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Pfizer (PFE - Free Pfizer Stock Report), the world's largest drugmaker and Dow-30 component reported fourth-quarter results that fell below our expectations. Pfizer's net income was slashed in half versus the comparable period of 2010, as the company was hit with considerable sales losses from generic competition to Lipitor. Although solid growth was realized in several non-pharmaceutical segments, it was not enough to fully mitigate the patent loss on Lipitor. The market looks to have expected such results, as PFE shares are off just slightly in a weaker market thus far in the trading hours following this release.

For the period, Pfizer's total revenue was $16.7 billion reflecting a year-over-year decline of 3.5%. On the pharmaceutical side, top-line losses were seen across all major operating segments. Primary Care sales, which represent the company's largest revenue component, shrunk 8%, to $5.4 billion, primarily attributed to declining sales of Lipitor. Specialty Care sales fell 5% to $3.8 billion, and Established Products declined 5% to $2.3 billion. Losses would have been greater if it had not been for a strong showing on the non-pharmaceuticals side. Pfizer's Animal Health segment reported sales of $1.1 billion, an increase of 13%, while the Consumer Healthcare and Nutrition units grew 8% and 22%, respectively.

Looking down the road, we believe it is essential that Pfizer increases its focus on business development and the growth of its pipeline to help offset additional patent expirations. After Lipitor, the company will be losing exclusivity for Viagra, Celebrex, and Lyrica during the pull to 2018, and it is unclear whether or not current pipeline opportunities will be sufficient in offsetting the anticipated revenue losses of these lucrative drugs. The company is awaiting U.S. approval for its new blood-thinning drug, Eliquis, next month. It is co-developing this offering with Bristol-Myers Squibb. In our view, this should represent a nice start toward bolstering its pipeline. The market for stroke-prevention products is currently estimated at about $8 billion a year.

All told, Pfizer remains a strong company with solid fundamentals, and sizable shares in most markets. Although patent expirations are a concern, we believe the company should be able to effectively weather the storm given its impressive track record. Moreover, Pfizer's stock has an above-average dividend yield and top rank for Safety (1). The company's Financial Strength (A+) is also outstanding.

About The CompanyPfizer is a major producer of pharmaceuticals, hospital products, consumer products, and animal health lines. Important product names include Norvasc (cardiovascular); Zoloft (antidepressant); Zithromax (antibiotic); Lipitor (cholesterol); Aricept (Alzheimer’s); Cardura (cardiovascular); Diflucan (antifungal); Zyrtec (antihistamine); Viagra (impotence); and Celebrex (rheumatoid arthritis and osteoarthritis). International sales accounted for about 57% of total sales in 2010.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.