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.)