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Markets shocked by Pfizer sales slump

Published on 26/10/05 at 12:17pm

Pfizer, the pharma industry's powerhouse, has suffered a 52% slump in profits in the third quarter, undermining investor confidence in a company renowned for its sustained growth.

The company has been hit from several directions, including patent expiries and stagnating markets, resulting in a 7% decline in sales in the period worldwide, with US sales falling by 15%.

In April, Pfizer's management had been bullish about a return to double-digit growth from next year with the help of a restructuring and cost saving programme to reduce overheads by $4 billion (2.25 billion pounds).

But chief executive Hank McKinnell found himself in the unaccustomed position of having to withdraw earnings forecasts for 2006 and 2007 - a retreat which saw investors wipe $13 billion of the company's share price in one morning's trading.

The company's share price now stands at its lowest since 1998, a time before mergers with Warner-Lambert and Pharmacia helped transform it into pharma's undisputed leading company.

A number of factors have deepened Pfizer's dip in profits, but perhaps the most alarming of these was a falling off in US sales of Lipitor, the company's flagship brand.

Pfizer admitted the cholesterol drug experienced an unexpectedly rapid slowdown in the US, where sales grew just 1% between July and September.

The blockbuster continues to grow strongly in other markets, but Pfizer will be depending on follow-up cholesterol product torcetrapib which it plans to combine with Lipitor by 2008.

Patent expiries on three major brands, Neurontin, Diflucan and Accupril/Accuretic hit hard during the quarter, while sales of Celebrex and Bextra continued to decline amid ongoing fear of Cox-II safety concerns.

Despite the shock to its system, Pfizer's management can reassure investors with an ongoing productivity programme and a promising pipeline of drugs.

The company has an industry-leading US salesforce, which it has now restructured geographically and around its changing customer base, and says it expects to save more than $600 million in 2005 across the company.

Karen Katen, head of Pfizer's pharmaceutical business (and a front runner to succeed Hank McKinnell as chief executive) underlined the strength in the late stage pipeline.

"The successful launches of Lyrica, Macugen, Zmax, and Revatio and the regulatory advance of product candidates Sutent, Exubera, anidulafungin, and dalbavancin are part of our strategies focused on restoring growth."

The company pointed to the quick uptake of new epilepsy/nerve pain treatment Lyrica in Germany and the UK as evidence of its continued success in launching new products.

Pfizer revealed that Lyrica now commands 14.2% of the anti-epileptic market in Germany and 9.5% in the UK, overtaking a number of established drugs and making it one of the most successful launches in European history.

Dwindling sales of Viagra (down 4% worldwide, 14% in the US) are also being addressed. Pfizer plans to introduce direct to consumer adverts in the US as well as non-product specific disease awareness campaigns to increase the number of men asking for help with erectile dysfunction problems.

Meanwhile, the company's new orphan drug Revatio for pulmonary arterial hypertension has been launched in the US. The drug, which uses the same active ingredient as Viagra (sidenafil), has also been approved for launch in the EU.

Related article:

Pfizer wins UK Lipitor court battle

Friday , October 14, 2005


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