Two weeks after
offered a broad outline for 2005, the company starts filling in the blanks on April 19 with its first-quarter financial results.
CEO Henry McKinnell told analysts on April 5 that 2005 will be
a transition year for Pfizer. He said the first-quarter earnings per share, excluding one-time items, would be 53 cents and full-year EPS would be $2.00.
Forty-eight hours later, that transition became more pronounced after the company agreed to
suspend sales of its arthritis drug Bextra. Pfizer also will insert a strict 'black box' warning on Bextra's cousin, Celebrex, as part of the Food and Drug Administration's efforts to expand warnings about cardiovascular risk to all prescription and nonprescription pain relievers. The company didn't change its EPS estimates.
The FDA says Bextra's risk outweighed its benefit, especially due to a rare but potentially deadly skin infection linked to the drug's use. In addition, the FDA says there is a "lack of adequate data" on the long-term cardiovascular risks of Bextra, and it adds that Bextra lacks "any demonstrated advantages" vs. older pain relievers.
Pfizer disputes the FDA's findings, and it plans to talk to the agency about the possible reinstatement of Bextra. Meanwhile, analysts have removed Bextra from their economic models. The drug produced $1.29 billion in sales last year. Celebrex contributed $3.30 billion.
The Bextra-Celebrex development won't affect Pfizer for the first quarter, which already is seeing lower sales of these drugs known as Cox-2 inhibitors.
Sales of both have tailed off since the fall, when a few medical research reports said the drugs increased the risk of cardiovascular problems. In December, the FDA reported that Bextra would be subject to stricter labeling as a result of the skin infection and cardiovascular risk. Also in December, the FDA recommended that doctors
restrict prescribing Cox-2 inhibitors and other pain relievers until FDA advisory panels could evaluate risks and benefits.
In February, two panels of experts, meeting jointly, voted overwhelmingly
in favor of Celebrex and narrowly in favor of Bextra. The panel also voted narrowly to recommend that
Vioxx be returned to the market. Merck pulled Vioxx on Sept. 30, citing a company-sponsored test showing long-term use was linked to a higher rate of cardiovascular problems. The panels recommended stronger warnings on the drugs' labels to restrict their use. Vioxx also is a Cox-2 drug.
Pfizer's First-Quarter Forecast
The consensus view among analysts polled by Thomson First Call is for first-quarter earnings per share of 53 cents. For the same period last year, EPS was 52 cents.
For the full year, the average Wall Street EPS estimate, excluding one-time items, is now $1.97, down 3 cents from the guidance Pfizer offered April 5. Previously, the consensus was for $2.13 a share. Last year's EPS was $2.12.
Analysts who follow Pfizer can apply either the glass-half-full or glass-half-empty philosophies.
If you support the latter, you'll be uncomfortable with the performance of a host of big-selling drugs thanks to generic or brand name competition. If you believe the former, you'll say Pfizer has held up pretty well considering the many assaults on its products.
Andrew Oh, of Leerink Swann & Co., figures Pfizer may offer a reduced year-end EPS prediction at Tuesday's earnings presentation. He has cut his estimate to $1.95. His first-quarter estimate is 53 cents.
He tells clients in a recent report that he is keeping a market perform rating on Pfizer due to weak EPS growth caused by the arthritis drug issues and the generic-drug impact on the epilepsy drug Neurontin.
Comparing first-quarter 2004 vs. first-quarter 2005, he says Neurontin sales could plunge by 58% to $295 million; Celebrex sales could sink by 45% to $420 million; and Bextra sales could fall 39% to $165 million.
The cholesterol drug Lipitor is expected to produce a solid gain of 15% to $2.88 billion; but Oh wonders how long it can fend off competition. Other big sellers are facing little or no growth: The blood pressure drug Norvasc could fall 7% to $1.06 billion, and the antidepressant Zoloft could add 4% to $845 million.
Oh expects first-quarter corporate sales to drop 2% from the same period last year. He doesn't own shares; his firm has a noninvestment banking relationship with Pfizer.
Over at Goldman Sachs, analyst James Kelly tells clients that perhaps the best thing about Pfizer, on which he has an outperform rating, is that it isn't Merck or
, for which he has in-line ratings.
Although Bextra is out of action, Kelly says some Bextra patients could wind up taking Celebrex, thus easing the impact of new strict warnings on the drug.
"Our growth rate remains unchanged -- 6% -- as does our investment thesis," says Kelly in an April 7 research report. "Pfizer's shares trade at the largest discount to the sector -- 13% in 2006 -- and the growth rate remains superior to other names."
Kelly predicts a first-quarter EPS of 53 cents and a full-year EPS of $1.96. He doesn't own shares; his firm has an investment banking relationship with Pfizer.