The World Is Saving Pfizer

It's a good thing Pfizer (NYSE: PFE  ) recently set up a division to address emerging markets. The company is going global whether it likes it or not.

Revenue for the third quarter was essentially flat year over year, but it tells a tale of two distinct geographic areas. In the U.S., sales decreased 15%, while international sales increased 13%. Thanks to the divergence, international sales now make up 59% of total revenue.

The loss of chemotherapy drug Camptosar to generic competition and allergy drug Zyrtec, transferred to Johnson & Johnson (NYSE: JNJ  ) as part of the consumer health-care division Pfizer sold, cost Pfizer more than half a billion dollars in revenue in the quarter, compared with last year.

Despite the woes that competitors Merck (NYSE: MRK  ) and Schering-Plough (NYSE: SGP  ) have had with their cholesterol-lowering drug, Vytorin, Pfizer doesn't seem to have been able to win over their patients: U.S. sales of Lipitor dropped 13% year over year. We'll have to wait until AstraZeneca (NYSE: AZN  ) reports next week to see if doctors have been favoring AstraZeneca's Crestor or have been putting their patients on one of the generic statins.

Where Pfizer is generating its cash matters so much because it's the cash flow and the dividend in particular that are holding up the stock price; earnings, which were up 7% per share on an adjusted basis, just don't matter that much. The dividend is paid in U.S. dollars, and, if Pfizer needs to move cash from places where it pays low taxes to the U.S., it's likely it would have to take a tax hit when it repatriates the cash. At this point the dividend seems sustainable, but we'll have to wait for the 10-Q report filed with the SEC to see the cash flow for this quarter.

The world may be holding up Pfizer at this point, but it won't be able to sustain things after Lipitor loses exclusivity at the end of 2011. Pfizer is going to have to get some of the 25 programs currently in phase 3 trials onto the market and make an acquisition or two with all that cash it has been hoarding.