Cost-Cutting Efforts, International Sales Push Pfizer's Q2 Sales Up 9%

U.S. pharma major Pfizer has registered revenue of US$12.1 billion and US$23.9 billion in the second quarter and first half of 2008, respectively, maintaining its growth performance. The company has been able to keep a tight leash on expenditure, with selling, informational and administrative (SIA) costs only marginally up by 1% year-on-year (y/y) in the second quarter and 2% y/y in the first half, while R&D expenditure dipped by 9% y/y and 2% y/y in the respective periods. The acquisitions of Encysive Pharmaceuticals and Serenex (both U.S.), however, raised in-process R&D expenses. Pfizer attributed its performance in the quarter to factors such as foreign-exchange revenues, lifting total sales by US$800 million, and key product sales that have aided top-line figures. Net income surged by 119% and 19% y/y in the second quarter and first half, respectively.

In terms of the geographical split, U.S. sales suffered a drop of 2% y/y, owing to increased generic competition to products that have lost marketing exclusivity, such as Norvasc, Zyrtec, and Camptosar. These three products combined affected revenues by up to US$500 million in the second quarter. However, brands such as Lyrica, Geodon, Sutent, Caduet, Chantix, Aricept, and Rebif registered higher growth rates during the second quarter. Sutent benefited from recent regulatory approvals in Japan, China, and Russia, thereby improving international sales by 80% y/y to US$151 million. However, U.S. sales dipped by 2% y/y in the second quarter. The strength of international sales was also reflected in the revenues of Pfizer's top product, Lipitor, as they advanced to garner US$4.4 billion for the second quarter, with international market revenues growing by 18% y/y against 1% from the U.S. market. Celebrex also reported revenue growth of 23% y/y to US$589 million, driven by the firm's educational and promotional efforts.

Outlook and Implications

Pfizer's financial performance demonstrates a firming up of top-line growth, despite the challenges in its main market, the United States. CEO Jeff Kindler has acknowledged the difficult conditions in the U.S. market in a conference call, detailing that pressures are now on the regulatory front, generic competition, and from payers. The company’s cost-cutting efforts have propped up the company's bottom- and top-line achievements. These initiatives are expected to be gain momentum and continue to be reflected in the coming quarters. Pfizer has also benefited from favourable foreign currency conditions. Product-based initiatives, mainly for Sutent and Celebrex, have also pushed individual performances.

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