Pfizer easily beat Wall Street expectations for the first quarter as the biggest U.S. drugmaker’s net income jumped 27 percent due to higher sales, a lower tax bill and some one-time gains. The company raised its 2016 financial forecasts, citing its strong performance in the quarter and an improved business outlook.
Its shares surged almost three percent in premarket trading.
Just four weeks after dropping its record $160 billion deal to buy fellow drugmaker Allergan Plc and move its headquarters on paper to Ireland to reduce its taxes, New York-based Pfizer Inc. surprised investors with the better-than-expected results and profit forecast.
The company had made a big bet on the Allergan deal, saying it was needed to make Pfizer more competitive with European rivals who face lower tax rates. Pfizer now says it will concentrate on operational efficiency, internal and external product development, and “shareholder-friendly capital allocation” in the near term, while deciding by year’s end whether to sell or spin off its established products business, which sells older, mostly off-patent drugs.
Some analysts and investors have been pushing Pfizer for years to separate that business to accelerate growth, which the company until now has been trying to achieve with acquisitions and through more partnerships to develop new medicines.
On Tuesday, Pfizer reported first-quarter net income of $3.02 billion, or 49 cents per share. That was up from $2.38 billion, or 38 cents per share, in 2015’s first quarter, despite higher spending on product manufacturing, marketing and administration.
Excluding one-time items, adjusted profit in the latest quarter was 67 cents per share, 12 cents better that the 55 cents expected by analysts surveyed by Zacks Investment Research.
The maker of Viagra and pain treatment Lyrica posted revenue of $13.01 billion in the period, up 20 percent and well above the $11.97 billion analysts expected.
Sales got a lift in part by changes in currency exchange rates and by $1.2 billion in new revenue from Pfizer’s $15 billion purchase last September of injectable drugmaker and infusion device maker Hospira. That deal gave Pfizer a leading position in the global market for injectable drugs, including a new class of lower-cost biotech drugs known as biosimilars.
The higher revenue was driven by big sales jumps in sales of top drug Lyrica, to $1.23 billion; top-selling vaccine Prevnar 13, for pneumonia and related pneumococcal infections, to $1.51 billion; new breast cancer drug Ibrance, to $429 million, and a doubling of sales of injectable drugs, to $1.52 billion.
Excluding the impact of currency rates and the Hospira acquisition, revenue was still up 15 percent in the first quarter, Pfizer Chief Financial Foicer Frank D’Amelio noted.
Pfizer said it now expects 2016 earnings in the range of $2.38 to $2.48 per share, up from its prior forecast of $2.20 to $2.30. Pfizer forecast revenue in the range of $51 billion to $53 billion, $2 billion higher than its last forecast.
It also announced a $5 billion accelerated share repurchase program in March.
“We began the year with very strong operational performance across both our Innovative and Established businesses and this has served as a key driver of an increase in both our revenue and earnings-per-share guidance for the remainder of the year,” Ian Read, chief executive and chairman of the board, said in a statement. “”In addition, we have made excellent progress integrating the legacy Hospira operations and now expect to achieve $1.0 billion of Hospira cost savings by 2018, 25 (percent) more than our initial cost savings target of $800 million.”
Pfizer shares rose 92 cents, or 2.8 percent, to $33.72 about an hour ahead of the market open. They have risen nearly two percent since the beginning of the year, while the Standard & Poor’s 500 index has climbed almost two percent.
