When the world's largest pharmaceutical company gives an update on its business, there's a lot of ground to cover. Motley Fool Inside Value selection Pfizer (NYSE:PFE) had three separate subject headings and fourteen different bullet points prefacing its business-update press release today. The report reveals that the pharmaceutical giant is taking some positive steps, though its future remains uncertain.
First of all, growth at Pfizer is currently stalled. Revenue and adjusted earnings for 2006 are expected to stay roughly flat year over year, as patent expirations offset gains from new launches. In 2007 and 2008, the company is projecting high single-digit average annual growth on an adjusted basis. On a positive note, these projections are probably fairly conservative, considering the company had to withdraw forecasts for more robust growth just months ago.
Pfizer is making the right moves to cut costs and regain its focus. The company is slashing the number of its manufacturing plants from 93 to 66 and seeking efficiency improvements in R&D and sales. Pfizer expects an impressive $2 billion in cost savings in 2006, followed by $3.5 billion in 2007 and $4 billion in 2008.
As for growth from new drugs, the outlook is unclear. Pfizer correctly describes Exubera, an inhaled insulin for diabetics, as a breakthrough treatment -- but it's hardly a slam dunk. Pfizer won't hold market exclusivity for long; Eli Lilly (NYSE:LLY) and others are developing their own inhaled insulin. In addition, rumblings regarding the drug's effects on lung function may curb sales a bit.
Finally, despite its massive cash pile and its promises to improve R&D productivity, Pfizer expects to file just two additional new drug applications (NDAs) in 2006, and one of these will be for a drug connected to a licensing agreement. In 2007, Pfizer will file just three NDAs.
Is Pfizer going away? Hardly. The company will continue to generate healthy profits for the foreseeable future, but if it wants to regain its vibrancy, it will have to do more.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
