BUSINESS••• A ^ ^ I™ MÊX W% ^^ ^^ C ^ ^ U I \ J | \
|L I I IL I ^ H ^ ^ M^Ê I W^E \jP\^ ^^ ^^ ^ ^ D | ifm wJ I V ^ # ^ # 1
^^ I ^^ ^" | % Ι Γ 3 IJ2 ^^ ^^ ^^ ^^ ^^ ^ ^ D ^ ^ ^ ^ l I ^ ^ F D ^ % 1 I V \ / L / U Wr E HI V ^ # 1 · r
EARNINGS RISE FOR DRUG PRODUCERS 1
1
Third-quarter sales major Third-quarter sales and and earnings earnings grow grow for for major pharmaceutical biotech firms firms pharmaceutical and and biotech ANN M. M. THAYER, THAYER, C&EN C&EN HOUSTON HOUSTON BUREAU BUREAU ANN
S
INCE CONSUMERS NEED PHAR-
INCE CONSUMERS NEED PHARmaceuticals no matter what the maceuticals noeconomic matter what circumstance, and the pocircumstance, economic andnine political events during the past litical events during the past drug nine months did little to dampen did little toMore dampen producers'months financial results. thandrug half producers'financial results. More thanboth half of the major drug producers reported of theand major drug producers reported both sales earnings growth near or above sales and earnings growth near orfor above the group average. Revenues grew bio the group average. biopharmaceutical andRevenues smaller grew drug for discov pharmaceutical smaller drug discovery companies asand well, with earnings tak ery acompanies well, with earnings taking significantasjump. ing a significant jump. Combined third-quarter sales for 13 Combined third-quarter sales for 13 leading pharmaceutical companies hit leading pharmaceutical companies hit $67.4 billion, up 9% compared with the $67.4 billion, up 9% compared with the same period last year. Overall earnings same period last year. Overall earnings grew 13% to $13.3 billion. For the first grew 13% to $133 billion. For the first nine months of 2001, sales for this group nine months of 2001, sales for this group were up 10% to nearly $201 billion and were up 10% to nearly $201 billion and earnings rose 14% to $39 billion. Profit earnings rose 14% to $39 billion. Profit margins—earnings as a percentage of margins—earnings as a percentage of
I in cumulative online sales, Merck says. Baxter also had strong third-quarter and nine-month results. Double-digit sales and earnings earnings growth growth came from its and came largely largely from its bioscience products, which include clot clott 1 ting factors and immune globulins. HowHow " ê actors ever, the costs assocated with a dialysis product recall will negatively affect Bax ter's results in coming months (C&EN, Nov 12, page 6). N< ^ 12,pageÔEli Lilly and Schering-Plough turned in Lilly and Schering-Plough turned in theEh poorest performance. Quality-control the poorest performance. Quality-control problems have disrupted Schering-Plough's problems have Schering-Ploughs production anddisrupted contributed to nearly flat production contributed to nearly flat results in theand third quarter and slight de results in the third quarter and slight decreases in sales and earnings over nine creases months.in sales and earnings over nine months,
sales—exceeded 19% in both periods. I sales—exceeded 19% in both periods. In terms of percentage growth, Abbott In terms of percentage growth, Abbott Laboratories overtook Merck as the stand Laboratories overtook Merck as the standout company Abbott's sales jumped 26% out company Abbott's sales jumped 26% I for the quarter and 18% in nine months, for the quarter and 18% in nine months, with earnings up 5% in both periods, ex with earnings up 5% in both periods, excluding acquisition-related charges. Drug eluding acquisition-related charges. Drug products, rather than its nutritional and products, rather than its nutritional and medical products businesses, contributed medical products businesses, contributed most to sales growth. And product sales most to sales growth. And product sales from Knoll Pharmaceuticals, acquired from from Knoll Pharmaceuticals, acquired from BASF in March, exceeded expectations. BASF in March, exceeded expectations. Still, Merck's performance was solid, Still, Merck's performance was solid, with sales up 13% in the quarter and 22% with sales up 13% in the quarter and 22% over nine months. Five products have been over nine months. Five products have been driving growth, with sales increasing an driving growth, with sales increasing an average 30% in the third quarter. The average 30% in the third quarter. The company's Merck-Medco pharmacy ben company's Merck-Medco pharmacy benefit management business grew as well, efit management business grew as well, and its Merckmedco.com Internet phar and its Merckmedco.com Internet pharI macy became the first to reach $1 billion I macy became the first to reach $1 billion I
ever, the costs assocated with a dialysis ÏÏï3Ël£g&.
COMPETITION FROM generic fluoxetine, COMPETITION generic hammered fluoxetine, which started inFROM early August, which sales started in early August, hammered Lilly's of the antidepressent Prozac, Lilly's sales of thequarterly antidepressent Prozac, bringing overall sales growth bringing overall quarterly sales growth down to just 2% and driving down earnings down to just 2% Prozac and driving down earnings 7%. Excluding sales, which were 7%. Excluding Prozac sales, which were down 34%, its sales rose 15%. down 34%, its sales rose 15%. Product sales continued to boost per Product sales continued to boost performance among biopharmaceutical pro formance among biopharmaceutical producers and small drug discovery firms. ducers and small drug discovery firms, Combined revenues for 30 leading com Combined revenues for 30 leading cornpanies rose 19% in the third quarter and panies rose 19% in the third quarter and nine-month period to $5.08 billion and nine-month period to $5.08 billion and $15.1 billion, respectively Third-quarter $15.1 billion, respectively Third-quarter
Drug company results Major pharmaceutical firms see steady growth in third quarter and nine months THIRD-QUARTER 2001 SALES EARNINGS8 CHANGE FROM 2000 PROFIT MARGIN MARGIN*b3 SALES EARNINGS 2001 2000 ($ MILLIONS)
|
NINE-MONTHS 2001 13 SALES EARNINGS3 CHANGE FROM 2000 PROFIT MARGIN MARGIN" ($ MILLIONS) SALES EARNINGS 2001 2000
Abbott Laboratories0 American Home Products'* AstraZeneca Aventis6 Baxter International Bristol-Myers Squibbf Eli Lilly9
$4,181.2 3,736.3 3,950.0 3,944.7 1,900.0 4,742.0 2,874.4
$686.0 867.1 720.0 546.0 272.0 1,231.0 723.2
26% 7 4 8 13 4 2
5% 14 10 31 18 9 -7
16.4% 23.2 18.2 13.8 14.3 26.0 25.2
19.7% $11,840.2 21.8 10,401.8 17.2 12,040.0 11.5 11,659.5 13.7 5,527.0 24.8 14,141.0 27.7 8,713.6
GlaxoSmithKlineh Johnson & Johnson' MerckJ Pfizerk Pharmacia1 m Schering-Plough™ Schering-Plough
7,191.0 8,238.0 11,919.6 7,898.0 4,466.0 2,382.0
1,382.0 1,553.0 1,948.2 2,185.0 541.0 601.0
10 11 13 TO 10 4 0
17 17 6 28 28 23 2
19.2 18.9 16.3 2 7/7 27.7 12.1 25.2
18.0 17.8 17.4 2 Ï9 23.9 10.2 24.8
13%
19.7% 19.0% $200,463.9 $38,984.7 $38,984.7 10% 10%
TOTAL"
$67,423.2 $13,255.5
9%
21,417.0 24,601.0 35,157.8 23,229.0 14,406.0 7,330.0
$2,126.3 18% 2,077.6 7 2,208.0 3 1,427.2 9 739.0 11 3,576.0 5 2,357.7 11 4,549.0 7 4,689.0 9 5,420.9 22 6,206.0 9 1,808.0 6 1,800.0 -1
5% 15 11 29 15 10 10
18.0% 20.0 18.3 12.2 13.4 25.3 27.1
20.2% 18.6 17.1 10.4 13.0 24.1 24~T~ 27.1
12 17 7 31 21 -3
21.2 19.1 15.4 26/7 26.7 12.6 24.6
20.2 17.8 17.5 22.2 10.9 25.0
U%
19.4% 18.8%
a After-tax earnings from continuing operations, excluding significant extraordinary and nonrecurring items, b After-tax earnings as a percentage of sales, c Includes BASF's drug business acquired in March, d Sold agrochemicals unit to BASF in June 2000. Results include animal health sales of $205 million for the quarter and $560 million for nine months, e Does not include animal nutrition and crop science businesses slated for divestiture, f Does not include orthopedic devices business spun off in August and beauty care unit slated for divestiture, g Includes animal health sales of $178 million for the quarter and $498 million for nine months, h Created from merger of GlaxoWellcome and SmithKline Beecham in late 2000. i Includes consumer product sales of $1.78 billion for the quarter and $5.25 billion for nine months, and medical devices and diagnostics sales of $2.78 billion for the quarter and $8.32 billion for nine months, j Approximately 50% of sales from Merck-Medco managed health business, k Acquired Warner-Lambert in June 2000. Includes animal health sales of $254 million for the quarter and $721 million for nine months, and consumer product sales of $1.31 billion for the quarter and $3.92 billion for nine months. I Created in March 2000 from the merger of Pharmacia & Upjohn and Monsanto. Includes agricultural sales of $923 million for the quarter and $4.25 billion for nine months, m Includes animal health sates of $169 million for the quarter and $493 million for nine months, and consumer product sales of $134 million for the quarter and $582 million for nine months, η Percentages calculated from combined sales and earnings.
HTTP://PUBS.ACS.ORG/CEN
C&EN / NOVEMBER 19. 2001
29
BUSINESS
Results for smaller firms Revenues and earnings for biopharmaceutical and small drug discovery firms on an uptick EARNINGS0 ($ MILLIONS)
Amgen $1,003.1 ArQule U.3 Biogen 265.2 Bio-Technology General 20.1 Cèlera Genomics 27.3
$329.9 -3.7 69.8 3.5 -15.6
THIRD-QUARTER 2001 CHANGE FROM 2000 REVENUE EARNINGS
6% 4 13 -7 49
PROFIT MARGINC 2001
2000
REVENUE3
EARNINGS0
($ MILLIONS)
5% nm 2 -20 nm
32.9% def 26.3 17.4 def
33.1% $2,891.4 21.7 41.9 29.3 762.9 20.5 82.1 def 387.8
$956.7 -5.7 213.8 19.0 17.0
NINE-MONTHS 2001 CHANGE FROM 2000 REVENUE EARNINGS
9% 15 12 30 6
PROFIT MARGINC 2001
2000
8% nm -18 555 -31
33.1% 33% def 6.1 28.0 38.4 23.1 4.6 4.4 6.7
Celgene Cephalon Chiron Cor Therapeutics Corixa
26.2 83.8 302.0 33.0 U.O
-6.3 21.5 57.8 0.8 -24.4
15 198 37 10 75
nm nm 34 nm nm
def 25.7 19.1 2.4 def
def def 19.5 def def
72.5 187.1 802.8 93.9 43.2
-8.6 3.4 136.1 1.2 -69.7
27 163 18 29 70
nm nm -3 nm nm
def 1.8 17.0 1.3 def
def def 20.7 def def
Elan Genentech Genzymed Gilead Sciences Icos
484.3 523.7 255.1 50.9 18.9
183.5 105.4 64.1 -25.2 -24.4
24 24 33 13 -13
37 22 16 nm nm
37.9 20.1 25.1 def def
34.2 20.4 28.7 def def
1,374.9 1,502.3 716.7 159.4 71.8
491.6 298.1 181.7 -79.3 -44.8
25 27 30 11 23
46 23 14 nm nm
35.8 19.8 25.4 def def
30.7 20.5 29.0 def def
IDEC Pharmaceuticals Immunex Incyte Genomics Ligand Pharmaceuticals Medlmmune
69.6 253.0 57.3 19.2 40.0
27.0 39.7 -2.6 -7.7 -19.0
63 16 10 41 -15
55 26 nm nm nm
38.8 15.7 def def def
40.7 14.4 def def 17.8
191.0 709.1 164.5 53.7 303.5
72.9 128.3 -22.8 -29.9 50.5
76 16 19 57 13
162 22 nm nm 59
38.2 18.1 def def 16.6
25.6 17.2 def def 11.8
Millennium Pharm. NABI Novo Nordisk Protein Design Labs QLT
82.2 54.6 718.7 8.1 19.5
-9.5 3.3 114.3 -1.8 7.3
87 10 13 72 103
nm nm 33 nm 170
def 6.0 15.9 def 37.2
def def 13.6 def 27.9
191.6 180.1 2,086.3 37.4 53.5
-74.5 5.5 344.2 8.0 19.4
39 10 16 13 206
nm 267 34 1,043 424
def 3.1 16.5 21.4 36.2
def 0.9 14.3 2.1 21.1
Scios Sepracor Serono Shire Pharmaceuticals Vertex Pharmaceuticals
19.6 36.7 321.9 219.1 40.4
-11.2 -36.4 63.8 58.2 -13.5
600 219 5 22 9
nm nm 20 50 nm
def def 19.8 26.6 def
def def 17.4 21.6 def
36.8 114.8 1,010.8 619.7 116.0
-33.7 -121.7 240.0 154.8 -33.5
304 89 11 26 7
nm nm 34 49 nm
def def 23.7 25.0 def
def def 19.6 21.2 def
$5,081.8
$948.6
TOTAL6
19%
28%
18.7% 17.3% $15,059.5 $2,818.0
19%
29%
18.7% 17.2%
a Revenues for calendar year including product sales, collaborative or contract R&D funding, and royalties, but not interest or investment income, b After-tax earnings from continuing operations, excluding significant extraordinary and nonrecurring items, c After-tax earnings as a percentage of revenues, d Results for general division, e Percentages calculated from combined revenues and earnings, def = deficit, nm = not meaningful.
earnings for the group were up 28% to $949 million, while the nine-month figure rose 29% to $2.82 billion. Third-quarter revenues more than doubled at Cephalon, QLT, Scios, and Sepracor. Cephalon reported its first profitable quarter and a small profit for the ninemonth period as well. Scios launched its flagship product, Natrecor, the first new drug in more than a decade for congestive heart failure, on Aug. 15. Amgen and Biogen, two of the more established biopharmaceutical companies, showed relatively modest sales and earnings growth in the third quarter. Although Biogen's reported earnings fell for the first nine months of 2001, a one-time gain of about $90 million from the sale of investments in 2000 played a big role in the drop. Chiron, Elan, Genentech, Genzyme, 30
C & E N / NOVEMBER
19, 2001
IDEC Pharmaceuticals, Immunex, Novo Nordisk, and Shire Pharmaceuticals, with established and newproducts, reported significant double-digit revenue and earnings growth in the third quarter. This was also the case in the nine-month period for all thesefirmsexcept Chiron, whose earnings fell 3%. In 2001, Chiron's operating expenses, including R&D, were significantly higher than in the previous year. NABI, Protein Design Labs, Medlmmune, Serono, and Bio-Technology General joined the high-performing group for the nine-month period, but results were not as strong for all these companies in the third quarter. Bio-Technology General's sales and earnings both dropped, largely because of a distributor that stocked product inventory and then cut back purchases. Medlmmune's revenues fell because it
reacquired productrightsfrom marketing partner Alza, which Johnson & Johnson purchased inJune. Decreased sales to Alza and the cost of reacquiring unsold inventory affected Medlmmune negatively Althoughfinancialresults varied among companies, biopharmaceutical producers continued to make progress. For the quarter, about half were profitable. On a more sustained basis, nearly two-thirds reported profits for the nine-month period. In addition, about 50% of the profitable firms had profit margins well above the group's combined 18.7% margin. At current growth rates, the top 30 biopharmaceutical companies will reach nearly $20 billion in combined sales this year, while their 13 larger colleagues, the traditional drug producers, together should top $265 billion. • HTTP://PUBS.ACS.ORG/CEN
