As one of the best-liked stocks in a somewhat unloved sector, Pfizer ( PFE) has shown an ability to beat analysts' estimates for quarterly earnings.

That will be one of the headlines Tuesday when the drug giant issues its first-quarter results and tries to exceed Wall Street consensus estimates for the sixth consecutive quarter. For the fourth quarter of 2003, Pfizer earned 53 cents a share, topping the consensus by 2 cents.

For the first quarter of this year, the consensus view according to Thomson First Call is an EPS of 51 cents on net income of $3.86 billion and revenue of $15.85 billion. Precise comparisons to the same period last year are difficult because the company was still in the process of acquiring Pharmacia. In fact, the deal was closed two weeks after the end of 2003's first quarter.

Unlike many Big Pharma companies whose stocks generate little passion -- and many neutral ratings -- among Wall Street analysts, Pfizer has attracted a strong legion of supporters. According to Thomson First Call, 23 analysts recommend buying the stock and seven analysts are neutral.

Carl Seiden, of J.P. Morgan, believes Pfizer's EPS growth can outpace not only its Big Pharma peer group but also the S&P 500 for the next two years. "We view that growth as low risk given the company's blockbuster growth drivers and considerable financial flexibility," Seiden said in an April 15 research report as he maintained his overweight rating on the stock.

Pfizer's cash-generating ability -- and the company's use of cash to "buy growth" through acquisitions or licensing -- will help propel the company, Seiden added. (He doesn't own shares; his firm has had an investment banking relationship with Pfizer.) Seiden said Pfizer's research pipeline is "underappreciated," adding that a number of experimental drugs could be significant contributors to the company's bottom line despite Pfizer's size.

The company, he said, could put five big new drugs on the market in less than two years.

Inspra, for patients who have suffered heart failure, has been launched. Caduet, which combines the cholesterol drug Lipitor and the high blood pressure medication Norvasc, and Spiriva, for lung disease such as bronchitis and emphysema, have been approved by the Food and Drug Administration. Caduet could reach the market as early as this month; Spiriva will be available at midyear. Caduet and Spiriva should be launched soon. Spiriva was developed by Germany's Boehringer Ingleheim and is being co-marketed by Pfizer.

Two other experimental drugs -- for the eye disease macular degeneration and for epileptic seizures -- could reach the U.S. market early next year, Seiden said. Fourteen drugs -- either home-grown or part of research and/or marketing deals with other companies -- are in phase III testing, the final stage of research before a drug is submitted to the FDA for review.

Like other Big Pharma companies, Pfizer faces the challenge of getting new big drugs onto the market before generic competition erodes sales of best-sellers.

In 2006, for example, U.S. patents will expire for Zithromax, an antibiotic used most often for respiratory infections, and the antidepressant Zoloft. In 2007, the blood pressure drug Norvasc and the allergy drug Zyrtec will lose patent protection. Last year, those four drugs accounted for 24% of the company's $45.2 billion in sales. Other challenges include increased brand-name drug competition for Lipitor and Viagra.

One immediate generic challenge concerns Neurontin, a Pfizer epilepsy drug that yielded $2.7 billion in worldwide sales last year, including $2.2 billion in the U.S. Pfizer is involved in a legal dispute with Ivax ( IVX) over the Miami-based company's attempt to sell a generic equivalent in the U.S. The legal uncertainty is playing havoc will analysts' economic models. Some predict a generic drug can reach the market later this year; others are forecasting competition in early 2005.

The various challenges have prompted Prudential Equity Group's Timothy M. Anderson to rate Pfizer's stock as neutral. "The company might be too big to grow top-line revenue at a healthy double-digit rate," he said in an April 13 preview of the company's earnings prospects. Upcoming patent expirations will hurt sales. So will one new brand-name challenger to Lipitor -- Crestor from AztraZeneca ( AZN) -- and one future Lipitor challenger -- Vytorin from Merck ( MRK) and Schering-Plough ( SGP).

Despite those qualms, Anderson said Pfizer now looks "better positioned than many of its peers in the near term," thanks to new product launches, which will do more to boost interest in the stock than boost EPS, and to cost-cutting from the Pharmacia acquisition, which has produced "stability in reported earnings." (His firm doesn't have an investment banking relationship with Pfizer. The research report notes that "the research analyst, a member of the team or a member of the research analyst's household, has a financial interest in Pfizer.")

Pfizer "is perhaps more over-owned than any other drug stock in the sector," said Anderson, explaining his neutral rating. "Also, Pfizer acts as a proxy for the drug group in general, and our rating on the group overall is neutral."

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