Pfizer Inc.'s first-quarter net income rose 53 percent as the world's second-largest drugmaker benefited from a gain related to a joint venture with China. But Pfizer's results fell short of Wall Street's expectations, and the company lowered its forecast for the year.
The current quarter shows that Pfizer continues to struggle after losing U.S. patent protection on some of its blockbuster drugs that bring in $1 million annually or more. When popular drugs go off patent, cheaper, generic versions of those medicines often pop in the market, and that competition cuts into sales of roughly two-thirds of Pfizer's drugs.
The biggest hit has been copycat versions of Pfizer's cholesterol fighter Lipitor, which was the world's best-selling drug for nearly a decade until it lost exclusivity in 2011 and in much of Europe last year. Sales of Lipitor, which once brought in about $13 billion a year, dropped 55 percent to $626 million in the first quarter.
Like many other drugmakers, Pfizer has been cutting costs to boost profit, but there's likely very little fat left to trim. Pfizer and most of its rivals also have been focusing on developing very-expensive drugs for rare disorders and on expanding sales in emerging markets such as China. But there's a limit to how much money those strategies can generate.
To please shareholders, the company also has been selling off nonpharmaceutical assets and using the proceeds to repurchase more shares. Indeed, Pfizer noted on Tuesday that it's returned about $8 billion to shareholders so far this year in dividends and share repurchases. But some investors have been pushing for more divestitures.
"They're having trouble hitting their sales goals so they need to make up for it with financial moves, like buying back shares, that help prop up the stock price," Erik Gordon, an analyst and professor at University of Michigan's Ross School of Business, wrote in an email.
During the first quarter, Pfizer, which is based in New York, said net income was $2.75 billion, or 38 cents per share, down from $1.79 billion, or 28 cents per share, a year earlier. Excluding one-time items, adjusted income was 54 cents per share, a penny less than the forecast of analysts surveyed by FactSet.
Results were boosted by a $490 million gain from the transfer of some product rights to its joint venture in China. In the year-ago quarter, Pfizer took charges totaling $1.66 billion, for litigation, acquisition and other costs.
Revenue in the latest quarter was $13.5 billion, down 9 percent from $14.89 billion a year earlier and below analysts' expectations of $13.99 billion.
Pfizer said unfavorable currency exchange rates reduced revenue by 1 percent, or 2 cents per share. The rest of the drop was due to lower sales, mostly due to generic competition of its schizophrenia drug Geodon, which got generic competition in the U.S. last March, and for Lipitor. Sales of nearly two dozen other drugs — many former blockbuster medicines with annual sales of $1 billion or more — also declined, mostly due to worsening generic competition.
However, sales also fell for some big sellers still protected by patents, including erectile-dysfunction drug Viagra, which was down 7 percent at $461 million, and the Prevnar 13 vaccine against ear infections, meningitis and other pneumococcal infections. Pfizer blamed Prevnar's 10 percent drop, to $846 million, on shifts in buying patterns in developed countries outside Europe and the U.S.
The bright spots during the quarter were Lyrica, for fibromyalgia and other pain, up 12 percent at $1.07 billion, and anti-inflammatory pain reliever Celebrex, up 3 percent at $653 million.
Despite what analysts called the "earnings disappointment," analysts Judson Clark of Edward Jones and Timothy Anderson of Bernstein Research maintained their "buy" recommendations.
While sales of both widely used medicines and specialty drugs for complex disorders mostly were down, sales of consumer health products such as Centrum vitamins jumped 12 percent to $811 million. Sales rose 5 percent to $2.42 billion in emerging markets such as China — the key growth target for the industry as U.S. and European health programs try to hold down costs.
Still, Pfizer lowered its earnings profit by 6 cents to $2.14 to $2.24 per share and its revenue forecast by $900 million to $55.3 billion to $57.3 billion.
Its shares fell 76 cents to $29.65 in morning trading.