Pfizer's Forecast Disappoints

The decline was contagious, as shares of U.S. and foreign Big Pharma companies fell.

Strategic Thinking

Pfizer's announcement had been highly anticipated ever since the company withdrew its 2006 and 2007 forecasts in October, citing "current and anticipated business conditions."

Analysts have been predicting that Pfizer would soon take some emphatic actions given its strong cash flow from operations (more than $16 billion predicted this year), solid balance sheet and top-grade credit rating. Pfizer also is aided by an infusion of $37 billion it received thanks to last year's repatriation of profits from foreign subsidiaries.

"We have no interest in massive acquisitions," said McKinnell, adding that his takeover strategy is focused on technology and products.

The company expects to reach a decision on its consumer-products unit in the third quarter. The consumer division oversees a number of well-known brands, including Listerine, Benadryl and Visine, and it had sales of $3.88 billion last year, or 7.5% of corporate revenue.

David Shedlarz, a vice chairman, said the unit had pretax income of $700 million last year and would be worth more than $10 billion as a stand-alone company. Given the premium now placed on consumer-products companies, "this is an opportune time" to review corporate strategy, he said. McKinnell added that Pfizer has "no interest" in divesting consumer products piece by piece.

The company said this year's Lipitor sales will likely exceed $13 billion, up from $12.2 billion last year. Lipitor, a treatment for high cholesterol, is the world's biggest-selling drug.

McKinnell said he expects Lipitor sales growth in 2007, although he didn't provide an estimate. Analysts are worried that Lipitor's U.S. sales will come under pressure following the patent expirations in the next few months of Pravachol from Bristol-Myers Squibb (BMY Quote) and, more significantly, Zocor from Merck (MRK Quote). The fear is that managed-care firms will press patients and doctors to seek cheaper generics instead of brand name cholesterol fighters like Lipitor.