If you have an ACS member number, please enter it here so we can link this account to your membership. (optional)

ACS values your privacy. By submitting your information, you are gaining access to C&EN and subscribing to our weekly newsletter. We use the information you provide to make your reading experience better, and we will never sell your data to third party members.



Drug Earnings Rise, Albeit Unevenly

Weak dollar helps U.S. companies; European earnings increase in the single digits

August 23, 2004 | A version of this story appeared in Volume 82, Issue 34

"Generics" is probably one of the least favorite words for pharmaceutical executives, given that patent expirations are creating generic challengers to their expensive branded products. GlaxoSmithKline says generic competition to Paxil and Wellbutrin had a "significant impact" on its second-quarter results. Although the weakened dollar worked in its favor, Bristol-Myers Squibb reports feeling the impact of generic competition for Taxol in Europe. Exchange rates displeased European drug companies, but the effect leveled off a bit in the quarter, according to Schering AG.

Combined second-quarter sales for pharmaceutical firms surveyed by C&EN totaled $80.2 billion, an increase of 9.7% over the same period in 2003. Earnings rose to $16.9 billion, up 11.8%. The industry's aggregate profit margin, which is earnings as a percentage of sales, was 21.0%, only slightly above the 20.7% of last year's second quarter.

Earnings for U.S. companies increased by 15.6%, and total sales were up by 12.7%. Although the profit margin for U.S. companies advanced to 21.8%, four of the nine U.S firms surveyed took hits in their earnings. European earnings were up a modest 4.6%, with results from Glaxo and Schering pushing the average down.

It was a mixed quarter for individual companies. Earnings at Bristol-Myers Squibb rose by 4.0%. The firm's second-quarter sales were up 5.9%, with U.S. sales showing a 3.0% increase and international sales, 10%. The company expects pressures due to patent expirations from this year through to 2007. Among the drugs with expiring patents are the diabetes drug Glucophage and the cancer drug Paraplatin in the U.S. and the anticancer agent Taxol in Europe. In both regions, the blood pressure medication Monopril is losing its exclusivity, as is the cholesterol-lowering drug Pravachol.

Pfizer's quarterly sales increased by 24.0%, and earnings rose a sharp 54.1%. The cholesterol-lowering drug Lipitor drew revenues of $2.4 billion, up 17%. Two new drugs were introduced in the second quarter: the cardiovascular medication Caduet and Spiriva, for pulmonary disease.

Johnson & Johnson's sales rose 11.1% in the second quarter, with earnings up 16.5%. Cypher, the company's coronary-artery-opening stent, did not drive growth as much as in recent quarters, given the competition particularly with Boston Scientific's Taxus stent. Strong pharmaceutical performers for J&J were arthritis and Crohn's disease treatment Remicade, the antiepileptic drug Topamax, Duragesic for pain, the antipsychotic Risperdal, and Natrecor for congestive heart failure. Sales of the anemia drug Procrit-Eprex were affected by competition from Amgen's Aranesp.

Earnings at Eli Lilly rose 6.7% in the second quarter, while sales increased 15.2% due to newer products such as the mesothelioma drug Alimta, Cialis for erectile dysfunction, Forteo for osteoporosis, the attention deficit hyperactivity disorder drug Strattera, the antidepressant Symbyax, and the sepsis treatment Xigris. Together, new products contributed 10% of total sales, or $350 million, for Lilly.

Schering-Plough reported a loss of $23 million in the quarter. Sales were down 7.0% compared with the same period of 2003, with a patent loss for hepatitis C medication Rebetol contributing to the decline. The company is pinning hopes on Vytorin, a newly launched cholesterol-lowering therapy that combines Merck's Zocor and Schering-Plough's Zetia in a single tablet. Unlike other drugs in this market, Vytorin works in a dual fashion, inhibiting cholesterol in both the liver and intestine.

Merck is equally optimistic about the drug's possibilities. Second-quarter sales at Merck grew 9.0%, although earnings decreased 0.9% over second-quarter 2003. Looking ahead, the company sees the high number of women whose bone loss goes undiagnosed as evidence of strong potential growth in the osteoporosis market and for its drug Fosamax.

IN EUROPE, individual companies showed varying results. Roche does not report quarterly earnings, but those for the first half of 2004 more than doubled from first-half 2003. Sales gains were 28% in oncology, 71% in virology, and 19% in transplantation areas. Roche's applied science division showed a sales increase of 10% in the first half.

GlaxoSmithKline's second-quarter earnings decreased by 16.8% as significant generic competition hampered performance of both Wellbutrin and Paxil. Advair, the blockbuster asthma drug, brought in 22% more revenue in the second quarter than a year ago. Advair and the diabetes drug Avandia are "engines of growth," the company says.

AstraZeneca's quarterly sales increased 19.1%, with earnings up 25.1% compared with the prior year's quarter. Strong performers were the oncology products Iressa and Arimidex, the cardiovascular drug Crestor, the heartburn medication Nexium, the schizophrenia treatment Seroquel, and Symbicort for asthma.

Aventis' second-quarter sales showed an increase of 1.2%, with earnings up by 34.6%. Aventis sold its share of the textiles-dye business DyStar in April and its therapeutic proteins business at the end of the first quarter. Sanofi-Synthélabo does not report quarterly, but for the first half of 2004 its sales increased 18.9%. During the quarter, Sanofi received Federal Trade Commission approval to take over Aventis in a $64 billion deal. Measured by sales, the combined firm will be the world's third largest drug company after Pfizer and Glaxo.

In the second quarter, companies show modest to strong sales and earnings



This article has been sent to the following recipient:

Chemistry matters. Join us to get the news you need.