This afternoon, Monday, May 5, 2014, PfizerPFE reported its first quarter earnings. Shares of the company are down 2.7 percent or $0.83 per share to $29.92. Below are some key takeaways from its conference call:
Chairman and CEO, Ian Read:
• The proposal we announced publicly last Friday represented a substantial
premium of 32% for AstraZeneca shareholders based on AstraZeneca's closing
price of 37.82 on the day before speculation began regarding a potential
proposal, a 39% premium to the closing price of 35.86 on the day before our
January proposal, and a 22% premium to the unaffected all-time high closing
price since the formation of the company in 1999.
• I would point out that our business has historically demonstrated seasonality
of revenues, and this quarter was no different. In terms of product
developments, we reported positive results from Prevnar 13 CAPiTA study in
older adults, and announced FDA approvals including supplementary new drug
applications for Xeljanz to include radiographic data in the label and for
Eliquis for prophylaxis of deep vein thrombosis, as well as FDA approval of
Nexium 24-hour for over-the-counter use for the treatment of frequent heart
burn in adults 18 and over.
• For the full year revenue outlook, we anticipate key products will continue
exhibiting growth and that operational growth in emerging markets will be in
the mid-single-digit range rather than in the 3% range we saw in this
quarter. Typically, our sequential annual product revenue pattern exhibits
relative strength in the late quarters compared to our first quarter. For the
balance of 2014, we anticipate incremental revenue contributions from
Eliquis, Xeljanz, Prevnar 13 Adult, Duavee and the expected launch of over
the counter Nexium.
• Reflecting on the state of our business, I am pleased with our pipeline
progress. We are continuing to see the benefit of the decisions we took over
three years ago when we decided to focus our research and development in the
areas where we have the most expertise and where the greatest unmet medical
need exists.
• Overall, I believe we are performing well in a challenging operating
environment. Our pipeline is advancing. We have a strong track record when it
comes to using capital to generate value, and we have an engaged and
motivated work force that has embraced the culture of ownership. Collectively
these are the elements of strategy that are helping to drive our overall
business results
• Throughout this year you will see us taking action to execute on our plans to
advance new therapies to patients, strengthen our commercial businesses,
manage our cost structure, and deploy our capital in ways that yield the
greatest value to our shareholders.
Frank D'Amelio, CFO:
• I also want to remind everyone that as a result of the full disposition of
Zoetis on June 24, 2013, the financial results of the animal health business
are reported as a discontinued operation in the consolidated statement of
income from the first quarter 2013.
• Now let's move on to the financials. First quarter 2014 revenues of
approximately $11.4 billion decreased 9% year-over-year reflecting a 3%
negative impact from foreign exchange and an operational decline of
approximately 6%, driven mainly by the expiration on October 31, 2013, of the
co-promotion term of the collaboration agreements for Enbrel in the U.S. and
Canada, the ongoing expiration of the Spiriva collaboration in certain
countries, continued erosion from branded Lipitor in the U.S. and most other
developed markets, the loss of exclusivity and subsequent multi-source
generic competition for Detrol LA in the U.S. and other product losses of
exclusivity in certain markets.
• These were partially offset by the strong operational growth of Lyrica,
Xalcori and Inlyta globally, Enbrel outside of the U.S. and Canada, Eliquis
and Xeljanz, primarily in the U.S., the contribution from the collaboration
to market generic medicines in Japan with Mylan. In addition, reported
revenues included $57 million from transitional manufacturing and supply
agreements with Zoetis.
• Adjusted diluted EPS of $0.57 increased 12% primarily due to an aggregate
operational decrease of 3% and adjusted cost of sales, adjusted SI&A
expenses, and adjusted R&D expenses primarily resulting from cost reduction
and productivity initiatives, a lower effective tax rate, and fewer diluted
weighted average shares outstanding due to our ongoing share repurchase
program and the impact of the Zoetis exchange offer.
• Reported diluted EPS of $0.36 compared with $0.38 in the year-ago quarter was
positively impacted by the above-mentioned items and lower restructuring and
asset impairment charges compared to the year-ago quarter. Reported results
were negatively impacted by the previously mentioned year-over-year decrease
in revenues and the non-recurrence of income from discontinued operations
associated with our animal health business and the gain associated with the
transfer of certain product rights to Pfizer's JV with Hisun in China in the
year-ago quarter. And finally, higher legal charges compared with the
year-ago quarter.
• Now moving on to our 2014 financial guidance, historically our business has
demonstrated seasonality of revenues, and this quarter is no different. That
said, we are confirming all components of our adjusted 2014 financial
guidance ranges, and as such continue to expect our adjusted revenue to be in
the range of $49.2 to $51.2 billion.
• Foreign exchange negatively impacted first quarter revenues by 3% or $364
million and had a net positive impact of $195 million on the aggregate of
adjusted cost of sales, adjusted SI&A expenses and adjusted R&D expenses. As
a result, foreign exchange negatively impacted first quarter adjusted diluted
EPS by approximately $0.01 compared to the year ago quarter.
• Because Pfizer recorded a number of charges during the first quarter 2014
relating primarily to the resolution of litigation related matters, Pfizer's
previously issued 2014 reported diluted EPS guidance is no longer valid.
Updated reported diluted EPS guidance will be provided as soon as practical.
As required by the U.K. takeover code, the Pfizer responsible officers
including Ian, Doug Lankler, our General Counselor and me, confirm that the
adjusted financial guidance provided has been properly compiled based on the
same assumptions set out in the adjusted financial guidance issued on January
28, 2014, and prepared in accordance with the accounting policies of Pfizer.
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