* Q2 profit ex-items 62 cents shr vs Wall Street view 54
* 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 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
"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
Pfizer shares rose to $24.21 on the New York Stock Exchange,
amid a moderate decline for the drug sector.