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The third quarter reports are in, and Pfizer's profits are up but sales are down. The company is compensating for looming patent expirations with layoffs and restructuring; is it enough to boost sales?
Pfizer had a busy week, finalizing the Wyeth merger and announcing positive third quarter results. And while employees await notice of pending job cuts and site closures, executives touted the company’s spike in profits and speedy merger process.
As of last Thursday, Pfizer officially owns Wyeth, and the company spent most of Friday transforming Wyeth into Pfizer, updating signage and amending messages. Pfizer CEO Jeffrey Kindler noted in an investor call that it took less than nine months to build the joint team and establish the leadership of the company. He said that in all, 112 Wyeth senior executives have joined the Pfizer team. No word yet on staffing reductions or layoffs.
With Wyeth under its belt, Pfizer now has a significant late-stage portfolio, with drugs in the works for Alzheimer’s, oncology, pain, and inflammation. The hope is that the new drugs will circumvent the dip in sales with upcoming patent losses.
As for third quarter figures, the news was fairly positive with the company seeing a 26 percent increase in profits over the previous year. Savings are being attributed to the restructuring of its manufacturing division and about 6,500 job cuts.
The not-so-great news is that Pfizer’s sales are down 3 percent to $11.62 billion. With looming patent expirations from blockbusters like Lipitor, there’s concern that the company isn’t growing profits by selling drugs. However, analysts expect Pfizer to make gains in the next few years.
“The stock’s all time lows-in terms of valuations-reflect a concern that there won’t be any top-line gains,” said Deutsche Bank analyst Barbara Ryan. “The last couple of years have been disappointing from an R&D perspective, and most of the industry’s successful products are losing patent protection. They are forced to cut costs to maintain returns and to continue to invest in R&D, which ultimately has to be the engine that drives new products.”
Some positive notes include:
• Lyrica posted a 35 percent operational growth outside the US
• Revenue outside the US grew 5 percent operationally
• Revenue from alliances grew 21 percent worldwide
Pfizer also said that it would not release Wyeth’s third quarter numbers, originally scheduled to be delivered on October 22. Ryan noted that this is typical for companies being acquired. Pfizer has no reason to post earnings for a company they didn’t own at the time, and Wyeth can choose to ignore earnings as they are now owned by Pfizer.