Associated Press
Pharmaceutical giant Pfizer Inc.'s mega-acquisition of Wyeth boosted its third-quarter revenue 39 percent, but hefty charges and a higher tax rate, both related to that $68 billion purchase, dragged its profit down 70 percent, the company said Tuesday.
The New York-based maker of cholesterol blockbuster Lipitor and impotence pill Viagra posted net income of $866 million, or 11 cents per share. That's down from $2.88 billion, or 43 cents per share, a year earlier.
Excluding one-time items totaling $3.51 billion, or 43 cents a share, the world's largest pharmaceutical company by revenue said net income would have been $4.37 billion, or 54 cents per share. That topped Wall Street expectations by 3 cents.
Pfizer raised its 2010 profit forecast, to a range of $2.17 to $2.22 per share excluding one-time items, from the prior guidance of $2.10 to $2.20 per share. Analyst expect $2.22 per share. But it lowered the top end of its revenue projection by $1 billion, to a range of $67 billion to $68 billion.
Revenue, while up from $11.62 billion in 2009's third quarter because of Wyeth's products, came up short of expectations at $16.17 billion. Analysts surveyed by Thomson Reuters were expecting, on average, revenue of $16.68 billion.
In afternoon trading, Pfizer shares fell 33 cents, or 1.9 percent, to $17.29.
Pfizer is the last major U.S. drugmaker to report its results. Because of the weak global economy and demands from European health programs for price cuts, Pfizer - as did many of its peers - missed Wall Street revenue expectations but managed to beat muted earnings-per-share expectations. That was the case for Johnson & Johnson, Eli Lilly and Co., Bristol-Myers Squibb Co. and Abbott Laboratories. Biotechnology company Amgen Inc., which makes anemia drugs, bucked the trend, narrowly beating revenue expectations and handily topping EPS forecasts.
"Their results followed the same pattern we've seen with peers, missing on the top line but beating EPS estimates due to cost controls," Credit Suisse analyst Catherine Arnold wrote to investors.
Pfizer's one-time items included $499 million for acquisition-related restructuring, $1.16 billion for the gradual decline in the value of intangible assets such as trademarks and brand names and $1.48 billion for asset writedowns related to buying Wyeth on Oct. 15, 2009.
The company also set aside a $701 million reserve for asbestos litigation related to a Pfizer subsidiary, Quigley Co., which is in a long-running bankruptcy reorganization. Quigley was acquired by Pfizer in 1968 and, until the early 1970s, sold products containing asbestos such as linings for furnaces and incinerators.
Sales of prescription drugs, Pfizer's biggest division, jumped 31 percent to $13.95 billion, boosted by the addition of new products from Wyeth such as biologic drug Enbrel for rheumatoid arthritis, Prevnar vaccine against ear and blood infections, and Premarin hormone replacement pills.
Lipitor sales were down 11 percent at $2.53 billion, as competition from generic versions of other cholesterol drugs such as Zocor continues to erode sales. Lipitor, the world's top-selling drug, loses U.S. patent protection in November 2011, and its sales are expected to fall sharply after that. Still, Pfizer reaffirmed its financial guidance for the following year, saying it expects 2012 sales of $65.2 billion to $67.7 billion and earnings per share, excluding one-time items, of $2.25 to $2.35.
Top sellers were Enbrel, at $799 million; Prevnar and a successor vaccine that prevents more strains of pneumococcal disease, with a combined $914 million; and pain treatment Lyrica, up 7 percent at $757 million. Sales were down for Viagra, anti-inflammatory pain reliever Celebrex and blood pressure drug Norvasc.
Sales of veterinary medicines rose 27 percent to $860 million and revenue from Capsugel, which makes capsules for oral medicines and dietary supplements, were flat at $176 million. Pfizer is considering selling that unit.
Pfizer also reported sales of $673 million from consumer health products such as Chap Stick and Centrum vitamins, and $441 million from nutrition products - both Wyeth businesses.
"For the third consecutive full quarter since we closed the Wyeth deal, we are reporting solid operating results," Chief Executive Jeffrey Kindler told analysts during a conference call.
He said Pfizer will expand its pain treatments, a priority area, with its pending $3.6 billion purchase of King Pharmaceuticals Inc., which makes abuse-resistant narcotic painkillers. Kindler noted other deals to expand its sales in emerging markets and its portfolio of drugs for rare diseases.
Analyst Dr. Timothy Anderson at BernsteinResearch, who rates the stock an "Outperform," wrote that Pfizer "has more interesting, immediate pipeline prospects ahead of it, and we are assuming that (Pfizer) will execute on most of these opportunities."
Pfizer shareholders have seen the company's dividend slashed to pay for Wyeth and its share price fall from $48 10 years ago to the high teens now.
Asked how the company will satisfy shareholders, Chief Financial Officer Frank D'Amelio said in an interview that the stock has climbed over the past three months, while Pfizer has been investing in new businesses, boosting sales of older products, buying back stocks and pushing late-stage experimental drugs toward approval. Those include ones to prevent stroke and to treat a genetically based lung cancer.
He said Pfizer's board in December is expected to raise the dividend, now 18 cents per quarter. Pfizer also aims to boost the dividend yield - the annual dividend divided by earnings per share - over the next three years from 33 percent to the industry average of 40 percent.
For the first nine months, net income was $5.37 billion, or 66 cents per share, down from $7.87 billion, or $1.16 per share in the January-September period of 2009. Revenue jumped 50 percent to $50.25 billion, thanks to the addition of sales of Wyeth products.
