Pharmaceutical giant Pfizer Inc. (PFE) on Wednesday reported a profit for the fourth quarter that almost tripled from last year, when results were negatively impacted by a hefty charge. Revenues for the quarter surged 34% from last year.
However, on an adjusted basis, quarterly earnings per share fell 25% on costs related to the company's mega acquisition of Wyeth and missed market projections by a penny.
Pfizer also forecast fiscal year 2010 adjusted earnings per share below analysts' consensus estimate.
Pfizer said that fourth-quarter net income attributable to the company was $767 million or $0.10 per share, up from $266 million or $0.04 per share in the year-ago quarter.
The latest quarter's results include the legacy Wyeth operations from the acquisition date through Pfizer's domestic and international year-ends.
Pfizer completed its acquisition of Wyeth for $68 billion in October 2009. The deal is strategically important for Pfizer as it is facing patent extinction for many of its products shortly. Between 2010 and 2012, drugs that make up 42% of Pfizer's pharmaceutical revenue, are slated to lose patent protection. The drugs going off-patent include Aricept, Lipitor, Viagra, Detrol, Geodon and Xalatan. Lipitor alone accounted for 28% of Pfizer's pharmaceutical sales in 2008.
With Wyeth under its fold, Pfizer now has a diverse product portfolio that includes 17 products with more than $1 billion each in annual revenue. It is expected that no drug will account for more than 10% of the combined company's revenue in 2012. The combination also brings together a robust pipeline of biopharmaceutical research and development projects, including programs in diabetes, inflammation/immunology, oncology and pain, as well as significant opportunities in Wyeth's Alzheimer's disease pipeline.
The results for the latest quarter were favorably impacted by higher revenues and the non-recurrence of an after-tax charge of $2.3 billion in the year-ago period related to the resolution of certain investigations concerning pain killer Bextra and various other products, in addition to lower costs related to the company's cost-reduction initiatives in 2009. These factors were largely offset by significant purchase accounting adjustments and acquisition-related costs associated with the Wyeth acquisition.
Excluding items, adjusted net income for the latest quarter declined to $3.83 billion or $0.49 per share from $4.39 billion or $0.65 per share in the same period last year. On average, 15 analysts polled by Thomson Reuters expected the company to earn $0.50 per share for the quarter. Analysts' estimates typically exclude special items.
Adjusted net income for the latest quarter was negatively impacted by increased expenses, primarily due to the addition of the legacy Wyeth operations, and increased investment in high-growth and in-line product opportunities, in addition to higher net interest expense and an increase in the effective tax rate on adjusted income. Additionally, adjusted earnings per share was impacted by the increased number of shares outstanding in comparison with the year-ago period, resulting primarily from shares issued to partially fund the Wyeth acquisition.
Quarterly revenues surged 34% to $16.54 billion from $12.35 billion in the comparable quarter last year. Analysts had a consensus revenue estimate for the quarter of $15.88 billion.
Pfizer noted that the revenues for the quarter favorably impacted by $3.3 billion, or 27%, due to the addition of the legacy Wyeth products, 3% due to legacy Pfizer products, and 4% due to foreign exchange.
Pfizer's U.S. revenues for the latest quarter rose 42% year-over-year to $7.4 billion, and international revenues increased 28% to $9.1 billion that reflected 21% operational growth and a 7% favorable impact of foreign exchange. U.S. revenues represented 45% of the total revenues, up from 42% of the total in the year-ago period. International revenues represented 55% of the total revenues, down from 58% of the total last year.
In the fourth quarter, cost of sales more than doubled from last year to $3.94 billion, while selling, informational and administrative expenses surged 47% to $5.37 billion. Research and development expenses were up 22% to $2.81 billion. Restructuring and certain acquisition-related costs doubled from a year ago to $3.13 billion.
Income from continuing operations for the quarter were $759 million or $0.10 per share, up from $231 million or $0.03 per share in the same period last year.
Among Pfizer's peers, healthcare giant Merck & Co. Inc. (MRK) is scheduled to issue its financial results for the fourth quarter on February 16. Analysts expect the company to report earnings of $0.78 per share for the quarter on revenues of $9.36 billion.
Swiss drug-maker Novartis AG (NVS) in January reported an increase in fourth-quarter profit, reflecting an operational progress in all of its divisions and more favorable currency conditions. Net income for the fourth quarter attributable to shareholders of Novartis AG increased to $2.3 billion or $1.01 per share from $1.54 billion or $0.67 per share in the previous year. Net sales for the fourth quarter grew 28% to $12.93 billion from $10.08 billion a year earlier.
Segment-wise, Pfizer's total biopharmaceutical revenues for the fourth quarter rose 30% to $14.61 billion from $11.24 billion a year ago. Operationally, revenues increased 26%, of which 22% was attributable to legacy Wyeth products, primarily Premarin in the Primary Care unit, Enbrel and Prevnar in the Specialty Care unit, Effexor in the Established Products unit as well as Enbrel and Prevenar in the Emerging Markets unit. Additionally, the favorable impact of foreign exchange increased revenues for the quarter by 4%.
Primary Care revenues for quarter were $6.52 billion, up 10% from last year. Worldwide revenues of the company's cholesterol drug Lipitor increased 1% to $3.18 billion, while Lyrica revenues increased 17% to $820 million.
Revenues from Specialty Care grew 5% to $2.93 billion, with Revatio revenues surging 38% to $131 million. In the Established Products segment, revenues surged 57% to $2.75 billion. Revenues from Emerging Markets grew 25% from last year to $1.97 billion. Oncology revenues for the quarter were $428 million, up 11% from last year.
Pfizer's revenues from the Diversified segment rose 83% to $1.81 billion. Operationally, revenues increased 78%, of which 77% was attributable to legacy Wyeth products, primarily Centrum, Advil and Robitussin in Consumer Healthcare, and certain Nutrition products. In addition, the favorable impact of foreign exchange increased revenues by 5%.
Of the total diversified segment revenues, Animal Health revenues increased 15% to $901 million, Consumer Healthcare revenues for the latest quarter were $494 million, and Nutrition revenues were $191 million. Capsugel revenues for the quarter increased 10% to $223 million.
For fiscal year 2009, Pfizer's net income was $8.64 billion or $1.23 per share, up from $8.10 billion or $1.20 per share a year ago. However, the results were below the company's projections for earnings in a range of $1.45-1.50 per share.
The results for the year were favorably impacted by higher revenues and the non-recurrence of a $640 million after-tax charge related to the resolution of certain litigation involving the company's non-steroidal anti-inflammatory pain medicines in the third quarter of 2008. These factors were partially offset by the unfavorable impact of foreign exchange and higher net interest expense.
Adjusted net income for the year dropped to $14.20 billion or $2.02 per share from $16.37 billion or $2.42 per share a year ago, but came in line with the company's forecast in a range of $2.00-$2.05 per share. Analysts expected the company to report earnings of $2.03 per share for the year.
Revenues for the year were $50.01 billion, up 4% from $48.30 billion in the previous year. The company had forecast full-year revenues in a range of $49.0 billion-$50.0 billion.
Analysts had expected revenues of $49.07 billion for the year.
Full-year revenues were favorably impacted by approximately $3.3 billion, or 7%, due to the addition of the legacy Wyeth products and 1% due to legacy Pfizer products. However, revenues were unfavorably impacted by 4% due to foreign exchange.
U.S. revenues for the year increased 7% to $21.7 billion, while International revenues increased 1% to $28.3 billion.
Pfizer noted that for full-year 2009, operational improvements from the company's stand-alone cost-reduction initiatives resulted in a decrease in adjusted total costs of about $200 million, despite significant investment in many high-growth and in-line product opportunities in the fourth quarter. The operational improvements were driven partially by the reduction in workforce as well as manufacturing and research and development site exits.
At the closing of the Wyeth acquisition, the combined workforce totaled about 120,700, an increase from the Pfizer stand-alone workforce of approximately 75,100. As of December 31, 2009, the company's workforce was approximately 116,500, a decline of 4,200 since the closing on October 15, 2009.
For fiscal 2010, Pfizer forecasts reported earnings per share in a range of $0.95-$1.10, and adjusted earnings per share in a range of $2.10-$2.20. The company projects reported revenues between $67.0 billion and $69.0 billion. Analysts expect the company to report earnings of $2.27 per share for the year on revenues of $67.47 billion.
For fiscal year 2012, at current exchange rates, Pfizer forecasts reported earnings per share between $1.58 and $1.73, and adjusted earnings per share in a range of $2.25-$2.35. The company projects reported revenue for the year between $66.0 billion and $68.5 billion.
Reports indicated that the company had earlier forecast earnings comparable to 2008 adjusted earnings of $2.42 per share and sales comparable to the roughly $70 billion in combined sales of Pfizer and Wyeth.
Pfizer said that the revised outlook reflects the impact of the completed and pending divestitures of Animal Health assets as required by regulators in connection with their approvals of the Wyeth acquisition, the shift in revenues for human immunodeficiency virus products to the joint venture with GlaxoSmithKline plc, and the elimination of Relistor revenues due to Wyeth's return of its rights to the licensor, which in the aggregate reduced the revenue target by about $1.5 billion.
As announced in January 2009, Pfizer implemented a cost-reduction program that is expected to achieve cost savings of about $3 billion, at 2008 average foreign exchange rates. The company has scrapped 100 projects from the combined company pipeline in order to concentrate on high-priority projects. Pfizer anticipates approximately $1 billion of these savings to be reinvested in the business, resulting in an expected $2 billion net cost reduction. In addition, the company expects synergies of about $4 billion due to the Wyeth acquisition, which is expected to result in $2 billion to $3 billion in net cost savings after reinvestment in the business.
In the aggregate, Pfizer expects to generate gross cost reductions of about $7 billion, resulting in net cost reductions of about $4 billion-$5 billion by the end of 2012, at 2008 average foreign exchange rates.
In Wednesday's regular trading session, PFE is trading at $18.66, down $0.40 or 2.10% on a volume of 6.97 million share. In the past 52 weeks, the stock has been trading in a range of $11.62-$20.36.
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