The good news: Pfizer delivered a big increase in third-quarter profits; 26 percent, to be exact. The bad: revenues slipped 3 percent, highlighting the fact that cost-cutting boosted earnings, not product performance. (Nonetheless, sales did beat analyst estimates.)
It's another chapter in this quarter's pharma earnings story. While companies are mostly managing to deliver on the profit side--via restructuring, layoffs, plant closures, what have you--some are falling short on sales. Given the fact that cost-cutting is a self-limiting endeavor, this pattern has some industry watchers concerned. Will pharma be able to pump up revenues from here? That's the question.
Now for the specifics on Pfizer. The drugmaker not only boosted Q3 profits to $2.88 billion, but raised its EPS forecast for the year to between $1.45 and $1.50 per share. That's despite the fact that sales of its best-known products dropped over the past few months. Cholesterol bestseller Lipitor brought in 9 percent less, or $2.85 billion. Chantix sales dropped 15 percent to $155 million, while Viagra fell 8 percent to $466 million.
But to some extent, Pfizer gets a pass this quarter. After all, the picture changes dramatically for Q4, now that its buyout of Wyeth has closed. "The Wyeth acquisition has investors focused on the future," Credit Suisse analyst Catherine Arnold noted (as quoted by Bloomberg). Besides bringing new products into the fold, that deal also gives Pfizer the chance for another big round of cost cuts as it eliminates operational overlap. Layoffs to the tune of 19,000-plus, not to mention shuttered facilities. So unlike other drugmakers who didn't make a $68 billion deal this quarter, Pfizer won't have to deliver organic sales growth to satisfy. At least not yet.
ALSO: Biogen Idec bucked the sales-slippage trend, boosting revenues by 2.5 percent to $1.12 billion; earnings grew some 34 percent to 96 cents per sahre, compared with 71 cents a year earlier. Report
ALSO: Eli Lilly reports third-quarter earnings Wednesday before the market opens. Report