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Biotech Results Rise in First Quarter

Profitable firms get more profitable, while others struggle to stem losses

May 23, 2005 | A version of this story appeared in Volume 83, Issue 21

The biopharmaceutical industry got off to a promising overall start in 2005, driven mainly by continued strong performance at a handful of powerhouse companies. Among smaller firms, a few trimmed their losses in the first quarter, but a larger group increased the red ink as they pursued the launch of money-making drugs.

For the 25 biotech firms surveyed by C&EN, total first-quarter 2005 revenues increased 19.0% over the year-earlier period to $9.40 billion, while earnings rose 21.4% to $1.76 billion. The aggregate profit margin for the surveyed companies improved slightly to 18.8% from 18.4%.

Although the overall numbers were good, stellar results from companies like Amgen, Genentech, and Gilead Sciences--including profit margins that exceed 30%--provided investors in the industry's numerous unprofitable firms with a reminder of biotechnology's financial potential.

Industry leader Amgen reported a 20.9% increase in revenues to $2.83 billion and a 22.9% rise in earnings to $924 million. Worldwide sales of Amgen's largest selling drug, the anemia treatment Aranesp, increased 33% in the first quarter to $723 million. Sales of an older anemia treatment, Epogen, were down slightly to $583 million.

Amgen's combined sales of Neulasta and Neupogen--both used to decrease infection related to chemotherapy--rose to $795 million in the quarter, an increase of 20%. Overall, Chief Executive Officer Kevin Sharer says, "We are off to a great start in 2005." He increased the firm's prediction of earnings for the year to a range of $2.80 to $2.90 per share, up from a previous range of $2.70 to $2.85.

At Genentech, earnings rocketed 50.1% to $312 million on a 49.9% revenue gain to $1.46 billion. The firm's first quarter was fueled by four new products launched in 2003 and 2004, according to CEO Arthur D. Levinson.

NOTABLE IS the colorectal cancer drug Avastin, which had $203 million in sales in the quarter and $676 million in sales in the 12 months following its launch, making it the most successful U.S. oncology product launch to date, Genentech says. Tarceva, a lung cancer treatment, had sales of $47.6 million in the first quarter, which was its first full quarter of sales.

Gilead Sciences' earnings gain--54.2% to $157 million on a 39.2% revenue rise to $430 million--topped even Genentech's. And its profit margin of 36.5% for the quarter led the biotechnology industry.

Gilead's strength continues to be its HIV product franchise, which had sales of $301 million in the quarter, up 47% over the 2004 period. The company launched the combination product Truvada in the U.S. in August 2004 and had higher sales of its components Viread and Emtriva as stand-alone products. "We will continue to invest in international product launches and R&D programs that support our strategy of building a leading worldwide anti-infective franchise," says John F. Milligan, the firm's chief financial officer.

Biogen Idec, another biotech major, had a disappointing first quarter, posting a 25.8% earnings decline to $106 million on an 8.5% revenue gain to $588 million. During the quarter, the firm took a $36 million charge to reflect voluntarily suspending sales of the multiple sclerosis (MS) drug Tysabri following reports of patient deaths during a clinical trial.

On the brighter side, Biogen Idec pulled in $160 million in copromotion profits, up 20%, from its joint venture with Genentech related to Rituxan, a treatment for non-Hodgkin's lymphoma. Sales of Avonex, another MS treatment, were up 5% in the quarter to $374 million.

Amylin Pharmaceuticals hopes to join the ranks of the biopharmaceutical giants with two new diabetes medicines--Symlin and Byetta--which were recently approved by the Food & Drug Administration. Both are expected to be in pharmacies by June 1.

"The remainder of 2005 is set up to be a year of transformation for Amylin," CEO Ginger L. Graham says. Meanwhile, the company continues to lose money: $43.6 million in the first quarter against $37.3 million in the year-earlier period.

Celera Genomics continued its shift in the quarter away from data supply and toward drug discovery. In announcing quarterly results, the firm revealed plans to discontinue its business of selling information gleaned during its race to decode the human genome. Its first-quarter revenues fell 26.8% to $8.2 million, largely, it says, as a result of expiring agreements to sell genomic information. Celera's first-quarter loss, $21.0 million, was about the same as a year ago.

A few small biopharmaceutical firms managed to trim their losses in the quarter. Protein Design Labs posted a $2.7 million loss, against $12.0 million a year ago. The company completed the $325 million acquisition of ESP Pharma late in the quarter in a move intended to give it a stable of marketed products. And Sepracor reported a loss of $22.6 million, versus a loss of $50.4 million in the first quarter of 2004.

But other firms increased their losses. Vertex Pharmaceuticals lost $42.8 million in the quarter, versus a loss of $36.2 million in the year-ago period. The firm attributes the deterioration to higher R&D expenses, including an increase of $12.2 million related to clinical trials of hepatitis C and inflammation drug candidates.

And Millennium Pharmaceuticals increased its loss--to $26.8 million from $20.6 million in the year-ago quarter--despite a 33.6% increase in revenues to $124 million. The revenue gain came from 51% higher sales of Velcade, a multiple myeloma drug, and increased milestone payments from its Velcade development deal with Johnson & Johnson. "Millennium continues to establish a track record for achieving its financial goals by growing its revenues and managing expenses," says Marsha Fanucci, chief financial officer.


For the group, earnings rose in the first quarter, but individual firms' results varied widely

Amylin Pharmaceuticals4.3-43.6-36.3nmdefdef
Biogen Idec587.8105.88.5-25.818.026.3
Celera Genomics8.2-21.0-26.8nmdefdef
Gilead Sciences430.4157.
ImClone Systems85.828.8-22.1-11.933.629.7
Isis Pharmaceuticals7.4-17.1-39.8nmdefdef
MedImmune 509.8114.14.32.822.422.7
Millennium Pharmaceuticals123.7-26.833.6nmdefdef
NABI Biopharmaceuticals26.1-15.8-43.6nmdefdef
Neurocrine Biosciences11.9-18.8-29.6nmdefdef
Novo Nordisk1,258.4213.611.417.017.016.2
Protein Design Labs38.8-2.740.6nmdefdef
Shire Pharmaceuticals333.710.43.1-
Vertex Pharmaceuticals28.6-42.863.4nmdefdef
a Revenues include product sales, collaborative or contract R&D funding, and royalties. b After-tax earnings from continuing operations, excluding significant extraordinary and nonrecurring items. c After-tax earnings as a percentage of sales. d For companies listed. Percentages were calculated from combined revenues and earnings. nm = not meaningful. def = deficit.



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