Why Is Pfizer’s Revenue Stream Declining?



Revenue breakup

Pfizer’s (PFE) net revenue decreased by nearly 4% to $49.6 billion in 2014. Its net revenue was $51.5 billion in 2013. For the total revenue, biopharmaceuticals’ contributions decreased to 92% in 2014—compared to 94% in 2012.

The revenue in the “Others” category includes revenue from consumer healthcare and revenue generated by Pfizer CentreSource. CentreSource is Pfizer’s contract manufacturing and bulk pharmaceutical chemical sales arm. It also includes the revenue related to the transitional manufacturing and supply agreement with Zoetis.

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Factors affecting revenue

The major factors for declining revenue include:

  • expiry of the co-promotion term of collaboration agreement for Enbrel in the US and Canada
  • loss of exclusivity for Detrol LA, Celebrex, and Geodon in the US
  • loss of exclusivity for Viagra in major European markets
  • loss of exclusivity for Aricept and Lyrica in Canada
  • continued erosion of branded Lipitor in the US and other developed markets
  • ongoing termination of the Spiriva collaboration in certain countries
  • unfavorable foreign exchange rates

Since 2014, the company changed the segmentation from Biopharmaceuticals and Consumer Healthcare to three segments as follows:

  1. GIP (Global Innovative Pharmaceutical) segment
  2. GVOC (Global Vaccines, Oncology & Consumer Healthcare) segment
  3. GEP (Global Established Pharmaceuticals) segment

We’ll discuss the revenue and cost analysis for each of the segments separately.

Other companies in the industry include Johnson & Johnson (JNJ), Merck & Co. (MRK), Novartis AG (NVS), and GlaxoSmithKline (GSK). Merck & Co. forms about 6.4% of the SPDR Health Care Select Sector SPDR ETF (XLV).


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