By Jonathan D. Rockoff And Michael Calia
Pfizer Inc. said a strong U.S. dollar and recent drug-patent
losses contributed to a 52% drop in net income in the fourth
quarter and would depress results this year.
Foreign exchange will hurt 2015 sales by $2.8 billion, or 17
cents a share, if the dollar remains at its current high levels,
Pfizer Chief Financial Officer Frank D'Amelio said.
Some rival health-products companies based in the U.S. have
similarly warned about the strong dollar's effects on 2015
performance. The expected weakness shows the downside to the
industry's search for faster growth in overseas markets. More than
60% of Pfizer's sales come from outside the U.S.
Aging drugs have been another big problem. Pfizer is facing the
loss of roughly $26 billion in sales between 2010 and this year
from drugs losing patent protection. In December, its painkiller
Celebrex began facing generic competition. To cope, the company has
cut $5.5 billion in operating expenses over the last few years
while trying to restock its R&D pipeline with heart and cancer
drugs and vaccines.
Pfizer explored two big deals last year, but AstraZeneca PLC
succeeded in rebuffing a $120 billion bid, and talks with Actavis
PLC also foundered. Chief Executive Ian Read said Tuesday that the
company remained open to doing a big deal, even one designed to
lower its taxes, despite new rules the U.S. Treasury established to
deter such transactions.
Yet, Mr. Read said Pfizer's "strong base business" didn't
require such a large deal. "We don't have to do a deal. If we had
to do a deal, we would have bought AstraZeneca. We didn't buy
AstraZeneca" because Pfizer doesn't need to overpay, Mr. Read said
in an interview.
Mr. Read said Pfizer was more inclined to do transactions that
net the company products that are "close to market or on the
market," rather than drugs in earlier stages of development.
Despite Pfizer's challenges, Mr. Read expressed optimism about
the company's long-term future without a big acquisition, citing
growing sales of new drugs like the blood-thinner Eliquis and
rheumatoid-arthritis pill Xeljanz. He also described bright
prospects for the company's drugs in development, including
breast-cancer therapy palbociclib, which could be approved this
year.
Among the items affecting Pfizer's performance in the quarter
was a $400 million charge to settle a class-action securities
lawsuit alleging that the illegal marketing of several medicines,
including the painkiller Bextra, artificially inflated the
company's stock. Pfizer denied wrongdoing, saying, "This resolution
reflects a desire by the company to avoid the distraction of
continued litigation and focus on the needs of patients and
prescribers."
The lawsuit alleged that, between January 2006 and January 2009,
Pfizer marketed several drugs for unapproved uses and a resulting
sales boost prompted company executives to make "false and
misleading statements about Pfizer's financial performance," which
in turn artificially inflated the stock price. Pfizer stock then
dropped on Jan. 26, 2009, after the drug maker disclosed plans to
pay $2.3 billion to resolve criminal and civil allegations that
certain drugs were marketed illegally. (Doctors are allowed to
prescribe drugs for off-label or unapproved uses, but companies
can't market them that way.)
Pfizer reported that net income fell by 52% in the fourth
quarter, to $1.23 billion from $2.57 billion a year earlier. The
New York-based company also said it expected to post $2 to $2.10 a
share in earnings and $44.5 billion to $46.5 billion in revenue for
the new year.
The strong U.S. dollar accounted for nearly all of Pfizer's 3.3%
revenue drop in the quarter, to $13.12 billion. Foreign exchange
accounted for a 3% or $450 million hit to revenue, Mr. D'Amelio
said.
Ed Silverman contributed to this article
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com and
Michael Calia at michael.calia@wsj.com
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