U.S. Drugmakers' Profits Rise on New Products: Industry Outlook
Bloomberg News
June 22, 1998, 3:06 p.m. ET
U.S. Drugmakers' Profits Rise on New Products: Industry Outlook
June 22 (Bloomberg) -- U.S. drugmakers, led by Warner-
Lambert Co., will report higher second-quarter profits because
they're making more efficient or more convenient medicines, such
as Pfizer Inc.'s impotence pill Viagra.
Warner-Lambert Co.'s earnings are surging on sales of its
year-old drug Lipitor, which cuts cholesterol at lower doses than
rival products such as Merck & Co.'s Zocor.
Drugmakers also are benefiting from newfound freedom to run
television commercials for their products. These ads are helping
make people aware of medicine for chronic conditions such as high
cholesterol and allergies. The aging of the U.S. population,
meanwhile, is spurring demand for Bristol-Myers Squibb Co.'s
heart and diabetes drugs and for bone protectors from Merck and
Eli Lilly & Co.
''More than that, the drugmakers are executing, and
executing well,'' said Mark Stoeckle, who manages the $900
million Colonial U.S. Stock Fund. ''Most people just focus on one
drug or two. There's a lot more to Pfizer than one drug, a lot
more to Merck than one drug.''
Pfizer could beat estimates by a penny or so because of
Viagra's unprecedented success, analysts said. The drugmaker is
forecast to earn 43 cents a diluted share, the average estimate
of analysts polled by IBES International Inc. It earned 34 cents
a year ago.
Although Viagra became one of the best-selling drugs in the
U.S. within weeks of its introduction, many analysts said they
want to see a quarter's worth of prescription data before raising
their estimates.
Pfizer
In addition to Viagra, Pfizer began selling its antibiotic
Trovan this year. The New York-based drugmaker also makes the
antidepressant Zoloft and heart medicines such as Procardia and
Norvasc.
Pfizer has an agreement to sell Warner-Lambert's Lipitor and
profits from those sales. Warner-Lambert, which also sells the
diabetes treatment Rezulin and Hall's cough drops, is expected to
earn 35 cents a diluted share, up from 28 cents a share, adjusted
for a 3-for-1 stock split, according to IBES.
Lipitor has grown in part by taking market share from the
world's top-selling cholesterol reducer, Merck's Zocor. Fighting
back, Merck has been running commercials on television to boost
Zocor sales.
Since August, the U.S. Food and Drug Administration has let
drugmakers say more about their products on the air.
Merck, which with $14 billion in worldwide pharmaceutical
sales last year is the largest U.S. drugmaker, put four new drugs
on the market in the past year, including Propecia, a pill to
treat baldness. The Whitehouse Station, New Jersey-based
drugmaker is expected to earn $1.08 a diluted share, up from 96
cents, according to analysts polled by IBES.
Like Merck, Schering-Plough Corp. also is running ads to
boost sales of its top-selling product, the allergy pill
Claritin. It is expected to earn 60 cents a diluted share, up
from 51 cents.
The drug industry spent $844 million on direct-to-consumer
advertising in 1997, up from $595 million in 1996, according to
IMS Health, an industry group.
Company 2nd-Qtr Year-Ago Number of
Estimate EPS Analysts
Abbott Laboratories $0.37 $0.34 13
American Home Products 0.39 0.35 25 Bristol-
Myers Squibb 0.82 0.74 24
Johnson & Johnson 0.74 0.66 20
Eli Lilly 0.43 0.38 26
Merck 1.08 0.96 31
Pfizer 0.43 0.34 30
Pharmacia 0.37 0.35 15
Schering-Plough 0.60 0.51 25
Warner-Lambert 0.36 0.28 26
--Kerry Dooley in the Princeton newsroom (609) 279-
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