Pfizer Posts Loss on Pharmacia Costs

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Pfizer Inc. (PFE), the world's largest drugmaker, on Friday reported a second-quarter net loss due to costs from its $60 billion acquisition in April of Pharmacia Corp. (search)

Pfizer, the maker of cholesterol drug Lipitor (search) and impotence drug Viagra (search), reported a loss of $3.59 billion, or 48 cents per share. It earned $1.96 billion, or 32 cents, a year ago.

The company reported a profit of 30 cents per share excluding one-time items. Analysts, on average, had forecast earnings excluding one-time items of 29 cents per share, according to a poll by Reuters Research, a unit of Reuters Group Plc.

Second-quarter combined sales of the Pfizer and Pharmacia product lines, which included Pharmacia sales for part of the period, were $9.99 billion. That represented a 37 percent jump compared to last year's stand-alone Pfizer, but the rise would have been much more modest if compared on a like basis.

"It was an extremely good quarter if you look at the performance of the individual drugs," said David Saks, an independent New Jersey-based analyst and money manager.

Pfizer said its sales growth was fueled by Lipitor, the company's biggest drug, whose global sales rose 13 percent in the quarter to $2 billion.

Henry Astarjian, an investment analyst at MFM International, said he was concerned that Lipitor's sales rose only 3 percent in the United States.

"That's only half the 6 percent U.S. growth seen in the prior quarter," said Astarjian, who noted that rival members of the "statin" class of anti-cholesterol drugs are also strapped with slowing growth.

Shares of Pfizer closed up 49 cents, or 1.5 percent, to $33.04, Friday on the New York Stock Exchange.

Pfizer acquired Pharmacia largely to obtain full rights to blockbuster arthritis drug Celebrex (search) and a sister medicine called Bextra (search), which had been co-marketed by the two companies.

Combined second-quarter sales of the drugs were $529 million, although their growth performance was unclear because Pharmacia sales before the merger were not included.

David Shedlarz, Pfizer chief financial officer, said Celebrex sales growth was curtailed as wholesalers worked down $300 million in excess inventories of Celebrex and other Pharmacia drugs. Pharmacia routinely kept about two months worth of supplies of their drugs with wholesalers but Pfizer said it keeps its levels lower.

"It was most significantly felt by Celebrex," Shedlarz said.

The net results included after-tax charges of $5.86 billion to account for the Pharmacia acquisition, as well as other merger-related costs of $178 million.

Global sales of Pfizer hypertension drug Norvasc (search) rose 13 percent to $1 billion. Epilepsy treatment Neurontin (search) surged 29 percent to $592 million, while Viagra rose 9 percent to $419 million.

Pfizer said it sees cost savings from the Pharmacia acquisition reaching $3 billion next year and approaching $4 billion in 2005. The company is expected to wring cost savings from the merger by cutting both research and manufacturing facilities and employees.

Analysts have expressed concern that Pfizer is unable to drive significant earnings growth without big acquisitions. Pfizer bought Warner-Lambert for $114 billion in June 2000 and had barely swallowed Warner-Lambert by the time it announced the Pharmacia deal in July of last year.

Pfizer affirmed its 2003 earnings forecast, excluding items, of about $1.73 per share, and said 2004 earnings would be about $2.13 per share.

The New York-based company forecast 2004 revenue of $54 billion, which it said represents 10 percent annual sales growth.

Pfizer said a weak dollar, which increases the value of goods sold in overseas markets, boosted sales of Pfizer products by $365 million in the period.