Issue Date: March 15, 2004
RESULTS IMPROVE FOR BIOTECH FIRMS
The fourth quarter capped off a fairly good year for many biotechnology companies. Revenues increased, earnings were generally better--some firms saw their first positive results ever--and profit margins improved. In many cases, product sales made up a growing portion of total revenues.
C&EN's quarterly survey of biotech companies shows a total revenue gain for 27 firms of 27.9% to $8.16 billion in the fourth quarter. Revenues include product sales, collaborative or contract R&D funding, and royalties. While revenues rose nicely, earnings from continuing operations for the group soared 62.7% to $1.33 billion, providing an aggregate 16.3% profit margin, up from 12.8% in the same period a year earlier.
For all of 2003, revenues for the group jumped 32.4% to $28.6 billion, and earnings surged 74.9% to $4.89 billion. This drove profitability to 17.1% last year from 13.0% in 2002.
There were some big earnings gains in the fourth quarter, but often on small numbers. Three companies had triple-digit increases in earnings: Savient Pharmaceuticals, Nabi Biopharmaceuticals, and Gilead Sciences.
Savient showed a 486% earnings increase to $4.1 million on a 29.2% jump in sales to $39.8 million. For the full year, the company's earnings increased 43.3% to $13.9 million, as revenues rose 32.5% to $137 million. "Our solid 2003 results reflect the full-year impact of our portfolio of commercial specialty pharmaceutical products, strengthened by our acquisition of Rosemont Pharmaceuticals in late 2003," says Chief Executive Officer Sim Fass.
Nabi's earnings increased almost as much, rising 436% to $5.9 million. Revenues, however, were down 17.4% for the quarter to $48.0 million. For the full year, Nabi's earnings were up 333% to $9.1 million. Again, however, revenues declined--this time by 9.9% to $177 million.
The largest firm with a triple-digit increase was Gilead. Quarterly earnings were up 158% to $91.4 million on an 81.7% sales rise to $264 million. The growth, according to the company, was driven primarily by a 108% increase in sales of its Viread (tenofovir disoproxil fumarate) HIV management drug. For the full year, Gilead's revenues increased 86% to $868 million, and earnings were up 244% to $303 million.
Four biotech companies went from negative numbers in the fourth quarter of 2002 to positive ones in the 2003 quarter. ArQule posted earnings of $1.2 million in the 2003 quarter compared with a loss of $50.4 million in the 2002 period. Revenues were up 13.6% to $18.4 million.
FOR THE FULL YEAR, the company had $2.1 million in earnings after a $69.1 million loss in 2002 on a 4.3% increase in revenues to $65.5 million. "These results provide a solid base on which to continue Arqule's transition to an innovative, well-financed, oncology-focused biotechnology company," CEO Stephen A. Hill says.
Celgene moved up from a loss of $97.4 million in fourth-quarter 2002 to a gain of $4.6 million in the same period in 2003. Revenues increased 117% to $80.8 million. Earnings for the full year reached $12.8 million compared with a loss of $101 million in 2002, while revenues doubled to $272 million. This marked the company's first full year of profitability.
Ligand Pharmaceuticals had income of $7.9 million in the fourth quarter of 2003 compared with a loss of $6.7 million in the 2002 period. Revenues more than doubled, increasing 111% to $57.6 million. However, for the full year, it posted a loss of $35.5 million, somewhat more than its $32.6 million loss in 2002. Revenues for the year increased 46.1% to $141 million.
Paul V. Maier, Ligand's chief financial officer, says, "The accelerating prescription growth of Avinza (morphine sulfate extended-release capsules), which achieved 3.8% market share in the last full week of December 2003, coupled with significant progress in new pharmacy distribution, managed care acceptance, and positive physician acceptance, met or exceeded key 2003 goals."
QLT was the fourth company emerging from losses. In the fourth quarter, it had earnings of $9.0 million, against an $824,000 loss in the same three months of 2002. For the full year, the firm's earnings increased 229% to $44.8 million. Revenues were up 19.7% for the quarter to $39.5 million and 32.9% for the year to $147 million. QLT's good fortune came on increased sales and earnings, which it shares with Novartis, of Visudyne (verteporfin) for treatment of age-related macular degeneration.
Industry leader Amgen posted good results for the quarter, although earnings growth slightly lagged that of sales. Earnings increased 30.3% to $615 million on revenues of $2.35 billion, up 32.9% from the same period in 2002. For the full year, the increases were reversed, with earnings growing 52.8% to $2.54 billion on a 51.3% revenue boost to $8.36 billion.
Genentech, another old-line biotech company, saw fourth-quarter revenues rise 25.7% to $934 million, although earnings increased much less--16.7% to $145 million. For the full year, the company's revenues were up 27.7% to $3.30 billion, but its earnings rose a faster 31.3% to $635 million. More than half--$1.9 billion--of its revenues were in oncology product sales.
"Our 2003 results are indicative of the overall strength of our strategy of managing our business to build both short- and long-term value," says Genentech's chief financial officer, Louis J. LaVigne Jr. "We exceeded our earnings-per-share performance targets, while at the same time making significant investments in our new product launches and increasing our R&D investments for future growth potential."
Building for the long term off of good 2003 results was a common theme at biotech companies large and small. For instance, Biogen Idec says it has reaffirmed its long-term goal of achieving 15% compound annual revenue growth and approximately 20% compound annual earnings-per-share growth through 2007.
At Genzyme, CEO Henri A. Termeer says: "Last year was a transforming year in many ways, and we begin 2004 as a more diversified, truly global company. We continue to build a business that is sustainable over time."
Ligand has a somewhat mixed outlook. While it expects a positive full-year 2004, it sees first-half losses and second-half strong profits. The company views "2004 as a transition year to a high-growth, profitable biopharmaceutical business with tremendous strength of product assets that drive growth going forward."
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