Pfizer Q1: Worse Than It Looks; Even Viagra Is Flagging

Last Updated Apr 28, 2009 10:36 AM EDT

Pfizer's Q1 2009 numbers are worse than they appear at first glance. An accounting maneuver makes the company look much more productive than it is; and sales of its key franchises are weak -- even Viagra, down 1 percent, seems to have reached its peak.

The basics: Revenues were down 8 percent to $10.8 billion; net income was down 2 percent to $3.8 billion. None of this was a surprise, we knew Pfizer was heading into its patent-cliff phase; that's why it wanted the merger with Wyeth.

Pfizer also promised to cut 19,500 jobs from the combined company, so there was an expected reduction in sales, marketing and admin expenses, Pfizer's major operating budget. For every dollar Pfizer spent on sales and marketing, it made $3.78 in revenues -- the highest yield on its quarterly investment in over two years. Is Pfizer finally becoming efficient?

No, not yet. It turns out that the company broke out a $554 million restructing charge (severance pay for fired reps, essentially) from its sales and admin number. Add that back in and the revenue yield declines to $3.17 per dollar invested -- lower than it's been since Q2 2008. The company is actually less efficient at generating its own sales now than it was in 2008.

That backs up what BNET noted back in January:
Perhaps both sides wanted this deal because they felt they had reached the end of their ability to cut and still keep revenues up?
There are also some scary downward-pointing lines on the franchise PowerPoint:
  • Lipitor was down 13 percent to $2.7 billion even though it is not off-patent until 2010.
  • None of Pfizer's CV drugs are growing.
  • Celebrex is down 8 percent to $564 million.
  • The cancer segment is an almost negligible contributor to the company's revenue health.
  • And Viagra, a flagship Pfizer brand, saw sales decline 1 percent to $454 million. That's more psychologically damaging than financial, because Viagra sales were up 10 percent last year.
On the bright side, Lyrica sales went up 17 percent to $684 million, so it seems that the project to convince people that fibromylagia exists is gaining traction.

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