Pfizer Seeks Deals as Generic Versions Hurts Older Drugs’ Salesby
2017 sales will be $52 billion to $54 billion, company says
Drugmaker continuing to explore deals, even before tax reform
Pfizer Inc. expects more generic competition for its established drugs in 2017, and the company’s deal-making to gain products may continue to thrive.
After posting fourth-quarter earnings and a forecast that were short of analysts’ estimates, New York-based Pfizer said it would continue to pursue deals, regardless of their size, as long as they create shareholder value. Changes in the U.S. tax code may be coming that would make deals cheaper, but the company won’t wait for them to deploy its cash, executives said.
“Some deals that previously were not affordable might now be affordable,” Chief Executive Officer Ian Read said on a conference call with analysts.
Investors and the industry are optimistic that Republicans in Washington and President Donald Trump will agree on a tax-cutting package that will encourage domestic transactions. Last year, Pfizer called off its planned $160 billion merger with Allergan Plc after some tax benefits were halted. The drugmaker bought Anacor Pharmaceuticals, a maker of skin products, for $5.2 billion, and Medivation Inc. with its blockbuster prostate cancer drug, Xtandi, for $14 billion.
Pfizer rose 1.3 percent to close at $31.73 at 4 p.m. in New York.
The drugmaker is betting on newer medicines to offset expiring patents on older drugs, and its innovative division’s revenue grew 1 percent to $7.7 billion. Ibrance, Pfizer’s new breast cancer treatment, more than doubled in sales to $643 million, beating the average projection of $593 million. The drug generated $2.1 billion last year, and analysts surveyed by Bloomberg predict annual sales will surpass $5 billion in 2019.
One of Pfizer’s drug candidates is avelumab for cancer, an immune checkpoint inhibitor that blocks tumors from hiding from the body’s defenses. Pfizer is developing it with the German drugmaker Merck KGaA for use both on its own and in combination with other drugs.
While avelumab has passed an early-stage safety trial, Read stressed the value of the drug in combination, saying that therapies in its class, called PD-L1s, are unlikely to fight cancer adequately on their own. Analysts have suggested that Pfizer should consider acquiring Bristol-Myers Squibb Co. to gain more cancer treatments.
Revenue in 2017 will be $52 billion to $54 billion, Pfizer said in a statement Tuesday, compared with the $54.3 billion average of analysts’ estimates compiled by Bloomberg. Earnings excluding some items will be $2.50 to $2.60 a share. Analysts had forecast $2.59 a share.
The financial forecast is Pfizer’s first since Trump took office. He’s criticized the drug industry’s prices and threatened to force drugmakers to bid on government business. At a White House meeting Tuesday, Trump told a group of pharma CEOs and industry leaders that pricing has been “astronomical” and competition is “key to lowering prices.”
Read said the company’s philosophy of drug pricing would not change. He said that tax reform would help Pfizer create jobs in the U.S. and applauded Trump’s suggestion of speeding up FDA drug approvals, because it would increase competition and lead to lower prices.
“There’s lots of ways we can work with the administration to ensure that patients have affordable drugs, or more affordable drugs, in the United States,” Read said.
The annual forecast included an expected $2.4 billion hit as products lose exclusive sales rights to from generic drugs and so-called biosimilars -- cheaper versions of expensive biotechnology drugs.
Fourth-quarter profit excluding some items was 47 cents a share, compared with estimates of 50 cents a share. Prevnar totaled $1.42 billion in sales, missing the $1.67 billion average estimate. The amount was “quite light,” Credit Suisse analyst Vamil Divan wrote in a note to clients.
Sales from the established division of older drugs fell 8 percent last quarter, but some of Pfizer’s biggest products performed poorly as well. The vaccine Prevnar, the top-selling drug, and the erectile dysfunction treatment Viagra fell short of sales expectations.
Fourth-quarter sales of Pfizer’s rheumatoid arthritis drug Xeljanz were $278 million, besting the $241 million estimated by analysts. The company reported $4 million in U.S. sales from the recent launch of Inflectra, a biosimilar of Johnson & Johnson’s blockbuster arthritis treatment, Remicade. The drug sold $58 million during the quarter outside the U.S. The company said it plans to launch five biosimilars through 2019, and expects to be among the leaders in that sector within a decade.
Sales of the pain medicine Lyrica were $1.24 billion, versus estimates of $1.22 billion.
Sales at Pfizer’s consumer unit totaled $3.4 billion last year, an increase of 5 percent from a year earlier. Pfizer has been rebuilding its consumer business since selling off the division in 2006. Read said the consumer unit remains a valuable part of the company.
Net income for the quarter was $775 million, or 13 cents a share, compared with a loss of $172 million, or 3 cents, a year earlier.