Pfizer Sinks on Lipitor Shortfall - TheStreet

Pfizer Sinks on Lipitor Shortfall

Sales drop sharply in the U.S.
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Updated from 11:52 a.m. EDT

Pfizer

(PFE) - Get Report

saw its shares drop Wednesday after its second-quarter results missed estimates by a wide margin, in part because of a steep decline in sales for Lipitor, the company's biggest drug.

Worldwide sales of the cholesterol fighter fell 13%, including a dramatic 25% dive in the U.S. Competition from generic versions of other cholesterol drugs and from brand-name alternatives took their toll.

A particular problem is coming from the fact that

Merck's

(MRK) - Get Report

Zocor lost U.S patent protection in mid-2006. Since then, managed care firms have been encouraging patients to start on, or switch to, generic Zocor rather than brand-name Lipitor.

"The statin market is even more intensely competitive than we thought it would be," Jeffrey Kindler, Pfizer's chairman and CEO, told analysts during a telephone conference call. Statin drugs reduce so-called bad cholesterol.

The emergence of generics for other Pfizer drugs, namely the blood-pressure medication

Norvasc and the antidepressant Zoloft, combined with Lipitor's woes to produce second-quarter earnings of 42 cents a share, excluding charges. Analysts polled by Thomson First Call had been forecasting 50 cents.

Overall, second-quarter revenue fell 6% from a year ago to $11.1 billion and was $300 million lower than the consensus projection.

By mid-afternoon, Pfizer's stock was down $1.05, or 4.1%, to $24.91 on heavier-than-average trading.

"While there's no question that we faced difficult challenges in the second quarter of 2007 -- including the impact of the loss of U.S. exclusivity for Zoloft and Norvasc, the timing of some expenses and Lipitor's performance in the U.S. -- we're still on track to meet our previously announced 2007 and 2008 revenue and adjusted diluted earnings per share goals," Kindler said.

The company continues to predict revenue of $47 billion to $48 billion, plus earnings per share, excluding items, of $2.08 to $2.15 a share for this year.

Pfizer had

trimmed its 2007 guidance in the first quarter due to earlier-than-expected generic competition for Norvasc, which had been its No. 2 drug. Second-quarter worldwide Norvasc sales dropped 45% from a year ago to $642 million, as the U.S. component plunged 97% to $18 million. Zoloft's worldwide second-quarter sales fell 82% to $127 million, as U.S. sales sank by 95% to $33 million.

For next year, Pfizer predicts revenue of $46.5 billion to $48.5 billion, with earnings, before items, of $2.31 to $2.45.

During the second quarter, once all items were counted, Pfizer earned $1.27 billion, or 18 cents a share. Last year, Pfizer earned $2.42 billion, or 33 cents a share, on revenue of $11.74 billion.

In addition to the various types of generic competition, Kindler said the second-quarter comparison was affected by payments to

Bristol-Myers Squibb

(BMY) - Get Report

for a collaboration in developing that company's experimental anticoagulant called apixaban.

Still, the biggest news was

Lipitor, "which did not meet our expectations for the quarter," Kindler said. Although foreign markets produced a 5% sales gain, the 25% plunge in the U.S. led to an overall 13% decline.

Second-quarter U.S. sales suffered from fewer prescriptions and higher rebates to managed care firms. Worldwide sales were $2.72 billion, including $1.38 billion in the U.S.

"Changes in the U.S. wholesaler inventory levels and differences in reconciliation of internal and external data that are normally seen each quarter to varying degrees, accounted for approximately 50% of the revenue decline in the U.S. second-quarter results," Kindler said. These factors "are not expected to have a negative impact on U.S. performance over the second half of the year."

Given the latest trends, Kindler predicted that worldwide 2007 sales of Lipitor would be flat to 5% below sales last year.

Lipitor's performance was doubly disappointing because first-quarter results had been

better than expected. After first-quarter results were announced, Pfizer predicted that Lipitor's sales this year would be "within a range of modest growth to a modest decline."

Pfizer's comments didn't mollify analysts. The stock "will continue to trade like a Treasury bond, until a substantial commercial acquisition is made, which dilutes dependence on Lipitor," says Barbara Ryan, of Deutsche Bank Securities, in a research note.

Ryan, who has a buy rating, doesn't own shares. Her firm has had a recent non-investment banking relationship.

The independent research firm Morningstar is contemplating lowering its fair value estimate for Pfizer due to the second-quarter results.

"We had expected Pfizer to hold on to significant revenue from Lipitor during the next several years, and this quarter calls that into question," says analyst Damien Conover in a research note. Pfizer's 2007 and 2008 forecasts "will be difficult to achieve with poor Lipitor performance," Conover adds.

Lipitor wasn't the only source of discouraging news. Sales of the arthritis medication Celebrex appeared to stall with sales gaining just 1% to $478 million. U.S. sales slipped 4% to $341 million. Worldwide sales of the impotence drug Viagra lost 3% to $382 million due to a 21% decline in the U.S.

Pfizer said the Celebrex slump in the U.S. was caused by a "modest decline" in volumes. A new direct-to-consumer ad campaign, launched in April, "is helping to stimulate patient interest," Pfizer said.

"The number of weekly visits to the Celebrex Web site has doubled and the number of calls to the patient 800-phone number has increased since the introduction of the ad," the company said. "Coupled with our renewed field force, we expect to see an impact later this year."

The inhaled insulin Exubera continues to be a major disappointment, producing only $4 million in sales for the quarter. A consumer-oriented print-ad campaign began last month, and television ads are scheduled to start soon.

The good news focused on several newer products, including the stop-smoking treatment Chantix, the kidney-cancer drug Sutent and the multiple-use Lyrica.

Second-quarter sales of Lyrica jumped 49% from last year to $405 million. The drug is approved for epilepsy, pain after shingles, diabetic nerve pain and, just recently, management of pain caused by fibromylagia.

Revenue from Sutent soared by 311% to $146 million. Chantix produced second-quarter sales of $200 million. It wasn't available during the second quarter of 2006.