Pfizer quar­terly profit plunges 38%

Jamaica Gleaner - - BUSINESS -

DRUG­MAKER PFIZER topped off a dif­fi­cult third quar­ter with news that it’s scrap­ping a closely watched ex­per­i­men­tal choles­terol drug, partly due to ex­pec­ta­tions in­sur­ers would limit ac­cess so much that it wouldn’t make much money, a pos­si­ble bad omen for the phar­ma­ceu­ti­cal in­dus­try.

The big­gest United States­based drug­maker on Tues­day re­ported its quar­terly profit plunged 38 per cent as higher spend­ing and a slew of ac­qui­si­tion-re­lated charges more than off­set higher sales. The medi­ocre re­sults missed Wall Street ex­pec­ta­tions and Pfizer low­ered the top end of its 2016 profit fore­cast.

Com­ing af­ter Pfizer Inc’s Septem­ber 26 an­nounce­ment that it won’t split into two com­pa­nies to ac­cel­er­ate growth — a move some in­vestors and an­a­lysts had hoped would boost Pfizer’s lag­ging stock — Tues­day’s re­sults dis­ap­pointed in­vestors and trig­gered a sell­off.

In af­ter­noon trad­ing, shares were down 62 cents, or 2 per cent, at US$31.20, with more than a nor­mal day’s vol­ume traded in the first three hours.

“Some in­vestors feel the com­pany has ca­reened from strat­egy to strat­egy over the past few years,” said Erik Gor­don, a pro­fes­sor and phar­ma­ceu­ti­cals an­a­lyst at Univer­sity of Michi­gan’s Ross School of Busi­ness.

That in­cludes failed at­tempts at two mega-ac­qui­si­tions — first of Bri­tain’s As­traZeneca Plc in 2014 and this year of Ire­land’s Al­ler­gan Plc — meant to slash Pfizer’s taxes, plus deals in­clud­ing this year’s pur­chase of can­cer drug­maker Me­di­va­tion and then aban­don­ing its long-ex­pected break-up.

Pfizer “has built share­holder value more on its wheel­ing and deal­ing” than on de­vel­op­ing new medicines, Gor­don added.

The maker of Vi­a­gra and pain treat­ment Lyrica said it dis­con­tin­ued the pricey bo­co­cizumab due to unim­pres­sive re­sults of late-stage test­ing and limited com­mer­cial prospects as pay­ers in­creas­ingly squeeze phar­ma­ceu­ti­cal com­pa­nies amid pub­lic fury over soar­ing drug prices. Bo­co­cizumab is in a new class of choles­terol medicines, PCSK-9 in­hibitors, cost­ing about US$14,000 per year.

In­sur­ers are ag­gres­sively lim­it­ing pa­tient ac­cess in favour of generic choles­terol pills such as Pfizer’s for­mer block­buster Lip­i­tor that cost sev­eral hun­dred dol­lars per year.

San­ford Bern­stein an­a­lyst Dr Tim An­der­son wrote to in­vestors that scrap­ping the drug “was un­ex­pected, and un­usual given the late-stage of de­vel­op­ment of the prod­uct. It fur­ther nar­rows (Pfizer’s) al­ready-thin pipe­line.”

New York-based Pfizer posted net in­come of US$1.32 bil­lion, or 21 cents per share, down from US$2.13 bil­lion, or 34 cents per share, a year ago.

Ex­clud­ing US$2.4 bil­lion worth of charges for ac­qui­si­tions and re­struc­tur­ing, ad­justed earn­ings came to 61 cents per share, a penny less than an­a­lysts ex­pected.

REV­ENUE FROM AC­QUI­SI­TION

Rev­enue, which was boosted by last year’s US$15 bil­lion ac­qui­si­tion of in­jected drug­maker Hospira, to­talled US$13.05 bil­lion, up 8 per cent. An­a­lysts ex­pected US$13.06 bil­lion.

Sales in­creased 9 per cent to US$7.33 bil­lion for Pfizer’s new medicine seg­ment, while sales in­creased 7 per cent to US$5.71 bil­lion for its es­sen­tial health busi­ness, which sells older, mostly off-patent drugs.

“We have strength­ened both of our busi­nesses through nearly US$40 bil­lion in ac­qui­si­tions over the past year,” CEO Ian Read told an­a­lysts dur­ing a con­fer­ence call.

Pfizer’s top seller, its Prevnar vac­cine against pneu­mo­nia and re­lated bac­te­rial in­fec­tions, dipped 3 per cent to US$1.54 bil­lion, while Lyrica sales were flat at US$1.24 bil­lion. New breast can­cer drug Ibrance more than dou­bled sales, to US$550 mil­lion.

Pfizer said the es­sen­tial health busi­ness should “tran­si­tion to a mod­est rev­enue growth busi­ness” due to its strength in emerg­ing mar­kets such as China, Hospira’s prod­ucts and the biosim­lar drugs — nearcopies of ex­pen­sive bi­o­logic drugs “man­u­fac­tured” in cells — Pfizer is de­vel­op­ing. The first, a near-copy of block­buster im­mune dis­or­der drug Rem­i­cade, called In­flec­tra, will launch late in Novem­ber. Al­ready on sale in Europe, it brought in US$83 mil­lion in the third quar­ter.

Pfizer’s spend­ing soared, partly due to ac­qui­si­tions. Pro­duc­tion costs jumped 39 per cent, and spend­ing on re­search and on mar­ket­ing and ad­min­is­tra­tion both in­creased 9 per cent.

Mean­while, Pfizer said it ex­pects full-year earn­ings of US$2.38 to US$2.43 per share, down from its prior fore­cast of US$2.38 to US$2.48. It fore­cast rev­enue of US$52 bil­lion to US$53 bil­lion, tweaked from its prior fore­cast of US$51 bil­lion to US$53 bil­lion. -AP

AP

In this Novem­ber 23, 2015 file photo, a woman passes Pfizer's world head­quar­ters in New York.

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