Pfizer Shares the Pain

Pfizer(PFE Quote) unveils fourth-quarter and full-year earnings results Wednesday in what portends to be a day of many questions.

Most notably, what will happen to the company's arthritis franchise? The biggest dilemma involves its signature product, Celebrex, for which one recent medical study showed greater cardiovascular risk than for patients receiving a placebo. But all other tests have showed no problems. A recent Citigroup Smith Barney report predicted Celebrex's worldwide sales could reach $3.24 billion for 2004, then fall to $1.62 billion in 2005 and keep falling.

And what will be the long-term impact on the arthritis drug Bextra, whose label was recently made more strict regarding a rare but dangerous skin disorder? The label also was changed to reflect one clinical trial showing that patients receiving Bextra plus another arthritis drug had a higher risk of cardiovascular problems than patients receiving a placebo. But this test only covered heart bypass surgery, and Bextra isn't permitted for any surgical patients in the U.S. Citigroup Smith Barney said Bextra could achieve $1.25 billion in sales for 2004, then sink to $623 million in 2005 and continue declining.

Throw in some slow starts for a few new products, the generic assault on the epilepsy drug Neurontin and the recent sales slowdown for Viagra, and you have all the ingredients for an eventful earnings report and a lot of uncertainty for the next few years.

"We continue to stay on the sidelines with shares of Pfizer," said George Grofik, a longtime Pfizer watcher for Citigroup Smith Barney, as he told clients recently that he was maintaining a hold rating on the stock.

Grofik said Pfizer faces "a number of structural issues" over the next few years, including "multiple patent expirations," heightened competition for brand-name products and "an industry average pipeline." (Grofik owns shares; his firm has had an investment banking relationship with Pfizer.)