Pfizer's cost cutting ability leads to upside guidance

Pfizer (PFE) reported second quarter profit that beat expectations and boosted its 2009 profit view based on slightly higher revenue expectations and lower cost projections. Pfizer has historically shown great ability to lower costs, which makes me confident they can meet their new earnings goal.

Revenue during the quarter fell 9.4% to $10.98 billion, essentially all due to currency changes. On the operating side, Pfizer was able to reduce COGS, marketing and administrative costs, and R&D as a percentage of total sales. Gross margin improved 290 basis points to 84%.

Pfizer’s $65.64 billion acquisition of rival Wyeth (WYE) remains on track to close this year, but still requires U.S. antitrust approval. Pfizer, like much of the rest of the pharmaceutical industry, is trying to cope with decreasing revenue from patented drugs and difficulties developing new drugs.

Pfizer is acquiring Wyeth to gain access to fast-growing biotechnology drugs and vaccines as the world’s best-selling drug, Lipitor, faces patent expiration in 2011.
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Peter J. Lazaroff