2020 Guidance

Pfizer expects trends of patient visit to doctors, vaccinations and elective surgical procedures to improve from third-quarter onward. Meanwhile, new prescription trends for certain key medicines are also expected to improve from the third quarter onward. Enrollment in clinical studies and new study starts resumed in the quarter after a brief pause in April and are expected to continue through the rest of the year. Pfizer’s manufacturing and supply chain activities were not materially disrupted by COVID-19.

Pfizer slightly raised its financial guidance for 2020 for the present Pfizer as well as for the “New Pfizer”, after the Upjohn divestiture.
Revenue guidance range was slightly upped from $48.5 billion to $50.5 billion to $48.6 billion to $50.6 billion. Adjusted earnings per share guidance was upped from a range of $2.82-$2.92 to $2.85-$2.95.

Research and development expense guidance for present Pfizer was maintained in the range of $8.6 - $9.0 billion. SI&A spending guidance was maintained in the range of $11.5 - $12.5 billion. Adjusted tax rate is expected to be approximately 15% in 2020.

The “New Pfizer” is expected to record revenues in the range of $40.8 billion to $42.4 billion (previously $40.7 billion to $42.3 billion). Adjusted EPS guidance for the “New Pfizer” is in the range of $2.28-$2.38, up from the previous expectation of $2.25-$2.35. Pfizer’s Biopharma unit will become the “New Pfizer” following the expected separation of Upjohn.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Pfizer has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Pfizer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.