Pfizer shares slump after profits warning

Pfizer stunned Wall Street yesterday by painting a gloomy picture for the next three years as it struggles to cope with competition from cheaper generic drugs, the loss of patents and safety concerns about Cox-2 painkillers.

Shares in the world's largest drug maker slumped 9 per cent to $21.90 on the New York Stock Exchange after the company said its third-quarter earnings were 52 per cent lower than last year at $1.59bn (£900m). Revenues also fell for the first time in four years.

Pfizer said profits for 2005 would be below expectations and added that it could no longer offer guidance for its performance in 2006 and 2007.

It is suffering from a decline in the sale of prescription medicines. Lipitor, its cholesterol-lowering medicine which is the best-selling drug in the world, was particularly weak, with US sales rising only 1 per cent to $1.74bn and worldwide sales up 6 per cent to $2.9bn.

Demand for Celebrex, a painkiller, has slumped. There has been a public outcry about its class of drugs, known as Cox-2 inhibitors, after Pfizer's rival Merck withdrew Vioxx from the market last year. Pfizer has been forced by US regulators to add a warning of heart risks to Celebrex's label.

Meanwhile, generic competition is gaining ground on Pfizer. Sales of its epilepsy and pain medicine Neurontin fell 80 per cent to $155m. The blockbuster antibiotic Zithromax had sales of $402m in the quarter, the last before it loses patent protection next month.

Like other large drug makers, Pfizer has been unable through its own research and development efforts to replenish its drug portfolio fast enough to replace blockbusters facing generic competition. Its bet on mergers and acquisitions to fill its pipeline also appears to be faltering.

Pfizer's acquisition of Pharmacia two years ago for nearly $60bn has not gone well. In the deal, it gained control of Celebrex and another Cox-2, Bextra. Pfizer ceased selling Bextra in April, while Celebrex sales have crashed.

Hank McKinnell, Pfizer's chief executive, said: "We are evaluating our financial prospects for 2006 and 2007... and are withdrawing our prior guidance for those years."

The declines will put pressure on Mr McKinnell to complete his plan to cut $4bn from annual costs by 2008.