Stock Review: PFIZER

Pfizer India, the Indian arm of the US drug major Pfizer Inc, reported muted performance for the four months ended March 2011. The company has changed its accounting year from December-November to April-March. Consequently, it announced results for the four months ended March 2011 that are not comparable to those reported for the three months ended February 2010.

However, according to the information received from the company's management, the net sales for the four months ended March 2011 grew 9% (when compared on a like-to-like basis) and the net profit similarly increased by 10%. Lower-than-expected sales of Becosules and 4-5 other products was the major reason for the dull show. Becosules, as a product, involves high value raw materials. Lower sales of Becosules have kept raw material costs low during the period. The raw material cost-to-net sales ratio has dropped to 28% against an average range of 32-37%. This has helped the company to post high operating profit margin of 22%. Since the past couple of quarters, Pfizer's largest business segment of pharmaceuticals has been growing faster than the average industry growth rate. The company has been able to maintain the trend during the four months ended March 2011. Consistently-performing top brands, expansion of field force and encouraging sales of newly launched branded generics is enabling the company to outperform the industry. The company has launched five new branded generics products from therapeutic areas like diabetes, anti-infectives and animal health during the four months. It has also recruited over 200 field staff during the same period.

Though Pfizer does not provide any growth guidance, it expects to maintain its current higher than-industry growth rate. This should not be difficult to achieve given that the sales of Becosules and other products have recovered. Pfizer's aggressive launch of branded generics from time to time and its consecutive investment in expanding its field force is required to market its existing and new product pipeline.

Pfizer's stock price has appreciated nearly 14% since the middle of March. The lower-than-expected performance may lead to short-term dent in this rally. The long-term fundamentals nevertheless remain positive.