Drug makers Pfizer Inc. (PFE) and Bristol-Myers Squibb Co. (BMY)
reported mixed first-quarter results as the stronger U.S. dollar
kept down sales growth at both companies. 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. Recently, Pfizer shares fell 16 cents, or 1.2%, to
$13.33 while Bristol shares dropped 87 cents, or 4.2%, to
$19.67.
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.
New York-based 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," JPMorgan analyst Chris Schott wrote in a note to
clients.
Pfizer's revenue fell 8% to $10.87 billion, short of analyst
expectations 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.
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.
Worldwide sales declined 13% to $2.72 billion. Pfizer is set to the
lose patent protection for Lipitor in 2011.
"While the recession has clearly had some impact on the
business, particularly in the U.S., so far that impact has been in
line with expectations that were built into our 2009 guidance,"
Chief Executive Jeffrey Kindler told analysts during a conference
call.
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 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, New York, 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,
one cent 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, which more than offset a 4-percentage point gain from
increased volume and a 4-point gain from price increases.
Some drug makers have increased prices aggressively recently,
which Credit Suisse analyst Catherine Arnold has attributed to an
effort to squeeze as much out of their assets as possible before
U.S. health-care reform dampens pricing power.
But Bristol-Myers and Pfizer played down the effect that price
increases had on their quarterly results. Bristol Chief Financial
Officer Jean-Marc Huet said the company has been "conservative" on
price increases. Pfizer Chief Financial Officer Frank D'Amelio said
pricing added just one percentage point to Pfizer's sales growth,
which was more than offset by the negative factors.
Bristol's 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.
Bristol Chief Executive James Cornelius said during a conference
call the company was using "better expense management." Bristol
also reaffirmed its previous 2009 earnings forecast of $1.58 to
$1.73 a share, or $1.85 to $2 excluding certain items.
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 and marketable
securities of roughly $9 billion that the company plans to use to
make acquisitions to beef up its pipeline and product lineup.
Separately, Bristol disclosed Tuesday it received a letter in
March from the Delaware attorney general's office advising the
company that a 38-state coalition was probing whether certain
marketing practices for Abilify violated state consumer-protection
laws.
Also, Bristol was named as a defendant in a purported
whistle-blower lawsuit filed in federal court in Massachusetts by a
former employee of Omnicare Inc. (OCR), which provides
pharmaceutical care to seniors, alleging Bristol and other drug
makers paid kickbacks to Omnicare to switch the medications of
Omnicare patients. Bristol said it would defend itself vigorously
against the suit.
-By Peter Loftus, Dow Jones Newswires; 215-656-8289;
peter.loftus@dowjones.com
(Mike Barris contributed to this report.)