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Pfizer (PFE) Beats on Q1 Earnings & Sales, Raises EPS View

Zacks Equity Research

Pfizer, Inc. PFE reported first-quarter 2019 adjusted earnings per share of 85 cents, which beat the Zacks Consensus Estimate of 77 cents. Earnings rose 13% year over year driven by higher sales and reduced share count.

The pharma heavyweight recorded revenues of $13.12 billion, which beat the Zacks Consensus Estimate of $12.80 billion. Revenues rose 2% from the year-ago quarter on a reported basis. Currency fluctuation hurt sales by 4% in the quarter. On an operational basis, excluding the impact of currency, revenues rose 5% year over year driven by higher sales of some key brands in Pfizer’s Biopharmaceuticals group.

International revenues rose 5% (up 12% an operational basis) to $6.94 billion. U.S. revenues however declined 2% to $6.18 billion.

Adjusted selling, informational and administrative (SI&A) expenses rose 3% (operationally) in the quarter to $3.31 billion. Adjusted R&D expenses declined 2% to $1.69 billion.

Change in Segment Reporting

In 2018, Pfizer’s reporting segments were Pfizer Innovative Health (IH) and Pfizer Essential Health (EH).

Beginning the first quarter of 2019, Pfizer is reporting under three new business units — Pfizer Biopharmaceuticals Group (previous IH unit except Consumer Healthcare), Upjohn (previous EH unit) and Consumer Healthcare. However, Pfizer re-allocated its biosimilar portfolio and certain legacy established products into the Biopharma group from the previous EH unit.

We remind investors that Pfizer’s Consumer Healthcare unit will merge with Glaxo’s GSK unit to form a new joint venture (JV). Pfizer will own a stake of 32% in the JV. Pfizer had been exploring strategic options for its Consumer Healthcare unit since October 2017. The transaction is expected to close in the second half of 2019.

Segment Discussion

Pfizer Biopharma sales grew 3% on a reported basis (up 7% an operational basis) from the year-ago period to $9.19 billion. Higher sales of Eliquis, Ibrance, Prevnar 13/Prevenar 13 and Xeljanz drove this segment’s sales growth.

Within the Biopharma group, Oncology revenues increased 15% to $1.96 billion. Vaccine revenues rose 13% to $1.61 billion. Internal Medicine rose 10% to $2.22 billion. The Inflammation & Immunology franchise rose 8% to $1.04 billion. However, the portfolio of Rare Disease declined 9% to $470 million. The newly added Hospital sub-segment’s sales declined 3% to $1.9 billion. The Hospital segment includes Pfizer’s global portfolio of sterile injectable and anti-infective medicines and also includes revenues from its contract manufacturing operation called Pfizer CentreOne.

Pfizer’s Upjohn group’s sales declined 1% to $3.08 billion. On an operational basis, sales rose 1% in the segment as strong growth in emerging markets and Japan was offset by decline in developed markets other than Japan.

Revenues in the Consumer Healthcare unit declined 5% (2% on an operational basis) to $858 million due to lower sales in the U.S. market, which were partially offset by higher sales in international markets.

Performance of Key Drugs

Ibrance revenues rose 25% year over year to $1.13 billion as continued strong uptake in international markets made up for moderating volumes in United States.

Xeljanz sales rose 34% to $423 million driven by continued growth in rheumatoid arthritis (RA) revenues and contributions from the drug's recent expansion into psoriatic arthritis and ulcerative colitis in the United States and only ulcerative colitis indication in certain developed markets.

Global Prevnar 13/Prevenar 13 revenues rose 10% to $1.49 billion. Prevnar 13 revenues rose 6% in the United States reflecting increased government purchases for the pediatric indication. Prevenar 13 revenues rose 16% in international markets driven by higher revenues in emerging markets.

Enbrel revenues declined 3% to $451 million in key European markets due to continued biosimilar competition. Pfizer has exclusive rights to Amgen, Inc.’s AMGN blockbuster rheumatoid arthritis (RA) drug, Enbrel, outside the United States and Canada.

Xalkori sales declined 16% to $123 million primarily due to competitive pressure. Sutent sales declined 6% to $232 million. Eliquis alliance revenues and direct sales rose 36% to $1.01 billion. Chantix sales rose 10% to $273 million in the quarter. Xtandi recorded alliance revenues of $168 million in the quarter, up 6% year over year.

Inflectra, Pfizer’s biosimilar version of Johnson & Johnson JNJ and Merck’s blockbuster RA drug, Remicade, recorded sales of $138 million globally, flat year over year.

In the Upjohn segment, sales of key drug Lyrica declined 1% to $1.19 billion reflecting wholesaler destocking ahead of the drug’s anticipated loss of exclusivity (LOE) in June and lower sales in developed Europe due to generic launches. Viagra sales declined 19% to $145 million due to generic competition that began in December 2017.

2019 Guidance

Pfizer maintained its sales guidance for 2019. However, the company raised the mid-point of its earnings guidance by a penny as increased expectation for other income, due to a milestone payment received in the first quarter, was offset by stronger currency headwinds.  The guidance includes a full year of revenues and expense contribution from the Consumer Healthcare unit.

Revenues are still expected in the range of $52.0 billion to $54.0 billion. Adjusted earnings per share are expected in the range of $2.83-$2.93 versus the previous expectation of $2.82-$2.92.

Research and development expense is expected in the range of $7.8–$8.3 billion while SI&A spending is projected in the range of $13.5 –$14.5 billion. Adjusted tax rate is expected to be approximately 16% in 2019.

Our Take

Pfizer beat estimates for first-quarter earnings and sales, raised the mid-point of its earnings expectations for 2019 by a penny and confirmed its previous outlook for full-year sales. Shares of Pfizer rose almost 1% in pre-market trading. Pfizer’s shares have declined 9.3% this year so far compared with a decline of 1% for the industry.

 

 

In 2019, Pfizer expects continued strong growth of key product franchises, including Ibrance, Eliquis, Xeljanz and Prevnar However, LOEs are expected to hurt 2019 sales significantly including the expected LOE of key drug Lyrica in the United States in June 2019. Also, currency headwinds are expected to significantly pull down 2019 revenues.

To offset the threat of generic competition, Pfizer is strengthening its pipeline as well as oncology portfolio. Pfizer gained FDA approval for four innovative medicines, Daurismo, Lorbrena, Vizimpro and Talzenna, in the last four months of 2018, which can boost its oncology sales in 2019. Pfizer boasts a strong pipeline and looks well positioned to deliver several potential new breakthrough innovative medicines in the next five years, which can drive long-term growth. Biosimilars are also expected to contribute to growth in 2019.

Pfizer currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Pfizer Inc. Price, Consensus and EPS Surprise

 

 

Pfizer Inc. Price, Consensus and EPS Surprise | Pfizer Inc. Quote

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