Pfizer tops Street 1Q forecasts on higher sales, lower taxes

Pfizer easily beat Wall Street expectations as the biggest U.S. drugmaker’s first-quarter net income jumped 27 percent due to higher sales, a lower tax bill and some one-time gains. The company raised its 2016 financial forecasts, citing the strong quarter and an improved business outlook.

Its shares climbed almost 3 percent in morning trading Tuesday.

Just four weeks after dropping its record $160 billion deal to buy fellow drugmaker Allergan Plc and move its headquarters on paper to Ireland to reduce its taxes, New York-based Pfizer Inc. surprised investors with the better-than-expected results and profit forecast.

The company had made a big bet on the Allergan deal, saying it was needed to make Pfizer more competitive with European rivals who face lower tax rates. Pfizer now says it will concentrate on operational efficiency, internal and external product development, and “shareholder-friendly capital allocation” in the near term, while deciding by year’s end whether to sell or spin off its established products business, which sells older, mostly off-patent drugs.

Some analysts and investors have been pushing Pfizer for years to separate that business to accelerate growth, which the company until now has been trying to achieve with acquisitions and through more partnerships to develop new medicines.

On Tuesday, Pfizer reported first-quarter net income of $3.02 billion, or 49 cents per share. That was up from $2.38 billion, or 38 cents per share, in 2015’s first quarter, despite higher spending on product manufacturing, marketing and administration.

Excluding one-time items, adjusted profit was 67 cents per share, 12 cents better than analysts expected.

“Pfizer needed good news to make up for the disappointing failure of the Allergan merger,” said Erik Gordon, a professor and pharmaceuticals analyst at University of Michigan’s Ross School of Business. “It may be short-lived, as the quarter may be its best quarter for the year.”

The maker of Viagra and pain treatment Lyrica posted revenue of $13.01 billion, up 20 percent and above the $11.97 billion analysts expected.

Sales got a lift in part by more-favorable currency exchange rates and by $1.2 billion in new revenue from Pfizer’s $15 billion purchase last September of injectable drugmaker and infusion device maker Hospira. That deal made Pfizer a global leader in injectable drugs, including the new, slightly cheaper biotech drugs known as biosimilars.

The higher revenue was driven by big sales jumps for top drug Lyrica, to $1.23 billion; blockbuster vaccine Prevnar 13, for pneumonia and related pneumococcal infections, to $1.51 billion; new breast cancer drug Ibrance, to $429 million, and injectable drugs, to $1.52 billion. In addition, five more selling days compared to the year-ago quarter boosted revenue by roughly $900 million.

Excluding the impact of currency rates and the Hospira acquisition, first-quarter revenue rose 15 percent.

Pfizer said it now expects 2016 earnings in the range of $2.38 to $2.48 per share, up from its January forecast of $2.20 to $2.30. Pfizer forecast revenue of $51 billion to $53 billion, up by $2 billion.

It also announced a $5 billion accelerated share repurchase program in March.

“Pfizer remains a company in flux. In 2011 it articulated a future where, because of past M&A, the company would likely split itself up. Yet, it has once again gone down the path of M&A,” Sanford C. Bernstein LLC analyst Dr. Tim Anderson wrote to investors. “At current prices, the stock is cheap relative to peers, (as) has often been the case over the last decade.”

Since 2000, Pfizer has grown primarily through mega-acquisitions of Wyeth and two other drugmakers, followed by buying Hospira last year. It unsuccessfully tried to buy AstraZeneca in 2014 and then Allergan this year.

Ian Read, Pfizer’s chief executive and chairman, said in a statement that Pfizer has made “excellent progress” integrating Hospira and now expect to $1.0 billion in related cost savings by 2018, instead of the initial target of $800 million.

In early trading, Pfizer shares rose 95 cents, or 2.9 percent, to $33.75.


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