Pfizer (PFE) Q2 2018 earnings summary

Executive summary

• Q2 revenue was $13.466B, up 4% reported and 2% operationally; key brands and biosimilars partly offset legacy-product declines and sterile-injectable shortages.

• Reported diluted EPS rose to $0.65 from $0.51; Adjusted diluted EPS increased 21% to $0.81. FY 2018 Adjusted EPS guidance rose $0.05 to $2.95–$3.05.

Financial highlights

• Q2 revenue increased $570M YoY, comprising $377M favorable FX impact and $194M operational growth; H1 revenue was $26.373B, up 3%.

• Q2 reported net income was $3.872B, up 26%; Adjusted income was $4.827B, up 19%.

• H1 reported net income rose 20% to $7.432B; Adjusted income rose 15% to $9.495B. H1 Adjusted diluted EPS was $1.58 versus $1.36.

• Q2 reported results benefited from higher other income, a lower effective tax rate, higher revenue and FX; higher cost of sales partly offset gains.

Outlook and guidance

• FY 2018 revenue guidance was lowered by $500M at the midpoint to $53.0B–$55.0B, solely reflecting unfavorable FX changes since mid-April; Adjusted EPS guidance rose to $2.95–$3.05 from $2.90–$3.00.

• Guidance included Adjusted cost of sales of 20.5%–21.5% of revenue, SI&A of $14.0B–$15.0B, R&D of $7.7B–$8.1B and an adjusted tax rate of ~16%.

• Adjusted R&D guidance increased for higher expected H2 late-stage program spending; adjusted other income guidance rose to ~$1.0B, reflecting H1 gains and collaboration milestone payments.

• Guidance assumed a $1.9B revenue impact from generic and biosimilar competition, and no U.S. Lyrica generic entry before June 2019, contingent on pediatric exclusivity.

• FY19 plans include Innovative Medicines, Established Medicines and Consumer Healthcare; strategic alternatives for Consumer Healthcare were under evaluation.