On Monday, Pfizer (PFE 1.00%) will release its quarterly report, and despite strong markets over the past year, the pharmaceutical giant's shares have stayed in a tight range. Investors are pondering how Pfizer can best foster growth in an increasingly competitive industry, and Pfizer's aggressive pursuit of AstraZeneca (AZN -2.17%) seems like an obvious way to get it. But does Pfizer really need AstraZeneca in order to keep pace with Merck (MRK 0.27%) and its other rivals?

Pfizer has faced the same patent-cliff woes that Merck and other major pharma companies have dealt with in recent years, with Pfizer's blockbuster drug Lipitor having lost patent protection and led to a big drop in revenue and net income. Even though Pfizer has new drugs like Lyrica and Enbrel to help restore that lost revenue, newer offerings like Eliquis and Xeljanz haven't had the strong starts that investors had hoped to see. With investors less excited about Pfizer's pipeline prospects than Merck's and those of other peers, Pfizer's potential buyout of AstraZeneca would give the company a bigger presence in the cancer-treatment space. Let's take an early look at what's been happening with Pfizer over the past quarter and what we're likely to see in its report.

Stats on Pfizer

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$12.07 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance

Can Pfizer earnings keep clawing back lost ground?
In recent months, analysts have been a bit downbeat on Pfizer earnings, cutting full-year 2014 and 2015 projections by 1% to 3%. The stock has posted modest gains, rising 3% since late January.

Pfizer's fourth-quarter results gave investors hope that the pharma giant could stand up to Merck and its other rivals. Revenue dropped 2% from the year-ago quarter, but that entire decline was due to adverse currency impacts, with sales having climbed 1% on a constant-currency basis. Similarly, Pfizer's roughly 60% drop in earnings was due to the sale of its nutritional-products division last year, and adjusted earnings climbed nicely from year-ago levels. Sales of Lyrica gained 11%, and Enbrel provided a 5% gain in sales to help keep Pfizer's overall revenue higher.

But the long-term health of Pfizer's business relies on its pipeline, and results from clinical trials during the quarter have been both good and bad. Lung-cancer drug dacomitinib failed to meet its primary goals in late-stage trials, demonstrating a lack of statistically significant survival compared both against a competing treatment and to a placebo. Yet breast-cancer drug palbociclib showed promise in a phase 2 study, and many believe that Pfizer could skip phase 3 trials entirely and seek FDA approval based solely on the completed trial's data. In addition, Pfizer's vaccine business has produced steady growth, with its Prevnar series taking advantage of the competitive moat that prevents most generic-drug producers from tackling the job of copying vaccines.

Still, Pfizer wants even more growth, and that's a big impetus for its pursuit of AstraZeneca. Pfizer has justified its initial bid of more than $100 billion for AstraZeneca by arguing that combining the two companies' cancer-treatment development areas could create new opportunities, especially in immuno-oncology. Yet there are also other areas where the two companies would complement each other well, with AstraZeneca filling in gaps in Pfizer's coverage in the cardiovascular realm. Moreover, the promise of being able to move its headquarters across the Atlantic could produce substantial tax savings, further boosting earnings. This morning, AstraZeneca rejected Pfizer's latest bid of roughly $106 billion, arguing that even the 7% boost from the initial bid was still inadequate given the large percentage of Pfizer stock involved and AstraZeneca's desire to remain independent.

In the Pfizer earnings report, look at the numbers that the pharma giant delivers on the sales and earnings fronts. But also listen for clues about how those numbers will change if an AstraZeneca merger goes through. With AstraZeneca having resisted initial attempts at a combination, Pfizer will have to persuade shareholders that the acquisition is the smartest way for it to stand up to Merck and keep growing. Pfizer can grow without AstraZeneca, but a big merger could be a much easier way to find growth for Pfizer.

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