Sunk by generics, Pfizer clings to emerging markets, cancer meds

Pfizer CEO Ian Read

Pfizer's third-quarter results perfectly capture the forces shaping Big Pharma these days. Patent losses linger, with hundreds of millions lost to generic competition old and new. But Pfizer had growth in emerging markets and cancer sales to help stanch the flow, so overall sales only shrank by 2% to $12.6 billion.

But shrink they did, and so did Pfizer's ($PFE) expectations for the full year. The company lowered the top end of its sales forecast by $1 billion, to $51.8 billion from $52.8 billion. Fortunately for earnings, Pfizer also cut its expectations for expenses, with sales and administrative costs expected to hit $14.7 billion at most, rather than its former top end of $15.2 billion. And fortunately for Pfizer's media coverage, analysts are likely to zero in on the company's ongoing work to separate internal operations into three discrete parts, perhaps in preparation for selling or spinning off more units.

In announcing the results, CEO Ian Read pointed to Pfizer's top-selling and still-growing products, Lyrica and Celebrex, which grew by 11% (to $1.14 billion) and 13% (to $752 billion). Xeljanz, the new rheumatoid arthritis drug, also got a shout-out for performing up to expectations. "Overall, I am very pleased with our continued and steady progress, on many fronts, to drive greater value for our shareholders," Read said.

And then there's Eliquis, the anticoagulant developed with Bristol-Myers Squibb ($BMY). Finally approved late last year as a stroke-prevention treatment for patients with atrial fibrillation, Eliquis was expected to gather market share quickly and effectively. So far, that hasn't happened. Bayer and Johnson & Johnson's ($JNJ) Xarelto and Boehringer Ingelheim's Pradaxa, which beat Eliquis to market, have entrenched themselves, and the newer drug is having a tough time pushing them back. But Read suggested change is afoot; prescription trends "continue to improve," he said, and a direct-to-consumer advertising campaign is underway. 

Meanwhile, patent expirations have been a familiar drag on third-quarter sales around  the industry, if not as dramatic as in recent years. In Pfizer's particular case, generic rivals siphoned off 27% of Lipitor's sales and European Viagra copies took an 11% toll on that brand, leaving their sales at $533 million and $460 million, respectively. Revatio (sildenafil), the Viagra twin aimed at pulmonary arterial hypertension, sank 44% on copycat competition. And the bladder drug Detrol (tolterodine), which faces Teva's ($TEVA) authorized generic version, deflated by about one-quarter, to $131 million. Meanwhile, generic versions of former blockbusters like Effexor and Zoloft continue to erode sales.

And like some of its rivals, Pfizer found a lift in emerging markets sales, if not as dramatic as theirs. Sales in those areas grew 2%, to $2.431 billion, mostly because of growth in China, where Lipitor (atorvastatin) made notable gains. Also like its rivals, Pfizer's emerging markets sales suffered a bit from government cost-cutting.

Meanwhile, cancer drugs--one of the brightest spots in the pharma business these days--gave the company another boost, with sales up about one-quarter. Pfizer said its push to improve diagnostic testing for potential Xalkori (crizotinib) patients--a small subset of lung-cancer sufferers--helped drive new prescriptions there. Inlyta (axitinib), the company's kidney cancer treatment, got a boost from pricing and reimbursement moves in Europe, and gained market share in the U.S. Total cancer sales for the period? $407 million.

All of this is interesting, if incremental, but investors and analysts are more interested in Pfizer's potential break-up plans. The success of its animal health spinoff and nutrition-unit sale--which are helping to fund new share buy-backs and dividends--have the market salivating for more. Analysts will be looking for an update as Pfizer's executives discuss the numbers later today. Stay tuned.

- see the Pfizer release

Special Reports: Top 10 Drugmakers in Emerging Markets - Pfizer | Top Pharma Companies by 2012 Revenues - Pfizer

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