Pfizer’s Depressing Quarter

Pfizer (PFE) shareholders can only take solace that the company’s annual forward dividend yields just over 6%, and the company sits on a mountain of cash. This is the good news.

First quarter profit dropped 18% to $2.78 billion, or 41 cents a share. Pfizer reiterated full year guidance between $1.73 and $1.88 a share, but expects revenue to be flat until 2009. The company cited generic competition as the largest factor contributing to their earnings decline.

During the earnings call, CEO Jeff Kindler continued to emphasize Pfizer’s long term strategy of cutting expenses and developing oncology drugs. Sales of its drug Sutent (to treat advanced kidney cancer as well as a certain type of gastrointestinal cancer), rose 86% to $190 million. Sales of Pfizer’s heavily advertised fibromyalgia (chronic pain/muscle tenderness) drug Lyrica were up 47% to $582 million. Anti-inflammatory Celebrex sales increased 2% to $611 million.

Sales of smoking cessation drug Chantix were up 71% to $277 million, but well below analysts expectations due to news the drug can cause suicidal behavior. Suicidal behavior as an adverse effect will occur in medications for addictive behaviors, depression/mental illness, and sleep disorders because all of these issues fall under the planetary energy of Neptune. Suicidal behavior is a negative manifestation of this planetary energy’s desire to escape from the harsh realities of life.

That’s the good news. Patent expirations of hypertension drug Norvasc (down 52% to $513 million) and Zyrtec (down 75% to $117 million) for allergies, contributed to lower earnings. Analysts on the call were mostly focused on sales of statin blockbuster Lipitor, down 7% to $3.14 billion.

Pfizer admitted they need to “find a way not to be dependent on a huge blockbuster.” Analysts were disappointed that Pfizer didn’t benefit from the Vytorin fallout. The company said the “pressure of managed care” was pushing patients to simvastatin (generic Zocor). Pfizer is hopeful that when patients visit their doctor for lipid testing, their numbers will prompt physicians to have their patients “get to goal with Lipitor.” Lipitor loses patent protection in the not too distant future.

When asked about the statin market going forward, Pfizer said it is “difficult to predict now what growth will be.” The pharmaceutical industry is feeling the winds of change concerning cholesterol as the solution to prevent heart disease. Additionally, three upcoming Congressional hearings will examine the industry’s marketing practices.

Big pharma can grow through licensing agreements with biotechnology companies, or it can outright acquire them. From a health perspective, Pluto in Capricorn (2008-2024) will witness chronic aches and pains affecting the skin, bones, joints and their surrounding muscles, reach epidemic proportions. Drugs should be developed that focus on keeping patients physically comfortable so they can remain active.

The caveat for the industry is that drugs will need to achieve this by returning to their original purpose: taken on an as-needed basis or for a specific period of time. The side effects of taking “lifestyle” drugs (such as statins) on a long term basis, both from a health and financial perspective, are too great for society to bear. The business model of long term drug use which evolved over the last twenty years, is no longer sustainable.

No comments: