Pfizer Earnings: Drug Growth And Pipeline In Focus For Q2
CONTRIBUTOR-FORBES
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| Pfizer Earnings: Drug Growth And Pipeline In Focus For Q2 |
Pharmaceutical company Pfizer reports second-quarter earnings on Tuesday, August 1 at 10 a.m. ET. For most major pharma companies, analysts and investors appear to be generally focused on the company’s current drug portfolio and the pipeline.
Pfizer breaks its revenue down into two segments: Innovative Health and Essential Health. The company has a large product portfolio and some of its core drug franchises in its Innovative Health division include Prevnar 13, Ibrance, Eliquis, Lyrica, Xeljanz, and Xtandi. In the first quarter, the company reported revenue in its Innovative Health segment increased 5% year over year to $7.42 billion, while revenue in its Essential Health Segment declined 10% to $5.36 billion.
Depending on the drug, revenue and earnings can be impacted by competing treatments, reimbursement rates, and other factors. And eventually, drugs’ patents will expire, which Pfizer management has pointed out will occur with Viagra in the U.S. later this year, and Lyrica at the end of 2018, resulting in a drop-off in revenue once those events occur. Since treatments eventually lose their exclusivity, companies have said they are continually looking to develop their pipelines.
Looking at Pfizer’s pipeline, with its first-quarter results the company reported that it had 96 compounds at various stages of development—36 in Phase 1, 17 in Phase 2, 32 in Phase 3 and 11 are in the registration process awaiting regulatory approval. The compounds in development address a wide range of conditions, but there’s always a degree of uncertainty as to which drugs will make it through the approval process.
In addition to its own research and development, Pfizer has added compounds to that pipeline through acquisitions over the years. It acquired Anacor Pharmaceuticals for $5.2 billion in June 2016, and Medivation for $14 billion in September 2016. Medivation’s primary drug is Xtandi, which is co-promoted with Astellas Pharma, and generated $2.3 billion in sales in 2016, according to CFRA analysts.
In addition to acquisitions, Pfizer has also continued to use its cash to return capital to shareholders through share buybacks and dividends. The company reported it had repurchased $5 billion common stock in February 2017 as part of an accelerated share repurchase agreement, and still has a repurchase authorization of approximately $6.4 billion remaining as of May 2.
Turning to dividends, the stock currently offers a $0.32 quarterly payment, providing a dividend yield of about 3.8%. But you can never count on dividends and as Pfizer has shown in the past, it can be cut quickly depending on the circumstances. In 2009, management announced it would slash the dividend in half to help finance its $68 billion acquisition of Wyeth. It was only a few quarters ago that dividend increases brought it back to the same level it was at before the
