| July 30
July 30 Big Pharma is still relying on
belt-tightening to prop up financial results.
Pfizer Inc and Merck & Co said on Tuesday
their quarterly results were again hit by generic competition
for once top-selling products and the toll of a strong dollar on
overseas revenue. Controls on marketing and administrative
expenses, and other costs, helped them report earnings slightly
above Wall Street estimates.
But neither company offered investors a quick return to
growth based on new products, even if the worst of the "patent
cliff" for best-selling drugs that have lost marketing
exclusivity is behind them.
"We are managing our costs in order for us to meet our
bottom line (earnings) guidance," Chief Executive Kenneth
Frazier said on a conference call with analysts.
Frazier said the company continues to have faith in the
value of its animal health unit and consumer healthcare
business, both of which had lower sales in the quarter.
"If we were to view these assets as being more productive
outside the company, we would consider other alternatives," he
Pfizer earlier this year completed the spinoff of its own
animal health business into a new company called Zoetis,
only months after selling off its nutritional products business.
It aims to return billions of dollars in proceeds to investors
through stock repurchases and higher dividends. But, like Merck,
it is holding on for now to its consumer healthcare unit.
Pfizer Chief Executive Ian Read said the industry's best
hope is a crop of new drugs and vaccines now in clinical trials
that could transform treatment for cancer, cardiovascular
diseases and other ailments.
"Certainly in the second half of this decade, I foresee
significant products coming to market which will be a catalyst
for industrial growth," he said in an interview.
The strength of the dollar, particularly against the
Japanese yen, has hurt sales of many U.S. companies with
extensive international business this year.
Merck said full-year sales were likely to be about 5 to 6
percent below last year's levels, Even so, it stuck to its
full-year profit outlook of $3.45 to $3.55 per share, excluding
Pfizer, the largest U.S. drugmaker, said second quarter
revenue fell 7 percent to $12.97 billion, with 3 percent of the
decline due to an unfavorable foreign exchange rate.
But Pfizer also trimmed costs and expenses by 3 percent and
reiterated its full-year earnings forecast of $2.10 to $2.20 per
Pfizer said income, excluding special items, fell 10 percent
to $4 billion, or 56 cents a share, from $4.45 billion, or 59
cents a share, a year earlier.
Merck earned $906 million, or 30 cents per share, down from
$1.79 billion, or 58 cents per share, a year earlier. Excluding
special items, Merck earned 84 cents a share.
A LIFT FROM U.S. HEALTH REFORM?
"It follows along with the bigger picture in healthcare
where things are OK. They're not horrible, but they're not great
either," said Michael Liss, portfolio manager at American
Liss predicted that the next big catalyst for the industry
would come when U.S. healthcare reform kicks into high gear next
year, helping millions more Americans get insurance coverage for
doctor's visits and medications.
"People are just waiting to get insurance and then spending
will pick up," Liss predicted. "The rate of growth will improve.
It's going to come from people having insurance."
But Pfizer's Read said the company does not expect the
Affordable Care Act to significantly bolster its sales or
"Most of those are younger and healthy patients, so we see
no near-term impact on our business," he said in an interview.
Pfizer's results were hurt by generic competition for its
cholesterol fighter Lipitor, formerly the world's top selling
medicine. Lipitor sales fell 55 percent $545 million, while
Merck saw sales of its off-patent asthma drug Singulair plunge
80 percent to $281 million.
Pfizer shares closed down 13 cents at $29.67, while Merck
fell 29 cents to $48.05 on the New York Stock Exchange.
Pfizer on Monday announced plans to internally separate its
commercial operations into two units for branded products and a
third for generics, leading to speculation that it was looking
to split up the company.
Chief Financial Officer Frank D'Amelio told analysts on a
conference call on Tuesday that Pfizer would need at least three
years to consider whether to break up the company, and that the
reorganization was essentially a test drive to more closely
examine their respective operations.
"This is all about getting the three businesses to hum
internally," he said.