Pfizer Earnings Conference Call Nuggets: Buybacks and Lipitor Strategy

On Tuesday, Pfizer Inc. (NYSE:PFE) reported its fourth quarter earnings and discussed the following topics in it conference call. Take a look.


Gregg Gilbert – Bank of America-ML asked: First for Ian and then Frank, given that we are actually getting closer to seeing proceeds, I want to better understand the buyback being the case to beat comment that you have been making. So buyback offers immediate accretion while good acquisitions often take a few years to generate a return? How are you truly comparing the two? Is it an accretion in an out year or something like that?

Then for Dave Simmons, what have been the key positive and negatives learned from your Lipitor strategy? How might that shape future strategy for generic launches?

Ian Read – Chairman and CEO responded: Okay. On the buybacks, I think it is clear that we look at the value of the share in the market today. We have models to look at the value of the share on a discounted cash flow basis, so we look on that return on a buyback along with the impact of dividend payments being lowered by the buyback. That gives us a certain financial return.

We compare that to the opportunities we have of acquiring businesses and the net present value of those businesses; it really is an economic view of what is the best use of the shareholders – of the funds for Pfizer shareholders.

Lipitor Strategy 

David Simmons – President and General Manager, Emerging Markets and Established Products responded: Gregg, regarding the question on learnings from Lipitor, I’d probably break these into two pieces. The first is we have done a lot of market research and learned in-depth the incentives that are occurring from different stakeholders in the healthcare environment during the LOE period was from day 1 to day 180 and then also post 180.

This cuts across payers, pharmacists and the patients themselves. Through those learnings and research, we have also been able to discover a significant percentage of patients who want to remain on the brand; they don’t feel that they understand how they can do that, and we have been developing strategies to how to tap into that desire without increasing cost to the healthcare system. So, the learnings are on that front.

The second thing that I would add in, is that the responses to the strategies we have put in have been very strong; we’re pleased with where we are in the Lipitor progress. Our share of branded Lipitor is tracking some 40 percent plus higher than historic analogs.

The strategies appear to be working, and as we go into upcoming LOEs assuming we get the same type of market research reads where we will be applying the learnings from Lipitor, tweaking them and trying to continue with our core goal. This is to make sure we maximize revenue profits and patient value from our brands.

Read added:  Thank you, David. That being said, the Lipitor opportunity is unique in its size and the 180-day period, I’m not sure how many molecules going forward will have that same dynamic as I believe the law has been changed to allow same-day filing.

You won’t have one company with 180-day exclusivity, you’ll have multiple companies. I think that will change the dynamic of post-LOE marketplace.

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