Pfizer prepares for split as profit beats estimates
NEW YORK: Pfizer Inc reported secondquarter earnings slightly ahead of forecasts yesterday as the United States’ largest drugmaker lines up a business split that could lead to the spin-off of its generics division.
The company, which has been 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% to $4.0 billion, or 56 cents a share, from $4.45 billion, or 59 cents a share, a year earlier. Revenue fell 7% to $12.97 billion.
Analysts, on average, were expecting second-quarter income of 55 cents a share, on revenue of $13.01 billion, according to Thomson Reuters I/B/E/S.
Pfizer, whose chief executive Ian Read has been reviewing the group’s structure after divesting its nutrition and animal health businesses, said on Monday that it planned to separate its commercial operations into two units for branded products and a third for generics.
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 maximising the use of capital.
Pfizer’s generics business, which represents 17% of total sales, has far lower profit margins than its patent-protected drugs.
Many analysts have urged Pfizer to spin off its generics business so it can focus on its core branded pharmaceuticals, although such a move is unlikely before 2016.
Within the core drugs division, rev- enues from cancer medicines increased by 28% in the second quarter, helped by new products like Inlyta and Xalkori.
Read also said that 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 capitalise on the investments we are making to better position Pfizer for long-term success,’’ he added.
Pfizer reiterated that it expected fullyear earnings of $2.10 to $2.20 per share.
The 7% fall in quarterly revenue reflected an operational decline of 4% and an unfavourable impact from foreign exchange of 3%.
Operationally, 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 their toll.
The US drugmaker’s determination to reshape its business is part of a wider trend by pharmaceutical companies around the world to divest slowergrowing and maturing operations.
Abbott Laboratories’ decision to split off its innovative drugs into AbbVie, in particular, has fueled a wider rethink 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.
Pfizer last November sold its nutrition business to Nestle SA for $11.85 billion in cash and in February spun off its animal health business into a new company called Zoetis.