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Earnings Preview: Pfizer to report 1Q results

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LINDA A. JOHNSON | April 27, 2012 04:42 PM EST | AP


Pfizer Inc., the world's biggest drugmaker by revenue, will tout the approval of a new cancer medicine and discuss its drug pipeline and plans to sell its infant nutrition business when the company reports first-quarter results before the stock market opens Tuesday.

WHAT TO WATCH FOR: Pfizer executives likely will focus on sales growth of its newer drugs and prospects for Inlyta, known chemically as axitinib. The twice-a-day pill for hard-to-treat kidney cancer was approved in January.

The Viagra maker is dealing with the biggest patent expiration ever in the industry. Its cholesterol blockbuster Lipitor, which had peak sales of $13 billion a year, got generic competition in the U.S. on Nov. 30. It's also lost patent protection in a few other countries and faces the same problem in other regions down the road.

Given the enormous profit Lipitor had been generating as it brought in roughly a fifth of company sales, Pfizer implemented a groundbreaking strategy to hang onto as much Lipitor revenue as possible until the end of May. That's when several other generic drugmakers will crowd the market with their own versions, pushing prices way down.

Pfizer kept running Lipitor ads well after the U.S. patent expired, offered insurers and patients big rebates and discounts if they stayed on brand-name Lipitor for the time being, and is sharing revenue from an authorized generic with partner Watson Pharmaceuticals Inc. Those two versions together have been holding onto more market share than the one other generic now available, from Ranbaxy Laboratories Ltd. Analysts will want specifics on how that is going and when Pfizer will end the rebates and discounts.

On Monday, Pfizer announced a deal to sell its infant-nutrition business to Swiss food and drink giant Nestle SA for $11.85 billion. As a result, Pfizer will update its 2012 financial forecast on Tuesday. The company said that after-tax proceeds would be spent on more share repurchases or possibly investing in other parts of the business.

Analysts may ask whether Pfizer will use some of that windfall to increase its dividend to reward patient shareholders who watched Pfizer's share price languish until a recent surge to just above $23. That's its highest level since January 2008. Pfizer halved its 32 cent quarterly dividend early in 2009 to help pay for its $68 billion acquisition of fellow drugmaker Wyeth, but has gradually boosted it to 22 cents.

Analysts may also ask for news on plans for the consumer health business. The New York company may spin it off to shareholders or have an initial public offering.

Pfizer is awaiting some key decisions by the Food and Drug Administration.

The agency pushed back until June 28 a decision on whether to approve Eliquis, for preventing strokes and blood clots in patients with an irregular heartbeat. Pfizer developed it with partner Bristol-Myers Squibb Co.

The FDA also is reviewing Pfizer's bosutinib, a daily pill for chronic myeloid leukemia patients with a specific genetic variation. The disease is one of four types of the blood cancer, and accounts for about 15 percent of leukemia cases.

And the FDA is deciding whether to go along with an advisory panel's recent recommendation to let the company and some rivals resume research on a new class of drugs called nerve growth factor inhibitors for arthritis and some other types of chronic pain. Pfizer has been developing one called tanezumab. Except for studies in cancer pain, the FDA has put all patient testing of the drugs on hold because some study participants suffered joint or jaw bone damage.

WHY IT MATTERS: Besides the Lipitor problem, in recent years Pfizer has had several highly touted drugs fail in late-stage patient testing after spending hundreds of millions of dollars, most recently an experimental Alzheimer's drug called Dimebon. The company needs to get more new drugs approved to offset dwindling Lipitor sales. CEO Ian Read, who took over in December 2010, has reorganized research operations, aiming to make them more productive.

WHAT'S EXPECTED: Analysts surveyed by FactSet expect, on average, earnings per share of 56 cents and revenue of $15.46 billion.

LAST YEAR'S QUARTER: Pfizer posted earnings per share of 28 cents, or 60 cents excluding one-time items, and revenue of $16.5 billion.

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