Net income plunged to $761 million, or 11 cents per share, from $3.36 billion, or 46 cents per share, during the same period a year ago. Excluding pretax charges of $2.8 billion to end its Exubera investment and other costs, Pfizer earned 58 cents per share in the latest period.Pfizer Takes $2.8 Billion Charge to End ‘Disappointing’ Inhaled Insulin Investment, Sales Fall
Pfizer Inc. reported a 77 percent drop in third-quarter profit Thursday as the world’s largest pharmaceutical company booked a multibillion-dollar charge to exit its ‘disappointing’ inhaled insulin franchise, Exubera, and posted lower sales of blockbuster cholesterol drug Lipitor.
Net income plunged to $761 million, or 11 cents per share, from $3.36 billion, or 46 cents per share, during the same period a year ago. Excluding pretax charges of $2.8 billion to end its Exubera investment and other costs, Pfizer earned 58 cents per share in the latest period.
Revenue fell 2 percent to $11.99 billion from $12.28 billion a year earlier, as Lipitor sales declined by about $150 million and sales of antidepressant Zoloft and blood pressure drug Norvasc were hurt by generic competition.
The results still beat consensus estimates of analysts polled by Thomson Financial, who expected profit of 52 cents per share on revenue of $11.77 billion.
Pfizer shares rose 15 cents to $24.70 Thursday afternoon — trading less than $1 above its 52-week low of $23.13, reached in August.
Sales of diabetes drug Exubera have been disappointing for both the company and Wall Street since its launch. The company said it will return licensing rights to partner Nektar Therapeutics Inc. and transition patients to other diabetes treatments over the next three months. The news sent Nektar shares plunging 17.5 percent to $6.69 — their lowest point since 2003.
Phasing out Exubera is part of the company’s strategy to be “realistic, listen to customers and be disciplined on evaluating investments,” said Jeff Kindler, chairman and chief executive, in a conference call. “We will, of course, carefully evaluate what happened in order to apply the lessons learned.”
Pfizer stopped production of the drug at its western Indiana plant and placed between 650 and 750 workers on paid leave. The plant is the sole production center for Exubera.
Wall Street welcomed the announcement, citing the drug’s evident difficulty on the market.
“At the end of the day, when you’re analyzing how best to deploy capital in an environment that challenged, Exubera may have been toward the bottom of the list,” said BMO Capital Markets analyst Robert Hazlett.
Morgan Stanley analyst Jami Rubin, in a note to investors, said she had expected the move, but not immediately.
From a treatment standpoint, Exubera was not a very convenient system, said Dr. Joel Zonszein, director of the clinical diabetes center at Montefiore Medical Center in New York City, which treats some 4,000 patients each year. Many patients with type 1 diabetes still opted for injections and type 2 diabetes patients found it cumbersome and didn’t necessarily need insulin.
“There’s no question about safety and effectiveness with Exubera,” Zonszein said. “But the practicality of putting a large patient population on it was a problem.”
Meanwhile, the loss of U.S. exclusivity and the subsequent rise of generic competition drove sales of Zoloft down 73 percent to $124 million and sparked a 47 percent drop in sales of Norvasc to $640 million. Sales of Lipitor, the world’s best-selling drug, dipped 5 percent to $3.17 billion.
To counter the expected loss in revenue, the company has been cutting jobs and closing facilities.
Looking ahead, Pfizer lowered its 2007 outlook to account for the hefty Exubera charges, now expecting earnings per share of $1.01 to $1.10 per share, down from a prior range of $1.30 to $1.41. However, Pfizer lifted the low end of its outlook for 2007 adjusted profit to a range of $2.10 and $2.15 per share from $2.08 to $2.15.
Revenue is now expected to range from $47.5 billion to $48 billion, up from $47 billion to $48 billion as previously estimated.
Wall Street has forecast adjusted profit of $2.12 per share on revenue of $47.55 billion for the full year.
Pfizer said Lipitor sales will likely be 3 percent to 5 percent lower in 2007, compared with 2006. This decline would mark the drug’s first since its launch nearly 10 years ago.
The company reaffirmed its 2008 outlook for adjusted profit per share of $2.31 to $2.45 on revenue between $46.5 billion and $48.5 billion. Wall Street has predicted earnings excluding items of $2.33 per share on revenue of $47.04 billion.