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Pfizer (PFE) Q1 Earnings Top, Biopharma Gains From Coronavirus
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Pfizer, Inc. (PFE - Free Report) reported first-quarter 2020 adjusted earnings per share of 80 cents, which beat the Zacks Consensus Estimate of 71 cents. Earnings however declined 5% year over year as lower revenues offset spending reductions.
The pharma heavyweight recorded revenues of $12.03 billion, which declined 8% from the year-ago quarter on a reported basis. On an operational basis, excluding the 1% negative impact of currency, revenues declined 7% year over year as higher sales of some key brands in Pfizer’s Biopharmaceuticals group were offset by revenue decline in the Upjohn segment and sales lost due to the spin-off of the Consumer Healthcare (CHC) unit. Meanwhile, first-quarter revenues included a net positive impact of approximately $150 million, or 1%, due to COVID-19.
Importantly, excluding the spin-off of the Consumer Healthcare (CHC) unit, first-quarter revenues declined 1% operationally. We remind investors that in August last year Pfizer merged its CHC unit with Glaxo’s (GSK - Free Report) Consumer unit to form a new joint venture (JV). Pfizer owns a stake of 32% in the JV and Glaxo owns the remaining 68%.
International revenues declined 8% to $6.38 billion. On an operational basis, international sales declined 6% in the quarter. U.S. revenues declined 8% to $5.65 billion.
Adjusted selling, informational and administrative (SI&A) expenses declined 16% (operationally) in the quarter to $2.75 billion. Adjusted R&D expenses rose 2% to $1.73 billion.
Segment Discussion
Pfizer reports under two business units — Pfizer Biopharmaceuticals Group and Upjohn.
Importantly, in July 2019, Pfizer had announced a definitive agreement to spin off its Upjohn unit and combine it with generic drugmaker Mylan in a Reverse Morris Trust transaction to create a generic pharmaceutical company to be called Viatris. In March, Pfizer announced a delay in closing of the pending merger due to the coronavirus pandemic. It was postponed to the second half of 2020 versus the prior expectation of mid-2020.
Pfizer Biopharma sales grew 11% on a reported basis (up 12% an operational basis) from the year-ago period to $10 billion. Higher sales of brands like Eliquis, Ibrance, Inlyta and Vyndaqel/Vyndamax and higher biosimilars revenues drove this segment’s sales growth. Weaker sales of Prevnar 13/Prevenar 13 in the United States and Enbrel internationally offset the increase.
Within the Biopharma group, Oncology revenues increased 25% (on an operational basis) to $2.44 billion. Vaccine revenues rose 1% to $1.61 billion. Internal Medicine rose 10% to $2.33 billion. The Inflammation & Immunology franchise declined 4% to $978 million. The portfolio of Rare Disease rose 38% to $639 million. Hospital sub-segment’s sales rose 11% to $2.01 billion. The Hospital segment comprises Pfizer’s global portfolio of sterile injectable and anti-infective medicines.
Pfizer’s Upjohn group’s sales declined 37%, both on a reported and operational basis, to $2.02 billion mainly due to U.S. loss of exclusivity of Lyrica and lower sales of Lipitor and Norvasc in China following the implementation of the VBP program in the country in December 2019.
Performance of Key Drugs
Ibrance revenues rose 11% year over year to $1.25 billion on continued strong uptake in international markets and consistent CDK class market share growth in the United States.
Xeljanz sales rose 8% to $451 million driven mainly by growth in international markets.
Inlyta revenues were $169 million in the quarter, much higher than $73 million in the year-ago quarter, driven mainly by 255% growth in the United States. U.S. sales gained from increased uptake, resulting from recent FDA approvals for the combination of Inlyta plus Bavencio and Inlyta plus Merck’s (MRK) PD-L1 inhibitor Keytruda in first-line treatment of advanced renal cell carcinoma patients
Global Prevnar 13/Prevenar 13 revenues declined 1% to $1.45 billion. Prevnar 13 revenues declined 10% in the United States. Prevenar 13 revenues rose 11% in international markets.
Enbrel revenues declined 21% to $347 million in key European markets due to continued biosimilar competition. Pfizer has exclusive rights to Amgen’s (AMGN - Free Report) blockbuster RA drug, Enbrel, outside the United States and Canada.
Eliquis alliance revenues and direct sales rose 29% to $1.3 billion. Xalkori sales rose 24% to $149 million. Xtandi recorded alliance revenues of $209 million in the quarter, up 25% year over year. Sutent sales declined 9% to $205 million. Chantix sales were flatat $270 million in the quarter.
Importantly, new drug Vyndaqel/Vyndamax recorded sales of $231 million in the quarter compared with $213 million in the previous quarter.
Braftovi and Mektovi, which Pfizer acquired following its acquisition of Array BioPharma in 2019, recorded sales of $37 million each in the first quarter of 2020 versus $30 in the previous quarter.
Total biosimilar revenues were $288 million, up 63% year over year. In sterile injectables, global revenues increased 15% operationally to $1.41 billion and U.S. revenues increased 22% operationally as Pfizer’s manufacturing recovery efforts started taking shape.
In the Upjohn segment, sales of key drug Lyrica declined 70% to $357 million due to multi-source generic erosion. Viagra sales declined 12% to $127 million due to generic competition.
2020 Guidance
The company re-affirmed its financial guidance for 2020 for the present Pfizer as well as for the “New Pfizer”, after the Upjohn divestiture. The company, however, did update certain components of the guidance to reflect actual and anticipated impacts of the coronavirus pandemic.
Revenues are still expected in the range of $48.5 billion to $50.5 billion. Adjusted earnings per share are expected in the range of $2.82-$2.92. Unfavorable impact of currency is expected to hurt 2020 revenues by $600 million (previously $200 million) and adjusted earnings by 4 cents per share.
Research and development expense for present Pfizer was raised from a range of $8.1- $8.5 billion to $8.6 - $8.9 billion to account for the company’s coronavirus-related research efforts. SI&A spending was lowered from a range of $12.0–$13.0 billion to $11.5 - $12.5 billion, primarily to reflect spending reductions related to COVID-19. Adjusted tax rate is expected to be approximately 15% in 2020.
The “New Pfizer” is expected to record revenues in the range of $40.7 billion to $42.3 billion, the midpoint of which indicates 8% volume-driven operational growth compared to 2019 Biopharma revenues. Adjusted EPS guidance for the “New Pfizer” is in the range of $2.25-$2.35. Pfizer’s Biopharma unit will become the “New Pfizer” following the expected separation of Upjohn.
Coronavirus Related Research Efforts
In March, Pfizer announced that it will co-develop Germany-based biotech BioNTech’s mRNA-based vaccine candidate, BNT162 to prevent COVID-19. In April, the German regulatory authority granted approval to the companies to begin a phase I/II clinical study in Germany and the first patient has been dosed with the vaccine candidate. The companies will jointly conduct clinical studies on their COVID-19 vaccine candidate also in the United States upon getting regulatory approvals. Pfizer says it has the potential to supply millions of vaccine doses by the end of 2020 if it receives the necessary regulatory approvals. Thereafter, it can rapidly scale up capacity to produce hundreds of millions of doses in 2021.
Meanwhile, Pfizer is also working to develop an investigational antiviral compound to treat SARS-CoV-2, the virus that causes COVID-19. It has identified a lead antiviral compound that showed activity against SARS-CoV-2 in preclinical screening. The company plans to start a potential clinical study of the lead molecule in the third quarter of 2020, 3-4 months earlier than expected.
Our Take
Pfizer beat estimates for earnings and kept its financial outlook for the year intact despite the coronavirus pandemic. As a result, Pfizer’s shares rose 2.3% in pre-market trading. However, this year so far, Pfizer’s stock has declined 2.2% against an increase of 0.1% for the industry
In the quarter, Pfizer saw slower rates of new prescriptions for certain products and vaccination rates for most vaccines due to widespread restrictions on patient visits to doctor and coronavirus-related lockdown. However, it expects the impact of these factors to be more significant in the second quarter. Some of Pfizer’s medicines —- Prevnar 13/Prevenar 13 and certain of its hospital products —- saw increased demand as Pfizer believes they were prescribed to COVID-19 patients though not approved to treat the same. Meanwhile, Pfizer also saw an increase in wholesaler buying patterns for Eliquis due to COVID-19.
Nonetheless, we believe the Consumer Healthcare joint venture with Glaxo, the Array acquisition (July 2019) and the pending merger of Upjohn unit with Mylan, if successful, will make Pfizer a smaller company with a diversified portfolio of innovative drugs and vaccines. The smaller Pfizer should see better revenue growth as the Lyrica LOE cliff goes away. Pfizer expects strong growth of key brands like Ibrance, Inlyta and Eliquis to drive sales in 2020. In addition, new brands such as Vyndaqel/Vyndamax, Braftovi, Mektovi and oncology biosimilars should bring in additional sales. Meanwhile, Pfizer expects improvement in coronavirus associated business disruptions in the second half of the year.
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Pfizer (PFE) Q1 Earnings Top, Biopharma Gains From Coronavirus
Pfizer, Inc. (PFE - Free Report) reported first-quarter 2020 adjusted earnings per share of 80 cents, which beat the Zacks Consensus Estimate of 71 cents. Earnings however declined 5% year over year as lower revenues offset spending reductions.
The pharma heavyweight recorded revenues of $12.03 billion, which declined 8% from the year-ago quarter on a reported basis. On an operational basis, excluding the 1% negative impact of currency, revenues declined 7% year over year as higher sales of some key brands in Pfizer’s Biopharmaceuticals group were offset by revenue decline in the Upjohn segment and sales lost due to the spin-off of the Consumer Healthcare (CHC) unit. Meanwhile, first-quarter revenues included a net positive impact of approximately $150 million, or 1%, due to COVID-19.
Importantly, excluding the spin-off of the Consumer Healthcare (CHC) unit, first-quarter revenues declined 1% operationally. We remind investors that in August last year Pfizer merged its CHC unit with Glaxo’s (GSK - Free Report) Consumer unit to form a new joint venture (JV). Pfizer owns a stake of 32% in the JV and Glaxo owns the remaining 68%.
International revenues declined 8% to $6.38 billion. On an operational basis, international sales declined 6% in the quarter. U.S. revenues declined 8% to $5.65 billion.
Adjusted selling, informational and administrative (SI&A) expenses declined 16% (operationally) in the quarter to $2.75 billion. Adjusted R&D expenses rose 2% to $1.73 billion.
Segment Discussion
Pfizer reports under two business units — Pfizer Biopharmaceuticals Group and Upjohn.
Importantly, in July 2019, Pfizer had announced a definitive agreement to spin off its Upjohn unit and combine it with generic drugmaker Mylan in a Reverse Morris Trust transaction to create a generic pharmaceutical company to be called Viatris. In March, Pfizer announced a delay in closing of the pending merger due to the coronavirus pandemic. It was postponed to the second half of 2020 versus the prior expectation of mid-2020.
Pfizer Biopharma sales grew 11% on a reported basis (up 12% an operational basis) from the year-ago period to $10 billion. Higher sales of brands like Eliquis, Ibrance, Inlyta and Vyndaqel/Vyndamax and higher biosimilars revenues drove this segment’s sales growth. Weaker sales of Prevnar 13/Prevenar 13 in the United States and Enbrel internationally offset the increase.
Within the Biopharma group, Oncology revenues increased 25% (on an operational basis) to $2.44 billion. Vaccine revenues rose 1% to $1.61 billion. Internal Medicine rose 10% to $2.33 billion. The Inflammation & Immunology franchise declined 4% to $978 million. The portfolio of Rare Disease rose 38% to $639 million. Hospital sub-segment’s sales rose 11% to $2.01 billion. The Hospital segment comprises Pfizer’s global portfolio of sterile injectable and anti-infective medicines.
Pfizer’s Upjohn group’s sales declined 37%, both on a reported and operational basis, to $2.02 billion mainly due to U.S. loss of exclusivity of Lyrica and lower sales of Lipitor and Norvasc in China following the implementation of the VBP program in the country in December 2019.
Performance of Key Drugs
Ibrance revenues rose 11% year over year to $1.25 billion on continued strong uptake in international markets and consistent CDK class market share growth in the United States.
Xeljanz sales rose 8% to $451 million driven mainly by growth in international markets.
Inlyta revenues were $169 million in the quarter, much higher than $73 million in the year-ago quarter, driven mainly by 255% growth in the United States. U.S. sales gained from increased uptake, resulting from recent FDA approvals for the combination of Inlyta plus Bavencio and Inlyta plus Merck’s (MRK) PD-L1 inhibitor Keytruda in first-line treatment of advanced renal cell carcinoma patients
Global Prevnar 13/Prevenar 13 revenues declined 1% to $1.45 billion. Prevnar 13 revenues declined 10% in the United States. Prevenar 13 revenues rose 11% in international markets.
Enbrel revenues declined 21% to $347 million in key European markets due to continued biosimilar competition. Pfizer has exclusive rights to Amgen’s (AMGN - Free Report) blockbuster RA drug, Enbrel, outside the United States and Canada.
Eliquis alliance revenues and direct sales rose 29% to $1.3 billion. Xalkori sales rose 24% to $149 million. Xtandi recorded alliance revenues of $209 million in the quarter, up 25% year over year. Sutent sales declined 9% to $205 million. Chantix sales were flatat $270 million in the quarter.
Importantly, new drug Vyndaqel/Vyndamax recorded sales of $231 million in the quarter compared with $213 million in the previous quarter.
Braftovi and Mektovi, which Pfizer acquired following its acquisition of Array BioPharma in 2019, recorded sales of $37 million each in the first quarter of 2020 versus $30 in the previous quarter.
Total biosimilar revenues were $288 million, up 63% year over year. In sterile injectables, global revenues increased 15% operationally to $1.41 billion and U.S. revenues increased 22% operationally as Pfizer’s manufacturing recovery efforts started taking shape.
In the Upjohn segment, sales of key drug Lyrica declined 70% to $357 million due to multi-source generic erosion. Viagra sales declined 12% to $127 million due to generic competition.
2020 Guidance
The company re-affirmed its financial guidance for 2020 for the present Pfizer as well as for the “New Pfizer”, after the Upjohn divestiture. The company, however, did update certain components of the guidance to reflect actual and anticipated impacts of the coronavirus pandemic.
Revenues are still expected in the range of $48.5 billion to $50.5 billion. Adjusted earnings per share are expected in the range of $2.82-$2.92. Unfavorable impact of currency is expected to hurt 2020 revenues by $600 million (previously $200 million) and adjusted earnings by 4 cents per share.
Research and development expense for present Pfizer was raised from a range of $8.1- $8.5 billion to $8.6 - $8.9 billion to account for the company’s coronavirus-related research efforts. SI&A spending was lowered from a range of $12.0–$13.0 billion to $11.5 - $12.5 billion, primarily to reflect spending reductions related to COVID-19. Adjusted tax rate is expected to be approximately 15% in 2020.
The “New Pfizer” is expected to record revenues in the range of $40.7 billion to $42.3 billion, the midpoint of which indicates 8% volume-driven operational growth compared to 2019 Biopharma revenues. Adjusted EPS guidance for the “New Pfizer” is in the range of $2.25-$2.35. Pfizer’s Biopharma unit will become the “New Pfizer” following the expected separation of Upjohn.
Coronavirus Related Research Efforts
In March, Pfizer announced that it will co-develop Germany-based biotech BioNTech’s mRNA-based vaccine candidate, BNT162 to prevent COVID-19. In April, the German regulatory authority granted approval to the companies to begin a phase I/II clinical study in Germany and the first patient has been dosed with the vaccine candidate. The companies will jointly conduct clinical studies on their COVID-19 vaccine candidate also in the United States upon getting regulatory approvals. Pfizer says it has the potential to supply millions of vaccine doses by the end of 2020 if it receives the necessary regulatory approvals. Thereafter, it can rapidly scale up capacity to produce hundreds of millions of doses in 2021.
Meanwhile, Pfizer is also working to develop an investigational antiviral compound to treat SARS-CoV-2, the virus that causes COVID-19. It has identified a lead antiviral compound that showed activity against SARS-CoV-2 in preclinical screening. The company plans to start a potential clinical study of the lead molecule in the third quarter of 2020, 3-4 months earlier than expected.
Our Take
Pfizer beat estimates for earnings and kept its financial outlook for the year intact despite the coronavirus pandemic. As a result, Pfizer’s shares rose 2.3% in pre-market trading. However, this year so far, Pfizer’s stock has declined 2.2% against an increase of 0.1% for the industry
In the quarter, Pfizer saw slower rates of new prescriptions for certain products and vaccination rates for most vaccines due to widespread restrictions on patient visits to doctor and coronavirus-related lockdown. However, it expects the impact of these factors to be more significant in the second quarter. Some of Pfizer’s medicines —- Prevnar 13/Prevenar 13 and certain of its hospital products —- saw increased demand as Pfizer believes they were prescribed to COVID-19 patients though not approved to treat the same. Meanwhile, Pfizer also saw an increase in wholesaler buying patterns for Eliquis due to COVID-19.
Nonetheless, we believe the Consumer Healthcare joint venture with Glaxo, the Array acquisition (July 2019) and the pending merger of Upjohn unit with Mylan, if successful, will make Pfizer a smaller company with a diversified portfolio of innovative drugs and vaccines. The smaller Pfizer should see better revenue growth as the Lyrica LOE cliff goes away. Pfizer expects strong growth of key brands like Ibrance, Inlyta and Eliquis to drive sales in 2020. In addition, new brands such as Vyndaqel/Vyndamax, Braftovi, Mektovi and oncology biosimilars should bring in additional sales. Meanwhile, Pfizer expects improvement in coronavirus associated business disruptions in the second half of the year.
Pfizer has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Pfizer Inc. Price, Consensus and EPS Surprise
Pfizer Inc. price-consensus-eps-surprise-chart | Pfizer Inc. Quote
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Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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