Pfizer Beats In Q1 But Lyrica Headwinds Will Likely Weigh On Near Term Growth

In this Friday, April 26, 2019 photo, RELPAX migraine pills manufactured by Pfizer are arranged for a photo in Doral, Fla. (AP Photo/Wilfredo Lee) photocredit: ASSOCIATED PRESS Pfizer (NYSE:PFE) recently reported its Q1 2019 results, which were above our estimates. This note details the company’s Q1 performance, and Trefis’ forecast for the full year 2019. You can view our interactive dashboard analysis ~ How Did Pfizer Fare In Q1, And What Can We Expect From Full Year 2019? for more details on the key drivers of the company’s expected performance. In addition, you can see more of our data for Healthcare companies here. How did Pfizer’s top line fare in Q1, and what’s the forecast for full year 2019? Total Revenues for Pfizer have largely remained in the range of $13 billion to $14 billion over the past few quarters.

Revenues grew 2% from $12.91 billion in Q1 2018 to $13.12 billion in Q1 2019.

The growth can largely be attributed to higher sales of some of its drugs, including Eliquis, Ibrance, Prevnar, and Xeljanz.

Revenues for the full year will likely be $53.84 billion, a figure slightly higher than 2018. This compares with average consensus of $53.35 billion.

What are Pfizer’s key sources of revenue? Pfizer till last year reported its revenues under two segments ~ Innovative Health and Essential Health.

Innovative Health includes revenues from sales of drugs for several indications in five therapeutic areas: Internal Medicine



Inflammation & Immunology, and

Rare Diseases

Essential Health includes revenues from the company’s established brands, biosimilars, and sterile injectable pharmaceuticals, among others.

However, starting 2019, it has divided its businesses into three segments ~ Biopharma, Upjohn, and Consumer healthcare. Biopharma includes all of the previous Innovative Health business units (except Consumer Healthcare), as well as a new Hospital business, and Pfizer CentreOne (Pfizer’s contract manufacturing operation). The segment also includes Pfizer’s biosimilar portfolio (merged with Oncology and Inflammation & Immunology business units). Upjohn includes branded and generic established medicines business. Pfizer’s Consumer Healthcare business will be merged with GSK’s consumer healthcare business to form a new company, with Pfizer owning a 32% stake.


For now our dashboard reflects the two divisions ~ Innovative Health and Essential Health ~ for the full year forecasts.

What to expect from the Innovative Health segment? Innovative Health is now part of Biopharma, which saw revenue growth of 3.5% to $9.19 billion in Q1. This can largely be attributed to strong sales growth of Ibrance, Xeljanz, and Eliquis. We expect this trend to continue in the near term, and forecast mid-single-digit segment revenue growth for the full year 2019.

Eliquis is witnessing increased acceptance, and it is the leader in the oral anticoagulants market (total prescriptions) in the U.S. The overall anticoagulants market is also expanding, and Eliquis will likely benefit from the market growth.

Ibrance is one of the top selling breast cancer drugs with annual sales exceeding $4 billion, and it should continue to see sales growth, primarily from international markets, which saw 107% operational growth in Q1.

Xeljanz growth can be attributed to an overall increase in rheumatoid arthritis prescriptions. The drug’s recent expansion into psoriatic arthritis and ulcerative colitis should further aid the sales growth.

Pfizer’s biosimilars portfolio, which is also now part of Biopharma, should be an important growth driver going forward, given Pfizer’s focus on generic versions of some of the blockbuster drugs, including Herceptin and Avastin.

What To Expect From Essential Health Segment? Essential Health segment sales are being impacted by lower sales of some of the drugs, including Viagra, which lost marketing exclusivity in the U.S. in late 2017.

Lyrica, which is part of the Upjohn segment, is expected to face generic competition this year, and as a result, wholesaler destocking impacted the U.S. sales in Q1. We expect this trend to continue in the near term, and forecast a mid-single-digit decline for the segment.

Note that Lyrica is an important drug with annual sales of around $5 billion.

The company estimated a $2.6 billion headwind in 2019 from products that have either lost marketing exclusivity or are about to lose it in the near term.

How did the changes in top line impact Pfizer’s Q1 earnings, and what is the full year outlook? Pfizer’s Q1 earnings of $0.85 per share on an adjusted basis were above our estimates , and reflect 13% growth over the prior year quarter.

The growth in earnings was driven by higher revenues, close to 200 bps improvement in adjusted net income margin, and a lower share count.

Pfizer’s full year 2019 earnings will likely be $2.94 per share on an adjusted basis, towards the higher end of its guided range of $2.83 to $2.93. This reflects a 2% decline to the prior year.

The decline in earnings will likely be led by lower margins, which will partly be offset by lower share count, while the top line is unlikely to see any significant growth.

The margins could contract in the near term, as the company spends more on R&D for its phase 3 pipeline. Also, the company may have to take pricing cuts for Lyrica, given it is approaching the end of the marketing exclusivity period.

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