Pfizer cuts forecasts as strong dollar bites

Pfizer on Tuesday became the latest US drugmaker to warn a strengthening dollar was hurting its performance as it cut its outlook for full-year sales and revenues.

The pharmaceutical group generates almost 60 per cent of sales from outside the US, making it particularly exposed to a stronger greenback when it converts foreign revenues back into dollars.

Pfizer said it expected full-year revenues to be in the range of $44bn to $46bn, trimming $500m off the $44.5bn to $46.5bn range it published in the previous quarter. It also cut its full-year earnings per share outlook to $1.95 to $2.05, compared to its earlier forecast of $2.00 to $2.10.

"Our update to these guidance components is solely due to recent negative changes in foreign exchange rates and does not reflect any unfavourable changes to our operational outlook for the year," said Frank D'Amelio, Pfizer's chief financial officer.

The company reported first-quarter earnings per share of 51 cents, compared to the typical analyst expectation of 49 cents. Revenues of $10.9bn were about $200m higher than the average Wall Street forecast. Shares in Pfizer were virtually flat in premarket trading.

Two weeks ago, Johnson & Johnson, the world's largest healthcare group, also warned about the impact of a stronger dollar and cut its full-year earnings guidance.

However, other large pharmaceutical groups appear to be shrugging off the impact of a stronger dollar, such as Merck, which on Tuesday raised its outlook for full-year earnings.

"[Pfizer] did lower 2015 sales and earnings guidance but attributes the reduction to greater headwinds from foreign currency fluctuations. This is understandable, but also is in contrast to Merck, which is slightly raising its 2015 earnings guidance today despite similar headwinds," said Vamil Divan, an analyst at Credit Suisse.

Investors sent shares in Merck up by 4.8 per cent, although that was in large part due to the publication of results from a study which appeared to show its blockbuster diabetes drug Januvia does not increase hospitalisations for heart failure.

Januvia, a type 2 diabetes drug known as a "DPP 4 inhibitor", is Merck's best-selling drug, pulling in revenues of $1.4bn in the first quarter.

Earlier this month, the US drugs watchdog said a similar drug made by AstraZeneca, Onglyza, could raise the risk of the death, a warning that has weighed on Merck's share price.

Roger Perlmutter, executive vice-president of Merck, said headline results from a study of 15,000 participants had shown "there was no imbalance in heart failure hospitalisations" for patients on Januvia compared to other therapies. The full study will be published in June.

"This removes Merck's biggest overhang," said Seamus Fernandez, an analyst at Leerink.

Merck raised its full-year earnings per share guidance to a range of $3.35 to $3.48 compared to earlier guidance of $3.32 to $3.47.

It left its 2015 revenue guidance of $38.3bn to $39.8bn unchanged, even as it pencilled in a further $200m impact from foreign exchange movements, predicting that better operational performance will cancel out a stronger dollar.

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