Pfizer ($PFE) reported good news and bad along with its quarterly results. Earnings beat expectations--but narrowly, and largely because 2009's fourth quarter was weighed down by merger-related charges. Without those charges, profits fell--but only by one percent. Rising drug sales powered year-over-year revenue growth to $17.56 billion--but full year net income dropped by 4 percent.
Additional revenue from Wyeth drugs contributed to Pfizer's 2010 profit performance; after all, 2010 was the first full year after the merger. But job cuts and other cost measures also helped, and those moves can't be repeated ad infinitum.
Perhaps most worrisome is Pfizer's future outlook. The company forecasts flat revenue for 2011--$66 billion to $68 billion, compared with $67.8 billion in 2010--and a decline in 2012. Predicted revenues for that year are $63 billion to $65.5 billion, predicated on U.S. generic competition for Lipitor, which begins in November, and lack of new-drug revenue the company had been expecting before prospects failed clinical trials.
As Forbes points out, new CEO Ian Read (photo) will be presiding over a shrinking company: Bernstein Research forecasts a revenue decline through 2015, with sales dropping 10 percent to $61 billion. Meanwhile, Bernstein's Tim Anderson figures the same five products will top Pfizer's drug sales in five years. That doesn't show much faith in the company's ability to foster new products.
And as Bloomberg notes, Pfizer is continuing a cost-reduction plan that includes firing 19,000 employees, shuttering eight manufacturing plants and shutting six research centers. Even before that plan was enacted, Pfizer had fired about 40,000 employees over the six years ended in 2009.