Advertisement
U.S. markets closed
  • S&P Futures

    5,210.00
    -4.75 (-0.09%)
     
  • Dow Futures

    39,211.00
    -12.00 (-0.03%)
     
  • Nasdaq Futures

    18,197.25
    -34.25 (-0.19%)
     
  • Russell 2000 Futures

    2,048.50
    -1.30 (-0.06%)
     
  • Crude Oil

    82.61
    -0.11 (-0.13%)
     
  • Gold

    2,164.30
    0.00 (0.00%)
     
  • Silver

    25.32
    +0.06 (+0.22%)
     
  • EUR/USD

    1.0878
    +0.0001 (+0.01%)
     
  • 10-Yr Bond

    4.3400
    +0.0360 (+0.84%)
     
  • Vix

    14.33
    -0.08 (-0.56%)
     
  • GBP/USD

    1.2727
    -0.0002 (-0.02%)
     
  • USD/JPY

    149.3260
    +0.2280 (+0.15%)
     
  • Bitcoin USD

    65,586.70
    -2,416.39 (-3.55%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,722.55
    -4.87 (-0.06%)
     
  • Nikkei 225

    39,596.29
    -144.15 (-0.36%)
     

Is Pfizer on Its Way Up?

- By Sangara Narayanan

Pfizer (PFE) finally had a good run this past six months. After what seemed to be an unstoppable slide in top line revenues, the company finally showed an impressive 15% increase to $26.2 billion from $22.7 billion in the year-ago six-month period. Unfortunately, the bottom line didn't see much of that increase, and only went to $5.02 billion from $5 billion last year -- about 1% growth.


Even though the top line gain primarily came from the Hospira acquisition, Pfizer's other blockbusters did contribute to overall revenue increase. The Hospira acquisition cost it nearly $17 billion, but it seems Pfizer got the better end of the deal.

Pfizer revenue history

Pfizer has been struggling with revenue slides from way back in 2011, when it peaked at slightly over $65 billion. Four years later in 2015, it was just below $49 billion after taking a thrashing from generics who jumped in and started ripping off chunks of market share from patent-expired blockbusters like Lipitor and Protonix.

But after five very long years, Pfizer is finally seeing its other drugs pick up the pace. Add Hospira to the mix and that's what we're seeing these past six months. In fact, management's confidence is up at the moment and they're guiding between $51 billion and $53 billion for the fiscal year. That's not a full recovery by any means, but at least investors will have something else to look forward to every quarter than yet another revenue drop.

sm0s6MksD6R9R0RMXZuZbJjgoZbUZvW80KIqvp3V
sm0s6MksD6R9R0RMXZuZbJjgoZbUZvW80KIqvp3V

A closer look at year-to-date numbers

When we look at the numbers for these two quarters without the Hospira acquisition factored in, we still see a 5% top line gain. So there is a measure of organic growth as well. However, a look at operating income shows a 10% drop during the period - $6.62 billion down to $5.98 this year.

On the one side, Pfizer is shelling out nearly half a billion dollars in multiple lawsuits connected to Bextra and Celebrex, its painkillers. In addition to the pain caused by these painkillers their acquisitions and restructuring have also cost them close to $460 million this year, up from under $150 million last year.

But investors are intolerant even of one-time hits, and Pfizer stock prices reflect that sentiment. After the second quarter results were out, the stock's trend snapped and sent it downward yet again, nearly wiping out any gains made since the middle of last year.

f4Wj12hz5uIIQctP2XnZfVp2hFdg1-HhFWknjqdV
f4Wj12hz5uIIQctP2XnZfVp2hFdg1-HhFWknjqdV

What does the future hold for Pfizer?

Pfizer's portfolio of drugs is still impressive after the patent expirations over the past several years. Lipitor still managed to bring in $870 million, the new oncology drug Ibrance brought $940 million, Enbrel did $1.5 billion, Prevnar brought in $2.77 billion and Lyrica crossed $2 billion. These five stars brought in more than $8 billion for the quarter, or 30% of their sales for the first six months of the year.

The one drug to keep your eye on for the next few quarters is the breast cancer pill Ibrance, which is already showing signs of "blockbuster-ness."

sR9le_0ZuJJvvUlbn-vZ-ZhihCYNzu0EHFxbRIOB
sR9le_0ZuJJvvUlbn-vZ-ZhihCYNzu0EHFxbRIOB

Prevnar is another drug that needs watching, but for their decline rather than their growth. The vaccine for pneumococcal diseases has already dropped to $1.26 billion from $1.5 billion in the year-ago quarter, and Pfizer expects full fiscal revenue from this drug to be lower than 2015.

Here's what they said in the Q2 call:

"Our Prevnar 13 franchise continues to be a significant contributor. With the success of our adult launch in the U.S., approximately 40% of the adult 65-and-plus population had been vaccinated as of the end of June. Achieving year-over-year growth is now more difficult because of the reduction in the number of U.S. adults over 65 who have not received their Prevnar 13 shot. We do, however, expect overall global Prevnar franchise sales for the full year will be comparable to slightly below 2015 levels."

So where does that leave Pfizer for the rest of the fiscal year?

Pfizer's year-to-date performance this year is far from enviable because of a mixed bag of losses countering gains. Overall, the company's sales is definitely showing an uptick but there may not be much in terms of profitability growth this fiscal year.

Some of the drugs that are still under patent are showing growth, but the older, generics-hit drugs will continue to decline well into next year. The one silver lining is the revised guidance for 2016, but even that isn't enough to send the stock up to greater heights. As such, the market accurately reflects the company's performance this year, only yielding a little more than 1.5% year-to-date.

Start a free 7-day trial of Premium Membership to GuruFocus.

This article first appeared on GuruFocus.


Advertisement