Pfizer Needs Something New for Its Profit Pain

Pfizer Lyrica medication Photograph by Daniel Acker/Bloomberg

Pfizer has a whole cabinet full of drugs, but none can do much to dull the pain caused by generics. Lipitor and Celebrex certainly aren’t doing the trick, and even Viagra can’t stand up to cheap knock-offs stealing Pfizer’s sales.

Revenue at the pharmaceutical giant declined 9 percent, to $11.4 billion, in the first quarter. Profit proved sicklier, dropping 15 percent, to $2.3 billion. Analysts had expected better. Here’s a look at how Pfizer’s top 10 drug families did in the period:

Pfizer’s moneymaker at the moment is Lyrica, which treats nerve and muscle pain brought on by diabetes, shingles, and fibromyalgia. Prevnar, a vaccine for strep infections, is also helping. But the big brand names that kept the company healthy for so long are falling apart.

The earnings underscore how brutal the drug business can be. Having a steady stream of new products and relatively strong patent protections is imperative. If the R&D department has a gap in its output, the executive team better buy something new and promising, which is one of the main reasons Pfizer is keen to acquire AstraZeneca, a British rival that has a robust line of cancer and cardiovascular therapies.

AstraZeneca said Friday that Pfizer’s $106 billion bid isn’t enough. What’s interesting is that the British drugmaker said Pfizer’s M&A mathematicians undervalued its own lab full of potential future pills. And now the buyout bid is looking even more expensive: Pfizer had planned to pay for roughly two-thirds of the deal in stock, and its shares dropped almost 3 percent this morning.

Meanwhile, Pfizer said its tax rate is hovering around 25 percent, presenting another major incentive for its overseas shopping. Buying AstraZeneca would let it ship a big chunk of its leadership team to London and sidestep a heap of U.S. taxes.

With AstraZeneca playing hardball, however, Pfizer is emphasizing to investors that it is not short of new ideas. “I look forward to the remainder of the year given the strength of our mid- and late-stage pipeline,” Chief Executive Ian Read said in a statement. Among other things, Read’s team in lab coats are working on a promising breast-cancer drug, another treatment for high cholesterol, a meningitis vaccine, and a pill for chronic back pain, which, if it pans out, is sure to play well with the baby boomers.

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