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Pfizer, Inc. (PFE) Q4 2013 Earnings Preview

 January 28, 2013 06:37 PM

The quarterly results of Pharma giant Pfizer, Inc. (NYSE: PFE) could be marred by the loss of patent exclusivity of blockbuster drugs such as Lipitor and Viagra amid slower growth in margins.

For the fourth quarter, New York-based Pfizer is expected to earn 44 cents a share, according to analysts polled by Thomson Reuters. In the same period last year, it earned 50 cents a share.

Earnings of Pfizer, one of the biggest pharmaceutical companies in the World, have beat Street view thrice in the past four quarters. Consensus estimates have dropped by 5 cents from 49 cents in the past 90 days.

[Related -Pfizer Inc. (PFE) Q3 Earnings Preview: What To Watch?]

Sales for the October to December period are estimated to fall 14.4 percent to $14.40 billion from $16.75 billion in the year-ago quarter due to the loss of cholesterol drug Lipitor and Viagra patents.

Investors focus will likely be on the company's 2013 guidance and the impact of the upcoming Zoetis IPO on Feb. 1, 2013 for about 20 percent of the Animal Health business. Since, Pfizer is floating only 20 percent of the shares, shareholders are likely to benefit from any favorable results Zoetis in the coming months.

"We believe that the eventual full separation of Zoetis could improve Pfizer's net margin by 130bp," BMO Capital Markets analyst Alex Arfael wrote in a note to clients.

Other areas of focus will likely be on the launch progress for Xeljanz since early prescription trends are not conclusive given Pfizer is in the early-mid stages of the reimbursement/access process.

[Related -Six Stocks That Could Get An October Bump From The FDA]

Among the key developments in the quarter, FDA approved Pfizer's anti-clotting drug Eliquis (apixaban), which it developed with Bristol-Myers Squibb Co. (NYSE:BMY) to reduce the risk of stroke and dangerous blood clots in patients with atrial fibrillation that is not caused by a heart valve problem.

Analysts see Eliquis has the potential of becoming a multi-billion dollar drug as atrial fibrillation is one of the most common types of heart problem and a dangerous condition as the blood clots can break off and travel to the brain or other parts of the body.

In the third quarter, net income attributable to the company fell to $3.21 billion or 43 cents a share from $3.74 billion or 48 cents a share, in the prior-year quarter. Adjusted earnings for the quarter totaled 53 cents a share. Revenues for the quarter fell 16 percent to 13.98 billion.

Pfizer, which bought Wyeth for $68 billion in 2009, has a diverse drug portfolio including Lipitor, Novarsc, Lyrica, Prevnar, Enbrel, Celebrex. The company shells out about $8 billion a year on R&D, and is developing more than 75 compounds.

So, naturally, investors will look for an update on the pipeline of upcoming products, especially when it has lost patents on key drugs. Any comments on the increased R&D spending efforts would help the stock post some nice gains.

On the flip side, the company lacks any strong drug to offset the unfavorable impact from the loss in Lipitor sales. This was quite evident in the past quarters, and the fourth quarter's result is not going to be any different. Eliquis is considered as a savior, but investors may want know about the marketing plans for the drug.

In terms of valuation, Pfizer seems very fairly valued at just 12 times its 2013 consensus earnings of $2.27 per share.

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