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Pfizer profits plunge 15 percent in 1st quarter

By Lee Howard

Publication: theday.com

Published May 05. 2014 3:03PM   Updated May 05. 2014 11:59PM

Pfizer Inc. reported Monday disappointing profits in the first quarter of the year, leading to speculation that its proposed purchase of AstraZeneca may be more important than ever to the pharmaceutical giant’s long-term strategy of potentially splitting up into three smaller companies.

 

Profits were off 15 percent, and revenues fell 9 percent. First-quarter profits totaled $2.3 billion, or 36 cents a share. This compares with $2.75 billion, or 38 cents a share, for the same period last year.

 

“Pfizer had a weak first quarter, with sales down all over the place,” said industry blog FiercePharma.

 

Adjusted earnings, which excludes one-time costs and revenue, worked out to 57 cents a share last quarter compared with 51 cents a year ago. Wall Street had projected earnings of 55 cents a share, but Pfizer’s stock price on the New York Stock Exchange fell more than 2 percent as investors focused on declining revenue trends.

 

This was the first quarter in which Pfizer delineated results from each of its three new business units: established products, consumer health and innovative products. Each unit reported declining profits.

 

“Some market-watchers are billing Pfizer’s (first-quarter) results as motivation for its behemoth bid for AstraZeneca,” FiercePharma said. “With AstraZeneca’s products in hand, Pfizer could beef up each of its three units for sale or spinoff action.”

 

During a conference call Monday, Pfizer chief executive Ian Read continued to beat the drum for the purchase of AstraZeneca, an English company that so far has spurned offers of up to $106 billion. Pfizer has acknowledged that the AstraZeneca bid, while based largely on a promising cancer-drug pipeline, has been made even more attractive because it would allow the New York-based company to domicile in Great Britain, saving tax dollars and allowing it to repatriate overseas profits with a negligible tax bite.

 

“We believe it is in the best interest of both companies that we pursue a friendly interaction,” Read said in a conference call Monday.

 

But British press reports have emphasized the opposition to a Pfizer takeover among top AstraZeneca officials, who are painting Pfizer as a mergers-and-acquisitions machine that will further reduce spending on research to squeeze more profits out of the combination.

 

Officials point to Pfizer’s acquisition five years ago of Wyeth for $67 billion, after which it cut more than 40,000 jobs worldwide and slashed billions of dollars from R&D spending. Job cuts included 1,100 in Groton, Pfizer’s largest research operation worldwide.

 

Pfizer has promised to retain 20 percent of its worldwide research scientists in Great Britain after a merger with AstraZeneca, but it has made no such promises of job-cut limits in the United States. Asked by an analyst about whether American R&D jobs would be on the chopping block as a result of an AstraZeneca deal, Read made no commitment.

 

“We clearly will stay with a massive presence in the U.S. as a combined company,” he said in the conference call.

 

Pfizer faced the daunting task of combining forces with Wyeth just two years before its Lipitor patent expired. Last quarter, continued erosion in the cholesterol drug’s sales was noted, as well as revenue drops for other medications with expired patents such as rheumatoid arthritis remedy Enbrel, incontinence pill Detrol LA and COPD treatment Spiriva.

 

“Despite continuing revenue challenges ... I look forward to the remainder of the year given the strength of our mid- and late-stage pipeline, the continued growth opportunities for our recently launched products as well as opportunities for upcoming product launches,” Read said in a statement.

 

l.howard@theday.com

 

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