BUSINESS
BIOTECH RESULTS SHOOT UP Earnings at biopharmaceutical companies grow as firms market new products and cut losses WILLIAM J. STORCK, C&EN NORTHEAST NEWS BUREAU
D
ESPITE LOSSES AT MANY FIRMS,
biopharmaceutical companies performed better in the first quarter than did their pharmaceutical counterparts. The sales and earnings increases among the biotech companies came on approvals of new products, increased demand for existing therapies, and increased sales overseas. Many firms also note that a greater proportion of total revenues is coming from product sales. For the 30 biotech firms surveyed by C&EN, earnings increased 50.9% from first-quarter 2003 to a total of $1.58 billion. The percentage increase for earnings was almost twice that of revenues, which rose 276% to $8.46 billion. And the earnings boost spurred an increase in aggregate profitability for the firms to 18.7% in the first quarter of this year from 15.8% in the same period in 2003. In a relatively young industry where many nascent firms often operate in the red, one of the factors that affected the first-quarter earnings total for the entire group was relatively narrower losses among these companies. Of the 30 companies, 13 racked up losses totaling $4070 million in the first quarter of last year. In this year's period, 14 companies showed a loss, but despite there being an additionalfirm,total losses were cut to $311.1 million. One of the biggest turnaround stories in the quarter was at ImClone Systems. Last year, the company was mired in the insider trading scandal that ensued from the Food & Drug Administration's failure to approve Erbitux (cetuximab), leaving the firm without what it hoped would be its most important product, and leaving investors wondering whether the company would survive. In thefirstquarter of 2003, ImClone had revenues of $19.6 million with no income from manufacturing. And the company had a loss of $34.8 million. In this year's first quarter, the company's profile has changed. FDA approved Erbitux, and ImClone began distribution on Feb. 24. Between then and the end of March, the company received royalty revHTTP://WWW.CEN-ONLINE.ORG
enue of $6.8 million from the drug. In addition, ImClone recorded $25.5 million in manufacturing revenue, $675 million in license fees and milestone revenue, and $9.5 million in collaborate agreement revenue. This adds up to $ 109.6 million, more than five times revenues in the first quarter of last year. And the $34.8 million loss in the
2003 quarter has been replaced by $62.7 million in earnings in this year's quarter. Daniel S. Lynch, chief executive officer, says the company's earnings announcement is very significant for ImClone Systems, "as the Feb. 12 FDA approval of Erbitux to treat late-stage, metastatic colorectal cancer has allowed us to begin what we believe will be a period of continued profitability We were pleased with the sales of Erbitux in just overfiveweeks of product shipments during the quarter, as they appear to indicate that physicians are rapidly integrating thisfirst-of-its-kindantibody into patients' treatment regimens." Amgen saw earnings increase 34.8% to $752.3 million as sales rose 33.0% to $2.34 billion. CEO Kevin Sharer says, "In the first quarter, Amgen continued to deliver strong operating results." In addition, he
BIOPHARMACEUTICAL COMPANIES Earnings rose in the quarter, but many firms still posted losses REVENUES" EARNINGS" CHANGE FROM 2003 REVENUES EARNINGS ($ MILLIONS)
32.1% def def 26.3 def
31.7% def def 26.6 def
805.5 61.5 -23.4 -19.7 13.7
10.4 9.2 11.3 13.7 21.3
1.9 8.4 18.3 17.6 24.4
56.5 87.2 132.4 459.2 -5.7
49.6 101.8 nm nm nm
13.8 33.0 def 57.2 def
14.5 30.6 def def def
-19.1 -13.1 111.0 -20.6 -4.8
-27.6 58.4 12.1 13.3 -10.1
nm nm 1.4 nm nm
def def 23.0 def def
def def 25.4 def 1.1
16.9 1,073.8 27.6 41.3 33.6
-12.4 175.6 -12.6 13.6 1.3
-55.2 8.4 21.6 25.2 20.0
nm 0.3 nm 18.3 -56.7
def 16.4 def 32.9 3.9
def 17.7 18.1 34.8 10.7
99.5 557.1 326.3 17.4 17.5
-19.7 106.1 74.6 -14.2 -36.2
17.8 36.6 7.2 42.6 9.4
nm 76.2 18.2 nm nm
def 19.0 22.9 def def
def 14.8 20.7 def def
27.6%
50.9%
18.7%
15.8%
33.0% -43.7 -24.8 24.0 -44.8
$2,343.0 6.7 11.8 541.7 11.2
$752.3 -37.3 -4.2 142.6 -21.9
Celgene Cephalon Chiron Enzon Pharmaceuticals Genentech
82.9 215.0 379.7 44.4 975.1
8.6 19.7 42.9 6.1 207.6
68.8 48.6 23.8 2.8 30.1
Genzyme Gilead Sciences Icos ImClone Systems InterMune
491.3 309.1 16.5 109.6 38.1
67.9 101.9 -86.3 62.7 -8.7
Isis Pharmaceuticals Ligand Pharmaceuticals Medimmune Millennium Pharmaceuticals NABI Biopharmaceuticals
12.3 36.6 483.2 92.6 46.3
Neurocrine Biosciences Novo Nordisk Protein Design Labs QLT Savient Pharmaceuticals Sepracor Serono Shire Pharmaceuticals Transkaryotic Therapies Vertex Pharmaceuticals
Amgen Amylin Pharmaceuticals ArQule Biogen Idee Cèlera Genomics
T0TALd
PROFIT MARGIN0 2004 2003
$8,458.1 $1,583.4
34.8% nm nm 22.8 nm
a Revenues based on calendar year, including 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 Percentages calculated from combined revenues and earnings, def = deficit, nm = not meaningful.
C & E N / MAY 1 7, 2004
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notes the approval of Amgen's first smallmolecule drug, Sensipar (cinacalcet HC1) for the treatment of secondary hyperparathyroidism in dialysis patients. Sharer also sees as significant the company's intention to acquire Tularik, "which should allow us to expand our research and gain a presence in the San Francisco Bay Area's biotechnology hub while bringing a wealth of talent and innovation in gene regulation with small molecules." ONLY THREE OF the c o m p a n i e s - C h i ron, Enzon Pharmaceuticals, and Savient Pharmaceuticals—had measurable earnings declines in the quarter. Chiron's earnings fell 23.4% to $42.9 million, even though revenues increased 23.8% to $379.7 million. The company blames, in part, the acquisition of vaccine maker Powderject, "as a portion of the facilities acquired was not active influvaccine production for a significant part of the quarter." Chiron also notes the product mix was heavily influenced by the shift of sales of the Encepur vaccine for tick-borne encephalitis to the fourth quarter of2003 from the first quarter of 2004. Enzon's earnings fell 19.7% to $6.1 million on a 2.8% increase in revenues to $44.4 million. Despite the decline, CEO Arthur J. Higgins says: "This quarter is highlighted by several notable achievements, with the most significant being adding OncoTCS to our product pipeline and soon thereafter submitting a New Drug Application for this important product. With a strengthened pipeline, continued strong performance from our marketed products, and the potential for a product approval and launch in the near term, Enzon is well positioned for continued growth." OncoTCS would be used for treatment of relapsed, aggressive nonHodgkin's lymphoma. The third firm, Savient Pharmaceuticals, had a big percentage decline from a small base as earnings dropped 56.7% to $1.3 million on 20.0% revenue growth to $33.6 million. The earnings decline was caused by rising costs rather than declining revenues. Many of the biotech companies are predicting a rosier future based on their latest results. For instance, Celgene, on the strength of its ninefold earnings jump, says it is increasing its 2004 earnings target to a range of 42 to 52 cents per share from its previous estimate of 4 0 to 50 cents per share. And it is increasing its revenue target to $365 million to $385 million from its earlier prediction of $360 million to $380 million. • HTTP://WWW.CEN-ONLINE.ORG
