Pfizer Earnings 4Q 2011: Drug Giant's Falls By Half After Generic Lipitor
Pfizer Inc.'s fourth-quarter profit fell by half because it sold less Lipitor, the cholesterol fighter that's the biggest drug ever to go off patent, and took some one-time charges.
The landing was softened by cuts in its sales force and other costs, but the drugmaker on Tuesday lowered its 2012 forecast due to the strengthening dollar and bigger-than-expected price cuts in two emerging markets, China and Turkey.
Shares slumped 1.5 percent initially but ended trading down less than 1 percent at $21.40, down 18 cents.
The New York-based maker of Viagra said net income was $1.44 billion, or 19 cents per share, down from $2.89 billion, or 36 cents per share, a year earlier.
Excluding restructuring, litigation and other charges, income was $3.86 billion, or 50 cents a share, down from $3.74 billion, or 47 cents a share.
Generic competition to about a dozen drugs reduced revenue 4 percent to $16.75 billion, from $17.35 billion.
Adjusted income and revenue topped analysts' expectations of 47 cents per share on revenue of $16.61 billion, according to FactSet.
The company forecast 2012 earnings per share of $2.20 to $2.30, excluding one-time items, down a nickel from its last forecast and below analysts' consensus of $2.30 per share. It forecast revenue of $60.5 billion to $62.5 billion, reduced by about $2 billion.
"Overall it was a decent Q4," BernsteinResearch analyst Dr. Tim Anderson wrote to investors. He and other broker analysts maintained their "Buy" ratings.
But Erik Gordon, a professor at the University of Michigan's Ross School of Business, said sales from Pfizer's latest drug approvals "will be a fraction of the sales lost from Lipitor's patent expiration, despite Pfizer launching the most aggressive post-generic defense ever seen."
"It's like throwing two shovels of gravel into the Grand Canyon," Gordon said of the new drugs.
Patent losses cost the company $5 billion throughout 2011, $1.3 billion of that in the last quarter, when U.S. pharmaceutical sales fell 15 percent to $5.46 billion.
The key hit was to Lipitor, which brought Pfizer $9.6 billion last year, down from its 2006 peak of $13 billion. The drug's U.S. patent expiration on Nov. 30 was the industry's most closely-watched event in 2011. With just a month in the quarter after that, Lipitor sales still fell 24 percent worldwide, to $2 billion.
CEO Ian Read said in an interview that brand-name Lipitor's market share was 34 percent in the last week, about 40 percent above historical comparisons for big drugs getting generic competition. In the last quarter, Pfizer launched an unprecedented strategy to retain Lipitor sales until more generic versions arrive in June, with heavy consumer ads and big discounts for patients and insurers who stick with the brand name. It also splits revenue from an authorized generic version that competes with the Ranbaxy Laboratories generic pill.
U.S. insurers had long been set to immediately switch patients on Lipitor to cheaper generics, but many didn't due to the discounts.
Read told analysts on a conference call that Pfizer's pipeline is progressing well, with key data on Alzheimer's drug bapineuzamab coming this year. In March, Pfizer will launch pneumococcal vaccine Prevnar 13 for adults, after getting that approval a month ago.
Kidney cancer pill Inlyta was approved last week, and lung cancer drug Xalkori in August. Pfizer is awaiting approval of rheumatoid arthritis drug tofacitinib and clot- and stroke-preventing drug Eliquis, a likely blockbuster that was developed with Bristol-Myers Squibb Co.
Read said Pfizer will decide this year whether to sell or spin off its animal health and nutrition businesses, which both had double-digit revenue growth, to $1.11 billion and $598 million, respectively.
If offers meet the financial criteria Pfizer has set, he said in an interview, the company would have two businesses: new drugs and the established products segment that sells off-patent drugs, particularly in emerging markets. Consumer health products would be folded into one of those.
Edward Jones analyst Linda Bannister expects the animal health and nutrition businesses to be divested.
"Once the company's smaller and more nimble," she said, "you could see an acceleration in growth" from the newer drugs.
Revenue for all five of Pfizer's prescription-drug segments fell by at least 4 percent, with primary care medicines, the segment that includes Lipitor, down 8 percent.
Total pharmaceutical revenue fell 6 percent to $14.14 billion. Sales rose several percent for erectile dysfunction pill Viagra, pain reliever Celebrex and immune disorder treatment Enbrel. Fibromyalgia treatment Lyrica jumped 22 percent to $998 million.
Pfizer said it plans to buy back $5 billion worth of stock this year, after buying $9 billion in shares and distributing $6.2 billion in dividends in 2011.
For the full year, net income rose 21 percent to $10.01 billion, or $1.27 per share, from $8.26 billion, or $1.02 per share, in 2010. Revenue edged up 1 percent, to $67.43 billion from $67.06 billion.
Linda A. Johnson can be followed at http://twitter.com/LindaJ_onPharma
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