It is a general belief that pharma companies are recession-proof. However, in this global recession not even the health sector has been spared. In addition, looming patent expirations and the pipeline issues are only adding to the pharma sector's woes. Companies in general have taken up serious retrenching measures to contain costs in order to retain profitability and pharma companies have been no exemptions. Amid the backdrop of the financial crisis, valuations of potential takeover targets have come down, making them all the more attractive, according to Standard & Poor's Credit Research.
A number of pharma companies are set to issue earnings results this coming week and listed below are a few of the names.
Quest Diagnostics
Quest Diagnostics Inc. (DGX), a provider of diagnostic testing services, is scheduled to report its fourth-quarter and full year 2008 results on Monday, January 26, before the market opens.
The company offers a wide range of diagnostic testing services, including anatomic pathology, which enables the diagnosis of cancer and other diseases, and gene-based testing, which includes maternal screening for birth defects and patient evaluation for inherited disorders. Diagnostic testing allows physicians to detect disease earlier and make diagnoses. The company has more than 2,000 patient service centers and over 180 laboratories, through which it offers its services.
According to the company, laboratory test results impact more than 70% of healthcare decisions. Although these results are critically important in helping physicians determine whether patients are healthy or ill, they represent less than 3% of healthcare spending in the United States. In February of 2008, Quest Diagnostics entered into collaboration with internet search giant Google Inc. (GOOG) to provide patients electronic access to their diagnostic laboratory data. Electronic prescribing is a focal point of president Obama's health-care reform plans.
For the fourth-quarter of 2008, Wall Street analysts have earnings estimates pegged at $0.80 per share and revenue estimate at $1.82 billion. The company's earnings topped analysts' estimates in the first three quarters of 2008, by 2.9%, 6.4% and 2.4%, respectively.
In the third-quarter ended September 30, 2008 the company's net income climbed to $110.7 million or $0.57 per share from $97.9 million or $0.51 per share in the year earlier quarter. Income from continuing operations for the third quarter of 2008 rose to $159.67 million or $0.81 per share from $150.3 million or $0.77 per share in the third quarter of 2007. Net revenues for the third quarter rose to $1.83 billion from $1.77 billion in the year-earlier period. Bad debt expense as a percentage of revenues for the quarter was 4.4%.
The company has a debt load of $3.13 billion, following the 2007 acquisition of specialty lab Ameripath. Quest Diagnostics acquired Ameripath for $1.23 billion in cash and assumed about $770 million of debt. Operating cash flow for the trailing twelve month period is $1.06 billion.
Quest Diagnostics, which has a 15% share in diagnostic testing market, believes that there is plenty of room for its growth.
St.Jude Medical
Medical devices maker St.Jude Medical Inc. (STJ) is scheduled to report fourth quarter and full-year financial results on Tuesday, January 27.
For the fourth quarter, St. Jude Medical expects net earnings to range between $0.65 per share and $0.67 per share and adjusted net earnings in a range of $0.59 to $0.61 per share. Analysts are looking for the company to report earnings of $0.58 per share for the fourth quarter.
In the first two quarters of 2008, St. Jude Medical reported positive earnings surprises and in the third quarter, the company's earnings matched the Wall Street analysts' consensus.
For fiscal 2008, the company revised its adjusted earnings outlook to the range of $2.30 to $2.32 per share from its previous outlook of $2.28 to $2.33 per share. FirstCall/Thomson Financial analysts have earnings estimate pegged at $2.29 per share for the year.
Bristol-Myers Squibb
Bristol-Myers Squibb Co. (BMY), which was recently outbid by Eli Lilly & Co. (LLY) in the takeover battle for ImClone, is slated to report results for the fourth-quarter and full year of 2008 on Tuesday, January 27.
Bristol Myers' key products include blood thinner drug Plavix, anti-hypertension drugs Avapro/Avalide, HIV drugs Reyataz and Sustiva, antipsychotic drug Abilify, cancer drugs Erbitux, Sprycel and Ixempra, hepatitis B drug Baraclude and rheumatoid arthritis drug, Orencia.
Last December, the U.S. Court of Appeals for the Federal Circuit upheld the June 2007 decision by the U.S. District Court for the Southern District of New York, related to Plavix patent, strengthening the patent's validity. The patent on Plavix runs through 2011 and there appears to be no immediate generic threat to the drug.
The company is making all attempts to create a future for itself and long-term value for its investors. In December of 2007, the company outlined its multiyear strategy to transform itself from a mid-cap pharma company to a next-generation biopharma company.
Bristol Myers has plans to partially spin-off its baby formula business Mead Johnson Nutrition Company. Last April, Bristol Myers stated that it would file a registration statement by the end of 2008 to sell approximately 10 percent and no more than 20 percent of Mead Johnson Nutrition Company stock to the public through an IPO. Bristol-Myers Squibb intends to retain at least an 80 percent equity interest in Mead Johnson Nutrition Company for the foreseeable future. The IPO process is expected to be completed by the end of the first half of 2009.
The company divested its wound and skin-care unit ConvaTec, which was also one of its reportable segments in August of 2008. Bristol-Myers sold ConvaTec to private equity firms Nordic Capital and Avista Capital Partners for $4.1 billion.
Wall Street analysts expect the company to earn $0.41 per share, on revenues of $5.44 billion for the fourth-quarter. The consensus earnings estimate for the full year of 2008 is $1.69 per share and revenue consensus estimate is $20.81 billion.
Last October, the company raised its 2008 outlook for earnings per share from continuing operations, on a GAAP basis, to a range of $1.61-$1.66, reflecting an estimated pre-tax gain of $900 million from Eli Lilly's acceptance of the company's tender of its ImClone shares. The company had previously forecast GAAP earnings from continuing operations of $1.36-$1.46 per share. Bristol Myers had also said that if it did not receive such cash from the tender, it expects full-year GAAP earnings from continuing operations to range between $1.32 and $1.37 per share.
Looking further ahead, Bristol-Myers continues to expect earnings from continuing operations, excluding items to increase at a compounded annual growth rate of 15% from its 2007 base for the next three years.
Gilead Sciences
Gilead Sciences Inc. (GILD), based in Foster City, California, focuses primarily on antiviral drugs for the treatment of HIV and hepatitis B. Gilead overtook GlaxoSmithKline plc (GSK) as the leader in the treatment for HIV in 2007. The company is scheduled to release fourth-quarter and full year results on Tuesday, January 27, after the market closes.
For the fourth quarter, FirstCall/Thomson Financial analysts are looking for earnings of $0.55 per share and revenue of $1.44 billion. For the full year of 2008, Wall Street analysts expect the company to earn $2.05 per share, on revenue of $5.34 billion.
Gilead's HIV franchise, which includes Truvada, Atripla, Viread and Emtriva, accounts for a major chunk of the company's total sales. Last month, the company filed a patent suit against generic drug firm Teva Pharmaceutical Industries Ltd. (TEVA) for allegedly infringing on its patent covering its blockbuster AIDS drug Truvada.
According to Gilead, none of its major revenue producing drugs is slated to go off patent in the near future. Truvada which raked in sales of $1.59 billion in 2007, representing a year-over year growth of 33%, has patent protection till 2021, according to the company. Gilead also earns royalties from anti-flu drug Tamiflu whose patent is expected to run till 2016 and Macugen, a treatment for wet macular degeneration, which has patent protection till 2017.
Pfizer
Drug giant Pfizer Inc. (PFE) is scheduled to report fourth-quarter and full year financial results on Wednesday, January 28.
For the fourth-quarter, Wall Street analysts expect the company to earn $0.59 per share, on revenue of $12.54 billion. In the first quarter, Pfizer's earnings fell short of analysts' estimates by 7.6%. In the second and third quarters, the company's earnings topped analysts' consensus by 1.9% and 3.3%, respectively.
Pfizer is reported to be in talks to acquire Wyeth in a deal valued at over $60 billion. With patents covering some of Pfizer's key drugs set to expire in the next few years, according to sources, such an acquisition would help to plug the impending holes in its balance sheet. Pfizer's cholesterol-lowering Lipitor, is one of the drug industry's historical best-selling drugs with annual sales of about $12 billion. The drug accounted for 26% of the company's total sales in 2007. Lipitor's basic patent expires in November of 2011.
When reporting its third-quarter results, Pfizer reduced its full year 2008 reported earnings guidance to a range of $1.61 to $1.71 per share from its prior guidance of $1.73 to $1.88 per share, reflecting in part the charges associated with the resolution of certain litigations involving its non-steroidal anti-inflammatory pain medications Bextra and Celebrex. The company narrowed its full year 2008 adjusted earnings outlook to a range of $2.36 to $2.41 per share from its prior outlook of $2.35 to $2.45 per share. Analysts are looking for earnings of $2.38 per share for the full year 2008.
The company had also raised the lower end of its revenue forecasts for the full year 2008, from $47 billion to $48 billion, but left the higher end unchanged at $49 billion. Analysts currently expect the company to post revenue of $48.58 billion for the full year 2008.
Boston Scientific Corp
Medical devices company Boston Scientific Corp. (BSX) is scheduled to report its financial results for the fourth quarter and the year ended December 31, 2008 on Thursday, January 28.
Boston Scientific's Taxus stent was approved by the FDA in March 2004, almost a year after the first drug-eluting stent --Johnson & Johnson's Cypher stent was approved in April 2003. Medtronic is the latest entrant in the lucrative drug-eluting stent market and its Endeavor stent was approved in February 2008.
Boston Scientific continues to reinforce its arsenal of stents. Last October, the company's Carotid WALLSTENT Monorail Endoprosthesis was approved by the FDA for the treatment of patients with carotid artery disease who are at high risk for surgery. In December, the company won the FDA approval for its Express SD Renal Monorail Premounted Stent System for use as an adjunct to percutaneous transluminal renal angioplasty in certain lesions of the renal arteries. The Express SD System is the first low-profile, pre-mounted stent approved for use in renal arteries in the United States.
In addition, the company's Apex PTCA Dilatation Catheter, designed to treat the most challenging atherosclerotic lesions was approved by the FDA in November.
Early this year, the company acquired Labcoat Limited, a privately held, development-stage drug-eluting stent technology company located in Galway, Ireland. Terms of the acquisition were not disclosed.
In mid-January, the company suffered a legal setback, following an unfavorable Appeals Court ruling in a patent lawsuit involving Johnson & Johnson (JNJ). The ruling of the Appeals Court overturned a jury verdict in 2005 that Boston Scientific's patent was infringed by Johnson & Johnson.
The company's earnings topped analysts' consensus estimate in the first and second quarters of 2008 by 54.5% and 18.2%, respectively. In the third quarter, earnings fell short of analysts' estimates by 18.2%.
The sales of drug-eluting stents have been on the decline since late 2006, following evidence of an increased incidence of blood clots (or thrombosis) in patients implanted with drug-eluting stents. A stent thrombosis can lead to a heart attack, which can be fatal. Boston Scientific's global sales of its coronary stent systems in 2007 were $2.027 billion, down 19% from $2.506 billion in 2006. In the third quarter of 2008, the company's total sales of its coronary stent systems dropped to $446 million from $507 million in the year-ago quarter.
However, according to Boston Scientific, with more recent data addressing the risk of late stent thrombosis and supporting the safety of drug-eluting stent systems, cardiologists have begun to regain confidence in this technology.
Novartis
Swiss drug maker Novartis AG (NVS), which has been executing strategic actions for sustainable growth, is scheduled to release its fourth-quarter and full-year financial results on Wednesday, January 28.
For the fourth-quarter, Wall Street analysts expect the company to earn $0.79 per share, on revenue of $10.78 billion. The company's earnings topped analysts' consensus estimate in the first and second quarters by 14.6% and 5.4%, respectively, while in the third quarter, earnings fell short of analysts' expectations by 3.2%.
For the full-year of 2008, FirstCall/Thomson Financial analysts have earnings consensus estimate of $3.66 per share and revenue estimate of $42.45 billion.
The company has implemented a new regional US business model to better address customer needs and differences in local market dynamics under a program called "Customer Centric Initiative". In connection with the organization of the new business model, a one-time charge of approximately $20 million is planned to be taken in the fourth quarter of 2008, with annual cost savings of $80 million anticipated from 2010.
Novartis' blockbuster high-blood-pressure drug Diovan is expected to lose its U.S. patent in 2012. According to Wall Street Journal, "several other drugs of Novartis are slated to lose patent protection at the same time as Diovan, which would affect about 21% of the company's $39.8 billion in sales." With patent expirations creeping closer, the company is taking all efforts to shore up its pipeline.
Last month, the company licensed a CMV (cytomegalovirus infections) vaccine candidate from U.S.-based AlphaVax Inc for $20 million. The vaccine is expected to enter Phase II clinical trials this year. Recently, the company's flagship product Gleevec was approved for a new indication -- for use after surgery for gastrointestinal stromal tumor or GIST. Including the recent approval, Gleevec is now approved for nine indications.
Celgene
Biopharmaceutical company Celgene Corp. (CELG) is scheduled to report its fourth quarter and full-year 2008 financial results on Thursday, January 29.
The company's marketed drugs include Thalomid/Thalidomide, Revlimid, Vidaza, Alkeran and Focalin. Revlimid, a drug approved for the treatment of transfusion-dependent anemia patients with a certain type of myelodysplastic syndrome linked to deletion 5q, a chromosomal abnormality, is Celgene's key sales growth driver.
Revlimid is currently being tested in a variety of cancer conditions like chronic lymphocytic leukemia, non-Hodgkin's lymphoma and solid tumors.
For the fourth quarter, Wall Street analysts expect the company to earn $0.42 per share, on revenue of $621.89 million. In the first three quarters of 2008, the company's earnings surpassed analysts' estimates. Analysts' estimates typically exclude special items.
Celgene has a history of giving conservative guidance. Early this month, the company upped its fiscal 2008 non-GAAP earnings in the range of $1.55 to $1.56 per share from its prior guidance of $1.50 per share.
For the full-year of 2008, FirstCall/Thomson Financial analysts have earnings estimate pegged at $1.55 per share and revenue estimate at $2.24 billion.
Looking ahead to 2009, the company expects fiscal non-GAAP earnings in the range of $2.05 to $2.15 per share and revenues to increase 20%, compared to 2008.
Eli Lilly & Co.
Drug giant Eli Lilly & Co. (LLY), which recently acquired Imclone, trumping rival Bristol Myers' bid, is slated to report financial results for the fourth quarter and full year of 2008 on Thursday, January 29. Lilly acquired Imclone for $6.5 billion in cash. The company has already warned that the acquisition costs will weigh on the company's 2008 bottom line, resulting in a loss for this year.
Last month, the company lowered its 2008 guidance range, citing costs related to the ImClone acquisition, which closed in November. Accordingly, on a reported basis, the company now expects to record a loss of $1.56 to $2.06 per share, compared to its earlier guidance of earnings per share of $2.44 to $2.49. Excluding significant items, the company continues to expect pro forma non-GAAP earnings to range between $3.97 and $4.02 per share.
Wall Street analysts expect the company to earn $4 per share, on revenue of $20.61 billion for 2008. Analysts' estimates typically exclude one-time items.
Last week, Lilly pleaded guilty to have illegally marketed its blockbuster anti-psychotic drug Zyprexa for unapproved use of dementia and agreed to pay $1.42 billion to settle criminal and civil allegations against it.
The company met with disappointment early this month when the FDA delayed a decision on its long-action version of Zyprexa. This is the drug's second go-around with the FDA. In February, the regulatory agency issued a not-approvable letter for the long-acting version of Zyprexa, requesting for more information about the risk and cause of excessive sedation observed in some patients. The drug was recently approved in Europe under the name Zypadhera.
The acquisition of Imclone has further strengthened the already-strong oncology pipeline of Lilly. The company currently has 59 molecules in clinical development.
Wyeth
Wyeth (WYE), which is rumored to be an acquisition target for Pfizer Inc. (PFE), is scheduled to report its fourth quarter and full-year results on January 29. Of late, the company is narrowing its dependence on traditional pharmaceuticals and focusing more on vaccines and biologics. Currently, 60% of the company's revenue is derived from non traditional pharma business like biotech, vaccines, nutritionals, consumer healthcare and animal healthcare. The share of revenue from non traditional pharma business is expected to grow to 75% by 2012.
The company's main growth drivers include Enbrel, a drug prescribed for rheumatoid arthritis and other auto-immune diseases, antidepressant drugs Effexor and Effexor XR and Prevnar, a pneumococcal vaccine. According to the company, Enbrel topped $5 billion in global sales, Effexor raked in worldwide revenue of $3.8 billion, while Prevnar notched up sales of $2.4 billion in 2007.
Wyeth's heart burn drug Protonix, which fetched sales of $1.9 billion in 2007 has come under earlier-than expected generic competition from Teva. The patent covering Protonix is originally slated to expire in July 2010, with Wyeth having the option to extend the date to 2011 to include pediatric exclusivity. However, Teva launched a generic version of Protonix in December of 2007, even before the expiry of the patent, claiming that the patent covering Protonix is invalid. A patent litigation is underway between Wyeth and Teva concerning Protonix.
For 2008, the company expects pro forma earnings to range between $3.35 and $3.49 per share, a decrease of 1% to 5% from 2007. Wall Street analysts expect the company to earn $3.54 per share, on revenue of $23.27 billion.
Wyeth, which has been considered a potential acquisition target, is itself reportedly in talks to acquire Dutch vaccine-maker Crucell NV (CRXL) in a $1.35 billion deal. Crucell produces vaccines for hepatitis B, influenza, typhoid and cholera.
AstraZeneca plc
Anglo-Swedish drug firm AstraZeneca plc (AZN) is scheduled to report fourth-quarter and full year financial results on Thursday, January 29.
The company's major revenue growth driver is Crestor, a prescription cholesterol medicine, which makes up over 40% of the sales. A study dubbed Jupiter recently revealed that Crestor can reduce the risk of heart attack, stroke, and cardiovascular disease by 45%, in people with normal cholesterol level. Last November, Crestor received FDA approval for an additional indication -- for the treatment of patients with primary dysbetalipoproteinemia (Fredrickson type III hyperlipoproteinemia) as an adjunct to diet.
AstraZeneca's other key products include breast cancer drug Arimidex, heartburn medication Nexium, anti-psychotic drug Seroquel and asthma drug Symbicort.
For the fourth-quarter, FirstCall/Thomson Financial analysts expect the company to earn $1.13 per share, on revenue of $8.29 billion. In the first three quarters of 2008, the company has reported positive earnings surprises.
Last October, the company boosted its full-year core earnings estimates to $4.90 to $5.05 per share from $4.60 to $4.90 per share. Core earnings estimates exclude restructuring costs and charges related to the company's 2007 acquisition of U.S. biotech company MedImmune. Analysts are looking for earnings of $4.81 per share on revenue of $31.70 billion for the year.
For comments and feedback: editorial@rttnews.com