Wall Street will get an idea of


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future Tuesday when the company meets analysts, but expect a good measure of uncertainty along with the usual full-year earnings forecast.

Pfizer is slated to provide fiscal year 2005 guidance. Analysts expect earnings per share of $2.12, according to the consensus among analysts polled by Thomson First Call. The range is $1.99 to $2.26. The first-quarter consensus is 52 cents, although Pfizer won't issue first-quarter results for another three weeks or so.

Right now, there's uncertainty on Wall Street as to what impact the controversy over the safety of arthritis drugs Bextra and, to a lesser extent, Celebrex will have on earnings this year.

Analysts want to know how these drugs will fare once the Food and Drug Administration acts on recommendations made by two advisory committees in mid-February

to place restrictions on all arthritis drugs known as Cox-2 inhibitors. Bextra and Celebrex belong to this class, as does Vioxx, which


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withdrew from the market on Sept. 30 due to tests showing a higher risk of cardiovascular problems. The advisory committees, by a narrow vote, said the benefits outweighed the risks for Vioxx and Bextra. The committees gave Celebrex overwhelming support.

There's also some troubling certainty on the horizon: Pfizer has the highest risk among Big Pharma companies for losing revenue to generic drugs during the next few years. A recent report by Moody's Investors Service says 33% of the company's 2003 revenue will be subject to generic attack by the end of 2007.

And that covers only drugs for which patents will definitely expire. Add other patent challenges, and Moody's says Pfizer's generic risk by 2007 balloons to an industry-leading 59% of 2003's revenue. The biggest wild card is the cholesterol drug Lipitor, which is being challenged in many countries by India's Ranbaxy Laboratories. The consensus view on Wall Street is that

Pfizer will prevail in key markets such as the U.S. Pfizer just lost a Lipitor patent fight in Austria, but the company says it will appeal.

Given the patent pressures, analysts want to know how Pfizer can increase revenue or cut costs to ease the patent-expiration impact. And that brings us to the other dose of uncertainty, which belongs to the employees. They'll want to know how many people will be fired, bought out or enticed with early retirement packages if Pfizer undertakes a long-awaited, analyst-advocated round of cost-cutting.

Contemplating Costs

A few months ago, some analysts were suggesting that Pfizer take an ax to its worldwide payroll of some 115,000 people, especially among the 38,000-member sales staff. Now, the prevailing opinion seems to be that a scalpel will be sufficient.

"While demands that the company scale back its infrastructure are increasing, we do not believe management will undertake any truly creative strategies to downsize," says C.J. Sylvester of Banc of America Securities in a recent research report, as he kept his neutral rating. (He doesn't own shares; his firm has an investment banking relationship with Pfizer.)

"The company will not announce a significant decrease in their U.S. sales force, outside of normal attrition, which may not be viewed favorably by investors," he adds. "However, we do believe a 'streamlining' of the company's entire infrastructure will occur."

Albert L. Rauch, of A.G. Edwards, says Pfizer will need to "increase efficiency in order to keep marketing costs in check," but he too believes Pfizer won't make drastic cuts in personnel.

"We do not view the marketing side of the company as broken," Rauch says in a March 29 report to clients. "We do not expect the company to 'fix' something that is working well. Nonetheless, we do expect refinements in Pfizer's marketing efforts, but no major reduction in expenses."

Although Rauch says Pfizer has one of the strongest R&D programs in the industry, he maintains a hold recommendation due to "a number of negative catalysts" in the next 12 to 28 months, including questions about future sales prospects for Celebrex and Bextra. He doesn't own shares; his firm doesn't have an investment banking relationship.

Analysts likely will revise their sales estimates after listening to Pfizer executives on Tuesday, but right now they forecast precipitous declines in sales for Celebrex and Bextra.

Sanford C. Bernstein & Co. sees Celebrex sales dropping from $3.3 billion last year to $1.4 billion this year. The firm predicts revenue from Bextra will fall from $1.29 billion last year to $515 million this year.

The firm's pharmaceuticals analyst, Richard T. Evans, doubts there will be massive layoffs unless ongoing clinical trials of an experimental cholesterol drug, torcetrapib, fail. "Beginning with the top line, we see limited prospect for ... a fundamentally different course of action" at Tuesday's meeting, he told clients on March 28. He has a market perform rating on the stock.

As with many other analysts who raise questions about prospects for the next few years, Evans notes that Pfizer is in better shape than many of its peers. Its operating profit margins are better than the industry average and will remain so for the rest of the decade, he says. Its cost of good sold is well below the average of its peers, and that difference also will continue through the decade. He doesn't own shares; his firm doesn't have an investment banking relationship.

And even though the sales force is bracing for some hits, it does a good job relative to its peers, says a recent report from Banc of America Securities. Among six giant U.S. drug companies, Pfizer's sales force productivity -- sales divided by the number of marketing representatives -- is second in the U.S. market and second worldwide.

"The view that Pfizer's sales force is bloated or unproductive is somewhat unfounded," the report says.