Pfizer yesterday said its earnings will fall 6 percent this year as the company, which has been struggling with patent expirations and drug-safety...
NEW YORK — Pfizer yesterday said its earnings will fall 6 percent this year as the company, which has been struggling with patent expirations and drug-safety concerns, announced a cost-cutting plan aimed at saving $4 billion by 2008.
Investors responded by pushing Pfizer shares up 97 cents, or 3.7 percent, to close at $26.90 yesterday.
Pfizer said the program would help return the company to double-digit earnings growth in 2006 and 2007, and Wall Street responded by driving the company’s shares 4 percent higher.
Details of the plan were sketchy but will include staff reductions, changes to purchasing arrangements, and possibly more plant closings. Further acquisitions are likely to add new technologies, too, the company said.
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Pfizer’s projection for this year fell below analysts’ estimates, but the promise of a return to double-digit earnings growth by next year exceeded their expectations.
“There won’t be a single ‘magic bullet’ or ‘big bang’ new strategy or business model,” said Pfizer Chairman and CEO Hank McKinnell, speaking to analysts at a conference in New York. “It will take a combination of both long-standing strategies and new approaches to prosper during the next decade.”
McKinnell said the company hadn’t started to implement the plan. “We have a lot of work to do,” he said.
Pfizer said cutting costs will drive earnings growth in 2006, but stronger sales should boost profits in 2007.
Pfizer’s targeted savings amount is double what analysts were expecting. While the company is looking to trim yearly spending by $4 billion — about 12 percent of its costs — implementing the plan will cost between $5 billion and $6 billion through 2008.
While analysts applauded the cost cuts, they remained wary that existing and pipeline products would generate enough sales to replace revenues lost as patents expire on some of its most lucrative products.
Pfizer is expected to lose as much as $9 billion in revenue in the next four years when patents expire on antidepressant Zoloft, allergy medicine Zyrtec and blood-pressure medicine Norvasc.