Pfizer Still Looking to Buy; Results Beat Views -- 2nd Update

By Jonathan D. Rockoff and Michael Calia 

Pfizer Inc. said Tuesday it was looking at potential deals, including big ones, after earlier dropping its pursuit of British rival AstraZeneca PLC.

The New York pharmaceutical company said U.K. takeover rules didn't allow it to consider reviving its interest in AstraZeneca for the time being.

The update came as Pfizer said its second-quarter revenue edged lower to $12.8 billion due to competition from low-price generic medicines, though its results for the period topped expectations.

In May, Pfizer dropped a $120 billion proposal to buy AstraZeneca. Pfizer Chief Executive Ian Read said the company is looking at deals, regardless of size.

"But we have no ongoing work looking at AstraZeneca because we are in a six-month quiet period" imposed by U.K. takeover rules, Mr. Read said in an interview.

One driver of Pfizer's interest in AstraZeneca, executives have said, was the chance to cut its tax burden by locating the combined company in the U.K., a maneuver known as a tax inversion. Mr. Read urged U.S. lawmakers to fix what he called the "competitive disadvantage" that American companies face against foreign rivals enjoying more-favorable tax rates and rules.

"There is a disadvantage to being an American company because something called taxes, which is an expense, are a lot higher," Mr. Read said.

Chief Financial Officer Frank D'Amelio also said the company was in the "late innings" of its major cost-cutting initiatives. After making billions of dollars in cuts in recent years, he said Pfizer doesn't see the opportunity for more such large reductions, unless the company does a big acquisition.

In the second quarter, the company posted earnings of $2.9 billion, or 45 cents a share, down from $14.1 billion, or $1.98 a share, in the prior-year period. Results for the same period a year ago included about $10.5 billion in pretax benefits from selling its animal-health unit as well as a legal settlement.

Excluding such items, earnings rose to 58 cents a share from 56 cents. Analysts had projected per-share earnings of 57 cents and revenue of $12.47 billion.

Revenue fell 2%, hurt by foreign-currency changes and the expiration of Pfizer's co-promotion with Amgen Inc. of Enbrel, a psoriasis and rheumatoid arthritis drug.

Pfizer lowered its revenue outlook for the year, pointing to the looming generic competition for blockbuster painkiller Celebrex in December. The company now expects $48.7 billion to $50.7 billion, down from its previous range of $49.2 billion to $51.2 billion.

Rival drug maker Merck & Co. said its second-quarter sales fell slightly to $10.9 billion as its drugs faced competition from generics and new rivals.

Merck reported a profit of $2 billion, or 68 cents a share, up from $906 million, or 30 cents a share, a year earlier. A large part of the bump, however, came from items including AstraZeneca exercising an option to buy Merck's interest in heartburn remedies Nexium and Prilosec.

Excluding that item, the company's adjusted per-share earnings rose to 85 cents from 84 cents.

To find new sales growth, Merck is trying to focus on therapeutic areas where it feels it is strongest, including drugs for cancer, hepatitis C and diabetes as well as vaccines.

Adam Schechter, who runs Merck's commercial operations, expressed confidence that regulators will approve pembrolizumab, an immunotherapy to treat skin cancer. "We are ready to launch pembrolizumab," Mr. Schechter said. The Food and Drug Administration decision deadline is Oct. 28.

Merck CEO Ken Frazier said Merck is interested in small deals to add to its portfolios of prescription drugs and animal-health products. He ruled out an inversion deal designed to reduce taxes.

Tess Stynes contributed to this article.

Write to Jonathan D. Rockoff at [e-mail] and Michael Calia at [e-mail]

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