Healthy Skepticism Library item: 14975

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Rubenstein S.
Pfizer Takes $2.3 Billion Charge Linked to Bextra Probe
The Wall Street Journal Blog 2009 Jan 26
http://blogs.wsj.com/health/2009/01/26/pfizer-takes-23-billion-charge-linked-to-bextra-probe/

Full text:

If you’re going to take a $2.3 billion earnings hit over government investigations, you might as well announce it the same day everybody’s more interested in your $68 billion deal.

Amid the hullaballoo over Pfizer’s bid for Wyeth today, Pfizer announced its fourth-quarter earnings, which fell to $266 million from $2.72 billion a year earlier, due primarily to that enormous charge. It stems from an agreement in principle that Pfizer made with the U.S. Attorney in Massachusetts to resolve probes over alleged off-label marketing of now-withdrawn painkiller Bextra, plus “other open investigations,” the company said.

That $2.3 billion charge dwarfs Eli Lilly’s recent record-breaking $1.42 billion settlement with the Justice Department over off-label marketing of antipsychotic Zyprexa.

Last October, Pfizer agreed to pay $745 million for agreements in principle to settle personal injury suits over Bextra and sister painkiller Celebrex. Plus, there was $60 million for attorneys general in 33 states and the District of Columbia, and $89 million to resolve class actions.

But those settlements didn’t apply to the “investigation by the Department of Justice of the marketing of the company’s Cox-2 medicines, particularly Bextra,” Pfizer said in a recent quarterly filing.

Pfizer’s earnings also show the kind of pain the company has been in that’s leading to the Wyeth deal. Sales fell 4% to $12.35 billion, weighed down by generic competition to allergy drug Zyrtec. Sales of smoking cessation drug Chantix also dropped 36% to $180 million amid controversy over its safety.

The company also said it expects a 10% reduction of its workforce, a new cost-cutting initiative that’s part of a broader 15% reduction in the combined Pfizer-Wyeth. Between the two companies, the job cuts will total around 18,000 people.

Wyeth also released its earnings, and they didn’t look so great either. Fourth-quarter profit slid to $960 million from $1.02 billion a year earlier, on sales that fell to $5.35 billion from $5.76 billion. One big issue was sales of heartburn drug Protonix, which dropped 60% to $185 million due to unexpected generic competition.

Two bright spots for Wyeth were Prevnar, whose sales rose 8% to $603 million, and Enbrel, which rose to $899 million. Those two products are key reasons Pfizer wants Wyeth.

Update: The job-cut figure at the two companies combined is now estimated at 19,500. See this post for more on the math.