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What to Expect with Pfizer's Q1 Results

By Keith Speights – Apr 29, 2018 at 6:17AM

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And what not to expect, too.

Pfizer (PFE -0.91%) stock hasn't been a big winner so far in 2018. On the other hand, the big pharma stock is beating the S&P 500 index at this point. And there will soon be a potential catalyst that could provide a spark.

On Tuesday, May 1, 2018, Pfizer will give an update on its first-quarter performance. When Pfizer reported its 2017 Q4 results in January, investors weren't overly impressed. Will it be a different story with the company's Q1 results? Here are three things to expect in Pfizer's update.

Financial report with magnifying glass highlighting words financial report

Image source: Getty Images.

1. Continued momentum for the top stars

Pfizer claimed three top stars that generated year-over-year sales growth of 45% or more in 2017: Ibrance, Eliquis, and Xeljanz. I think you'll see continued momentum from all three drugs in the company's first-quarter results.

I'd be quite surprised if sales for Ibrance weren't much better in Q1 than they were in Q4. Pfizer recorded a one-time price adjustment for the cancer drug in the fourth quarter related to finalizing reimbursement agreements in some European markets. That shouldn't be a factor in the first quarter.

What about competition from Novartis' Kisqali and Lilly's Verzenio, both of which, like Ibrance, are CDK inhibitors targeting treatment of breast cancer? In January, Pfizer COO Albert Boula stated that the company hasn't seen any big impact from these rival drugs on Ibrance's performance. Based on already-released Q1 results for Novartis and Lilly, I think Ibrance should have a good quarter when Pfizer announces its results.

As for Eliquis, there don't appear to be any obstacles to the anticoagulant keeping its strong momentum going. Xeljanz could enjoy a boost in sales from the Food and Drug Administration approval in December for treatment of psoriatic arthritis.

2. Big impact from tax reform

Pfizer's executives were highly influential in pushing for the ultimate passage of corporate tax reform in the U.S. I think we'll see some fruits from their efforts in the first quarter.

The company's effective tax rate last year was around 23% after backing out the one-time impact of a tax benefit. This rate is a blended rate from taxes paid across the world. With the U.S. tax cuts in effect, Pfizer should have an effective tax rate of 17% in Q1. This lower rate should make the drugmaker's bottom line look much better than it did in the prior-year period.

Pfizer also stated earlier this year that it planned to repatriate most of its $24 billion or so in cash parked overseas. While moving this money back into the U.S. won't impact its financial results for the first quarter, it is still significant for the company, especially in giving more flexibility for business development activities.   

3. Same old challenges -- with a twist or two

While Pfizer should have good news from its top drugs and from tax reform, the company will still face some of the same challenges in the first quarter that it had last year. And one of them could be even worse.

Declining sales from loss of exclusivity for drugs had been a significant headwind for Pfizer over the last several years. One of its longtime winners, Viagra, lost exclusivity in December 2017. The impact of generic competition affected Viagra's sales to some extent in Pfizer's Q4 results, but it will really show up when the drugmaker reports its Q1 results.

Product supply shortages with Pfizer's sterile injectables business will also likely be a factor weighing down its essential health business segment performance in the first quarter. While Pfizer thinks that it will "make significant progress" in addressing these issues in 2018, we'll see how much progress was made in Q1. My guess is that the headwinds for the sterile injectables business won't subside very much this early in the year.

What not to expect

There are a couple of things that I don't think Pfizer will discuss in detail when it provides a first-quarter update.

First, I doubt the company will shed much light on where things stand with the potential sale or spinoff of its consumer healthcare business. Several potential buyers are no longer in the running, which could make a spinoff more likely. However, my hunch is that Pfizer isn't yet ready to reveal exactly what it will do with the business.

Second, don't expect Pfizer to shed significantly more light on what acquisitions it might or might not make. Reports surfaced recently that the company isn't interested in buying its Eliquis partner, Bristol-Myers Squibb. I would be surprised if Ian Read or other Pfizer executives provide any substantial comments on those reports or any other potential deals. I do expect that Pfizer will make more acquisitions in 2018 -- but I think the company will, as it should, keep its cards close to the vest. 

Keith Speights owns shares of Pfizer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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