PfizerThursday reported a worse-than-expected drop in quarterly earnings on declining sales of flagship cholesterol fighter Lipitor and drugs facing generic competition, sending its shares down nearly 3 percent.
The world's biggest drug maker said first-quarter net profit fell 18 percent to $2.78 billion, or 41 cents per share, from $3.39 billion, or 48 cents per share, a year earlier, when it took a big restructuring charge.
Excluding special items, Pfizer earned 61 cents per share. On that basis, analysts polled by Reuters Estimates had forecast 66 cents.
"The misses appear to be largely across the board, from the top line to the expenses," Morgan Stanley analyst Jami Rubin wrote in a research report. She said Lipitor sales were $300 million below her forecasts, and the main reason for the earnings shortfall.
Pfizer said it still expects earnings this year of $2.35 to $2.45 per share, excluding special items. That would represent growth of 6.8 percent to 11.3 percent, due largely to an ongoing aggressive cost-cutting program that has already eliminated more than 10,000 jobs.
"We see potential challenges in meeting this guidance," said Rubin, who noted the disappointing quarterly results highlight "potential cash flow needs."
Global sales of Lipitor, the world's top-selling drug, fell 7 percent to $3.1 billion. U.S. sales of the medicine plunged 18 percent despite widespread publicity since January about the failure of Vytorin, a rival drug sold by Schering-Plough and Merck , to reduce artery plaque in a closely watched trial. to reduce artery plaque in a closely watched trial.
"What's surprising to people was that despite a positive currency tailwind and some disruptions in the cholesterol market related to Vytorin, they still weren't able to pull it out" and meet the consensus earnings expectations, said Miller Tabak health care analyst Les Funtleyder.
Pfizer has been unable to come up with new blockbuster medicines to replace those that have lost patent protection, a concern that has driven its shares down to lows not seen since late 2005.
"It becomes a question of what do they do next, what do they do to reverse the negative momentum in the share price," Funtleyder said. "And the longer they wait to do something, as the valuation goes down, the less flexibility they have."
Despite Pfizer's woeful performance in recent years, many investors are clinging to its shares because of the company's industry-topping dividend.
Global first-quarter revenue fell 5 percent to $11.85 billion, shy of the $12.06 billion Reuters Estimates forecast. Sales would have fallen 10 percent if not for the weak dollar, which raises the value of overseas sales when converted back to the U.S. currency.
New York-based Pfizer attributed the sales decline primarily to the loss a year ago of U.S. patent protection on blood pressure drug Norvasc and new generic competition for Zyrtec, an allergy medicine the company stopped selling in late January.
Worldwide pharmaceutical sales fell 6 percent to $10.9 billion.
Norvasc revenues were cut in half, to $513 million, while Zyrtec sales plunged 75 percent to $117 million. Arthritis treatment Celebrex edged up only 2 percent to $611 million, a marked slowdown from recent quarters. Impotence treatment Viagra grew 6 percent to $460 million.
Lyrica remained a revenue sparkplug, with sales surging 47 percent to $582 million due to its effectiveness against nerve pain and newly approved use against fibromyalgia. Sales of Sutent, another newer drug that is now the gold standard for kidney cancer, rose 86 percent to $190 million.
Champix, which helps smokers quit, was another bright spot amid the bleak earnings report, as its sales jumped 71 percent to $277 million.
Pfizer shares were down 60 cents, or 2.8 percent at $20.50 in early New York Stock Exchange trading.