Pfizer, Bristol 1Q Profits Mixed On Forex, Generic Pressure
April 28 2009 - 10:52AM
Dow Jones News
Drug makers Pfizer Inc. (PFE) and Bristol-Myers Squibb Co. (BMY)
reported mixed first-quarter results, as the stronger U.S. dollar
dampened sales growth at both companies and generic competition
factored especially into Pfizer's decline.
But both companies' earnings were higher than Wall Street
expectations due to cost-cutting measures including work-force
reductions. Pfizer shares fell 8 cents to $13.41. Bristol shares
dropped 27 cents to $20.27.
Pfizer said it remained on track to close its acquisition of
Wyeth (WYE), a cash-and-stock deal valued at about $68 billion when
it was announced in January. Pfizer is buying Wyeth to help offset
the impending loss of exclusivity for its top-selling drug,
cholesterol pill Lipitor, and to diversify into areas other than
traditional prescription pharmaceuticals, such as biotechnology and
consumer health. Also, further cost cuts are planned for the
combined entity, which should help earnings growth.
Pfizer said Tuesday it earned $2.73 billion, or 40 cents a
share, for the three months ended March 31, down from $2.78
billion, or 41 cents a share, a year earlier. A higher provision
for income-taxes weighed on earnings, stemming from steps taken to
finance the Wyeth deal.
The latest quarter included restructuring and acquisition costs
and other items. Excluding items in both periods, earnings fell to
54 cents a share from 61 cents a share a year earlier, but were
ahead of the mean estimate of analysts polled by Thomson Reuters of
49 cents a share.
"The results were driven primarily by discipline on the cost
side," J.P. Morgan analyst Chris Schott wrote in a note to
clients.
Revenue fell 8% to $10.87 billion, short of the Thomson estimate
of $11.08 billion, with the stronger dollar contributing 5
percentage points of the decline. This continues a first-quarter
trend among major drug makers of exceeding earnings estimates while
falling short on the top line.
The stronger dollar is of special concern to Pfizer, which gets
54% of total revenue from abroad. Non-U.S. revenue dropped 7%,
reflecting a 10 percentage point hit from the dollar.
But U.S. revenue took a hit, too, dropping 10%. Pfizer lost U.S.
marketing exclusivity for allergy drug Zyrtec in January 2008 and
for cancer drug Camptosar in February 2008, exposing them to
cheaper competition.
Also, Lipitor sales continue to drop due to increased
utilization of generic cholesterol drugs such as simvastatin. In
the U.S., Lipitor sales dropped 17%, while worldwide sales declined
13% to $2.72 billion. Pfizer is set to the lose patent protection
for Lipitor in 2011, which will allow generics makers to sell
cheaper copycat versions.
Pfizer Chief Executive Jeff Kindler said Pfizer faced "a
challenging and dynamic economic and competitive environment."
Overall, Pfizer's pharmaceutical sales dropped 7%. Sales for the
Chantix smoking-cessation drug declined 36% due to safety issues,
while arthritis drug Celebrex saw an 8% sales contraction. A
continued source of growth was pain drug Lyrica, whose sales rose
17%.
Pfizer's animal-health sales declined 13% to $537 million due to
the stronger dollar, the weak economy and inventory changes.
Pfizer's gross margins improved thanks partly to the stronger
dollar.
Pfizer lowered its forecast for reported 2009 earnings to
reflect costs related to the purchase of Wyeth. It now sees 2009
earnings of $1.20 to $1.35 a share, down from a prior forecast of
$1.34 to $1.49 a share. It still expects earnings, excluding items,
of $1.85 to $1.95 a share.
Bristol-Myers Bristol said net income for the three months ended
March 31 rose to $921 million, or 32 cents a share, versus $891
million, or 33 cents a share. (Per-share earnings declined despite
an increase in net income due partly to accounting for earnings
"attributable to noncontrolling interest.")
The latest quarter included restructuring costs and a charge to
cover a settlement of securities litigation stemming from Bristol's
attempt to settle a patent dispute over anti-clotting drug Plavix
in 2006. Excluding items in both periods, earnings from continuing
operations for the latest quarter would have been 48 cents a share,
a penny ahead of the mean estimate of analysts surveyed by Thomson
Reuters and up from 39 cents a share a year earlier.
Net sales rose 3% to $5 billion, just short of the Thomson
estimate. The stronger dollar reduced growth by about 5 percentage
points.
Plavix sales rose 10% to $1.4 billion, while sales also
increased for the Reyataz HIV drug, Abilify antipsychotic and
Orencia rheumatoid arthritis treatment. Sales dropped for
hypertension drugs Avapro and Avalide, as well as Erbitux cancer
drug.
While other pharmaceutical companies have tried to grow bigger
and diversify into non-pharmaceutical operations, Bristol has shed
non-drug assets and tightened its focus on biotech and so-called
specialty-pharmaceutical drugs. In February, Bristol-Myers sold a
minority stake in Mead Johnson Nutrition Co. (MJN), which sells
Enfamil baby formula, in an initial public offering.
The moves have left Bristol flush with cash -- roughly $8
billion -- that the company plans to use to make acquisitions to
beef up its pipeline and product lineup.
-Peter Loftus; Dow Jones Newswires; 215-656-8289;
peter.loftus@dowjones.com
(Mike Barris contributed to this article.)