BUSINESS
TROUBLES PEAK FOR THE DRUG INDUSTRY PATENT LOSSES on many top-selling drugs caused
declines in both sales and earnings
SOME OF THE pharmaceutical industry’s biggest products stepped off the patent cliff between mid-2011 and mid-2012, and their swift replacement by generics had a major impact on companies’ earnings for the fourth quarter of 2012 and the full year. Six of the top 10 selling drugs in 2010 faced new and significant competition starting in 2011: Pfizer’s Lipitor, BristolMyers Squibb (BMS) and Sanofi’s Plavix, AstraZeneca’s Seroquel, and Eli Lilly & Co.’s Zyprexa all lost patent protection in the U.S. (C&EN, Dec. 10, 2012, page 15). Nexium and Crestor, both from AstraZeneca, met new competition in other markets. As a consequence, only three of the 11 big pharma firms tracked by C&EN saw sales and earnings grow in 2012. Overall, fourthquarter sales were down 1.6%, and earnings decreased 4.7%. For the full year, sales dropped 2.6%, and earnings slipped 3.6%. Of the firms experiencing major patent losses, AstraZeneca, Lilly, and BMS were the hardest hit. Each company has struggled to come up with new drugs to counter the revenue loss, and each has adopted a slightly different strategy in its attempt to return to growth. AstraZeneca has had one of the longest periods of sales decline and thus has made the most changes to its organization. Last year brought the loss of patent protection on the antipsychotic Seroquel, sales of which were promptly decimated by generics competitors. For the year, Seroquel sales dropped 70% to $1.3 billion. Meanwhile, loss of exclusivity in some European markets for four drugs—Seroquel, the blood pressure treatment Atacand, the heartburn pill Nexium, and the antibiotic Merrem—as well as generics competition in Canada for the cholesterollowering drug Crestor, added to the British firm’s overall sales decline. Despite a major R&D overhaul, AstraZeneca failed to deliver the stream of new drugs that it expected to emerge from its pipeline and offset the loss of Seroquel.
BRISTO L-MY ERS SQU IBB
LISA M. JARVIS, C&EN NORTHEAST NEWS BUREAU
effort involved traveling to 15 sites across nine countries and holding 18 town meetings attended by 8,500 employees. Soriot said the initial changes he has made at AstraZeneca were a direct result of those visits. “Throughout all my visits, whether with commercial or R&D colleagues, one common theme that I hear is a frustration with the complexity and bureaucracy in the organization,” Soriot told analysts. Employees complained decisions took too long to be made. His response was to cut a top management layer, giving R&D chief Martin Mackay and commercial operations head Tony Zook their walking papers. The goal of the new structure is to close the gap between senior management and the R&D leaders who drive the science. Later this month, Soriot will provide more details of how AstraZeneca will reinvent itself. Analysts think the company will need to make medium- to large-sized acquisitions to fill in the gaps in its portfolio. LARGER DEALS are less likely in the near
Fourth-quarter earnings were down 7.6% to $1.9 billion, based on a 15.8% decline in sales to $7.3 billion. For the year, sales fell 16.7% to $28.0 billion; earnings dropped 18.4% to $8.1 billion. The poor performance resulted in several management changes. AstraZeneca Chief Executive Officer David Brennan stepped down in April 2012 and was replaced six months later by Pascal Soriot, a former Roche executive. Soriot is slowly forming a plan for the company. In a call with investors to discuss the annual results, he disclosed that he has spent his first months doing a deep dive into the business. That
CLEAR STRATEGY
Bristol-Myers Squibb sees strong potential in its new blood thinner Eliquis.
term, Leerink Swann stock analyst Seamus Fernandez told investors in a research note, but “we continue to believe that the initial path forward on [mergers and acquisitions] for AstraZeneca should focus on rebuilding the U.S. product portfolio within the company’s current areas of strength.” At the same time, AstraZeneca should work on bolstering its specialty businesses through internal investment and small acquisitions, Fernandez argued. While AstraZeneca is eyeing acquisitions, Lilly CEO John C. Lechleiter is relying on his firm’s own R&D engine to restore growth. Lilly is going through possibly the toughest period in its history, with the loss of patent protection on its top-selling drug, the antipsychotic Zyprexa, in 2011 and generics competition for its new top seller, the antidepressant Cymbalta, set for 2014. The loss of exclusivity caused sales of Zyprexa to fall 63% to $1.7 billion last year. It also had an impact on Lilly’s bottom line: Fourth-quarter earnings dipped 2.5% to $945 million, and sales were down 1.5% to $6.0 billion. For the year, earnings fell 23.0% to $3.8 billion, based
Only three of the 11 big pharma firms tracked by C&EN saw sales and earnings grow in 2012. WWW.CEN-ONLINE.ORG
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