US Drug Makers 3Q Helped By Cost Cuts, Major Product Sales
October 22 2009 - 3:23PM
Dow Jones News
U.S. drug makers Merck & Co. (MRK) and Bristol-Myers Squibb
Co. (BMY) reported higher third-quarter sales and earnings from
continuing operations, helped by reduced costs and higher revenue
from major products.
Schering-Plough Corp. (SGP) reported declining sales and
profit--though earnings excluding one-time items were up--for what
is likely to be its final full quarter as a stand-alone company.
Schering has agreed to be acquired by Merck in a deal seen closing
by the end of the year.
The pharmaceutical industry continues to face challenges such as
intense competition from generic drugs, difficulties bringing new
drugs to market, and the broader economic weakness. U.S.
health-overhaul legislation also has fueled uncertainty about the
sector. But some companies have been able to increase earnings
through cost cuts and boosting sales of current blockbusters, while
doing deals to bolster research pipelines.
For the quarter, most large drug companies met or exceeded Wall
Street earnings expectations, even if some had declining
pharmaceutical revenue or missed revenue expectations.
Market reaction was muted Thursday. Shares of Bristol-Myers
declined 1.7%, while Merck and Schering-Plough were up
slightly.
While Merck and Bristol-Myers both had improved results, the
rivals are pursuing very different strategies. Merck has chosen to
address its challenges by getting substantially larger and
diversifying into nonprescription drug businesses with its purchase
of Schering.
Bristol, in contrast, has chosen small--by shedding
nonpharmaceutical assets and using the proceeds to fund its
drug-research efforts. "Only time will tell which of these
strategies is best," Bristol-Myers Chief Executive James Cornelius
told reporters on a conference call.
For the three months ended Sept. 30, Merck's profit more than
tripled to $3.4 billion, or $1.61 a share, from $1.09 billion, or
51 cents a share, a year earlier. The latest quarter included a
large gain from Merck's sale of its 50% interest in the Merial
animal-health joint venture with Sanofi-Aventis SA (SNY); excluding
items in both periods, earnings rose to 90 cents a share from 80
cents.
Merck sales rose 2% to $6.05 billion, with negative
currency-exchange rates reducing growth by 3 percentage points.
Merck's biggest drug, Singulair for asthma and allergies, had sales
of $1.09 billion, up 5%, continuing a rebound that started earlier
in the year. Other products posting gains included drugs for
diabetes and HIV, while sales of hypertension drugs declined.
Sales of Merck's Gardasil cervical-cancer vaccine dropped 22% to
$311 million, as Merck continues to have difficulty persuading
women ages 19 to 26 to get the shot. Gardasil was recently approved
by U.S. regulators for use in boys and men to prevent genital
warts, but a tepid recommendation from government advisers this
week is expected to limit its uptake in males.
Merck's cholesterol-drug joint venture with
Schering-Plough--which sells Vytorin and Zetia--continued to be
under pressure due to studies last year raising questions about
their effectiveness and safety. Pressure could mount next month
when researchers present the findings of a clinical trial comparing
Zetia with Abbott Laboratories' (ABT) Niaspan. The results aren't
yet known, but many on Wall Street suspect they will be negative
for Zetia--a perception reinforced Thursday when Merck executives
tried to play down the importance of the trial.
Schering-Plough's earnings dropped to $515 million, or 29 cents
a share, from $614 million, or 35 cents a share, a year earlier.
Excluding acquisition-related charges and other items, earnings
rose to 40 cents from 39 cents.
Net sales fell 1.7% to $4.5 billion, reflecting a
6-percentage-point hit from currency changes.
Among Schering-Plough's noncholesterol treatments, sales of
arthritis drug Remicade rose 8% to $608 million, while allergy
treatment Nasonex saw a 3% increase.
Schering's animal-health product sales declined 12% to $669
million, with Schering citing a difficult economic environment and
other factors. Consumer-health sales were roughly flat with a year
earlier at $282 million.
Bristol-Myers' third-quarter profit fell to $966 million, or 48
cents a share, from $2.58 billion, or $1.28 a share, a year
earlier. The prior year included the $2 billion gain from selling
its ConvaTec wound-care business. Excluding restructuring and other
items, earnings from continuing operations rose to 52 cents from 45
cents.
Net sales rose 4% to $5.49 billion. Sales of the blockbuster
Plavix anticlotting agent were up 8% to $1.55 billion, despite
facing increasing availability of generic copycat versions in
Europe. Abilify, an antipsychotic treatment, posted a 16% gain.
-By Peter Loftus, Dow Jones Newswires; 215-656-8289;
peter.loftus@dowjones.com
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