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Pharmacia inventories hurt Pfizer Q2 results
New York | Monday, July 28, 2003, 08:00 Hrs  [IST]

Pfizer reported net losses of $3.6bn in the second quarter as the world's largest pharmaceuticals group took a $5.9bn non-cash charge for its acquisition of US rival Pharmacia.

The quarter was the first for the combined company, which expects $45bn in sales and $13bn in cashflow from operations this year, and $54bn in sales and $18bn in cashflow next year.

Pfizer, which closed its $58bn acquisition of Pharmacia in April, said on Friday that its second quarter included 10 weeks of the group's US operations, and only six weeks from its overseas business. However, excluding one-off items, Pfizer's second-quarter earnings per share exceeded expectations in spite of falling 9 per cent from last year. The drop in earnings came as the group worked to slash Pharmacia drug inventories at distributors and internally by almost 75 per cent.

Pfizer last month cut its earnings estimate by 7 cents per share for the year - to single-digit growth - due to Pharmacia's high drug inventory levels.

Pfizer said cutting inventory reduced second-quarter earnings by $300m, or 3 cents per share.

It also saw $178m in merger costs, offset by a $73m gain, both after tax. Including all one-off items, Pfizer recorded a loss of $3.6bn, or 48 cents per share, compared with a profit of $1.96bn, or 31 cents per share, last year.

Pfizer's second-quarter earnings, excluding the items, were $2.37bn, or 30 cents per share, compared with $2.1bn, or 33 cents, last time. Sales increased 37 per cent to $10bn, helped by the addition of Pharmacia sales and strong growth in Pfizer's blockbuster drugs.

Its growth was led by Lipitor, the industry's biggest selling drug, which saw sales rise 13 per cent to more than $2bn in the quarter. However, analysts are concerned that its growth is waning due to new competition such as AstraZeneca's Crestor and Zetia, co-developed by Schering-Plough and Merck.

Pfizer continues to expect nearly $4bn in cost savings by 2005 and accretion from Pharmacia next year. It backed earnings estimates of $1.73 and $2.13 for this year and next.

Hank McKinnell, Pfizer chairman, weighed in strongly against a bill that passed the US House of Representatives on Friday. It would allow for more importation of drugs from outside the US, where prices are often subsidised.

"We are at war. We are at war with terrorists, and we should be strengthening our borders not weakening them," Mr McKinnell said.

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