NEW YORK – Pfizer Inc. (PFE), the world's biggest drug company, said its first quarter net income plunged 87 percent because of numerous charges, including one for suspending sales of its pain reliever Bextra, which it said will drive earnings for the year below its previously announced forecast.
Pfizer earned $301 million or 4 cents a share, for the January-March period, down from $2.3 billion, or 30 cents a share, a year earlier. Revenue rose 5 percent to $13.1 billion from $12.49 billion in the year ago quarter.
Pfizer said it took $2.19 billion charge to repatriate $28.3 billion in cash from overseas and a $622 million charge related to its purchase of Pharmacia in 2002. It also took a $766 million charge for suspending sales of Bextra at the request of the Food and Drug Administration (search). The FDA had concerns about Bextra (search), which was linked to higher risk of heart attacks as well as a serious skin condition.
Not counting the charges, Pfizer earned 54 cents a share, beating the consensus estimate of analysts surveyed by Thomson Financial by a penny a share.
Revenue growth in the quarter was driven by several drugs including cholesterol-lowering drug Lipitor and antibiotic Zithromax. Lipitor revenues rose 23 percent to $3.1 billion while Zithromax sales jumped 71 percent to $797 million.
However, revenues from pain relievers Bextra and Celebrex (search) plunged. Celebrex sales sank 47 percent to $411 million while Bextra revenues collapsed 79 percent to $56 million.
Both drugs, along with Merck & Co.'s (MRK) Vioxx, belong to a class known as Cox-2 inhibitors. Vioxx was pulled from the market last September after a study linked it to higher risk of heart attack and strokes. That was initially expected to lift sales of Celebrex and Bextra but subsequently both were also tied to such risks.
Pfizer said in the wake of the Bextra suspension it expects to earn $1.98 a share for all of 2005 after various charges, down from its previous estimate of $2 a share. That means Pfizer's earnings would fall 7 percent this year from the $2.12 a share it earned in 2004.
Pfizer' initial estimate was released earlier this month when it announced it would cut $4 billion in costs by 2008 as part of a program to return the company to double-digit earnings growth in 2006 and 2007. Details were sketchy but the company said the plan included staff reductions, changes to purchasing arrangements and possibly more plant closing.
At that time, Pfizer also said it had hoped to revitalize Bextra and Celebrex sales as part of its plan to increase earnings. But two days after its announcement, the FDA asked Pfizer to remove Bextra from the market. Some analysts had speculated losing Bextra could jeopardize a return to double-digit growth in 2006 and 2007 but Pfizer didn't mention that in its release.
Pfizer is slated to lose as much as $9 billion in revenue in the next four years as patents expire on anti-depressant Zoloft, allergy medicine Zyrtec and blood-pressure medicine Norvasc.
The tax expense for the repatriation of $28.3 billion in cash came after Pfizer took advantage of the American Jobs Creation Act passed by Congress last year. It allows companies to repatriate retained earnings from their overseas operations at a greatly reduced tax rate.