Bloomberg News

Pfizer Beats Estimates on Cost Cuts and Non-Drug Revenue

February 02, 2012

(Updates with closing share price in sixth paragraph.)

Jan. 31 (Bloomberg) -- Pfizer Inc., the world’s largest drugmaker, reported earnings that beat analysts’ estimates as the company’s non-pharmaceutical units and cost cutting overcame losses from generic competition to its best-seller Lipitor.

Fourth-quarter earnings excluding some items were 50 cents a share, beating by 3 cents the average of 18 analyst estimates compiled by Bloomberg. Net income fell 50 percent from a year earlier to $1.44 billion, or 19 cents a share, after the New York-based company lost patent exclusivity for the cholesterol pill Lipitor, Pfizer said in a statement today.

A decline in sales from prescription drugs was countered by revenue increases at the animal health unit and infant nutrition business, two divisions Chief Executive Officer Ian Read has said are slated to be spun off or sold. The company reduced costs by 9 percent in the quarter.

“Cost is where they can keep a grip on what operating income will look like,” said Aparna Krishnan, an analyst with IHS Global Insight in London. “Even 9 percent costs-down still does not compensate for the 4 percent drop in top-line growth,” she said.

Pfizer’s divestiture of the nutrition and animal health units is part of Read’s strategy to shrink the company and focus on new prescription drugs. Read said today those divestitures are “on track,” and the company would announce them this year.

Pfizer fell less than 1 percent to $21.40 at 4:01 p.m. New York time. The shares have gained 18 percent in the past 12 months.

Forecast Trimmed

Pfizer forecast 2012 profit of $2.20 to $2.30 a share, 5 cents less than the previous range of $2.25 to $2.35. “That nickel is entirely due to foreign exchange,” said Chief Financial Officer Frank D’Ameilio.

Investors may disregard the reduction, since it’s attributable to the exchange rates, Tim Anderson, an analyst with Sanford C. Bernstein & Co. said in a note today.

Revenue fell 3.5 percent to $16.7 billion, spurred by a 6 percent drop in sales from its pharmaceutical business to $14.1 billion. Revenue from the animal health unit grew 13 percent to $1.11 billion, and sales from the infant nutrition unit rose 22 percent to $598 million.

Lipitor Sales

Lipitor led the revenue decline. Sales of the drug fell 24 percent to $2 billion. U.S. drug sales declined 15 percent to $5.46 billion.

“These are big blockbuster drugs for Pfizer which are potentially not going to be growing or not growing as much in 2012,” Krishnan said in a telephone interview. “It’s going to be that big gulf that’s a challenge.”

Read said the company probably wouldn’t replicate its strategy of offering rebates and coupons to hold onto market share for Lipitor even after copycats entered the market. “The Lipitor opportunity is unique in its size,” Read said.

The biggest cuts to expenses came from research and development spending, which fell 17 percent to $2.33 billion.

Fourth-quarter net income a year earlier was $2.89 billion, or 36 cents, when the company enjoyed exclusive rights to its best-selling product Lipitor.

The company is awaiting U.S. approval in March of its blood thinner, Eliquis, developed with Bristol-Myers Squibb Co. to prevent stroke in heart patients, a market estimated at $7 billion to $9 billion by Leerink Swann & Co. analysts.

In March, Pfizer also plans to start selling its pneumococcal vaccine, Prevnar-13, for adults over 50 in March. The company’s two Prevnar vaccines are Pfizer’s number-three product, with $834 million in combined fourth-quarter sales.

After losing exclusive rights to sell Lipitor in the fourth quarter, Pfizer will also face competition from copycat versions of erectile dysfunction pill Viagra at the end of March. The “little blue pill” was Pfizer’s sixth best-selling product in the fourth quarter. Its sales rose 5 percent to $523 million.

--With assistance from Robert Langreth in New York. Editors: Bruce Rule, Angela Zimm.

To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net;

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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