Editor's note: Pfizer unexpectedly changed the date of its earnings announcement to Monday, July 29.
Pfizer (NYSE:PFE) beat Wall Street analysts' revenue and earnings estimates when it reported its first-quarter results in April. The company's biopharmaceuticals segment took center stage, generating enough growth to overcome declines for Pfizer's Upjohn and consumer units.
The drugmaker announces its second-quarter results on Monday, July 29. Here are three things you should look for in Pfizer's Q2 earnings update.
1. Continued momentum for Pfizer's "big three"
In the first quarter, Pfizer's "big three" blockbuster products -- anticoagulant Eliquis, breast cancer drug Ibrance, and pneumococcal vaccine Prevnar 13 -- powered much of the company's growth. Sales for Eliquis soared 32% year over year. Ibrance delivered sales growth of 25%. Prevnar 13, Pfizer's current top-selling product, saw sales increase by 10% year over year. I think you can expect continued strong momentum for all three products in the second quarter, and especially so for Eliquis and Ibrance.
Bristol-Myers Squibb, which co-markets Eliquis with Pfizer, already reported 24% year-over-year sales growth for the drug in its Q2 results. In the first quarter, Pfizer posted sales growth for Eliquis that was 4% higher than what Bristol-Myers reported.
Sales for Ibrance are showing the strongest growth in international markets. Angela Hwang, group president of Pfizer's biopharmaceuticals segment, said in the company's Q1 conference call that "we believe this growth to be sustainable as we see that there is still significant room to grow." Assuming she's right, look for another strong quarter for Ibrance.
2. A greater decline before the cliff dive for Lyrica
Pfizer reported that sales for its enormously successful nerve pain drug Lyrica slipped 2% year over year in the first quarter. I think we'll probably see an even greater decline in Q2 before the big cliff dive for Lyrica that's on the way in the third quarter.
Lyrica lost its exclusivity on June 30, 2019. That's at the end of Q2, so you might think that sales of the drug would hold up pretty well during the quarter. Maybe they did, but there's a real possibility that Lyrica's sales already began to drop at a faster rate than in Q1.
My hunch is that pharmacy wholesalers likely accelerated their de-stocking of Lyrica in anticipation of generic versions of the drug hitting the market. If I'm right, Pfizer will report a year-over-year sales decline for Lyrica that's greater than the 2% posted in the first quarter.
3. Currency headwinds across the board
In the first quarter, the negative impact of foreign exchange caused Pfizer's reported growth to be 4% lower than it would have been otherwise. In total, Pfizer's revenue was a whopping $453 million lower than it would have been on a constant-currency basis. These currency headwinds impacted all three of the company's business segments.
I think that this foreign exchange impact will be at least as problematic in Pfizer's Q2 update as it was in the first quarter. The U.S. dollar was stronger throughout most of the second quarter than it was in the first quarter. A strong dollar isn't helpful for companies that do a lot of business overseas because it reduces the value of their international sales and earnings. Pfizer makes a little over half of its total revenue from international sales.
Expect Pfizer's Q2 update to also include discussions on several items that probably didn't materially impact its financial results in the quarter. For example, the company won several regulatory approvals in the first few months of 2019, including FDA approval in May of Vyndaqel and Vyndamax in treating transthyretin amyloid cardiomyopathy (ATTR). While this could be big for Pfizer over the long run, the incremental sales in Q2 likely didn't amount to very much.
Pfizer will also probably talk a good bit about the planned acquisition of Array BioPharma. The deal is expected to close sometime in the next few months. Pfizer thinks that it will dilute its adjusted earnings per share by $0.04 to $0.05 this year, but it's most likely to take that hit in the fourth quarter.
I suspect we'll hear Pfizer play up its post-2020 return to growth quite a bit as well. The company knows that it's about to enter into a sales slump with Lyrica facing generic competition. But Pfizer's long-term prospects still look bright, and you can't blame Pfizer executives if they take every opportunity they can to emphasize that to analysts and shareholders.