Pfizer Limited — Q1 FY21 earnings call

Call held 5 Aug 2020

Management summary

Pfizer India delivered a resilient performance in Q1 FY21 despite significant COVID-19 headwinds. While the hospital and pediatric vaccine segments were severely impacted by lockdowns, the core Internal Medicine portfolio grew strongly following a successful sales model restructuring. Exceptional cost control and tax benefits led to double-digit profit growth despite a revenue contraction.

Highlights

  • Revenue from operations stood at ₹515 crores, a decline of 5.3% YoY due to COVID-19 impact on hospital and vaccine segments.

  • Net Profit (PAT) grew by 10% YoY to ₹124 crores, supported by a lower effective tax rate of 25% vs 30% last year.

  • EBITDA margin expanded significantly to 37% from 31% YoY, primarily driven by a sharp reduction in travel and promotional expenses.

  • Internal Medicine business (55% of revenue) logged healthy growth of 13% following a major go-to-market restructuring in Q4 FY20.

  • Hospital (Critical Care) business declined by 41% as ICU wards were prioritized for COVID patients and elective surgeries were postponed.

  • Vaccine business declined by 23% as pediatric clinics remained closed during the lockdown, though adult vaccination showed resilience.

  • The company declared and paid a special Platinum Jubilee dividend of ₹320 per equity share in May 2020.

Concerns

  • Prolonged impact on Hospital/Critical Care segment

Key financials

  1. Revenue from Operations ₹515 Cr -5.3%YoY
  2. EBITDA Margin 37%
  3. Profit from Operations ₹159 Cr +13%YoY
  4. PAT ₹124 Cr +10%YoY
  5. Other Income ₹17 Cr -52.8%YoY

What they filed

Q1 FY27: revenue up 8.3%, net profit up 6.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue589 538 592 603 642 +9%645 +20%629 +6%653 +8%
EBITDA189 146 228 210 230 +22%228 +56%236 +4%248 +18%
Net profit158 128 331 192 189 +20%142 +11%200 −40%204 +6%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Internal Medicine
    13% Revenue Growth55% Revenue Share
  • Hospital (Critical Care)
    -41% Revenue Growth
  • Vaccines
    -23% Revenue Growth
  • Consumer Healthcare
    -27% Revenue Growth

Guidance & targets

Margin

  • EBITDA Margin Band Margin · Normalized future · Medium confidence 25% to 30%
    But I would say, as you look at the past trends, we will come to a good margin in the range of about 25% to 30%.

    — Milind Patil, CFO

Revenue

  • Minipress XL Annualized Sales Revenue · FY21 · High confidence ₹70-80 crores
    we believe that we should be on way to clock around Rs.70-80-odd crores on an annualized basis, so we should get all our patients back.

    — S. Sridhar, Managing Director

  • Nexium Sales Growth Revenue · next year or so · Medium confidence ₹40 crores

    From ₹20 crores today

    I am hoping this Rs. 20-odd crores will actually double up in the next year or so.

    — S. Sridhar, Managing Director

  • Meronem Annual Sales Ambition Revenue · Annual · Medium confidence ₹100 crores
    Meronem holds on to it, it is a 100 crores product in a year, and that's our ambition.

    — S. Sridhar, Managing Director

Risks & concerns

  • Prolonged impact on Hospital/Critical Care segment

    high

    ICUs remain full with COVID patients, leaving little room for elective surgeries and transplants that drive antibiotic sales.

    Management acknowledged

  • Normalization of EBITDA margins

    medium

    Current 37% margins are unsustainable as travel and promotional activities resume.

    Management acknowledged

  • Divestment of Consumer and Upjohn portfolios

    low

    These portfolios (contributing ~4% of sales) will be divested at some point, leading to a small revenue leak.

    Management acknowledged

Areas of evasion (2)

  • Specific details on the COVID vaccine's commercial path in India.
  • Specific therapeutic segments for the 5-year new product pipeline.

Q&A highlights

2 direct
Competition in Pneumococcal Vaccine (Prevenar) Direct
I welcome the competition... I believe the market will expand and everyone will have a share of the pie. We are still going to be the only 13 valent in the country.

Investors were concerned about Serum Institute's entry into the private market; management believes low penetration allows for multiple players.

Asked by Gagan Thareja

Eliquis Patent Litigation and Competition Direct
Natco is not in the market. They launched a few batches in violation of a patent. We managed to move the Delhi High Court and Delhi High Court actually stayed the further launches.

Confirms Pfizer's successful defense of a key innovative brand against generic entry.

Asked by Gagan Thareja

COVID-19 Vaccine Launch in India Partial
It is too early to comment on that... primarily the governments across the world will have the first right to procure for their citizens. We will reach out to the Government to see what they require.

Management clarified that the vaccine rollout is government-led and it's uncertain if it will be launched through the listed entity.

Asked by Cyndrella Carvalho

2 min read 5 chapters

Detailed narrative

Segmental Divergence Under COVID-19

The quarter was defined by a sharp split in performance. The Internal Medicine segment, which includes legacy brands like Becosules and Corex, grew 13% YoY. In contrast, the Hospital business plummeted 41% as ICU wards were dedicated to COVID-19 patients, halting elective surgeries. Vaccines also saw a 23% decline as pediatric footfalls vanished during the lockdown. Management estimated the net revenue impact of COVID-19 at approximately ₹57 crores for the quarter.

Strategic Restructuring of Internal Medicine

In Q4 FY20, Pfizer executed a major restructuring of its Internal Medicine business (55% of revenue). The new model uses a mix of 100% Pfizer FTEs in select territories and a 100% contract sales model in others. This 'feet on the ground' approach allowed the company to clock 100% of its budget during the peak COVID months of April-June, signaling a successful turnaround for this previously 'see-saw' business.

Margin Expansion and Sustainability

EBITDA margins reached an exceptional 37% in Q1, up from 31% YoY. This was largely due to 'other expenses' falling to 13% of sales (₹65 crores) from 19% (₹100 crores) as travel and physical doctor conferences were replaced by digital engagement. CFO Milind Patil cautioned that while some digital efficiencies will remain, margins are expected to normalize to the 25-30% range as competitive intensity and field activities return.

Innovative Portfolio and Pipeline

Pfizer continues to shift toward its global innovative portfolio, which now accounts for 48.6% of sales compared to 36.3% in 2016. New products launched in FY20 contributed ₹170 crores (8% of sales). Zavicefta, launched last year, reached ₹32-33 crores in sales. Management remains focused on maximizing the global Pfizer portfolio in India, though they were tight-lipped about specific upcoming launch dates.

Vaccine Dynamics and Competition

While pediatric Prevenar sales fell 25% in Q1, adult vaccination (₹11 crores in Q1) is viewed as a major future growth driver due to increased health awareness. Addressing the entry of Serum Institute's pneumococcal vaccine, management expressed confidence in Prevenar's 20-year efficacy record and 13-valent differentiation, believing the new competition will primarily serve to expand a currently under-penetrated market.

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