Pfizer earnings top estimates

Pfizer today reported second-quarter earnings slightly ahead of estimates as the largest US drugmaker lines up a business split that could lead to the spinoff of its generics division.

The company, 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 per cent to $4.00 billion, or 56 cents a share, from $4.45 billion, or 59 cents a share, a year earlier. Revenue dropped 7 per cent to $12.97 billion.

Analysts, on average, expected second-quarter income of 55 cents a share, on revenue of $13.01 billion.

Atlantic Equities analyst Richard Purkiss said improved profit margins, helped by cost controls, were responsible for the slightly better-than-expected profit.

Pfizer said it planned to separate its commercial operations into two units for branded products and a third for generics.

Chief executive Ian Read has been reviewing the group's structure after divesting its nutrition and animal health businesses.

Mr Read said Pfizer’s new model would help revitalise 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 per cent of total sales, has far lower profit margins than its patent-protected drugs.

Many analysts have urged Pfizer to spin off generics so it can focus on core branded pharmaceuticals, although such a move is unlikely before 2016.

Within the core drugs division, revenues from cancer medicines increased by 28 per cent in the second quarter, helped by new products like Inlyta and Xalkori.

Mr 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.

It reported global sales of $12.97 billion, slightly lower than Wall Street estimates of $13.02 billion.

The 7 per cent fall in quarterly revenue reflected an operational decline of 4 per cent and an unfavorable impact from foreign exchange of 3 per cent.

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 a toll.

The US drugmaker’s determination to reshape its business is part of a wider trend among pharmaceutical companies around the world to divest slower-growing and maturing operations.

Abbott Laboratories’ decision to split off its innovative drugs into AbbVie, in particular, has fueled a rethinking 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.

Last November, Pfizer sold its nutrition business to Nestle for $11.85 billion in cash, and in February spun off its animal health business into a new company called Zoetis.

Reuters