Pfizer Inc is expected to report lower quarterly earnings on Tuesday, hurt by competition from generic copies of its Lipitor cholesterol fighter, but investors will focus mainly what the company plans to do after Lipitor faces U.S. generics in November.
J.P. Morgan analyst Chris Schott said the company could beat Wall Street's second-quarter estimates, helped by the weaker dollar and aggressive cost-cutting.
Analysts will focus on any updates from Pfizer management on "multiple catalysts ahead" for the world's biggest drugmaker, Schott said, including progress in late-stage trials of its promising treatments for rheumatoid arthritis, lung cancer and strokes.
Wall Street has been sour on Pfizer for most of the past decade due to its steadily falling earnings, plunging share price and its inability to create big-selling new medicines.
But many investors have developed a rosier view of Pfizer in the past year due to drugs and cost savings derived from its 2009 purchase of rival Wyeth, which will cushion the blow when its $10 billion-a-year Lipitor loses U.S. marketing exclusivity.
Pfizer's stock reflects Wall Street's recent embrace of the drugmaker, whose $114 billion purchase in 2000 of Warner-Lambert and $60 billion acquisition of Pharmacia in 2003 are deemed by many to have hobbled, rather than strengthened, the company.
Its shares have risen about 8.5 percent so far this year, slightly outpacing a 7.5 percent gain for the ARCA Pharmaceutical Index of large U.S. and European drugmakers <.DRG>. Over the past 52 weeks, Pfizer shares have risen 27 percent, twice the advance seen for the drug sector.
Pfizer earlier this year said it would cut as much as 25 percent of its $8 billion to $8.5 billion research budget to deliver on a 2012 profit forecast. The decision, although cheered by Wall Street, has generated some controversy.
John LaMattina, who led Pfizer research from 2004 to 2007, said the cuts, by reducing Pfizer's research budget to 10 to 11 percent of its expected 2012 revenue, could impair its long-term drug development record.
"Four, five, 10 years out, I'm not sure that this is going to be a very good position to be in," he said in an interview.
Pfizer is hoping to become more profitable and reward shareholders by divesting its animal health and nutrition units. Pfizer said last month it might sell or spin off the businesses, which are valued at more than $16 billion, to focus on its core pharmaceutical business.
It expects to complete any transactions in 12-to-24 months, but said it does not expect to make any further announcements about the businesses until next year.
The company said on Monday it had completed the sale of its Capsugel business, the world's biggest maker of hard capsules, to private equity firm KKR & Co for almost $2.4 billion in cash.
(Reporting by Ransdell Pierson; Editing by Richard Chang)