Source: Flickr user David Goehring. 

Big pharmaceutical companies are in the midst of dealing with the most sweeping patent cliff in their history, and Pfizer (PFE 0.86%) is still dangling on the edge.

Having lost Lipitor, Viagra, and a number of other key therapies to generic competition in recent years, CEO Ian Read and Pfizer have made it clear that the company plans to grow its business organically and through acquisitions in order to get past this pipeline hiccup. But the company's third-quarter earnings results demonstrate that this clearly isn't going to be an overnight process.

For the quarter Pfizer reported total revenue of $12.36 billion, down roughly 2% from the $12.64 billion reported in the year-ago period. Though currency effects did negatively impact its sales, this dip was predominantly associated with ongoing patent exclusivity losses. Adjusted profit for the quarter dipped nearly 2% as well to $0.57 per share, down $0.01 per share from the year-ago quarter. However, both figures surpassed Wall Street's consensus forecast that had called for a profit of $0.55 per share on $12.24 billion in sales. 

Let's have a closer look at what's working and what's not as of Pfizer's latest quarter.

What's working
The three keys to success in Pfizer's latest quarter were its success in emerging markets, strength in oncology and vaccines, and leadership from its biggest drugs.

Source: Pfizer.

Emerging market growth for the quarter totaled $2.87 billion, up 9% from the year-ago period, and continues to handily outpace Pfizer's falling revenue. Cholesterol-fighting drug Lipitor was a big component of that growth, with China helping to push total emerging market sales of the drug up 19% on an operational basis to $308 million. Year-over-year emerging market sales growth was also strong for Viagra, Zyvox, and its Prevnar family of vaccines, which grew 25%, 37%, and 23% on an operational basis, respectively.

Looking at total sales, oncology and vaccines were the stars. Global vaccine sales shot higher by 19% during the quarter to $1.14 billion, led by the aforementioned strength in its Prevnar vaccines, while global oncology sales jumped 17% on an operational basis to $551 million. Pfizer's oncology segment saw significant strength from the likes of Xalkori and Inlyta, which had sales improve by 55% and 23% year over year.

Finally, many of Pfizer's key drugs simply outperformed once again. Lyrica, Pfizer's best-selling nerve pain drug, grew by a whopping 16% during the quarter to $1.3 billion, and is easily on pace to be a $5 billion per year drug moving forward. Similarly, Prevnar family sales up 18% to $1.14 billion helped nearly balance out the negatives.

What's not working
A good chunk of this section can be devoted to the ongoing loss of exclusivity of key drugs. Detrol, for example, saw sales plummet 58% to $54 million as generic competition continues to push Pfizer's branded drug to the wayside. Lipitor, despite strong growth in markets abroad, is also struggling with patent exclusivity losses in a number of countries and saw its global sales fall 8% to $490 million. Xalatan and Effexor can also be added to the list with double-digit sales declines.

Source: Pfizer.

But, it wasn't just patent expirations, either. Pfizer has also seen a number of very profitable collaborations end, which results in the company still receiving royalties on a handful of therapies, but nowhere near what it was receiving prior to the end of its collaboration pacts. Pfizer had an agreement with Amgen (AMGN 0.15%) over anti-inflammatory drug Enbrel, for instance, which has now ended and has certainly constrained Pfizer's profitability. Similarly, its collaborative revenue for chronic obstructive pulmonary disorder drug Spiriva ended in a number of countries. Not surprisingly, alliance revenue tumbled 66% in the third quarter to $233 million.

Looking ahead
Looking toward the remainder of 2014 Pfizer issued a relatively mixed and narrowed forecast. It now expects $48.7 billion-$49.7 billion in full-year revenue, modestly tighter than the $48.7 billion-$50.7 billion in sales it had been forecasting. Adjusted profits are expected to be in the $2.23-$2.27 per share range compared to a previous projection of $2.20-$2.30 per share.

The company's expense outlook was just as mixed, with research and development expenses being boosted on the low-end from a range of $6.7 billion-$7.2 billion to a fresh range of $6.9 billion-$7.2 billion, while its adjusted cost of sales was pushed a favorable range of 18.5%-19% from a prior range of 19%-20%.

Pfizer Q3 presentation slide. Source: Pfizer.

What's this all mean? For Pfizer shareholders it means more of the same for at least the next couple of quarters. It means Pfizer is struggling to grapple with falling revenue and eagerly looking for acquisitions that could make an immediate impact. It also means cutting costs wherever it can and incentivizing investors to stick with Pfizer stock. This is one reason we've witnessed Pfizer repurchase $4.2 billion worth of its shares through three quarters of 2014 and remain on track to rebuy $5 billion worth of shares this year.

The biggest near-term catalyst, as I've discussed previously, remains the priority review of first-line estrogen-positive, HER2-negative breast cancer drug palbociclib. In combination with Novartis' (NVS 0.10%) Femara palbociclib nearly doubled patients' progression-free survival to 20.2 months from 10.2 months compared to Femara alone. On a survival basis the numbers were a bit less impressive, adding just 4.2 months relative to Femara alone (37.5 months versus 33.3 months), but it nonetheless looks as if it has a good shot at gaining an approval from the Food and Drug Administration. Palbociclib could be the drug that helps Pfizer end its perilous revenue slide. 

Even though I'm excited about palbociclib's potential, I'm still not sold on Pfizer or its CEO Ian Read. This is a multi-year turnaround plan, which is a fancy way of saying your investment probably isn't going to do much of anything for at least a couple of years. Until I see concrete plans on how Pfizer plans to deploy its capital in order to facilitate growth, or see much more in the way of pipeline innovation beyond palbociclib, I don't personally see any reason to own Pfizer's stock.