Why Analysts Were Mostly Upbeat about Pfizer's 4Q15 Earnings

(Continued from Prior Part)

Understanding growth contributors

Previously we discussed Pfizer’s (PFE) revenue trends. To better understand the factors affecting its growth, let’s explore its strong product portfolio and pipeline.

The key performers in the company’s product portfolio include Lyrica, Xeljanz, and Viagra for the Global Innovative Pharmaceuticals (or GIP) segment and Prevnar 13 and Ibrance for the Global Vaccines, Oncology, and Consumer Healthcare (or VOC) segment.

Positive growth contributors

The following products contributed toward the positive growth of Pfizer:

• A 6% increase in Lyrica revenues at $955 million in 4Q15 compared to 4Q14, primarily due to a 12% increase in sales in US markets.

• A 2% increase in Viagra sales due to solid demand in US markets. Viagra sales totaled $342 million in 4Q15. Positive growth in Viagra sales in the last three quarters implies that the product has now absorbed the effect of patent expiry and pricing pressure. Revenues will now grow based on demand for the drug.

• Although they constitute a relatively small business line, Xalkori and Xeljanz achieved sales of $135 million and $172 million, respectively. Though Xalkori’s revenue only grew 4%, Xeljanz’s revenue jumped 66% compared to the same quarter last year.

• A 43% increase in Prevnar family revenues compared to the previous quarter, following higher demand for Prevnar 13 in both US and international markets. The Prevnar family has achieved average growth of ~20% quarterly on a constant currency basis in the last eight quarters. In 4Q15, the total contribution of the Prevnar family was over 13.2% at $1.9 billion compared to $1.3 billion in 4Q14.

Alliance revenues rose by ~56% at $431 million in 4Q15 compared to $276 million in 4Q14. Alliance revenues include Eliques, Rebif, Spiriva, and Aricept. Alliance revenues have fallen over the past few years due to the expiration of its Enbrel and Spiriva collaborations. Ibrance, the new cancer drug for the treatment of advanced breast cancer, was launched in February 2015 and has received a good response from healthcare practitioners.

Key products contribute major revenues for any pharmaceutical company. For example, Humira, a product for arthritis, accounted for ~63% of total revenues for AbbVie (ABBV) in 2014. Humalog and Cymbalta are among the seven key drugs of Eli Lilly (LLY), contributing over $1 billion in revenue each in 2015. Crestor and Nexium are among the four key products of AstraZeneca (AZN), contributing over $1 billion in revenue each in 2015.