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Wyeth Purchase Boosts Pfizer Profits


Pfizer's strategy to use Wyeth's drug pipeline to increase its sales has paid off as the drug giant announced that its fourth quarter earnings nearly doubled year-to-year. Too bad investors are running in fear of an ugly 2010 forecast.

Pfizer proved that it could survive the patent death of Lipitor-for this year- with the $68 billion purchase of Wyeth. Yet while the drug giant showed massive profit growth in the fourth quarter year-over-year, it came in below investor expectations.

At first glance, the numbers are impressive. Reported revenue is up 34 percent to $16.5 billion, and net income is up 188 percent from $266 million in 2008 to $767 million in the fourth quarter 2009. But the huge boost can be attributed (in part) to the addition of Wyeth’s product portfolio. Pfizer is counting on the Wyeth deal to circumvent billions of dollars in losses it expects to see in 2012 due to loss of patent exclusivity of the cholesterol blockbuster Lipitor.

CEO Jeffrey Kindler noted that revenues were bolstered this year because the company had to pay out $2.3 billion in 2008 to cover the costs associated with the investigation into the Bextra off-label marketing debacle.

While the numbers look good on paper, they actually fell short of analyst predictions, causing a ripple in pharmaceutical stocks on Wednesday afternoon. Pfizer forecast earnings per share to hover around the $2.10 to $2.20 mark, falling below analyst expectations of $2.27 per share.

During an investor call, Kindler weighed heavily on recent changes in the company; pointing out new deals and enhancements it has made to its leadership teams. He explained how he’s made teams smaller and more agile and gave the hard sell to investors. Of note, Pfizer saw double-digit growth in emerging markets-up 25 percent to $1.9 billion-and boosted its sales force in China.

“The Wyeth acquisition will enhance long term visibility by diluting Lipitor, adding earnings synergies at the beginning of the next decade when Lipitor's patents expire, and broadening the company’s revenue mix,” Deutsche Bank analyst Barbara Ryan stated in a letter to investors. “The risks to Pfizer’s shares include greater-than-expected share losses for Lipitor, due to the availability of generics, and more disappointments from its new drug portfolio.”

Other revenue notes:

  • Primary care sales increased 10 percent to $6.5 billion

  • Specialty care sales jumped 84 percent to $2.9 billion

  • Sales of established products were up 57 percent to $2.7 billion

  • Oncology saw an 11 percent spike to $428 million
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