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Pfizer, Inc. (PFE) Tops Q2 EPS by 1c

July 29, 2014 7:01 AM EDT

(Updated - July 29, 2014 7:02 AM EDT)

Pfizer, Inc. (NYSE: PFE) reported Q2 EPS of $0.58, $0.01 better than the analyst estimate of $0.57. Revenue for the quarter came in at $12.8 billion versus the consensus estimate of $12.49 billion.

The company sees FY14 revs of $48.7 to $50.7 billion, from $49.2 to $51.2 billion and the consensus of $49.28 billion. FY14 EPS affirmed at $2.20 to $2.30 with the Street at $2.24.

Ian Read, Chairman and Chief Executive Officer, stated, “I am pleased with our operating performance to date. Our recently launched products continued to gain traction during the quarter while our mid- and late-stage pipeline continued to progress with a regulatory submission in the U.S. completed for our meningitis B vaccine candidate and our palbociclib regulatory submission in the U.S. underway. We also look forward to the recently announced meeting in August of the U.S. Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices (ACIP) to evaluate and make a recommendation regarding usage of our Prevnar 13 vaccine in the adult population. In addition, we also announced targeted business development transactions within our Global Oncology(3) and GEP(3) businesses.”

“I continue to see Pfizer as well positioned to effectively execute on our strategy to further strengthen each of our businesses on a global basis and deliver value to all of our stakeholders,” Mr. Read concluded.

Frank D’Amelio, Chief Financial Officer, stated, “Overall, I am pleased with our second-quarter 2014 financial results despite the continued negative impact from product losses of exclusivity and the termination of certain co-promotion collaborations. We updated our 2014 adjusted revenue(2) guidance to reflect the anticipated negative impact associated with expected multi-source generic competition for Celebrex in the U.S. beginning in December 2014. Importantly, we reaffirmed our adjusted diluted EPS(2) guidance, absorbing an approximate $0.05 per share anticipated negative impact from this loss of exclusivity and an approximate $0.01 per share negative impact from the planned upfront payment to Cellectis, which reflects our financial flexibility and confidence in the business going forward. Given our strong operating cash flow, we continue to expect to repurchase approximately $5 billion of our shares this year, with $2.9 billion repurchased through July 28. These 2014 repurchases and planned repurchases are expected to reduce total shares outstanding by approximately 100 million shares by the end of the year after factoring in actual and projected dilution related to employee compensation programs.”

QUARTERLY FINANCIAL HIGHLIGHTS (Second-Quarter 2014 vs. Second-Quarter 2013)

  • Reported revenues(1) decreased $200 million, or 2%, which reflects an operational decline of $113 million, or 1%, and the unfavorable impact of foreign exchange of $87 million, or 1%. The operational decrease was primarily due to the expiration of the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada, the ongoing termination of the Spiriva collaboration in certain countries as well as the loss of exclusivity and subsequent multi-source generic competition for Detrol LA in the U.S. and other product losses of exclusivity in certain markets. Revenues in developed markets were favorably impacted by the operational growth of certain key products including: Lyrica, Nexium 24HR in the U.S. as a result of its recent launch, Prevnar, Eliquis, Xeljanz, Celebrex, Xalkori and Inlyta. Additionally, revenues in emerging markets increased 11% operationally, including strong operational growth from Prevenar as well as from Lipitor, primarily in China. Second-quarter 2014 reported revenues(1) included $71 million from the transitional manufacturing and supply agreements with Zoetis.
  • GEP(3) revenues decreased 5% operationally, primarily due to the loss of exclusivity and subsequent launch of multi-source generic competition for Detrol LA in the U.S. in January 2014, Viagra in most major European markets in June 2013 as well as Aricept in Canada in December 2013. Additionally, the co-promotion collaboration for Spiriva has terminated in most countries, including the U.S. in April 2014, or has entered its final year in other major markets, which, per the terms of the collaboration agreement, has resulted in a decline in Pfizer’s share of Spiriva revenues. These declines were partially offset by the strong operational performance of Celebrex worldwide, Lyrica in Europe as well as Lipitor, primarily in China.
  • GIP(3) revenues declined 5% operationally, primarily due to the expiration of the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada on October 31, 2013; for a 36-month period thereafter, Pfizer is entitled to royalty payments that have been and are expected to continue to be significantly less than the share of Enbrel profits prior to the expiration of the co-promotion term, and those royalty payments are and will be included in Other (income)/deductions–net rather than in Revenues. GIP(3) revenues were also negatively impacted by certain product losses of exclusivity, primarily for Lyrica in Canada in February 2013. These declines were partially offset by strong operational growth from Lyrica, primarily in the U.S. and Japan, as well as the performance of recently launched products, including Eliquis globally and Xeljanz primarily in the U.S.
  • VOC(3) revenues increased 15% operationally, reflecting the following:
Global Vaccines(3) revenues grew 14% operationally. Prevnar 13 revenue in the U.S. increased 12%, driven by government purchasing patterns and increased demand. International sales of the Prevenar family were up 15% on an operational basis, primarily reflecting increased shipments associated with the Global Alliance for Vaccines and Immunization (GAVI) as well as the timing of government purchases in various emerging markets compared with the year-ago quarter.
Consumer Healthcare(3) revenues increased 15% operationally, primarily due to the launch of Nexium 24HR in the U.S. in late-May 2014.
Global Oncology(3) revenues increased 16% operationally, primarily driven by the continued strong uptake of Xalkori and Inlyta globally. Xalkori revenues were positively impacted by a greater accumulation of patients on therapy as a result of an increase in the testing rate for the anaplastic lymphoma kinase (ALK) gene abnormality, which has led to more patients being treated, as well as an extended duration of therapy. Inlyta revenues were favorably impacted by continued increases in renal cell carcinoma market share. This growth was partially offset by the timing of purchases for Sutent in China.
  • Adjusted cost of sales, adjusted SI&A expenses and adjusted R&D expenses(2) in the aggregate increased 4% operationally. Overall, they increased $255 million, or 4%, primarily reflecting:

higher adjusted cost of sales(2), primarily reflecting an unfavorable change in product mix;

lower adjusted SI&A expense(2) as a result of benefits from cost-reduction and productivity initiatives partially offset by investments to support several recent product launches; and

higher adjusted R&D expense(2), primarily due to recently initiated Phase 3 programs for bococizumab, ertugliflozin and certain other new drug candidates as well as for studies of Xeljanz and certain other products in potential new indications.

  • The effective tax rate on adjusted income(2) was 27.9%, consistent with the prior-year quarter, primarily reflecting the favorable impact of the resolution in second-quarter 2014 of certain tax positions, pertaining to prior years with various foreign tax authorities, offset by an unfavorable change in the jurisdictional mix of earnings.
  • The diluted weighted-average shares outstanding declined by 673 million shares, due to the company’s ongoing share repurchase program and the impact of the Zoetis exchange offer, which was completed on June 24, 2013.
  • In addition to the aforementioned factors, second-quarter 2014 reported earnings were primarily impacted by the following:

Unfavorable impacts:

the non-recurrence in second-quarter 2014 of income from discontinued operations in the year-ago quarter attributable to the company’s Animal Health business, including the gain associated with the full disposition of Zoetis; and
the non-recurrence in second-quarter 2014 of income in the year-ago quarter from a litigation settlement with Teva Pharmaceuticals Industries Ltd. and Sun Pharmaceutical Industries Ltd. for patent-infringement damages resulting from their “at-risk” launches of generic Protonix in the U.S.

Favorable impacts:

lower acquisition-related costs, purchase accounting adjustments and asset impairment charges compared to the prior-year quarter; and
a lower effective tax rate, primarily due to the favorable impact of the resolution in second-quarter 2014 of certain tax positions, pertaining to prior years with various foreign tax authorities, a favorable change in the jurisdictional mix of earnings as well as the non-recurrence of the unfavorable tax liability attributable to the income associated with the aforementioned patent litigation settlement.

*** Pfizer, Inc. reaffirmed FY2014 guidance.

For earnings history and earnings-related data on Pfizer, Inc. (PFE) click here.



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