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Pfizer, the world’s largest drug company by revenues, said it would file documents in mid-August to sell up to 20 per cent of its animal health division in an initial public offering, as it reported higher than expected quarterly earnings after cost-cutting.
Net income rose $3.25bn, or 43 cents per share, in the second quarter, from $2.61bn, or 33 cents a year earlier. Earnings excluding one-off costs beat analysts’ estimates of 54 cents by 8 cents as the company cut costs
But the loss of exclusivity for its Lipitor brand, a bestselling cholesterol-lowering medication, eroded Pfizer’s sales. Total revenues fell 9 per cent to $15.1bn in the three months to July 1, as sales of Lipitor dropped 53 per cent to $1.22bn.
The company has said it would spin off the animal health unit as part of a plan to restructure the company in order to offset losses from Lipitor, once the bestselling drug in the pharmaceutical industry’s history.
Pfizer said last year it would overhaul its business to focus on pharmaceuticals by disposing of its nutrition and animal health units after it lost exclusive rights to Lipitor after its patent expired in November, exposing the brand to cheaper generic competition.
Overhead costs were down 17 per cent, while research and development expenses dropped 24 per cent.
The company, which has shifted away from its bigger-is-better approach of diversifying through acquisitions, has already sold the nutrition division, which makes baby formula, to Nestlé for $11.8bn in April.
JPMorgan, Bank of America and Morgan Stanley have been helping Pfizer arrange the IPO for its animal health unit. Pfizer has been looking to raise about $3bn through a part-flotation of the division, which has been valued at as much as $18bn.
“The pending sale of our nutrition business and potential separation of our animal health business as a standalone public company to be named Zoetis remain on track,” said Ian Read, Pfizer’s chief executive on Tuesday.
“If the IPO is successfully completed, which we are targeting for the first half of 2013, we will have a variety of options to achieve a potential full separation of Zoetis.”
The company reiterated its 2012 adjusted earnings forecast of $2.14 to $2.24 a share in spite of expected currency headwinds.
“The real question is about the companies’ drugs pipeline, whether or not they will successfully sell their non-core businesses and what they will do with the cash once they do complete the sale,” said Mark Schoenebaum, healthcare, biotechnology and pharmaceuticals analyst at ISI Group, ahead of the earnings release.
Pfizer shares rose 1.4 per cent in pre-market trading in New York.