* Q2 profit ex-items 62 cents shr vs Wall Street view 54 cents
* Q2 revenue $15.06 bln vs Wall Street view $14.87 bln
* IPO to comprise up to 20 pct stake in animal health unit
* Cost cuts, far improved profit margins bolster results
* Shares rise 1.3 percent
By Ransdell Pierson
July 31 (Reuters) - Pfizer Inc reported higher-than-expected quarterly earnings on Tuesday, due largely to lower spending on research and marketing, and said it may fully divest its animal health unit following an initial public offering of up to 20 percent of the business.
Atlantic Equities analyst Richard Purkiss said Pfizer's operating profit margins improved four percentage points beyond expectations in the second quarter, helped by cost cuts related to its $67 billion acquisition in October 2009 of U.S. rival Wyeth.
"That means management is doing a good job in integrating Wyeth and restructuring the pharmaceuticals business," said Purkiss. Pfizer's experimental drugs, which include a promising treatment for rheumatoid arthritis now awaiting U.S. approval, are another reason to hold Pfizer shares, he said.
Wall Street is focusing most intently on Pfizer's experimental treatment for Alzheimer's disease, bapineuzumab, deemed to have blockbuster sales potential if it can slow progression of the memory-robbing disease.
Earlier this month, Pfizer said the drug had failed to help cognition in one of two large North American trials, but the company and partner Johnson & Johnson are hoping for better results in another late-stage North American study, the results of which could be announced before September 11.
Pfizer, whose shares were up 2.1 percent in mid-morning trading, said it earned $3.25 billion, or 43 cents per share, in the quarter, compared with $2.61 billion, or 33 cents per share, a year earlier. Excluding special items, profit was 62 cents per share, compared with analysts' average forecast of 54 cents, according to Thomson Reuters I/B/E/S.
The largest U.S. drugmaker said in June that it planned to separate its animal health unit into a standalone company, allowing Pfizer to focus on its core pharmaceuticals business. On Tuesday it said it plans by mid-August to ask regulators to approve an initial public offering of up to a 20 percent stake in the new animal health business, to be called Zoetis.
Pfizer's animal health unit, with $4.2 billion in revenue last year, has more than 9,000 employees and sells medicines, vaccines and other products for livestock and pets.
"If the IPO is successfully completed, which we are targeting for the first half of 2013, we will have a variety of options to achieve a full separation of Zoetis," Pfizer Chief Executive Ian Read said in a statement.
Pfizer shares have risen 25 percent in the past year, in large part because of the company's plan to divest its infant formula business and animal health unit and return much of the proceeds to shareholders through share buybacks and dividends.
In April, the company agreed to sell its baby formula business to Nestle SA for $11.85 billion in cash, with the deal to be completed in the first half of 2013. The business was treated in the second quarter as a discontinued operation.
Pfizer's global revenue fell 9 percent to $15.06 billion, hurt by generic competition against cholesterol fighter Lipitor, but it topped Wall Street expectations of $14.87 billion.
Sales would have fallen 6 percent if not for the stronger dollar, which lowers the value of sales in overseas markets. Most other big U.S. drugmakers were hurt by foreign exchange factors in the quarter, including Johnson & Johnson, which cut its 2012 profit view as a consequence.
But Pfizer stuck to its 2012 earnings forecast of $2.14 to $2.24 per share, excluding special items, a decline of no more than 7 percent from a year earlier despite plunging demand for Lipitor. That is largely because of huge cost cuts, especially to Pfizer's research budget.
"The company maintained all 2012 guidance despite the forex headwinds, which suggests underlying confidence in demand and ability to manage expenses," ISI Group analyst Mark Schoenebaum said in a research note.
Sales of Lipitor, which lost patent protection in November, fell 53 percent to $1.22 billion in the quarter.
Sales of nerve pain treatment Lyrica jumped 14 percent to $1.04 billion, while sales of rheumatoid arthritis drug Enbrel rose 8 percent to $988 million, helping cushion the Lipitor decline
Pfizer shares rose to $24.21 on the New York Stock Exchange, amid a moderate decline for the drug sector.