Pfizer Net Falls 77% on Exubera Charge; Beats Estimates

Global pharmaceutical company Pfizer said Thursday its Q3 net income fell 77%, hurt by a $2.8 billion charge related to a surprise discontinuation of sales of its inhaled insulin drug Exubera, and strong competition from generic copies of its top-selling drugs -- yet still managed to better analyst estimates. The world's number-one drugmaker said Q3 profits were $761 million ($0.11/share), down from $3.36 billion ($0.46/share) a year ago. Profit excluding special items was $0.58/share; analysts were on average expecting $0.52/share, according to a Reuters poll. Revenue fell to $12 billion from $12.3 billion, in-line with $11.99 billion analyst consensus estimates. The company said it decided to stop selling Exubera after the treatment failed to catch on with doctors. CEO Jeff Kindler, while upbeat on the quarter, admitted, "...we need to deliver better results, continue to make tough decisions about allocating our capital wisely, and bring more new products to the market as quickly as possible. Doing all of this will put Pfizer on the right course and build value for our shareholders" (full earnings call transcript later today). Weak earnings have shareholders pressuring Kindler to use the company's $23 billion in cash to make acquisitions that will add to its pipeline. "It really becomes a question of what they can do with their strong balance sheet to fill the hole...," Deutsche Bank analyst Barbara Ryan told Bloomberg. "They either have to do a whole handful of smaller deals or one gigantic deal, and it remains to be seen what path they will take." In 2010, Pfizer's top-selling cholesterol treatment Lipitor, which sold $3.2 billion this quarter (-3%), loses its patent. Over the next four years, the company loses patents on drugs that produce about 50% of the company's current revenue. Shares are down 5.2% YTD, and 11% over the past year.

Sources: Press release, Reuters, Bloomberg
Commentary: Sanofi Shares Climb Amid Rumors of Pfizer Interest • Icahn Playing Marriage Broker Between Biogen and Pfizer
Stocks to watch: PFE. Competitors: MRK, JNJ, WYE, TEVA, NVS, BMY. ETFs: FDL, IYH
Earnings call transcript: Pfizer Q2 2007

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