Drug makers Bristol-Myers Squibb Co. (BMY) and Wyeth (WYE)
reported higher second-quarter earnings, helped by cost cuts and
rising sales of top products, and continued an industry streak of
exceeding Wall Street expectations.
Both companies faced headwinds from unfavorable
currency-exchange rates, the weak economy and competition from
cheaper generic drugs. But like some other drug makers this week,
Wyeth and Bristol reported higher-than-expected earnings and
boosted their financial forecasts for full-year 2009.
Wyeth and Bristol are taking very different strategic
directions, though. Wyeth, of Madison, N.J., has agreed to be
acquired by Pfizer Inc. (PFE) in a deal originally valued at about
$68-billion, expected to close by the end of the year.
New York-based Bristol, however, has stayed independent, and
late Wednesday announced a $2.4 billion purchase of
biotechnology-drug developer Medarex Inc. (MEDX), or $2.1 billion
net of Medarex's projected cash. The deal is designed to advance
Bristol's strategy of stocking up on biotech drugs and helping to
prepare for the loss of market exclusivity for its top-selling
drug, the blood thinner Plavix, next decade.
"This deal is expected to give us increased leadership in the
area of biologics," Bristol-Myers Chief Executive James Cornelius
told analysts on a conference call. "It vastly expands the scope of
our pipeline in oncology and immunology."
While some analysts said Medarex's price tag - a 90% premium to
its closing share price Wednesday - might be viewed as hefty,
Medarex has assets including royalty streams that could prove
valuable to Bristol, even if the acquired experimental drugs don't
fully pan out. Johnson & Johnson (JNJ), for example, will pay
royalties for its use of Medarex technology in two new drugs for
psoriasis and rheumatoid arthritis.
And if Medarex's lead compound, ipilimumab for melanoma, does
successfully reach the market, "the deal will seem particularly
smart," said Credit Suisse analyst Catherine Arnold. Bristol-Myers
said it might submit that drug for regulatory approval next year -
the original planned filing target of 2008 was postponed after
Bristol and Medarex learned the Food and Drug Administration wanted
more data.
Bristol shares recently rose 42 cents, or 2.07%, to $20.71,
while Medarex shares shot up 89% to $15.87. Wyeth shares rose 31
cents to $47.17.
For the three months ended June 30, Bristol said earnings rose
29% to $983 million, or 49 cents a share, from $764 million, or 38
cents a share, a year earlier. The latest quarter included charges
for Bristol's ongoing cost-cutting program and other items;
excluding these, earnings were 56 cents a share, well above the
47-cents-per-share mean estimate of analysts surveyed by Thomson
Reuters.
Bristol's sales rose 3% to $5.38 billion. Unfavorable currency
rates reduced sales growth by about five percentage points.
Bristol's biggest unit, biopharmaceuticals, had 4% sales growth,
while sales for the Mead Johnson Nutrition Co. (MJN) nutritionals
unit declined 1%.
Bristol posted an 11% increase in sales of Plavix, to $1.54
billion. Bristol co-markets Plavix with Sanofi-Aventis SA (SNY) of
France. Plavix sales could soon take a hit because Eli Lilly &
Co. (LLY) and Daiichi Sankyo Co. (4568.TO) are about to launch a
competing drug, Effient, in the U.S. Bristol and Sanofi are due to
lose U.S. patent protection for Plavix in 2012.
Sales of Bristol's antipsychotic Abilify rose 22% to $643
million, while HIV drug Sustiva had an 11% increase, to $312
million. Sales declined for hypertension drugs Avapro and Avalide,
and for cancer drug Erbitux.
Bristol raised its 2009 earnings forecast range, excluding
one-time items, to $1.95 to $2.05 a share, from $1.85 to $2 per
share. The Medarex deal is expected to reduce earnings by 2 cents
to 3 cents a share this year.
For the three months ended June 30, Wyeth had net income of
$1.27 billion, or 94 cents a share, versus $1.12 billion, or 83
cents a share, a year earlier. The latest quarter included charges
of $52 million, or 4 cents a share, related to a cost-cutting
program and merger costs. Excluding these, earnings were 98 cents a
share, well ahead of the 85-cents-per-share mean estimate of
analysts surveyed by Thomson Reuters.
Wyeth's sales declined 4% to $5.7 billion from $5.9 billion a
year earlier, as a six-percentage point hit from unfavorable
exchange rates more than wiped out a 2% operational increase.
A culprit in the overall sales decline was the blockbuster
antidepressant Effexor, sales of which plunged 25% to $772 million.
Wyeth attributed this to increased generic competition outside the
U.S. Sales of antibiotic Zosyn and hormone therapy Premarin also
declined.
But sales of the Prevnar vaccine, which prevents pneumococcal
disease in children, jumped 13% to $783 million, continuing its
strong growth. Wyeth's sales of arthritis drug Enbrel outside the
U.S. and Canada rose 6% to $736 million, and it booked alliance
revenue from the U.S. and Canada of $304 million, up 7%. Wyeth
exclusively markets Enbrel in many countries outside the U.S. and
Canada, and co-promotes within the U.S. and Canada with Amgen Inc.
(AMGN).
"The diversity of our businesses has limited our exposure to
some of the global market conditions that we see," Joseph Mahady,
head of Wyeth's pharmaceutical unit, told analysts on a conference
call. "And of course prudently managing our [spending] has yielded
further benefit on the bottom line."
Wyeth's nutritional sales inched up 1% to $436 million. Sales of
Centrum vitamin products and Advil products declined in the single
digits on a percentage basis.
Wyeth's takeover by Pfizer is expected to close by the end of
the year. Wyeth's shareholders voted in favor of the deal Monday
and it's still subject to antitrust clearance in the U.S. The
European Commission cleared the deal last week, conditioned upon
the divestiture of certain animal-health assets in Europe because
Pfizer and Wyeth have overlapping businesses.
Wyeth raised its full-year earnings view to $3.48 to $3.58 a
share, from $3.33 to $3.53 a share, excluding one-time items.
-Peter Loftus; Dow Jones Newswires; 215-656-8289;
peter.loftus@dowjones.com
(Andrew Morse contributed to this article.)