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Pfizer Profit Tops Analyst Estimates on Sales of Pain Drugs

Pfizer Chief Executive Officer Ian Read
Pfizer Chief Executive Officer Ian Read. Source: Pfizer Inc. via Bloomberg

Pfizer Inc., the world’s biggest drugmaker, reported second-quarter profit that topped analyst estimates as sales of pain medicines offset declining revenue from expired patents.

Profit excluding some items was 60 cents a share, beating by a cent the average estimate of 16 analysts surveyed by Bloomberg. Revenue fell 0.9 percent to $16.98 billion, matching estimates. Sales of the New York-based company’s Lyrica pain pill and Enbrel arthritis medicine topped analyst predictions.

Pfizer is selling its animal health and infant formula units and trimming its workforce to prepare for the loss in November of exclusive rights to Lipitor, the world’s best-selling drug with $10.7 billion in annual sales. Pfizer has three late-stage experimental medicines that analysts estimate may bring in more than $3.5 billion annually by 2015.

“Investors are shifting their focus back to the pipeline, shifting back to the cost cutting and the share repurchases,” said Damien Conover, an analyst at Morningstar Inc., in a telephone interview. “We probably have one more quarter where the divestitures will be of high interest, but people are going back to the core business.”

Net income rose 5.2 percent to $2.61 billion, or 33 cents a share, from $2.48 billion, or 31 cents, a year earlier, the company said. Pfizer reiterated its 2011 profit forecast range of $2.16 to $2.26 a share. It also maintained its guidance for 2012, the first full year of generic competition to Lipitor.

Pfizer fell 87 cents, or 4.6 percent, to $18.14 in New York Stock Exchange composite trading, underperforming the 2.6 percent decline in the Standard & Poor’s 500 Index. Shares have climbed 17 percent in the past 12 months.

Dollar Decline

“Overall, results were pretty much in line with what everybody expected,” said Barbara Ryan, an analyst at Deutsche Bank AG, in a telephone interview. “I don’t think there was anything here to get people excited, but I’m not sure there was anything negative either.”

The dollar’s slide against other currencies helped boost revenue by 4 percentage points as sales outside the U.S. were converted to a weakening dollar. Pfizer last year received 57 percent of its revenue from outside its home country, according to data compiled by Bloomberg. The dollar fell 14 percent from the end of 2010’s second quarter to June 30 of this year, as measured against a basket of six other currencies.

Breaking Up

Pfizer Chief Executive Officer Ian Read said on July 7 he is divesting the company’s animal health and nutrition units to buy back shares and focus on developing new drugs. The units may fetch $22 billion, according to Seamus Fernandez, an analyst at Leerink Swann & Co.

Revenue at Pfizer’s animal health division jumped 18 percent to $1.056 billion for the quarter, the company reported today. Nutrition sales climbed 4 percent to $493 million.

“Equity investors are pressuring management to do more in the way of splitting up the company than just exploring strategic alternatives for nutrition and animal health,” said Carol Levenson, director of research at Gimme Credit LLC in Chicago, in a note to clients. “Obviously a more extensive splitup would have implications for bondholders, likely negative ones.”

Sales of Pfizer’s Enbrel arthritis treatment rose 13 percent $914 million for the quarter. The pain pill Lyrica increased 19 percent to $908 million. Sales of legacy pain products gained in the $3.3 billion acquisition of King Pharmaceuticals Inc. in March added $357 million in sales, Pfizer reported.

Nine of the world’s 15 best-selling medicines will lose patent protection during the next five years. Chief among these products is Lipitor, which lost market exclusivity in Spain and Canada last year and will have generic U.S. competition in November.

Lipitor Sales

Lipitor had sales of $2.59 billion in the second quarter beating the $2.43 billion Fernandez estimated. Sales will decline by half next year after generics makers flood the U.S. market with cheaper copies, according to eight analysts surveyed.

In addition to Lipitor, Pfizer loses patent exclusivity to at least 18 drugs from 2010 through 2015, according to data compiled by Bloomberg. Those drugs were responsible for $25.6 billion in 2009 revenue, or 60 percent of the company’s revenue.

Pfizer’s most promising experimental drugs are its apixaban blood thinner, tofacitinib for rheumatoid arthritis and crizotinib for lung cancer. Crizotinib was accepted for priority review by the U.S. Food and Drug Administration, with a decision expected by year’s end. Pfizer has said it will seek approval of tofacitinib and apixaban this year. The company partners with New York-based Bristol-Myers Squibb Co. on apixaban.

Pfizer is also awaiting a decision from the FDA on whether it can market Prevnar to adults. Two studies presented in May found the shot was effective in adults over the age of 50, supporting the company’s application.

Sales of pneumonia vaccines Prevnar and Prevnar13 rose 44 percent to $821 million, falling short of Fernandez’s $1.08 billion estimate. Pfizer said U.S. Prevnar sales were hampered by changes in the timing of bulk purchases.

Pfizer acquired Enbrel and Prevnar in the $68 billion purchase of Wyeth in 2009.

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