Updated from 7:10 a.m. EDTBuoyed by a Wall Street-beating second quarter and strong sales by the cholesterol drug Lipitor, Pfizer ( PFE) said Thursday it was raising its full-year financial guidance. Pfizer expects earnings this year to be about $2 a share rather than $1.93, excluding special items. Both EPS figures have been adjusted to reflect the pending sale of its nonprescription drug and consumer products business to Johnson & Johnson ( JNJ). Pfizer has declared the unit a discontinued operation, requiring it to reclassify its financial statements. The sale price is $16.6 billion, and Pfizer expects after-tax proceeds of about $13.5 billion. With the sale and its projected cash flow from operations over the next 30 months, Pfizer expects to be in possession of about $34 billion, after capital spending and dividends. The company plans to spend $17 billion over the same time period acquiring technologies and products "that will drive long-term growth," said David Shedlarz, a vice chairman. Hank McKinnell, Pfizer's chairman and CEO, said his company would look at "targeted acquisitions" in the $1 billion to $4 billion range. Pfizer reaffirmed that it would spend up to $17 billion through 2007 to repurchase stock, including $7 billion this year. "We achieved strong operating performance in the face of increased generic competition and revenue losses due to patent expirations," McKinnell said. "Pfizer is losing about one-third of its human-health revenue due to patent expirations between 2004 and 2008. Many companies could not survive such a profound loss of revenue." By early afternoon, Pfizer's stock had climbed 46 cents, or 2%, to $23.76. McKinnell said second-quarter results beat Pfizer's expectations, as well as Wall Street's consensus forecast. The company produced earnings of 50 cents, excluding one-time items, compared with the 48 cents estimated by analysts polled by Thomson First Call. "At current exchange rates, we continue to target a return to revenue growth in 2007 and average annual growth in adjusted diluted EPS over 2007 and 2008 in the high single digits," he said.
Total revenue for the second quarter rose 3% to $11.74 billion, bolstered by a 9% gain for Lipitor, up to $3.12 billion vs. the same period last year. U.S. sales rose 11% for Pfizer's biggest drug, which also is the bestselling drug in the world. Analysts have been concerned that generic versions of Merck's ( MRK) Zocor and, to a lesser extent, Bristol-Myers Squibb's Pravachol, will prompt insurers to encourage doctors and patients to
switch to cheaper generics at the expense of Lipitor. "We are targeting Lipitor sales of about $13 billion this year, a stretch goal in light of the recent introduction of generic Zocor in the U.S., as well as other competitive pressures," said Karen Katen, a vice chairman and president of Pfizer's human-health businesses. "While our Lipitor sales target remains ambitious, we believe we can achieve it." Readers of Pfizer's tea leaves will notice that although Katen predicted sales of "about" $13 billion on Thursday, a Feb. 10 press quoted Katen as forecasting Lipitor would exceed $13 billion. During a telephone conference call, Katen told analysts that she doubted Lipitor's position in managed-care firms' formularies would erode over the next year. Formularies, containing a list of drugs, often have three tiers of copayments for patients. The lowest out-of-pocket payment is for generic drugs, the second tier is for recommended brand-name drugs and the third is for brand-name drugs that managed-care firms say are as effective as generics or that may have added side-effect risks. Katen told analysts not to just focus on Lipitor, noting that eight drugs produced double-digit sales gains during the second quarter. However, many of those big gainers are still small revenue-producers compared with Lipitor. The blood pressure drug Norvasc had second-quarter sales of $1.16 billion, flat vs. last year. The antidepressant Zoloft, which lost U.S. patent protection last month, saw its sales slip 11% to $706 million in the second quarter. Some bigger products had healthy gains, including the arthritis medication Celebrex, whose worldwide sales of $471 million gained 17% vs. the same period last year. Sales of Lyrica jumped to $271 million vs. $38 million for the year-ago quarter. Lyrica is prescribed for nerve pain associated with diabetes, epileptic seizures and nerve pain associated with shingles. The schizophrenia drug Geodon posted sales of $165 million, up 14%.