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Weak U.S. dollar should boost Big Pharma earnings
By Val Brickates Kennedy, MarketWatch
Last Update: 10:00 AM ET Jul 19, 2008
BOSTON (MarketWatch) -- Major pharmaceutical companies are expected to roll out higher second-quarter earnings reports next week, helped partly by strong overseas sales stoked by a weak U.S. dollar.
Some of the sector's heaviest hitters will be on deck next week, including Merck & Co. MRK, Schering-Plough Corp. SGP, Pfizer Inc. PFE, Eli Lilly & Co. LLY, Bristol-Myers Squibb BMY and Wyeth. WYE
According to analysts at Cowen & Co., a favorable exchange rate is expected to boost sales about 4.6%, on average.
Merck, Schering-Plough
Partners Merck and Schering-Plough will be sharing center-stage on Monday, and the topic of the day for investors will likely be their controversial cholesterol drug, Vytorin.
A combination of Merck's popular cholesterol agent Zocor and a newer drug called Zetia, Vytorin has been regarded as a key future growth driver for both companies. But sales of the product have suffered recently after a controversial study showed it wasn't any more effective in treating heart disease than generic versions of Zocor, which are substantially cheaper.
As a result, investors will be interested to see whether sales of Zocor and Zetia have stabilized or are still trending downward. Zetia and Vytorin are sold and accounted for through a joint venture.
According to a recent note by Cowen & Co., Vytorin sales are seen as coming in 6% lower at $640 million, while Zetia sales will be down 2% at $595 million.
Meanwhile, analysts expect Merck to report a profit of 83 cents a share. Sales should be about $6.04 billion, vs.$6.11 billion in the 2007 period, according to FactSet Research.
Currency rates should contribute about 4.3% to worldwide sales, Cowen said.
Cowen sees sales of Merck's best-selling drug, the asthma medication Singulair, climbing 9% to $190 million. Sales of its highly-publicized, new cervical cancer vaccine, Gardasil, should jump 19% to $425 million.
On the Schering-Plough side, Wall Street is looking for the drugmaker to report a profit of 40 cents a share. Sales should be around $4.77 billion, up from $3.18 billion, according to FactSet.
Currency rates are seen as contributing about 6% to the company's top-line, said Cowen.
Cowen added it expects sales of one of Schering-Plough's hottest products, Remicade, to shoot up 27% to $500 million. Remicade is co-marketed with Johnson & Johnson JNJ, which released its earnings report earlier this week.
Pfizer, Wyeth
Reports from Pfizer and Wyeth are slated for Wednesday, with both drugmakers expected to report largely flat sales due in part to increased generic competition for many of their products.
According to Wall Street analysts, Pfizer is pegged at posting earnings of 54 cents a share. Sales are seen around $11.55 billion, up from $11.08 billion last year, according to FactSet.
A positive overseas exchange rate should lift Pfizer's top-line number by about 4%, said Cowen.
Sales of Pfizer's No. 1 product, the cholesterol agent Lipitor, are seen as coming in 3% lower at $2.7 billion, according to Cowen. Lipitor has been facing increased competition from products such as generic Zocor.
Pfizer's top-line has also been weighed down in recent quarters by the loss of market exclusivity for such once-hot products as Zithromax, Zoloft and, most recently Norvasc.
Wyeth is seen as posting slightly lower earnings of 86 cents a share. Sales should come in at $5.69 billion, up from $5.65 billion, according to Fact Set.
A weak U.S. dollar should lift sales about 4%, according to Cowen.
Sales of Wyeth's biggest product, the antidepressant Effexor, should come in about 3% higher at $1.01 billion. The company's second-best seller, the heartburn medication Protonix, recently lost patent protection. As a result, Protonix sales are seen as plunging 65% to $190 million, said Cowen.
Wyeth's next best-selling product, the rheumatoid arthritis drug Enbrel, should have sales of around $860 million, up 4%, according to Cowen.
Enbrel is co-marketed with Amgen Inc. AMGN, which slated to release its earnings report later this month.
Lilly and Bristol-Myers
Eli Lilly is due to issue its report on Thursday. A poll of analysts targets Lilly posting earnings of 99 cents a share. Revenue should be around $5.04 billion, up from $4.63 billion, according to FactSet.
A favorable exchange should contribute about 5%, according to Cowen.
Cowen analysts said they see sales of Lilly's top product, the psychiatric drug Zyprexa, sliding 5% to $1.15 billion.
Strong double-digit growth, however, is expected from Lilly's newer drugs: the antidepressant Cymbalta, erectile dysfunction drug Cialis, lung cancer medication Alimta and diabetes treatment Byetta. Cymbalta sales are seen as being particularly strong, up 31% at $680 million, said Cowen.
Analysts see Bristol-Myers Squibb as reporting higher earnings per share of 40 cents. The New York-based drugmaker is expected to have sales of $5.21 billion, up from $4.93 billion, according to FactSet.
Sales of the blood thinner Plavix, Bristol-Myers biggest revenue driver, are seen as rebounding 14% to $1.26 billion. Plavix sales were flattened in mid-2006 when Canadian drugmaker Apotex introduced a cheaper generic version of the drug to the U.S. market.
Although the Apotex product was ordered off the market by a federal court after just one month, the glut of generic Plavix in the distribution channel served to crush sales of the branded product until well into 2007.
Plavix is co-marketed with Sanofi-Aventis.SNY
Cowen sees solid double-digit growth for several of Bristol-Myers newer products, including Abilify, Reyataz, Orencia and Sprycel. Sales of the oncology drug Erbitux, co-developed with ImClone Systems IMCL are expected to climb 8% to $200 million.
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