This is a summary of the first quarter fiscal 2008 earnings call conducted by Pfizer Inc. (PFE) on April 17, 2008
Management:
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CEO and Chairman Jeffrey Kindler
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CFO Frank D''Amelio
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President, Worldwide Pharmaceutical Operations Ian Read
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Acting General Counsel David Reid
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VP Amal Naj
Key Investor Issues:
- Net income of $2.8 billion or 41 cents a share, was down 18% from $3.4 billion or 48 cents a share from the prior year.
- Revenues were at $11.8 billion, a 5% decrease from 2007.
- Pfizer is updating downwards its EPS guidance to $1.73 to $1.88.
First Quarter Highlights:
Revenues were at $11.8 billion, a 5% decrease year-over-year due to the loss of U.S. exclusivity of Norvasc, Zyrtec and Camptosar.
- Norvasc revenues decreased $556 million, Zyrtec revenues decreased $344 million, Camptosar revenues decreased to a much lesser extent by $37 million.
- Partially offsetting this negative impact were foreign exchange, which increased reported revenues by approximately $570 million or 5% and the solid performance of many new and in-line products.
Reported net income of $2.8 billion or 41 cents a share dropped 18%, from $3.4 billion or 48 cents a share as a result of a decrease in Norvasc and Zyrtec revenues and to a lesser extent increased in-process R&D expenses associated with the CovX and Coley acquisitions.
- Pfizer incurred $177 million in restructuring charges compared with $795 million in the prior-year quarter, driven by charges related to employ severance payments and costs.
- Restructuring charges are primarily associated with employee costs and asset impairments.
- It also incurred $357 million of implementation costs compared with $174 million in the prior-year quarter.
- Adjusted cost of sales as a percentage of revenue was 15.3% versus 14% in 2007 reflecting the negative effect of foreign exchange.
- Cost of sales was to a lesser extent unfavorably impacted by geographic and business mix and these more than offset the savings Pfizer achieved from ongoing cost reduction initiatives.
Adjusted SI&A expenses were $3.4 billion, a year-over-year increase of 3% and adjusted R&D expenses were $1.6 billion, a slight increase of 1% year-over-year.
- Although adjusted cost of sales, SI&A and R&D expenses benefited from the ongoing cost-reduction initiatives, the $330 million negative impact of foreign exchange on adjusted total cost more than offset that benefit.
- Excluding FX the first quarter adjusted total cost actually decreased by $170 million operationally year-over-year.
- The effective tax rate on adjusted income is 21.9% versus 21.7% in the year-ago quarter.
Product Highlights:
- Lipitor had revenues of $3.1 billion, a decrease of 7% including the favorable impact of FX, which increased revenues by approximately $135 million or 4%.
- In the U.S., Lipitor revenues declined 18% due to the continuing intensely competitive generic market.
- Internationally, Lipitor revenues increased 13%, of which 10% was due to foreign exchange and the remainder due to operating growth.
Lyrica, the only FDA-approved treatment for fibromyalgia continued to deliver strong performance with revenues of $582 million, an increase of 47% year-over-year.
- Xalatan and Geodon had revenue increases of 13% and 12% respectively and grew in the U.S. and international markets.
- Chantix revenues increased 71% and U.S. revenues increased 33%. In international markets Chantix achieved triple-digit revenue growth year-over-year, albeit off of a smaller base.
- Over the past year Pfizer has launched Chantix in 20 countries.
- Sutent, the treatment for advanced kidney cancer and gastrointestinal stromal tumors, posted revenues of $190 million, an increase of 86% y-o-y.
Earnings Guidance
- Beginning in the second quarter of 2008, the impact from the decline in Norvasc revenue will be included in the quarterly results for both 2007 and 2008 as it lost U.S. exclusivity in March 2007.
- Pfizer expects to generate savings in 2008 from cost reduction efforts and by 2009 year end, expects to reduce these plants around the world to 44.
- The company is exiting the four remaining R&D sites of the six that has been identified for closure.
The firm is decommissioning the insulin-related operations at two dedicated facilities as a result of the decision to exit Exubera.
- There are outsourcing opportunities at various stages of implementation. Pfizer continues to match our workforce level with market reality.
- Pfizer is on track to decrease adjusted total cost by at least $1.5 billion to $2 billion on a constant currency basis by the end of 2008 versus 2006.
- To reflect the effects of business development transactions, Pfizer is updating the range of its reported diluted EPS guidance to $1.73 to $1.88, from $1.78 to $1.93.
- This range includes the impact of IPR&D charges associated with acquisitions that closed in the first quarter, Coley, CovX and two smaller acquisitions related to Animal Health.
Key questions and answers from the first quarter fiscal 2008 earnings call conducted by Pfizer Inc. on April 17, 2008]
Comment around the dividend being maintained at least at the current levels due to the loss of Lipitor exclusivity?
