U.S. Drugmakers' Profits Rise on New Products: Industry Outlook
Bloomberg News
September 21, 1998, 2:20 p.m. ET
U.S. Drugmakers' Profits Rise on New Products: Industry Outlook
Sept. 21 (Bloomberg) -- U.S. drugmakers, including Warner-
Lambert Co., Pfizer Inc. and Schering-Plough Corp., will report
higher third-quarter profits, thanks to an expanding market for
pills to treat chronic ailments such as diabetes, high
cholesterol and high blood pressure.
''The drug group is looking better than just about anyone
else in the third quarter,'' said Linda Miller, who manages John
Hancock's Global Rx Fund. ''Part of it is the willingness of
managed-care companies to pay for medicine.''
Managed-care companies, looking to cut costs, are willing to
pay for drugs that may help save them money by keeping people out
of the hospital. Merck & Co.'s sales of cholesterol-reducing
drugs, a medicine intended to prevent heart attacks, top $4
billion a year. Warner-Lambert and Bristol-Myers Squibb Co. each
have cholesterol drug with $1 billion in annual sales.
Drugmakers also benefited in the quarter from medicines
introduced in the past year that cater to the aging population.
Pfizer's impotence pill, Viagra, was the most-successful drug
introduction ever earlier this year. Merck started sales of a
pill to treat male baldness, and Eli Lilly & Co. brought out a
drug to prevent thinning of bones, known as osteoporosis, a
common condition in older women.
These companies also are largely sheltered from the decline
in value of currencies in Russia and Asia because they get most
of their sales from North America and Europe. Merck, the world's
largest drugmaker, gets about 75 percent of its revenue from the
U.S. alone. Warner-Lambert, which also makes consumer goods such
as Dentyne gum and Schick razors, gets more than half of its
sales from the U.S.
Warner-Lambert Turnaround
Morris Plains, New Jersey-based Warner-Lambert is expected
to earn 34 cents a diluted share, the average estimate of
analysts polled by First Call, up from 24 cents in the year-ago
period, adjusted for a 3-for-1 stock split.
Lipitor and the diabetes pill Rezulin, which is licensed
from Japan's Sankyo Co., turned Warner-Lambert into an industry
leader. Both drugs were introduced in 1997. Lipitor exceeded
sales of $1 billion in its first 12 months on the market, while
Rezulin had sales of $226 million in the second quarter.
Lipitor has grown in part by taking market share from
Merck's top-selling product, the cholesterol-reducer Zocor.
Lipitor now holds about 34 percent of the U.S. cholesterol-
reducer market and Merck, 24 percent, according to IMS Health
Inc., which tracks U.S. pharmacy sales.
''It's a real Cinderella story,'' Miller said.
New Drugs from Merck
Warner-Lambert's threat to Zocor comes amid disappointing
early sales of some of Merck's new drugs, analysts said. In July,
Merck warned that its 1998 profit would be at the lower end
analysts' estimates of $4.27 to $4.42 a share. It guided analysts
to a range of $4.28 to $4.39 a share.
Since December, Merck has introduced five drugs, including
Maxalt for migraines. The biggest hit of the new crop appears to
be a once-a-day treatment for asthma, Singulair, said said James
Keeney, an analyst at ABN Amro, who has a ''hold'' on Merck..
''The five new drugs are not generating the sales we
expected,'' he said.
In the third quarter, meanwhile, Pfizer will have revenue
from two new drugs -- the antibiotic Trovan and Viagra.
Viagra sales likely will drop from its record-setting pace
in the second quarter, when it generated sales of $411 million.
Drug wholesalers stocked up on Viagra during the second quarter
and U.S. pharmacy sales have slowed, falling to about 165,000
prescriptions filled a week after topping 300,000 in one week in
May.
Revenue from new drugs, though, will add to that from
Pfizer's older drugs, including some of the world's most-widely
prescribed medicines, such as the high-blood pressure medicine
Norvasc and antidepressant Zoloft.
Pfizer is expected to earn 56 cents a diluted share, the
average estimate of analysts polled by First Call. A year-
earlier, it earned 46 cents a share.
Drug Advertising Guidelines
Drugmakers also are benefiting from new U.S. guidelines on
advertising. In the past, drugmakers used television very little
because of the time that would have been required to give details
on side effects. Now, drugmakers run ads on television and refer
viewers to magazines and Web sites for details.
Advertising campaigns like Schering-Plough's TV ads for
Claritin, the world's biggest allergy drug, boosted sales for its
top seller. That's expected to push Schering-Plough's third-
quarter profit to 57 cents a diluted share from 48 cents a year
earlier.
Eli Lilly & Co. also has used more direct-to-consumer ads to
boost sales of its top seller, Prozac, the world's biggest
antidepressant drug. Sales of the 11-year-old drug rose 11
percent to $1.28 billion in the first half of 1998.
Indianapolis-based Lilly is expected to earn 49 cents a
share, up from 40 cents, First Call Corp. said.
Company 3rd-Qtr Year-Ago Number of
Estimate EPS Analysts
Abbott Laboratories $0.34 $0.30 16
American Home Products 0.46 0.33 24
Bristol-Myers Squibb 0.95 0.84 28
Johnson & Johnson 0.70 0.63 22
Eli Lilly 0.49 0.40 27
Merck 1.12 0.97 33
Pfizer 0.56 0.46 31
Pharmacia 0.41 0.35 18
Schering-Plough 0.57 0.48 26
Warner-Lambert 0.34 0.24 29
Estimates and year-ago figures provided by First Call Corp.
--Kerry Dooley in the Princeton newsroom (609) 279-4016 |
