BUSINESS
DRUG EARNINGS FLAT IN SECOND QUARTER Sales were up slightly, but earnings were flat in the quarter and rose only a bit for the half year ANN M. THAYER, C&EN HOUSTON
Q
UARTER AFTER QUARTER FOR
the past few years, leading pharmaceutical companies have generally reported double-digit growth in sales and earnings. This trend showed signs of slowing in the first quarter of 2002, and then clearly came to a halt in the second quarter. However, although combined earnings didn't grow, none of the world's major drug producers reported a loss, excluding special and one-time charges. Combined second-quarter 2002 sales for 15 leading drug companies were $68.0 billion, up 5% compared with the same period last year. Overall earnings for the group remained unchanged at $14.2 billion. Although earnings didn't grow, only a few individual companies could be blamed for
dragging down the industry's results, since many others experienced healthy gains. Bristol-Myers Squibb was the primary culprit, with quarterly sales down 14% to $4.05 billion and net earnings down 60% to $440 million. Sales of the company's major products—the anticancer drugTaxol, antianxiety drug BuSpar, and diabetes drug Glucophage—declined 93% compared with second-quarter 2001 because of generic competition. Attempts to reduce wholesaler inventories also bit significantly into sales. Excluding Bristol-Myers, combined results for the remaining 14 drugfirmswere up 6% for the quarter and net earnings were up 5%. Missing from the group is Roche, which reported only half-year results as C&EN went to press; its six-month sales
rose 3%, but its earnings plummeted 27%. Generic competition also affected results at Eli Lilly and Merck. Merck's second-quarter pharmaceutical sales were down 2% to $5.16 billion, and net earnings dropped 6% to $1.66 billion. The impact on Lilly was even greater: Sales dropped 9% to $2.78 billion, and net earnings dropped 20% to $659 million. IN CONTRAST, sales forJohnson & Johnson's diversified health care business rose 11% to $9.07billion. Net earnings climbed 16% to $1.84 billion. More than half ofthe companies surveyed—but particularly Aventis, AstraZeneca, Baxter International, GlaxoSmithKline, Pharmacia, and Pfizer—posted better than average sales and earnings growth. Sales were up at Novartis, but net earnings declined. Although Wyeth also reported solid double-digit sales and earnings growth, the company's future performance is expected to be hurt by recent clinical study results that suggest women should stop using combination hormone replacement therapy (C&EN,July 15, page 8). Products involved in the study are one of Wyeth's leading franchises and contributed about $2 billion in sales last year. Combined results for the 15firmswere
DRUG COMPANY RESULTS Sales were up, but earnings lagged in the second quarter and first half SALES EARNINGS3 ($ MILLIONS)
Abbott Laboratories0 AstraZeneca Aventisd Baxter International Bristol-Myers Squibb6
PROFIT MARGINb 2002 2001
FIRST-HALF 2002 SALES EARNINGS3 CHANGE FROM 2001 SALES EARNINGS ($ MILLIONS)
9% 7 19 19 -60
17.9% 17.7 14.4 14.8 10.9
17.2% 17.6 12.9 13.5 23.4
11% $8,504.2 $1,625.3 9 8,803.0 1,733.0 10 7,902.0 1,090.0 10 523.6 3,972.0 8,135.0 1,025.0 -13
SECOND-QUARTER 2002 CHANGE FROM 2001 SALES EARNINGS
$4,314.9 4,382.0 3,993.0 2,022.0 4,053.0
$771.0 775.0 576.0 300.0 440.0
5% 7 7 8 -14
Eli Lilly* GlaxoSmithKline9 Johnson & Johnson11 Merck' NovartisJ
2,775.2 7,954.0 9,073.0 5,159.6 5,053.0
658.5 1,915.0 1,843.0 1,655.7 1,256.0
-9 9 11 -2 3
-20 10 16 -6 -8
23.7 24.1 20.3 32.1 24.9
27.3 23.7 19.4 33.2 27.9
5,336.3 15,261.0 17,816.0 9,962.0 9,911.0
1,287.7 3,537.0 3,677.0 3,213.6 2,346.0
Pfizerk Pharmacia1 Schering AG Schering-Plouqhm Wyethn
8,033.0 3,553.0 1,298.0 2,833.0 3,502.8
2,086.0 513.0 138.0 633.0 599.9
8 8 4 8 10
10 6 0 0 16
26.0 14.4 10.6 22.3 17.1
25.4 14.7 11.0 24.2 16.2
16,452.0 6,680.0 2,540.0 5,389.0 7,146.4
4,519.0 919.0 279.0 1,232.0 1,471.8
TOTAL0
$14,160.1_
5%
0%
20.8%
PROFIT MARGIN15 2002 2001
13% 14 24 26 -56
19.1% 19.7 13.8 13.2 12.6
18.8% 18.8 12.2 11.4 25.0
-9 7 11 -2 6
-21 12 17 -5 3
24.1 23.2 20.6 32.3 23.7
28.0 22.2 19.6 33.1 24.4
9 6 5 9 8
12 8 6 3 14
27.5 13.8 11.0 22.9 20.6
26.7 13.5 11.0 24.3 19.5
6%
2%
21.3% I 21.9%
a After-tax earnings from continuing operations, excluding significant extraordinary and nonrecurring items, b After-tax earnings as a percentage of sales, c Includes hospital product sales of $962 million for the quarter and $1.81 billion for the half, and nutritional product sales of $826 million for the quarter and $1.70 billion for the half, d Excludes crop science and animal nutrition businesses divested during the quarter, e Includes nutritional sales of $489 million for the quarter and $952 million for the half, f Includes animal health sales of $162 million for the quarter and $330 million for the half, g Includes consumer product sales of $1.18 billion for the quarter and $2.25 billion for the half, h Includes consumer product sales of $1.65 billion for the quarter and $3.25 billion for the half, and medical devices and diagnostics sales of $3.17 billion for the quarter and $6.13 billion for the half, i Excludes Merck-Medco managed health business, which was slated for spin-off. j Includes animal health sales of $159 million for the quarter and $309 million for the half, and nutrition/baby food sales of $571 million for the quarter and $1.12 billion for the half, k Includes animal health sales of $274 million for the quarter and $513 million for the half, and consumer product sales of $1.33 billion for the quarter and $2.60 billion for the half. I Excludes Monsanto agricultural operations pending spin-off, but includes animal health sales of $122 million for the quarter and $241 million for the half, m Includes animal health sales of $171 million for the quarter and $321 million for the half, and consumer product sales of $188 million for the quarter and $387 million for the half. n Includes animal health sales of $194 million for the quarter and $356 million for the half, o Percentages calculated from combined sales and earnings.
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C & E N / AUGUST 1 9, 2002
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