By Vinay Singh
Pfizer (NYSE:PFE) and Teva Pharmaceutical (NYSE:TEVA) both cited rising foreign market sales and favorable currency exchange rates as the reasons for stronger third-quarter sales numbers, illustrating an emerging trend within the industry.
Pfizer reported better than expected third quarter results this week (see transcript) primarily on news that surging foreign sales helped offset declining U.S. demand for its products. The company managed to beat consensus estimates and boosted its full-year 2011 forecast while also predicting that 2012 earnings will be little changed from this year despite losing patent protection on its blockbuster statin Lipitor.
Favorable foreign exchange rates were responsible, however, for much of the gain in the third quarter. Pfizer reported third quarter sales of $17.2 billion, a 7 percent increase from the $16 billion in revenue for the same period a year ago. Operational growth accounted for just $247 million increase while foreign exchange represented a $951 million increase. U.S. sales fell 3 percent to $6.9 billion in the quarter compared to the same period a year ago. International sales, though, rose 15 percent to $10.3 billion accounting for 60 percent of total revenue.
Pfizer CEO Ian Read cited Pfizer’s emerging markets business as one of the highlights for the quarter. Pfizer said sales in emerging markets increased 21 percent for the third quarter compared to the same period a year ago. He pointed to the third quarter numbers as evidence the company’s emerging markets expansion strategy was paying off. He said Pfizer’s performance “demonstrates the traction we are getting as a result of the investments we are making.”
Teva Pharmaceutical posted mixed results for its third quarter (see transcript), but like Pfizer, the company reported that strong foreign sales, primarily in its generic business, helped offset poor sales in its U.S. generics business. Sales grew $90 million, or 2 percent, to reach $4.3 billion. But that was less than the $148 million in revenue attributed to favorable exchange rates during the quarter.
Sales for the quarter in international markets, mostly Japan, Latin America, and Russia, shot up 56 percent year-over-year, while sales in North America fell 20 percent and sales in the United States dropped 48 percent during the same period. Though some of the blame for the lower numbers was placed on the weaker U.S. dollar, Yanai also stated that the lack of any significant new product launches in the third quarter hurt U.S. sales numbers.