Pfizer Rises as Cost Cuts Help Drug Giant Beat Estimates
Pfizer Rises as Cost Cuts Help Drug Giant Beat Estimates
(Bloomberg) -- Pfizer Inc. gained Tuesday after it raised its 2019 sales and profit forecast, giving respite to investors worried about the drugmaker’s decision to merge its older-products business with generics giant Mylan NV.
The New York-based drugmaker said 2019 sales will be $51.2 billion to $52.2 billion, an increase of $700 million compared with what it projected in July. It expects costs to decline, as well, and reported third-quarter earning per share of 75 cents, well above analysts’ 62-cents average.
The shares rose 2.7% to $38.27 at 10:42 a.m. in New York. They’re down 15% this year as of Monday’s close, with almost all of the decline coming since the deal with Mylan was announced on July 29.
The business still faces challenges: Upjohn, the profitable older drugs unit that will combine with Mylan, is grappling with price pressure from China’s government. The brand-name prescription drugs at the heart of what’s left of Pfizer will meet competition from cheaper generics in the next decade.
“We acknowledge that some of our products will lose patent protections in 2026 and beyond and we are working now on initiatives to potentially mitigate those impacts,” Pfizer said in a presentation to investors released Tuesday morning.
The Mylan deal is scheduled to close next year, and will fold Upjohn’s operations into the yet-to-be-named firm.
Upjohn is heavily reliant on China -- a huge market for older brand-name drugs. The government there has been pressuring drugmakers with a new bidding program meant to drive down prices. Upjohn’s sales were down 26% in the third quarter, though Pfizer said most of the decline was because pain drug Lyrica lost U.S. patent protection. In China, it expects operational growth to be in the mid-to-high single digits this year.
“It’s key that they raised guidance for Upjohn in China to the extent that people are nervous that China’s volume-based procurement expansion would cause a lot of pressure,” said Evercore ISI analyst Umer Raffat. “As it turns out, that’s not happened.”
Raffat said that the call Pfizer will hold with analysts later Tuesday morning will be crucial for setting expectations for after the deal.
“We were appropriately cautious,” Pfizer Chief Executive Officer Albert Bourla said on the call. “Things have improved compared to what we saw in the second quarter.”
Key Details
- Pfizer’s bio-pharmaceutical unit increased 7% year-over-year to $10.1 billion in the third quarter. The segment’s strong performance was driven by key products like breast cancer drug Ibrance, and blood thinner Eliquis.
- Pfizer saw a 2% revenue boost in China as sales of off-patent drugs Lipitor and Norvasc grew in provinces where the country’s volume-based procurement program hasn’t yet been implemented.
- Total revenue for the quarter fell 5%, largely due to loss of patent-exclusivity of former blockbuster Lyrica in the U.S. Lyrica will go with the Upjohn business.
To contact the reporter on this story: Riley Griffin in New York at rgriffin42@bloomberg.net
To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Timothy Annett
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