Pfizer ($PFE) posted fourth-quarter earnings that satisfied investors and analysts. But its guidance for 2016? Not so much.
The drug giant, in the midst of a megamerger with Allergan ($AGN), put up solo revenue of $14.05 billion, and adjusted earnings came in at $0.53. Sales actually beat some analysts' estimates by almost half a billion, and sales growth-- including its Hospira buy--amounted to 14%, or 7% including the impact of the strong dollar.
The brand-new breast cancer drug Ibrance was a particularly strong performer at $315 million, but Prevnar 13, its pneumococcal vaccine, really cleaned up. The shot brought in $1.86 billion, a gravity-defying leap of 43%.
But the company issued a revenue forecast of $49 billion to $51 billion for 2016, and that fell more than $1 billion short of Wall Street expectations. The consensus was for about $52.4 billion on the top line. Earnings forecasts were also light at $2.20 to $2.30, compared with analyst estimates of $2.38.
CFO Frank D'Amelio said the difference in Pfizer's forecast versus analyst consensus included a major currency shift in Venezuela, which took an $800 million chunk out of 2016 expectations. Plus, analysts had some overly rosy projections on Prevnar 13; the company thinks the vaccine franchise can't continue on its steep growth trajectory in 2016, and has projected sales of that product to be flat this year.
For the full year, Pfizer brought in $48.8 billion in revenue, led by the pain drug Lyrica at $3.6 billion--a 9% rise. The anti-inflammatory med Enbrel delivered $3.33 billion, an 18% decline year-over-year. For the coming year, as biosimilars make their debut in Europe, Pfizer is expecting a "modest" impact on Enbrel sales, according to John Young, who heads up the company's established products business.
Prevnar's full-year sales hit $6.2 billion, up 40%, while Eliquis, Viagra and Xeljanz also performed strongly, the company said. Pfizer attributed the Prevnar jump to new approvals in adults, and CEO Ian Read said the company has pretty well captured the potential increase in that market. "We'll hold onto that, but you won't see growth," he said during the Q4 earnings call.
With Read anticipating a potential breakup into two companies focused on "innovative" and "established" products, investors will be looking at the performance in those two areas for the quarter and the year. Pfizer's innovative products business, which includes vaccines and consumer healthcare, brought in $26.8 billion in 2015 revenue, up 11% including currency effects. Established products racked up $21.6 billion, down 14%. The Hospira buy is expected to pump up the latter division, however, with its portfolio of injectable generics and its pipeline biosimilars, one of which is already on sale in Europe.
|Pfizer CEO Ian Read|
As for the timing of that breakup, Pfizer extended its potential timeline when it announced its Allergan buy. Read reiterated that timing during the earnings call, saying Pfizer would make a decision by the end of 2018. Pressed about that delay--in light of the stock's recent weakness--Read said the extra time would be important to making a decision.
The company needs to see whether it can run the combined businesses successfully inside Pfizer first, and then decide whether they'd be better off on their own--and whether splitting up could really capture any trapped value.
"Any shareholder would want these questions answered," Read said, adding, "We think we are taking the right approach for shareholder value."
Read also repeatedly maintained that Treasury rules on tax-saving inversion deals--one of the big benefits of its Allergan buy--won't get in the way of closing the merger. That's despite the crackdown Treasury has promised to deter similar deals.
"Under current law I do not believe there is any reason why this deal will not close," Read said. "Full stop."
- see the Pfizer release (PDF)
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Editor's note: This story was updated and clarified with information from Pfizer's fourth-quarter earnings call with analysts.