Pfizer said Thursday third-quarter earnings fell sharply due to a $2.8 billion charge to end its involvement with the poorly selling inhaled insulin drug Exubera.
But excluding one-time charges, profit beat analysts' forecasts as overall revenue fell just 2 percent, less than Wall Street had expected. Cholesterol fighter Lipitor lost ground and sales of several other important Pfizer drugs plunged due to competition from cheaper generics.
Deutsche Bank analyst Barbara Ryan said Pfizer's abandonment of Exubera was irrelevant from a financial perspective because the drug had such dismal sales.
"They tested the patient (Exubera) and there was no pulse, so it's going from zero to zero," she said.
The world's biggest drugmaker earned $761 million, or 11 cents per share, in the third quarter, compared with $3.36 billion, or 46 cents per share, a year earlier.
Excluding special items, profit was 58 cents per share.
Analysts' average forecast was 52 cents, according to Reuters Estimates.
In addition to the Exubera charge, Pfizer said results were hurt by restructuring expenses tied to cost-reduction initiatives.
Revenue fell to $11.99 billion but was $270 million higher than the average Wall Street forecast. Pfizer said positive foreign exchange factors boosted revenue by $300 million.
"Despite our best efforts, Exubera has failed to gain the acceptance of patients and physicians," Chief Executive Jeff Kindler said in a press release. "We have therefore concluded that further investment in this product is unwarranted."
Exubera, developed in partnership with Nektar Therapeutics, was approved by U.S. regulators in January 2006 and made history as the first form of inhaled insulin. Other companies are trying to develop similar products.
New York-based Pfizer said it would return its worldwide Exubera rights to Nektar and work with doctors over the next three months to switch Exubera patients to other diabetes treatments.
After being launched, many investors assumed Exubera would become a sure-fire blockbuster, on the theory that diabetics would prefer an inhaled form of insulin over traditional injectable forms of the hormone used to control blood sugar.
Instead, Exubera became a dud, with paltry sales. Some analysts speculated the bulky canister device used to administer the powdered drug was a turn-off to patients.
In view of the hefty Exubera charge, Pfizer slashed its 2007 net earnings forecast. But excluding special items, it issued a slightly improved forecast of $2.10 to $2.15 per share, thanks in part to lower expenses.
For 2008, it said it still expects earnings, excluding special items, of $2.31 to $2.45 per share.
Deutsche Bank's Ryan said Pfizer's earnings report was encouraging, given the company's financial forecasts for this year and next.
"They're delivering on their guidance, which can be viewed as a meaningful positive considering all the challenges the company is facing," she said.
Global sales of Pfizer's array of medicines fell 4 percent in the third quarter, hurt by recent patent expirations on its Zoloft anti-depressant and Norvasc medicine for high blood pressure. The end of patent protection opened the door to competition from cheaper generics.
Zoloft sales plunged 73 percent to $124 million, while sales of Norvasc fell 47 percent to $640 million.
Lipitor sales fell 5 percent to $3.17 billion, hurt by competition from a generic form of the Merck cholesterol drug Zocor.
Pfizer said it now expects full-year sales of Lipitor to fall 3 percent to 5 percent, a more cautious view than its prior forecast that sales could be flat to 5 percent lower.
Bright spots in the third quarter included Pfizer's Lyrica treatment for neuropathic pain, whose sales surged 37 percent to $465 million, and schizophrenia drug Geodon, which rose 13 percent to $228 million.
Arthritis drug Celebrex continued to rebound following sales declines related to safety concerns. Third-quarter sales rose 8 percent to $577 million.
Revenue from impotence treatment Viagra rose 6 percent to $450 million, while revenue from relatively new cancer drug Sutent more than doubled to $151 million.