Pharmaceutical giant Pfizer (NYSE:PFE) closed out 2011 with the loss of its biggest selling drug and one of the best-selling drugs in history. Despite the loss, the company is still reporting billions in profits and offers a decent combination of appealing valuation, above-average dividend, and respectable expected profit growth in the coming years. (For related reading, see Investing In The Healthcare Sector.)

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Full-Year Recap
Total sales eked out 1% growth to $67.4 billion and consisted of a 2%, or $1.6 billion decline in organic growth that was boosted by 3% in benefits, or $1.9 billion, from positive foreign currency fluctuations. U.S. sales struggled, falling 7% to $26.9 billion, or nearly 40% of total sales. International sales accounted for the remaining $40.5 billion and advanced 6%, though foreign exchange fluctuations boosted that total by 5%. Fourth quarter sales fell 4% to around $16.7 billion to reflect the loss of flagship drug cholesterol-lowering drug Lipitor, which lost patent protection in November 2011.

Pre-tax income advanced 6% to $8.7 billion for a very healthy margin of 12.9% of sales. The improvement reflected a 3% reduction in research and development (R&D) expense to $9.1 billion, reduction in restructuring and other charges, though income tax expense jumped nearly threefold to $4 billion. A gain from a discontinued business pushed reported net income to $10 billion, or 21% ahead of last year's figure. Share buybacks boosted earnings per diluted share by 25% to $1.27.

For the coming year, Pfizer expects to report sales in a range of $60.5 billion and $62.5 billion for an annual decline of between 7-10%. It expects to report earnings between $1.37 and $1.52 per diluted share, but adjusted EPS in a range of $2.20 and $2.50. It also anticipated operating cash flow of $19 billion. (To learn more about understanding earnings outlook, read Earnings Forecasts: A Primer.)

The Bottom Line
After years of anticipation, 2011 finally saw the loss of Lipitor, which was a huge sales and profit driver for Pfizer. The company has moved aggressively to sell Lipitor at a lower price point and directly to consumers to attempt to not lose all the related revenue, but the sales will be a fraction of the $10.7 billion in sales that Lipitor reported in 2010.

As with rivals that include Eli Lilly (NYSE:LLY), Merck (NYSE:MRK) and Forest Laboratories (NYSE:FRX), Pfizer faces a continued wave of drug patent expirations in the next few years. Despite the pressure to sales, it should be able to maintain decent annual profit gains through a combination of cost-cutting efforts and new product introductions. For instance, the recently approved FDA drug Eliquis, for the treatment of atrial fibrillation that is being developed along with Bristol-Myers Squibb (NYSE:BMY), could see sales of over $4 billion by 2017, according to estimates by industry analysts.

At a forward P/E of below 10 and current dividend yield of around 4.1%, Pfizer offers a decent combination of a reasonable valuation and income for investors. Again, sales growth will be lacking for the foreseeable future, but Pfizer is still very profitable and has ample cushion to adjust its cost structure to maintain a respectable level of profit gains going forward. (For additional reading, see Evaluating Pharmaceutical Companies.)

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At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

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