Pfizer Says Earnings Will Drop 25%

Pfizer Incorporated, the world’s largest drugmaker, said earnings this year will plunge 25% as sales growth stalls and the company invests in a program aimed at cutting $4 billion in annual costs.Net income will fall to $8.6 billion, or $1.16 a share, partly because of a restructuring that will cost as much as $6 billion over four years, the chief executive, Hank McKinnell, told analysts at a meeting in New York yesterday. Factory, purchasing, and sales staffs will shrink, the New York-based company said.The targeted savings exceeded analysts’ estimates by more than $1 billion, and Pfizer shares rose 3.7%. With patents expiring on drugs that generate almost a third of sales and demand falling for the painkiller Celebrex, Pfizer promised to streamline its force of 38,000 salespeople and close plants to cut manufacturing expenses.“To save $4 billion, you can’t treat this as business as usual,” Mr. McKinnell said at a news conference after yesterday’s meeting. “There will be some areas of the company that will be quite significantly impacted.”Mr. McKinnell, 62, declined to say how many of the company’s 115,000 employees would lose their jobs. The annual savings would amount to 12% by 2008, he said.Pfizer said it will have a maximum of two sales representatives for each product per doctor, down from as many as five. Attrition may occur when sales representatives are asked to move to another city or state and choose not to do so, McKinnell said at the briefing.Pfizer shares rose 97 cents to $26.90 at in New York Stock Exchange composite trading. Before yesterday, they had dropped 28% in the past year, the third-worst performance among companies in the Dow Jones Industrial Average. Shares of rival drug companies, including Schering-Plough Corporation and GlaxoSmithKline, also rose.Pfizer’s move to trim sales staff clears the way for rivals to do the same, said Steven Sean Hill of First Investor’s Corporation in New York.“It’s like a nuclear arms race,” said Mr. Hill, who helps manage about $3.5 billion, including Pfizer shares. “If Pfizer is going to be aggressive about cutting sales reps, then others like Glaxo will, too.”Schering-Plough shares rose 52 cents, or 2.9%, to $18.50, while Glaxo’s American depositary receipts climbed $1.01, or 2.2%, to $46.20. Eli Lilly & Company gained $1.88, or 3.7%, to $53.21, and Merck & Company rose 54 cents, or 1.7%, to $33.04.Pfizer already leads its biggest American competitors in sales and net income per employee. Pfizer generated $456,660 in sales and $98,790 in earnings for each staff member last year, compared with $366,430 and $92,870, respectively, for Merck and $311,410 and $40,680 for Lilly. Pfizer’s anti-cholesterol drug Lipitor is the world’s bestselling medicine, with $10.9 billion in sales last year.Pfizer said revenue this year will be little changed at $52.5 billion after three years of gains. Excluding expenses related to restructuring and other costs, Pfizer expects profit of $2 a share. Analysts surveyed by Thomson Financial had estimated profit on that basis would rise to $2.13 from $2.12 in 2004.McKinnell is counting on newer products and medicines in the last of three phases of development needed for U.S. approval to help expand sales after this year. They include Lyrica for nerve pain, the Exubera inhaled insulin treatment, and a combination cholesterol drug that reduces “bad” cholesterol and elevates “good” cholesterol.Profit will rise at least 10% in 2006 and 2007, Pfizer said, helped by the continued growth of major drugs, new product launches, and the productivity initiatives.“We’re going to see revenue growth in both 2006 and 2007,” Mr. McKinnell said in an interview.

Pfizer Says Earnings Will Drop 25%

Pfizer Says Earnings Will Drop 25%

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