What to Look for When Pfizer Inc. Reports Earnings

Pfizer's upcoming earnings call is likely to be followed by a wave of commotion. Here are some key factors you can listen in for to draw your own opinion.

Jan 22, 2014 at 6:30PM

Pfizer's (NYSE:PFE) earnings call is coming up on Tuesday, January 28, just after the market opens. Losses from generic competition, an ongoing organizational overhaul, and string of recent downgrades will make this one of the most listened to calls of the season. With this much attention, there is likely to be a great deal of noise immediately following the call, but here are a a few critical points to help you focus on the essentials.

Unloading generics
Halfway through last year, Pfizer discussed the separation of its commercial operations into three distinct units. Two units for patent protected brands and one for generics. According to Reuters, Valeant Pharmaceuticals (NYSE: VRX), Mylan Inc (NASDAQ:MYL), and Actavis (NYSE: ACT), are all interested, but there's a small problem -- they probably can't afford it.

VRX Free Cash Flow (TTM) Chart

VRX Free Cash Flow (TTM) data by YCharts

Pfizer's generics operations are contained within its Established Products and Emerging Markets reporting segment. It hauled in about $14.5 billion during the first nine months of 2013. The odds of any one of the above companies raising enough cash to make an outright purchase are slim. Also, the sale of smaller pieces to interested parties would probably incur enough taxes to erode the sales' profitability.

The company could avoid the tax charges if it were to spin-off the generics unit, then allow it to merge with a smaller company that later assumes full control of the new entity. Valeant, for one, appears willing to do such a deal.

When Pfizer last reported earnings the company was still focused on setting up the new organization model of two innovative businesses and one established business segment. Management doesn't appear to be in a hurry here, but listen in for more talk of reorganization. There may at least be hints of a spin off, which would allow the company to direct more of its resources toward the development of new therapies.

Generics aside, Pfizer has been plagued with slow launches of products expected to become blockbusters. During Q3 2013, the company recorded Xeljanz sales of just $35 million. The oral treatment for rheumatoid arthritis is facing intense competition from AbbVie's top seller Humira, and Amgen's Enbrel. Sure the competition is entrenched, but Xeljanz is a pill, versus its competitors' injectables. Apparently, this differentiating factor has not been a significant tailwind for sales.

A label expansion to psoriasis may have to wait. During an ongoing phase 3 trial pitting Enbrel against Xeljanz, Pfizer's drug was similarly effective at a 10 mg dose. Unfortunately, it is unlikely to win an approval at that dosage due to safety concerns. If the lower dosage, which may be less effective than Enbrel, wins approval it is hard to imagine dermatologists falling in love with it.

There are a slew of ongoing clinical trials intended to expand Xeljanz's label, but it seems for the next couple years, its growth will depend on adoption among rheumatoid arthritis patients. The company has increased its marketing efforts, I'll be listening in closely to see if sales of this potential blockbuster are accelerating.

Similar to Xeljanz, this is another potential blockbuster that hit the ground crawling. Along with partners Bristol-Myers Squibb (NYSE: BMY), Pfizer launched this anticoagulant late in 2012, and it ran face-first into existing competition. The drug should be able to compete on its lower incidence of bleeding episodes, but few seem to have noticed.

Pfizer began a direct-to-consumer television ad campaign late in September 2013. If Pfizer can differentiate Eliquis from the competition, it would go a long way toward returning the company to growth. I'll be listening closely for signs that the campaign is working.

Emerging markets and oncology
Of Pfizer's three reporting segments, all three lost some ground during the first nine months of 2013, compared to the same period a year previous. During Q3 2013, the Established Products and Emerging Markets segment fell a little less than 1%, and the Specialty Care and Oncology segment actually grew just a bit compared to the same period a year previous.

Strong growth in oncology and emerging markets aren't likely to return the company to topline growth on their own, but they just might be enough to stop the losses. On the other hand, if there is any sign of these divisions losing steam, things could get ugly.

Stay cool
With this handful of points to stay focused on, you should be prepared to make your own assessment of the earnings release. If you're listening to the call, you'll also have specifics to listen in for. If you're holding shares of Pfizer, its competition, or a potential suitor of the generics business, staying informed will put you a step ahead. The market has a tendency to overreact first, then ask questions later. Stay sharp, and you might be able to spot an opportunity.

Pfizer's dividend is still going strong, but is this a Dow stock investors need to own?
If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.

Cory Renauer has no position in any stocks mentioned. The Motley Fool recommends Valeant Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information