NEW YORK -- Pfizer reported quarterly revenue well below Wall Street expectations on falling sales of key brands and generic drugs, underscoring its interest in pursuing a $106 billion bid for rival AstraZeneca to promote new business growth.
Pfizer (PFE) said Monday it raised its bid last week in response to what it had heard from AstraZeneca (AZN) shareholders and believed it to be a "compelling" offer.
AstraZeneca quickly rejected the sweetened bid, saying it "substantially" undervalued the company, and on Monday it declined to comment on Pfizer's substantial revenue shortfall in the first quarter.
"We are very disappointed with their unwillingness to engage in conversations," Pfizer Chief Executive Officer Ian Read said of AstraZeneca's management.
Pfizer said total first-quarter revenue fell 9 percent to $11.35 billion, which was $730 million below Wall Street expectations. Revenue would have fallen 6 percent, if not for the stronger dollar, which lowers the value of sales outside the United States.
Pfizer shares fell 2.6 percent to $29.95 in midday trading.
To assuage concerns about potential layoffs of researchers in Britain, Pfizer vowed that 20 percent of the research and development workforce of a combined company would remain in the U.K. That created fears that U.S. researchers would bear the brunt of expected job cuts, especially those at its oncology research center in La Jolla, California.
The largest U.S. drugmaker earned $2.33 billion, or 36 cents a share, in the quarter. That compared with $2.75 billion, or 38 cents, in the year-earlier period, when the company reported gains from the transfer of product rights.
Excluding special items, Pfizer earned 57 cents a share. Analysts, on average, expected 55 cents, according to Thomson Reuters I/B/E/S.
"Definitely the results on the top line came in weaker than we were anticipating," said Morningstar analyst Damien Conover, who cited disappointing sales of generics outside the United States.
Pfizer's earnings ultimately met his expectations because the company was able to cut costs, Conover said.
Pfizer still expects 2014 adjusted earnings of $2.20 to $2.30 a share, but the forecast assumes that painkiller Celebrex won't face U.S. generic competition this year. Sales of the drug fell 4 percent to $624 million in the quarter, and could be jeopardized by ongoing U.S. patent battles in the United States.
Generics, Big Medicines Stumble
"What we're seeing is an unusually weak first quarter, but I'm not sure it will be reflective of the full year," said Richard Purkiss, an analyst with Atlantic Equities in London who noted the company didn't lower its full-year sales forecast.
Purkiss said a number Pfizer's key medicines, including Celebrex and impotence treatment Viagra "undershot" sales hopes in the quarter. Global sales of cholesterol fighter Lipitor, which is now facing cheaper U.S. generics, also disappointed.
Pfizer first approached AstraZeneca in January with an offer that valued AstraZeneca at 46.61 pounds a share. It made its second spurned approach on April 26, with an offer valued at 50 pounds ($84.34) a share.
If the merger goes through, it would be the largest acquisition of a British company by a foreign business. Under British takeover rules, Pfizer has until May 26 to announce a firm intention to make an offer or give up.
Sales in all three of Pfizer's operating segments declined from a year ago. Its established products unit, made up of hundreds of generic medicines and those about to lose patent protection, suffered the biggest fall with sales down 13 percent to $5.99 billion.
Pfizer provided detailed financial results for the three business units for the first time as a prelude to possibly divesting one or more of them by 2017.
Many analysts and investors hope Pfizer divests the established pharmaceuticals unit. It recently spun off its animal health and infant formula businesses in order to focus on the more lucrative patent-protected medicines. Proceeds from those deals also enabled Pfizer to aggressively buy back shares and boost its dividend.
Pfizer has said, however, it couldn't divest any of its units until 2017, after it has compiled three years of sales and earnings data for each.
In its earnings report, Pfizer said it still expected to buy back about $5 billion worth of its shares this year, with $1.7 billion already repurchased.
Sales at its Vaccines, Oncology and Consumer Healthcare unit fell by $20 million to $2.17 billion, while sales of global innovative pharmaceuticals, involving drugs that still have patent protection, fell 7 percent to $3.07 billion.