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Charges, generic Lipitor cut Pfizer 1Q net 19 pct

A Friday, March 2, 2012 photo shows the exterior of Pfizer in Groton, Conn. Pfizer Inc. said Tuesday, May 1, 2012, that its first-quarter profit fell 19 percent, mainly because new generic competition to its blockbuster cholesterol pill Lipitor cut U.S. sales by 15 percent as the drugmaker offered big rebates and discounts to keep patients on its brand. A Friday, March 2, 2012 photo shows the exterior of Pfizer in Groton, Conn. Pfizer Inc. said Tuesday, May 1, 2012, that its first-quarter profit fell 19 percent, mainly because new generic competition to its blockbuster cholesterol pill Lipitor cut U.S. sales by 15 percent as the drugmaker offered big rebates and discounts to keep patients on its brand. (AP Photo/Elise Amendola)
By Linda A. Johnson
AP Business Writer / May 1, 2012
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NEW YORK—Generic competition for Pfizer Inc.'s blockbuster cholesterol pill Lipitor is starting to cut into the bottom line of the world's biggest drugmaker, as expected.

The best-selling drug in the industry's history saw its U.S. patent expire on Nov. 30, ushering in a rival's generic version and an authorized one Pfizer markets with a partner. But brand-name Lipitor hung onto about a third of the market in the first quarter -- far more than normally would be expected -- thanks to Pfizer offering big insurer rebates and discounts to patients who stayed on its brand for now.

With the first full quarter of generic competition to Lipitor and copycats of two smaller drugs reducing revenue by a combined $1.3 billion, Pfizer said Tuesday that its first-quarter profit fell 19 percent. However, that was mainly due to a whopping $2.64 billion in legal, restructuring and other charges.

The world's biggest drugmaker still beat Wall Street's profit expectations but narrowly missed its sales forecast.

New York-based Pfizer lowered its adjusted profit forecast for 2012 by 6 cents, to $2.14 to $2.24 per share, excluding about 90 cents worth of charges. Analysts had predicted $2.26 per share.

Pfizer said it lowered that forecast and cut its expected 2012 revenue by $2.5 billion to between $58 billion and $60 billion because of its deal to sell its infant-nutrition business to Switzerland's Nestle SA for $11.85 billion early next year.

Previous forecasts had factored in the steep drop in revenue from Lipitor, which had peak sales of $13 billion. Pfizer is offering the rebates and discounts until more generic versions hit drugstores on May 31, when prices will drop much more.

In the latest quarter, Lipitor sales fell from $2.4 billion to $1.4 billion, mainly due to a 71 percent plunge in U.S. revenue. However, CEO Frank D'Amelio said in an interview that U.S. market share was "was 2 1/2 times higher than what we would have expected" without the deals.

The maker of Viagra said net income was $1.79 billion, or 24 cents per share, down from $2.22 billion, or 28 cents a share, a year earlier.

Excluding one-time items, Pfizer would have made $4.43 billion, or 58 cents per share. Analysts expected 56 cents a share, according to FactSet.

After-tax charges included $1.07 billion for adjustments to the value of acquired businesses, $115 million in acquisition-related costs, and $1.45 billion for a mix of restructuring and productivity charges, a write-down on a drug compound acquired when Pfizer bought fellow drugmaker Wyeth in 2009, and legal fees.

Those included a $450 million charge for a confidential agreement announced Tuesday to end a lawsuit with Brigham Young University and a professor there. The suit concerned companies that Pfizer bought allegedly breaching a 1991 agreement on research involved in the discovery of blockbuster painkiller Celebrex.

Revenue totaled $15.4 billion, down 7 percent from $16.5 billion a year ago. Analysts were expecting $15.46 billion.

Sales in the U.S. fell 15 percent to $5.95 billion, from $7.02 billion. International sales edged up 1 percent, to $9.45 billion.

The nutrition deal is to close in the first half of 2013. Pfizer plans to use the proceeds to continue buying back shares to keep boosting its stock.

The company also is planning to spin off or otherwise divest its animal health business, sometime between this July and July 2013.

"We are building two strong cores, an innovative core and a value core," with consumer health products helping boost both, CEO Ian Read told analysts.

Pfizer shares edged down 12 cents to close at $22.78. But that's up about 36 percent since Read became CEO in December 2010.

Still, analyst Steve Brozak of WBB Securities said when company executives keep highlighting share buybacks rather than acquisition plans, "this is the epitome of quiet desperation." He said the company doesn't have enough drugs in development to replace Lipitor's revenue.

Other analysts were more positive.

Linda Bannister of Edward Jones said Pfizer's earnings beat was driven by greater-than-expected cost controls, adding that she's "pleased with Pfizer's ability to execute on its strategy to divest noncore assets and concentrate" on prescription drugs.

Bannister, who has a "Buy" rating on Pfizer, noted it "has several late-stage pipeline products that are expected to be approved in the near term," including potential blockbusters Eliquis for stroke prevention and tofacitinib, the first new pill in a decade to delay the worsening of rheumatoid arthritis.

Eliquis could get U.S. approval on June 28; tofacitinib faces review by an expert panel on May 9.

Revenue from prescription medicines fell 8 percent to $13.07 billion. After Lipitor, the second best-selling drug was Lyrica, for fibromyalgia and pain. Its revenue jumped 16 percent to $955 million.

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Linda A. Johnson can be followed at http://twitter.com/LindaJ--onPharma

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