Drug earnings: Good, bad and ugly
Pfizer yanks Exubera off the market and takes $2.8B charge; Novartis cutting 1,260 jobs with 12% dive in profit; Baxter stock up 7% on strong earnings.
NEW YORK (CNNMoney.com) -- A slew of Big Pharma earnings reports from five lead drugmakers Thursday looks like the title cast from "The Good, The Bad and The Ugly."
Eli Lilly & Co. (Charts, Fortune 500) and Baxter Pharmaceuticals (Charts, Fortune 500) reported "good" earnings for the third quarter, resulting from strong sales of Lilly's anti-psychotic Zyprexa and Baxter's anti-hemophilia drugs Advate. Also, Lilly raised its adjusted earnings outlook for all of 2007 to between $3.50 and $3.55 per share.
Baxter's stock surged 7 percent on the news, while Lilly made only slight gains.Wyeth (Charts, Fortune 500) - the "bad," but not that bad - announced a slight dip in earnings, despite strong sales. The primary reason: because of charges from the closing of a factory that makes Enbrel, its drug for rheumatoid arthritis and psoriasis. Wyeth stock dipped slightly.
The ugliest results came from Pfizer Inc., (Charts, Fortune 500) the world's largest company that derives all its sales from pharmaceuticals, and Swiss drug giant Novartis (Charts).
New York-based Pfizer said it's abandoning its inhalable insulin product Exubera, and incurred a $2.8 billion charge as it broke off all investments to the program. Exubera, a needle-free method of taking insulin, was once considered by analysts to be a potential billion-dollar blockbuster.
But Exubera, a tube-shaped dispenser for powered insulin, failed to win the hearts and minds of diabetics, with one diabetic journalist comparing the device to a "bong."
"Despite our best efforts, Exubera has failed to gain acceptance of patients and physicians," said Pfizer chief executive Jeffrey Kindler in an earnings release, noting that he "initially had high expectations" for inhalable insulin. "We have therefore concluded that further investment in this product is unwarranted."
While the failure of Exubera came as no surprise, the timing of its withdrawal seemed abrupt, said Robert Hazlett, analyst for BMO Capital Markets.
"Given the lack of success of the product, we might have thought something would occur down the road a bit, but the timing itself was a bit surprising to a number of us in the [analyst] community," said Hazlett.
Also, Pfizer said it was pressured by declining sales to its flagship drug Lipitor, a treatment for high cholesterol. As a result, Pfizer profit wase less than $800 million, a mere fraction of the $3.4 billion in profit from the year-earlier quarter.
Nonetheless, Pfizer remains a relatively secure company, said Barbara Ryan, analyst for Deutsche Bank North America, in a published note to investors.
Ryan said that Pfizer shares "will trade like a Treasury bond in the near term, until, in our view, a substantial commercial acquisition is made" which would "dilute" the company's dependence on the declining Lipitor. The patent for Lipitor expires in 2011, with an expected hemorrhage in sales.
Novartis, based in Basel, said it was cutting 1,260 jobs in the U.S., with most of the job cuts resulting from attrition, rather than lay-offs. Novartis suffered a 12 percent dive in profit, excluding proceeds from the sale of nutrition units to Nestle, despite a 9 percent gain in revenue.
Novartis chief executive Daniel Vassella said the pain of the third quarter was from a necessary reorganization of the company.
"Following the successful divestments of the Medical Nutrition and Gerber businesses [to Nestle] we are now strategically focused on health care and products," said Vassella, in an earnings release.
Investors seemed unfazed by the "ugly" news, with moderate stock gains for Pfizer and Novartis.
The analyst quoted in this story do not own stock in the companies they discussed, but Deutsche Bank seeks investment banking business with the companies it covers.http://money.cnn.com/2007/10/18/news/companies/big_pharma/index.htm?section=money_topstories
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