Pfizer Earnings Fall But Beat Expectations

Pfizer Inc.’s fourth-quarter profit fell by half due to higher costs for production, administration and restructuring, but new revenue from an acquisition helped the world’s second-biggest drugmaker beat Wall Street expectations.

The New York-based company’s revenue rose by 7 percent, ending a long stretch of declining sales due to generic competition with one-time blockbusters. For the first time in five years, Pfizer posted higher revenue, excluding the impact of unfavorable exchange rates, as its 2015 sales rose 3 percent.

In the latest quarter, Pfizer benefited from rising sales of its newer medicines, including its nascent portfolio of cancer drugs, as well as the addition of injectable medicines made by Hospira, which Pfizer acquired last September.

The maker of pain treatment Lyrica said on Tuesday that net income was $613 million, or 10 cents per share. A year earlier, its net income was $1.23 billion, or 19 cents per share.

Adjusted for non-recurring costs, income in the latest quarter was 53 cents per share, a penny better than analysts expected. Pfizer also took an $806 million charge that basically wrote off its sales in Venezuela, where the bolivar’s value has plunged to 1/32nd of its prior rate.

Like many rival drugmakers, Pfizer lost patent protection over the last several years on many of its biggest drugs, led by cholesterol fighter Lipitor. It lost patent protection in November 2011 after nearly a decade as the world’s top-selling drug. Altogether, new generic competition cost Pfizer $3.2 billion in 2015 and the company forecast it will lose another $2.3 billion to cheap copycats in 2016.

In the fourth quarter, the drugmaker posted total revenue of $14.05 billion, up from $13.12 billion a year earlier. Analysts expected $13.61 billion.

Pfizer said the strong dollar lowered its revenue by 7 percent. That’s because its products are paid for in local currencies, reducing the value of the purchase price.

“The good news is that sales of some of its key, innovative drug products continue to grow,” noted analyst Erik Gordon, a professor at University of Michigan’s Ross School of Business.

Hospira’s injectable medicines earned $1.51 billion, while sales of the Prevnar vaccine against pneumonia and other bacterial infections surged 43 percent to $1.86 billion, fueled by expanded approvals that cover many adults.

Sales of Lyrica, for fibromyalgia and other pain, rose 6 percent in markets where its patent is still in force but worldwide fell 12 percent to $1.3 billion. Alliance revenue – mostly sales of clot-preventing drug Eliquis, which Pfizer markets with partner Bristol-Myers Squibb Co. – jumped 65 percent to $420 million.

Altogether, Pfizer’s innovative, or new drugs segment had sales of $7.64 billion, up 15 percent. Its established products – ones that have lost patent protection or will soon – posted sales of $6.27 billion, down 2 percent.

Pfizer is in the process of buying Irish drugmaker Allergan for $160 billion in a deal that would move Pfizer’s official headquarters for tax purposes from New York to Allergan’s base. The strategy, called a tax inversion, would sharply decrease Pfizer’s income tax bill from its current U.S. tax rates, though the drugmaker’s operations would still be run from New York.

“One of the reasons for doing the Allergan deal was to ensure we had top-tier robust growth in our innovative business,” Pfizer CEO Ian Read told analysts during a conference call.

Pfizer said it expects full-year earnings in the range of $2.20 to $2.30 per share, with revenue in the range of $49 billion to $51 billion. The strong dollar is expected to cut the value of sales by $2.3 billion in 2016.

During the year, Pfizer expects important data on some of its experimental drugs, particularly for cancer drugs that work by stimulating the immune system. Some are now being tested in combination with a second drug, and next year Pfizer will test some triple therapies, as researchers believe combo drugs will be more effective against many cancer types.

For all of 2015, Pfizer reported net income of $7.75 billion, or $1.24 per share, and revenue of $48.9 billion.

Pfizer shares slipped 10 cents to $30.07 in afternoon trading Tuesday. They are down 5 percent over the past year.