U.S. drug group poised for robust Q4 earnings
Monday January 11, 7:05 pm Eastern Time
By Ransdell Pierson
NEW YORK, Jan 11 (Reuters) - The largest U.S. drugmakers
are poised, on average, to boast year-over year earnings growth
of 20 percent or better in the fourth quarter, spurred by
continuing robust U.S. sales of newer products, analysts said.
''The fourth quarter will prove to be a continuation of the good earnings trends of the first nine months of 1998,'' said Sam Isaly, a pharmaceuticals analyst for the New York research firm OrbiMed Advisors.
He said the ''super-fast earnings growers'' will be Warner-Lambert Co (NYSE:WLA - news), Pfizer Inc (NYSE:PFE - news), Eli Lilly (NYSE:LLY - news) and Schering-Plough Corp (NYSE:SGP - news).
''Warner-Lambert will be on top with (diluted per-share) earnings growth of 40 percent,'' thanks to ever-expanding sales of the company's potent cholesterol-lowering drug Lipitor which was launched in early 1997, Isaly said.
Lipitor commands a dominant 42 percent share of the popular ''statin'' class of anti-cholesterol drugs, based on new weekly prescriptions. Last year it leapfrogged over Merck & Co's (NYSE:MRK - news) flagship statin, Zocor, whose market share now stands at about 26.5 percent.
Isaly predicted Pfizer would have earnings growth of about 30 percent in the fourth quarter, fueled by sales of its anti-impotence pill Viagra introduced in April 1998.
''Lilly and Schering-Plough are in a tight race for third place, with each likely to show earnings growth of up to 25 percent'' in the quarter, he added.
Lilly is riding high with continued sales growth of its antidepressant Prozac and strong sales of its newer drugs, Zyprexa for schizophrenia and cancer therapy Gemzar.
Schering-Plough has seen continued strong growth for its Claritin line of antihistimines and strong sales of its Rebetron combination therapy to treat chronic hepatitis C, approved by the U.S. Food and Drug Administration in June.
Madison Securities pharmaceutical analyst Sharon Doering said Merck was one of the biggest fourth-quarter question marks among big U.S. drugmakers, but predicted it would meet the $1.16 per diluted share consensus forecast of analysts polled by First Call.
That would be about a 15 percent earnings gain from Merck's 1997 quarter, but a slowdown from the company's 18 percent to 20 percent growth seen in the full year of 1997.
''A key thing we will all be looking for is sales performance of five new drugs launched by Merck in 1998,'' said ABN-AMRO analyst James Keeney, including Singulair for asthma and Propecia for hair growth.
He said growing sales of the five new Merck drugs would be vital between the years 2000 and 2001 to offset a revenue shortfall that will occur when patents expire on five older company drugs.
Keeney predicted the eight largest U.S. drugmakers, also including Pharmacia & Upjohn and Bristol-Myers Squibb Co (NYSE:BMY - news), would post average per-share earnings growth of 21 percent.
''That would be the third consecutive quarter that the rate has topped 20 percent,'' Keeney said.
The odd man out in the fourth quarter will be American Home Products Corp (NYSE:AHP - news), said Keeney, who predicted ''flat'' earnings of about $0.44 per diluted share despite a nonrecurring gain of three or four cents per share from sale of the last vestiges of AHP's food
business.
American Home's earnings are lagging because of increased costs of launching new drugs, a weak agricultural chemicals business and discontinuation in 1998 of painkiller Duract because of liver failure in some patients, said Brown Brothers Harriman analyst Michael Krensavage .
Krensavage predicted an upturn for American Home, however, with earnings growth above the drug group's 15 percent average beginning in 2000, based on likely sale of the company's agriculture chemicals business and prospects for new drugs.
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