Originally published April 14 2005
Pfizer trims budgets to boost earnings
by Mike Adams, the Health Ranger, NaturalNews Editor
Pharmaceutical giant Pfizer announced that it plans to cut annual expenses by $4 billion by the year 2008, a 12 percent reduction in its budget. The move is intended to offset slow, even negative, growth of sales on some of its top-selling drugs, and to fend off competition from generic drugs. Pfizer expects earnings for 2005 to fall by 22 percent to $1.16 per share, and for revenue to be stable at $52.5 billion. Pfizer says it will return to double-digit growth in earnings in 2006 and 2007. Analysts believe the company will close 20 of its 90 remaining production plants, and the company says it will allow its sales force to shrink through attrition.
Pfizer (PFE) is cutting costs to shore up earnings amid increased competition from generic drugs and a blow to its painkiller franchise.
The No. 1 drugmaker announced Tuesday that it will trim annual costs by $4 billion, or 12%, by 2008 to offset slowing growth or dwindling sales of some of its top-selling drugs.
It expects earnings after special items to fall 22% to $1.16 a share and for revenue to be flat at $52.5 billion as it mounts one of its biggest restructurings.
"You don't have $4 billion in cost cuts without cutting a substantial number of heads," says Lehman Bros.
Pfizer has already closed a handful of plants, and Butler says 20 of the almost 90 remaining could go.
Pfizer's 38,000-person sales force will shrink mostly through attrition, Pfizer says.
That means doctors will see fewer Pfizer representatives, which might lead other drugmakers to shrink sales forces, says Steven Sean Hill, health care analyst and portfolio manager for First Investor's.
Those include its No. 2 seller, blood pressure drug Norvasc, and its No. 3 seller, anti-depressant Zoloft.
New prescriptions for painkillers Celebrex and Bextra, with $4.6 billion in 2004 sales, have fallen sharply because of heart attack and stroke concerns for drugs in their class.
Both are COX-2 drugs, such as Merck's Vioxx, which was pulled off the market Sept. 30.
Even Pfizer's leading anti-impotence drug, Viagra, saw revenue drop 11% last year because of increased competition and slower-than-expected market growth.
The biggest potential winner, cholesterol drug torcetrapib, is at least three years away.
Lipitor lowers bad cholesterol; torcetrapib is intended to lift the good cholesterol.
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