Pfizer's Q3 beats, but flat sales mean CEO Read needs a big move

Pfizer CEO Ian Read

Pfizer ($PFE) is popping the confetti on earnings that beat analysts' expectations, bolstered by sales of cancer drugs and growth in emerging markets. But as for that much-talked about deal with AstraZeneca ($AZN)? No word for now. And given declining sales for the quarter, some analysts figure Pfizer still needs to make a big move--acquisition or otherwise.

Earnings rang in at $2.67 billion for the third quarter, up from $2.59 billion a year ago, when Pfizer was hit with restructuring costs and writedowns. Sales dropped 2% to $12.36 billion on generic competition for some of its standout products--such as Viagra and Aricept--but still topped the Street's expectations of $12.24 billion, Reuters reports. Strong performance of cholesterol powerhouse Lipitor in China and pain fighter Lyrica in Europe also helped swing the company's numbers northward.

Anyone looking for news about Pfizer's power play for U.K.-based AstraZeneca will need to stay tuned. The company in its third quarter earnings statement highlighted its July agreement to scoop up Baxter's ($BAX) portfolio of vaccines for $635 million and its recent $360 million deal for InnoPharma, but remained mum about any future acquisition plans.

In May, Pfizer abandoned its 6-month pursuit of AstraZeneca after the drugmaker rejected its $118 billion bid. CEO Read in July said the company was shopping around for other deals, and rumors emerged that Actavis ($ACT) was a potential target--but for now, Pfizer will neither confirm nor deny.

Still, a deal could be exactly what Pfizer needs to keep its ship afloat. As Edward Jones analyst Ashtyn Evans told Reuters, now that fellow pharma giant AbbVie canceled its deal for Shire, Pfizer could be less likely to make a move. But given the company's bleak prospects and upcoming patent expirations, Pfizer "will have to do something, like breaking up the company or making a big acquisition," Evans told the news outlet. 

Meanwhile, Pfizer is working hard to ramp up its product portfolio and counter slumping sales. Generic competition to pain drug Celebrex is set to hit by the end of the year, potentially dealing a costly blow to the company. But promising Q3 numbers for cancer drugs Xalkori and Xeljanz could help pad the Pfizer's bottom line; Xalkori raked in $112 million in worldwide sales, a 56% leap year-over-year, while Xeljanz brought in $85 million--an eye-popping 142% increase from the same quarter last year.

And then there's palbociclib, the company's promising cancer therapy. Earlier this month, Pfizer picked up a priority review designation for the closely-watched drug, inching it closer to full regulatory approval. Peak sales estimates place the palbociclib at around $3 billion a year, funds that could do wonders for the company's bottom line.

But product development is not the only card Pfizer has in its pocket; the company last week announced an $11 billion share buyback plan, leaving some investors and analysts wondering what the move meant for future M&A. For now, though, the drugmaker isn't letting the cat out of the bag.

"Given our continued strong financial position, I see Pfizer as well positioned to potentially allocate capital for the benefit of shareholders across multiple financial and strategic opportunities," Read said in the company's earnings statement.

- read Pfizer's earnings statement (PDF)
- here's the Reuters story

Special Report: The top 10 pharma companies by 2013 revenue - Pfizer

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