New York-based drugmaker and Dow-30 component Pfizer (PFE – Free Pfizer Stock Report) reported a fourth-quarter GAAP loss of $0.07 a share, versus earnings of $2.02 in the comparable period of 2017. While revenues inched up a few percentage points year to year (more below), a sharp increase in restructuring costs and significant asset impairment charges weighed heavily on the bottom-line tally. The comparison was further skewed by a massive tax benefit ($1.79 a share) realized in fourth quarter of 2017. Meantime, adjusted earnings, which exclude one-time gains, losses, and other nonrecurring items, and are more closely followed by Wall Street, came in at $0.64 a share, versus $0.62 last year. The adjusted figure surpassed consensus expectations by a penny, thanks, in part, to a beat in revenues, but management's 2019 guidance was a bit lighter than anticipated. Shares of PFE are trading modestly higher today.
In the December period, worldwide revenues advanced 2% year over year, to $13.98 billion, representing the sixth-consecutive quarter of top-line growth. It also marked a nice beat versus the consensus estimate of $13.90 billion, as generic pressures were mostly offset by stronger growth in several of the company's core franchises. Key highlights included a 35% increase in rheumatoid arthritis drug Xeljanz and a 28% uptick in blood thinner medication Eliquis. Strong momentum in top oncology asset Ibrance (+58%) and high-single-digit gains in Chantix (+9%) and Lyrica (+8%) also provided nice support, helping to mitigate continued generic erosion in Viagra (-39%) and some softness in the top-grossing Prevnar vaccine lineup (-1%).
For full-year 2019, the drugmaker is guiding for adjusted earnings of $2.82-$2.92 a share, on revenues of $52 billion-$54 billion, which implies a pullback on the bottom line ($3.00 in 2018) and not much upside on the top line ($53.6 billion in 2018). Management indicated that its guidance anticipates continued strong growth in Ibrance, Eliquis, Xeljanz, and Xtandi, as well as the expected loss of exclusivity of Lyrica in the United States in June. The nerve pain medication is currently Pfizer's second-highest grossing franchise with Q4 sales north of $1.2 billion, so its loss should have a significant impact in the back half 2019. In total, management expects a $2.6 billion headwind from generic competition in 2019.
Although Pfizer's Q4 results came in ahead of expectations, there appears to be some cause for concern in the near term. The company's top-grossing product Prevnar (11% of Q4 sales) has shown signs of deceleration and its number-two seller Lyrica (9% of Q4 sales) is quickly approaching patent expiration. Management has also warned of biosimilar threats in other areas of the portfolio and anticipates a significant negative impact from foreign exchange in 2019. On a positive note, the brunt of the Viagra impact is now in the rearview mirror, and improved traction in the new product cycle should help to alleviate some pressure. We are also encouraged with Pfizer's robust pipeline and its ability to produce meaningful contributors, long term. In recent commentary, management indicated that it sees opportunity for 25-30 approvals through 2022, of which roughly half have blockbuster potential.
All told, we continue to view Pfizer stock as a solid core holding in the large pharma group. The company has strong finances, high-grade fundamentals, and an impressive track record of returning value to shareholders. In addition, the equity scores well across all of our proprietary risk metrics and currently holds our Highest (1) rank for year-ahead relative price performance.
About The Company: Pfizer is a major producer of pharmaceuticals. The company is engaged in discovering, developing, and manufacturing of healthcare products. Important product names include LYRICA (nerve and muscle pain); PREVNAR (vaccine); ENBREL (arthritis, psoriasis, and more); IBRANCE(advanced breast cancer) and CELEBREX (osteoarthritis, rheumatoid arthritis). The company acquired injectable drugmaker Hospira in 2015 and medical devices producer Medivation in 2016.
- Michael Ratty
