Pfizer earnings beat forecasts as drugmaker plans split
Pfizer reported second-quarter earnings slightly ahead of forecasts on Tuesday as the United States' largest drugmaker lines up a business split that could lead to the spin-off of its generics division.
Pfizer stock moved higher in trading immediately following the announcement. (Click here to track the company's shares following the report.)
The company, which has been hit by falling sales of its now off-patent cholesterol fighter Lipitor, reaffirmed its financial outlook for the year.
For the second quarter, adjusted income fell 10 percent to $4 billion, or 56 cents a share, from $4.45 billion, or 59 cents a share, a year earlier. Revenue fell 7 percent to $12.97 billion.
(Read more: Could Street turnnegative on Pfizer, Merck)
Analysts, on average, were expecting second-quarter income of 55 cents a share, on revenue of $13.01 billion, according to Thomson Reuters I/B/E/S.
Pfizer, whose CEO Ian Read has been reviewing the group's structure after divesting its nutrition and animal health businesses, said on Monday it planned to separate its commercial operations into two units for branded products and a third for generics.
Read said Pfizer's new model would help revitalize its innovation-based core drugs business, while enhancing the value of consumer and off-patent established brands, and maximizing the use of capital.
Pfizer's generics business, which represents 17 percent of total sales, has far lower profit margins than its patent-protected drugs.
Many analysts have urged Pfizer to spin off its generics business so it can focus on its core branded pharmaceuticals, although such a move is unlikely before 2016.
Within the core drugs division, revenues from cancer medicines increased by 28 percent in the second quarter, helped by new products like Inlyta and Xalkori.
Read also said he expected business in emerging markets to accelerate in the second half of the year, led by China.
"From a total company view, we are tracking to our expectations for the full year and continue to capitalize on the investments we are making to better position Pfizer for long-term success," he added.
Pfizer reiterated that it expected full-year earnings of $2.10 to $2.20 per share.
Lipitor and Prevnar Hits
The 7 percent fall in quarterly revenue reflected an operational decline of 4 percent and an unfavorable impact from foreign exchange of 3 percent.
Operationally, the biggest hit came from losses of exclusivity on Lipitor, while shifts in government purchasing patterns for bulk orders of Pfizer's Prevnar pneumococcal vaccine also took their toll.
The U.S. drugmaker's determination to reshape its business is part of a wider trend by pharmaceutical companies around the world to divest slower-growing and maturing operations.
Abbott Laboratories's decision to split off its innovative drugs into AbbVie, in particular, has fueled a wider rethink across the industry as to whether other companies or groups of investors may be better owners for certain assets.
In Europe, GlaxoSmithKline is also selling off certain non-core brands, and in April it took a similar tack to Pfizer by opting to bundle many of its established drugs into a new unit.