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Biotech Shines In 2005

Treatments for cancer and arthritis propel sales and profits at biopharmaceutical firms

by Lisa M. Jarvis, C&EN Northeast News Bureau
March 20, 2006 | APPEARED IN VOLUME 84, ISSUE 12

The biotechnology industry continued to grow at breakneck speed in 2005, although much of that growth was due to expanded indications and greater demand for existing products, rather than newly launched drugs.

For the 25 biotech companies tracked by C&EN, combined fourth-quarter earnings skyrocketed 64.8%, while revenues grew by 22.7%. The combined profit margin was up 19.0%, compared with 14.1% in the fourth quarter of 2004.

For the full year, earnings improved by 32.2%, based on revenue growth of 22.1%. Full-year profit margins amounted to 20.2%, versus 18.6% in 2004.

Though only 10 of the 25 biotech firms tracked by C&EN drive the performance of the biotech industry, these leaders have clearly come into their own. Amgen has not only become the biggest biotech around, but its size now eclipses some of the bellwether traditional drug companies. Full-year revenues of $12.4 billion, a 17.8% increase over 2004, put the company ahead of Schering-Plough, and approaching Eli Lilly, in size.

Amgen's fourth-quarter revenue was up 12.4% to $3.3 billion, while earnings improved by 23.9% to $928 million.

Stronger U.S. demand pushed sales of Amgen's anemia treatment Aranesp up 24% in the quarter to $873 million. However, Aranesp also ate into sales of Amgen's other anemia product, Epogen, which saw sales fall 10% in the fourth quarter to $626 million. Amgen attributed the decline to a switch from Epogen to Aranesp among hospitalized patients on dialysis and expects Epogen to return to growth this year.

Despite a crowded field in the rheumatoid arthritis arena, Amgen's Enbrel offered up a strong performance, bringing in $674 million in the fourth quarter, a 19% increase.

Amgen appears to be feeling the same productivity pressures experienced by major pharmaceutical companies. Challenged to refuel its pipeline, it agreed to pay roughly $2.2 billion in the fourth quarter to acquire Abgenix. The deal gives Amgen full access to the monoclonal antibody panitumumab, which the companies have been codeveloping to treat colon cancer.

Genentech continued to ride the wave of its highly successful oncology portfolio, posting a 61.2% spike in fourth-quarter earnings to $363 million, based on a 43.9% rise in revenues to $1.9 billion.

Sales of the colon cancer drug Avastin were up 89% to $359 million in the fourth quarter. For the year, the drug brought in $1.1 billion, surging 108% to cross that magical "blockbuster" threshold.

Genentech's Herceptin benefited from new evidence that it helps to prevent the recurrence of tumors in women with early-stage breast cancer. Herceptin revenues nearly doubled in the fourth quarter to $250 million, while full-year sales were up 56% to $747 million.

The non-Hodgkin's lymphoma treatment Rituxan brought in $484 million in sales for the quarter, a solid 13% increase. Demand could take off in 2006, as the Food & Drug Administration last month approved the drug to treat rheumatoid arthritis.

Rituxan also buttressed sales at Biogen Idec, which copromotes the drug in the U.S. with Genentech. Biogen Idec's net earnings for the quarter were up 61.8% to $165 million based on a 7.7% rise in revenues to $633 million.

The multiple sclerosis treatment Avonex was the primary growth engine for the company, with fourth-quarter sales of the drug improving 12% to $413 million. Biogen Idec's slice of sales of Rituxan amounted to $182 million, a 13% increase.

To help ramp up growth going forward, Biogen Idec is trying to resuscitate Tysabri, a multiple sclerosis drug that was pulled from the market just months after its launch. The drug, when taken in combination with Avonex, was linked to a rare and often fatal nervous system disorder.

After hearing Biogen Idec's plan to establish a patient registry and monitoring program, an FDA advisory committee recommended earlier this month that the drug be allowed back on the market. FDA is expected to issue a final ruling shortly. Analysts have projected that, if reintroduced, Tysabri could enjoy peak sales exceeding $1 billion annually.

DEMAND FOR flu drugs led to healthier results at two biotech firms. Gilead Sciences posted stellar results, receiving a huge boost from the settlement of its dispute with Roche over the flu drug Tamiflu. Fourth-quarter revenues were up 64.9% to $609 million, while net earnings more than doubled to $257 million.

Royalties from Tamiflu totaled $101 million in the fourth quarter, compared with a paltry $5.8 million in the same period in 2004. The improvement resulted from the resolution of the dispute, which centered around claims that Roche was not putting enough manufacturing and marketing muscle behind Tamiflu, as well as swelling demand for the drug as countries prepare for a potential avian flu pandemic.

The flu also gave Chiron a shot in the arm. The company was able in 2005 to return its Fluvirin flu vaccine to the market, allowing it to turn in fourth-quarter earnings of $164 million following a $7.0 million loss in the fourth quarter of 2004. Fourth-quarter revenues were up 41.7%.

In 2004, regulatory authorities suspended Chiron's manufacturing license at the Liverpool, England, facility where it manufactures Fluvirin. The company managed to resolve its quality-control problems at the site in time for the 2005-06 flu season, enabling $96 million in sales of the vaccine in the fourth quarter.

However, Chiron was also stung by the 2005 withdrawal of its Begrivac flu vaccine following manufacturing issues at a plant in Marburg, Germany. Novartis is set to take over full ownership of Chiron sometime in the first half of 2006, a move that might help permanently resolve the inconsistencies that have hindered strong growth in the company's vaccines franchise.



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