Tuesday, April 28, 2009

Pfizer Earnings Not Great...But Not Horrible

Earnings out this morning from drug giant Pfizer:

  • Pfizer Inc. posted a 2 percent drop in first-quarter profit Tuesday, as cost-cutting by the world's largest drugmaker couldn't offset big drops in sales for several medicines, especially a big drop for the cholesterol fighter Lipitor.
  • New York-based Pfizer said it had net income of $2.73 billion, or 40 cents per share, in the first quarter. A year ago, it reported net income of $2.78 billion, or 41 cents per share. Excluding charges, Pfizer's earnings per share were 54 cents., topping analyst estimates of 49 cents.
  • Revenue totaled $10.9 billion, down 8 percent from $11.8 billion in the first quarter of 2007. Analysts polled by Thomson Financial expected slightly higher revenue, at $11.1 billion.
  • Increased competition hurt Lipitor, the world's top-selling drug, with sales dropping 13 percent to $2.7 billion in the quarter. Concerns about dangerous side effects cut sales of smoking cessation drug Chantix by 36 percent, to $177 million.
  • "During the quarter, we continued our ongoing efforts to reshape our operating model, made substantial progress in planning for the Wyeth integration, and faced a challenging and dynamic economic and competitive environment," Chief Executive Jeff Kindler said in a statement. "We remain on track to deliver on our full-year 2009 guidance for revenues and adjusted results."
  • Pfizer reiterated its January financial forecast, saying it expects earnings per share of $1.20 to $1.35 -- or $1.85 to $1.95 a share excluding one-time items. The company expects revenue to range between $44 billion and $46 billion.

My interest mostly lies with my position in Wyeth, whom Pfizer agreed to purchase earlier this year. It is a partial cash ($33.00/share), and partial stock (.985 shares of PFE). Thus to get the buyout premium, it all depends on Pfizer's stock. The deal is slated to close later this year. Right now, with Pfizer at 13.49, the value of the transaction would be about $46.28/share for Wyeth shareholders. Wyeth's stock is currently $42.32. As we get closer to the closing, Wyeth shares will get closer to that number, as long as Pfizer's stock holds up. I'm not all that high on the merger, but have to hold the stock for now. Basically I'm holding my shares to get paid. If it was an all cash deal, I would have likely already sold.

Disclosure: Long WYE.

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