Pfizer beats Street; shares flirt with five-year high
NEW YORK (Reuters) - Pfizer Inc (PFE.N) reported higher-than-expected quarterly earnings, helped by cuts to its research and marketing spending, and said it may fully divest its animal health unit following an initial public offering of up to 20 percent of the business.
Shares of the largest U.S. drugmaker, which is on the rebound from a decade of failures to produce big-selling new medicines, jumped as much as 3.2 percent to levels not seen since November 2007.
One of its more promising treatments, a rheumatoid arthritis drug known as tofacitinib, is awaiting approval from U.S. health regulators. Pfizer said on Tuesday that the Food and Drug Administration had asked for a "routine" analysis of trial data for the drug, which could delay a decision by three months or more beyond an August 21 agency deadline.
"We started investigating this product 20 years ago, so another three months is not that important," Chief Executive Ian Read said in an interview. If approved, tofacitinib could become a more convenient alternative to Abbott Laboratories Inc's (ABT.N) $8 billion-a-year injectable Humira arthritis treatment.
Pfizer said in June that it planned to separate its animal health unit into a standalone company as it focused more closely on its core pharmaceuticals business. On Tuesday, it said it would ask regulators by mid-August to approve an initial public offering of up to 20 percent of the unit, to be called Zoetis.
Pfizer's animal health business, with $4.2 billion in revenue last year, has more than 9,000 employees and sells medicines, vaccines and other products for livestock and pets.
"If the IPO is successfully completed, which we are targeting for the first half of 2013, we will have a variety of options to achieve a full separation of Zoetis," Read said in a statement.
Pfizer shares have risen more than 25 percent in the past year, as investors welcomed the move to divest animal health and its baby formula business. Much of the proceeds are being returned to shareholders through share buybacks and dividends.
In April, the company agreed to sell its baby formula business to Nestle SA (NESN.VX) for $11.85 billion in cash, with the deal to be completed in the first half of 2013. The business was treated in the second quarter as a discontinued operation.
WRINGING MORE SAVINGS FROM WYETH DEAL
Pfizer said it earned $3.25 billion, or 43 cents per share, in the second quarter, compared with $2.61 billion, or 33 cents per share, a year earlier. Excluding special items, profit was 62 cents per share, compared with analysts' average forecast of 54 cents, according to Thomson Reuters I/B/E/S.
Atlantic Equities analyst Richard Purkiss said Pfizer's operating profit margins improved 4 percentage points beyond expectations in the second quarter, helped by a wide variety of cost cuts, including ones related to its $67 billion purchase of U.S. rival Wyeth in October 2009.
"That means management is doing a good job in integrating Wyeth and restructuring the pharmaceuticals business," said Purkiss. Pfizer's experimental drugs, including tofacitinib, are another reason to hold Pfizer shares, he said.
Investors are also awaiting trial data from Pfizer's experimental treatment for Alzheimer's disease, bapineuzumab, deemed to have blockbuster sales potential if it can slow progression of the memory-robbing disease.
Earlier this month, Pfizer said the drug had failed to help cognition in one of two large North American trials, but the company and partner Johnson & Johnson (JNJ.N) are hoping for better results in another late-stage North American study, the results of which could be announced before September 11.
Pfizer's revenue fell 9 percent to $15.06 billion in the quarter, hurt by generic competition for cholesterol fighter Lipitor, but it topped Wall Street expectations of $14.87 billion.
Sales would have fallen 6 percent if not for the stronger dollar, which lowers the value of sales in overseas markets.
Pfizer reaffirmed its 2012 profit view of $2.14 to $2.24 per share, excluding special items, a decline of no more than 7 percent from a year earlier despite plunging demand for Lipitor.
Sales of Lipitor, which lost patent protection in November, fell 53 percent to $1.22 billion in the quarter. Sales of nerve pain treatment Lyrica jumped 14 percent to $1.04 billion, while sales of rheumatoid arthritis drug Enbrel rose 8 percent to $988 million, helping cushion the Lipitor decline
Pfizer shares were up 2.2 percent at $24.24 on Tuesday afternoon on the New York Stock Exchange, off an earlier high at $24.48.