Drug Stocks Break Out on Earnings News
Smartmoney.com
October 19, 1999 3:23 PM
By Stacey L. Bradford
DRUG STOCKS soared today, powered by the twin
engines of robust earnings reports and a benign set of
economic numbers. A look at our Map of the Market
shows the whole group surging ahead as the market
absorbs news of impressive sales growth. Pfizer (PFE)
and Johnson & Johnson (JNJ) topped Wall Street
expectations while Bristol-Myers Squibb (BMY) reported
results that were in line with estimates. On Wednesday
Eli Lilly (LLY) and Schering-Plough (SGP) will report
earnings. On Thursday, Merck (MRK) and SmithKline
Beecham (SBH) will make their reports.
Here's a compendium of today's results:
Pfizer
Pfizer, the No. 2 drug maker, reported a drop in
third-quarter income but still came in ahead of analysts'
expectations. The company's shares were up 7.4% in
late-afternoon trading.
Pfizer said net income came to $701 million, or 18 cents
a share on a fully diluted basis, compared with $1.4
billion, or 36 cents a diluted share, in the year-earlier
period. Revenue increased 20% to $3.99 billion.
However, the latest results included a $310 million pretax
charge for inventories. Excluding the charges, the
company said it would have posted earnings of $906
million, or 23 cents a share. The mean estimate of
analysts surveyed by First Call/Thomson Financial was
for earnings, excluding charges, of around 21 cents per
share.
The revenue increase in the latest quarter reflected 21% growth in unit volume,
with price changes and foreign-exchange fluctuations having a slight negative
effect, Pfizer said. Worldwide pharmaceutical revenue totaled $3.67 billion, an
increase of 21% over the same period last year. The revenue increase reflected
the continued strong product sales and healthy revenue from Lipitor, Aricept
and Celebrex. Pfizer co-markets the cholesterol-lowering Lipitor with
Warner-Lambert (WLA) and the arthritis drug Celebrex with Merck. Aricept is
an Alzheimer's treatment.
Sales of Norvasc, a treatment for angina and hypertension, increased 17% to
$789 million. The antidepressant Zoloft rang up sales of $530 million, an 8%
increase. The anti-impotence drug Viagra recorded a 77% sales increase to
$249 million.
Consumer-health-care sales, which are now included as part of the
pharmaceuticals segment, increased 5% in the quarter to $131 million. These
results predominantly reflect strong core-brand performance, driven particularly
by Visine.
Johnson & Johnson
New Brunswick, N.J.-based Johnson & Johnson beat Wall Street expectation
by two cents. Its net income rose to $1.1 billion, or 80 cents a share on a fully
diluted basis, compared with $961 million, or 70 cents a diluted share, a year
earlier. Revenue increased 18% to $6.75 billion. The mean estimate of
analysts surveyed by First Call was for net income of around 78 cents per
share.
JNJ shares were up 4.7% this afternoon.
The impact of the stronger dollar relative to foreign currencies decreased
third-quarter sales by 1.3%, Johnson & Johnson said. Domestic sales were up
24.1%, while international sales increased 10.7%, reflecting a negative
currency impact of 2.9%.
Global pharmaceutical sales increased 23.9% to $2.6 billion in the quarter,
including 35.7% growth in domestic sales and a 9.5% increase in international
sales. International-sales gains of 12.6% in local currency were offset by a
negative currency impact of 3.1%.
Johnson & Johnson said the sales growth reflects the strong performance of
the anemia treatment, Procrit/Eprex; Risperdal, an antipsychotic medication;
Duragesic, a transdermal patch for chronic pain; Levaquin, an anti-infective; the
analgesic Ultram; and the oral-contraceptive line of products.
Also during the quarter, the company announced a $4.9 billion stock-for-stock
merger with Centocor, which develops monoclonal-antibody technology and
vascular-care and immunology products. The merger was completed on Oct. 6.
Professional-segment sales rose 19.9% to $2.4 billion, including a 19.2% jump
in domestic sales and a 20.8% increase in international sales. Johnson &
Johnson said the 1998 acquisition of DePuy, an orthopedic-products
manufacturer, contributed to the sales growth.
Consumer-segment sales for the third quarter were $1.7 billion, an increase of
7.4% from the same period a year ago. Domestic sales were up 14.3%, while
international-sales gains in local currency of 7.0% were almost entirely offset
by a negative currency impact of 6.7%. Consumer sales were led by continued
strength in skin care, which includes the Neutrogena, RoC and Clean & Clear
product lines, as well as solid results from McNeil Consumer Healthcare,
which markets Tylenol, Benecol and other over-the-counter pharmaceuticals.
Benecol contains the dietary ingredient stanol ester, which is patented for use
in reducing cholesterol.
Bristol-Meyers Squibb
Bristol-Myers Squibb reported a 14% increase in third-quarter net income,
matching analysts' expectations. The company's shares popped 6.2% in
late-afternoon trading.
The New York-based company said net income came to $1.1 billion, or 54
cents a share on a fully diluted basis, compared with $966 million, or 47 cents
a diluted share, in the year-earlier period. The result for the latest quarter
equaled the mean estimate of analysts surveyed by First Call. Revenue
increased 11% to $5.04 billion.
Bristol-Myers said third-quarter worldwide pharmaceutical sales rose 15%, with
U.S. sales climbing 22% and international sales up 2%, or 6%, excluding
foreign-exchange effects.
Worldwide sales of the company's Pravachol cholesterol-lowering drug fell 1%
to $386 million for the quarter. Third-quarter sales of Taxol, an anticancer
agent, rose 23% to $375 million. Sales of the Glucophage diabetes drug rose
57% to $349 million in the period. Sales of the Zerit and Videx antiretroviral
agents gained 17% to $155 million and 14% to $49 million, respectively.
The Buspar antianxiety agent came in with a 12% sales increase to $155
million, and sales of the Serzone antidepressant rose 41% to $86 million.
Bristol-Myers also said third-quarter sales of Cefzil, used for respiratory
infections, tacked on 11% to $109 million and sales of the antihypertensive
Monopril rose 9% to $94 million. Third-quarter sales of Excedrin rose 5% to
$61 million, and sales of Bufferin jumped 19% to $32 million. Sales of the
company's Plavix heart-attack and stroke treatment were $148 million, more
than triple the $45 million recorded a year ago.
The company's beauty-care sales rose 5%, while medical-devices sale
increased 4% to $402 million.
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