Pfizer results fall short; company trims profit forecast
(Reuters) - Pfizer Inc (PFE.N) reported much lower-than-expected first-quarter sales on Tuesday, hurt by weak demand for its Prevnar 13 vaccine used to prevent pneumonia and other infections, and it trimmed its 2013 profit forecast.
Pfizer, whose shares fell 3.6 percent in afternoon trading, earned $2.75 billion, or 38 cents per share in the quarter. That was up from $1.79 billion, or 24 cents per share, a year earlier, when it took restructuring and legal charges.
Excluding special items, including a $490 million gain from the transfer of product rights to an investment vehicle in China that Pfizer partly owns, the company earned 54 cents per share. Analysts on average expected 55 cents.
"It was just a lousy quarter, relative to the company's potential and earnings power," said Michael Liss, portfolio manager with American Century Investments.
Revenue for the largest U.S. drugmaker fell 9 percent to $13.5 billion, below Wall Street expectations of $13.99 billion. It would have declined 8 percent if not for the stronger dollar, which hurts sales overseas.
Liss said U.S. sales of Prevnar, the company's third-biggest product, were $150 million below forecasts because wholesalers, with adequate supplies already on hand, held off on purchases of the vaccine.
Sales of Prevnar 13 were down 10 percent at $846 million. They rose 19 percent in the prior quarter.
"Prevnar just jumps off the page as a disappointment," said Edward Jones analyst Judson Clark.
Pfizer predicted Prevnar sales would strengthen during the year, as wholesalers draw down on existing supplies.
Clark said Pfizer shares, which had risen 22 percent so far this year, were still attractively priced at about 13.3 times the company's expected earnings per share for 2013. That compares with a price-to-earnings ratio of about 15 for other large drugmakers, he said.
Company sales rose only 5 percent in emerging markets due in part to reduced government purchases of Prevnar 13 and of the company's Enbrel treatment for rheumatoid arthritis. Emerging market sales had increased 17 percent in the prior quarter.
Sales of generic medicines, which Pfizer calls established products and sells mainly overseas, fell 16 percent to $2.35 billion. That was also a reversal from the prior quarter, when they rose 3 percent.
Sales of cholesterol fighter Lipitor, which has been competing with cheaper generics since November, plunged 55 percent to $626 million, while sales of impotence drug Viagra fell 7 percent to $461 million.
Investors have bid up Pfizer shares this year on high hopes for its experimental drugs and the recent approvals of its treatments for cancer, rheumatoid arthritis and blood clots.
Pfizer has also attracted investors through its efforts to spin off nonpharmaceutical operations and return much of the proceeds to shareholders through bigger dividends and repurchases of common stock.
In November, Pfizer approved an additional $10 billion in share repurchases, after buying back almost $6 billion in stock in 2012 through an earlier $10 billion authorization.
Pfizer in November sold its nutrition business to Nestle SA (NESN.VX) for $11.85 billion in cash. Then in February, it spun off its animal health business into a new company called Zoetis. At the time, Pfizer said it would control roughly 80 percent of Zoetis, but divest its stake within 18 months and return much of the proceeds to shareholders in the form of stock repurchases.
MULLS SALE OF GENERICS
Pfizer is now considering whether to sell its generics business, which has far smaller profit margins than its patent-protected branded drugs. The generics had sales last year of $10.2 billion, representing 17 percent of company sales.
Company Chief Executive Ian Read on Tuesday said it will take Pfizer three years to determine whether it should hold on to both businesses, or whether shareholders would benefit from a sale of the generics business.
In the meantime, Read said the company will increasingly manage the businesses as separate operations and conduct financial audits to gauge their relative worth to Pfizer.
"We will test the model of separate managements and see if it generates shareholder value, and whether shareholders recognize that," Read said in an interview. "And we'll take decisions from them."
Pfizer said it expected full-year earnings of $2.14 to $2.24 per share, down from its previous forecast of $2.20 to $2.30. It cited the falling Japanese yen, which is hurting sales in that important market, and the impact of lost earnings from the 20 percent of its animal health business it has already spun off into Zoetis. The company earned $2.19 per share last year.
Pfizer shares were down 3.6 percent at $29.33 in afternoon trading on the New York Stock Exchange.
(Reporting by Ransdell Pierson; Editing by Lisa Von Ahn, Jeffrey Benkoe and Phil Berlowitz)
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