Pfizer Inc reported higher third-quarter profit as aggressive cost-cutting offset a negative foreign exchange impact and declining sales of drugs, including those facing competition from cheaper generics.
Despite slow growth of some newer drugs and declines for many of its established medicines, sales were still better-than-expected and lower costs and job cuts allowed Pfizer to top Wall Street estimates for the quarter, sending its shares up as much as 2.4 percent before paring gains.
The world's biggest drugmaker, which got much bigger last week with completion of a $67.3 billion acquisition of Wyeth, posted a net profit of $2.88 billion, or 43 cents per share in its last pre-merger quarter, compared with a profit of $2.28 billion, or 34 cents per share, a year ago.
Excluding items, Pfizer earned 51 cents per share, exceeding analysts' average expectations by 3 cents, according to Thomson Reuters I/B/E/S.
Sales declined 3 percent to $11.6 billion, but that also topped analysts' estimates of $11.41 billion.
The quarter was very good, said Deutsche Bank analyst Barbara Ryan. Revenues were higher than expected. They beat the earnings number by 3 cents despite a 31.8 percent tax rate, which reflects the repatriation of cash.
Pfizer's bought Wyeth to help soften the 2011 blow from the loss of U.S. patent protection on the cholesterol drug Lipitor -- the world's biggest-selling prescription medicine -- by adding Wyeth's lucrative vaccines and biologic medicines.
Lipitor's worldwide sales for the third quarter declined 9 percent to $2.9 billion. They were down 12 percent in the United States, amid competition from cheap generic versions of rival cholesterol-lowering drugs.
Pfizer updated its full year forecast to include Wyeth sales and operations following the October 15 closing of the acquisition -- its third mega-deal in the last nine years after swallowing up Warner-Lambert in 2000 and Pharmacia in 2003.
The company now expects revenue of $49 billion to $50 billion and adjusted earnings of $2.00 to $2.05 per share, up from its pre-Wyeth view of $1.30 to $1.45 per share.
I think people are optimistic about the opportunities for earnings and cash flow over the next couple of years primarily as a function of the Wyeth acquisition, Ryan said.
Pfizer CEO Jeff Kindler told analysts on a conference call that the Wyeth integration process began immediately and that the company will move quickly both with further job cuts and to retain top Wyeth talent.
As part of the integration process, the company said it intends to announce decisions on research and development sites in the next 30 to 60 days and on manufacturing plant strategy in the next three to six months.
Wyeth has done a very nice job of positioning themselves very well for where opportunities in the industry will be, not just for where the opportunities are, Chief Financial Officer Frank D'Amilio said in an interview.
Pfizer said its results were helped by a reduction in workforce of about 1,100 jobs in the quarter and 6,500 since the start of the year.
The 6,500 job cuts were part of a 15 percent total workforce reduction Pfizer is planning, D'Amilio said, adding that he expects the process to be completed by 2012.
Part of the timing is driven by local country laws. In countries where we can go fast, we will go fast because we don't want a lot of uncertainty, D'Amilio said.
Adjusted research and development costs declined 8 percent to $1.6 billion, while adjusted selling, informational and administration expenses were down 6 percent to $3.2 billion.
Overall it was a decent quarter, driven by cost cutting, Sanford Bernstein analyst Tim Anderson said.
Revenue was hurt by about 5 percent due to foreign currency exchange rates, partly related to the strength of the dollar a year ago. That was somewhat offset by a 2 percent increase due to an adjustment in the year-ago quarter for product returns.
In a recent interview Pfizer identified the cancer drug Sutent, the pain medicine Lyrica and the smoking cessation drug Chantix as important future growth drivers.
But Lyrica sales were only up 5 percent to $708 million, while Sutent sales grew 9 percent to $246 million. Chantix, which has been beset by reports of psychiatric problems, fell 15 percent to $155 million.
In addition to its flagship Lipitor, other older medicines were also in decline with the blood pressure drug Norvasc down 13 percent to $488 million, the pain drug Celebrex down 4 percent to $602 million and erectile dysfunction treatment Viagra off 8 percent to $466 million.
That said, Ryan noted, It was unbelievable how close everything came in relative to what people expected.
Shares were up 2 cents at $18.00 in afternoon trade on the New York Stock Exchange, well off an earlier high of $18.42.
(Reporting by Bill Berkrot; Editing by Derek Caney, Dave Zimmerman)