Pfizer unveils plan to save $4 billion

updated 1:54 p.m. ET April 5, 2005

NEW YORK - Pfizer Inc., the world’s largest drugmaker, on Tuesday forecast a 6 percent decline in earnings this year as it launches a cost-cutting plan aimed at saving $4 billion by 2008 amid concerns over patent expirations and the safety of its popular painkiller Celebrex.

The company said its 2005 earnings are expected to be $2 per share, short of the average view of $2.13 per share from analysts surveyed by Thomson Financial and below the $2.12 earned a year ago. Accounting for one-time items, full-year income is estimated at $1.16 per share.

However, New York-based Pfizer projected earnings for the first quarter ended March 31 at 53 cents per share, topping the analyst consensus of 52 cents, and gave an optimistic profit forecast for 2006 and 2007.

Pfizer’s targeted savings amount to twice the $2 billion figure 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, Pfizer said.

Some analysts were awaiting major changes at the pharmaceutical giant, including widespread layoffs. Chairman and Chief Executive Hank McKinnell, speaking to analysts at a Tuesday conference in New York, indicated that the company intends to reduce its overall headcount of 115,000 but did not say by how much.

Other company officials, however, said Pfizer is whittling down its U.S. sales force of about 12,000 to carry just two representatives per product for each doctor — decreased from a current level of two to five reps.

“We are restructuring the field force to better meet ongoing customer needs,” said Pat Kelly, president of U.S. pharmaceuticals. “... We have geographically re-deployed. There will be some modest reduction, but that will be achieved through attrition and sales-force management.”

Pfizer faces “a number of uncertainties,” including the loss of patent exclusivity on a number of key products, the outlook for its Cox-2 franchise — which includes painkillers Bextra and Celebrex — and “continued pricing pressures and market acceptance of new products,” McKinnell said.

But the cost cutting is expected to yield “significant” benefits beginning next year, according to Pfizer, which is predicting a return to double-digit earnings growth in 2006. The following year, expanding revenue from new and existing products will accelerate that growth, Pfizer said.

The company’s outlook is a sharp contrast to analysts’ current estimates for Pfizer’s earnings to rise 4.2 percent in 2006 but fall flat again the year after. By comparison, the industry is expected to grow profits by an average of 2.1 percent this year, 6.9 percent in 2006 and 7.4 percent in 2007.

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