Healthy Skepticism Library item: 992

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Publication type: news

Hensley S, Hollister H.
Pfizer Reports Solid Earnings;Wyeth Returns to Profitability Restrained Drug-Price Rise May Slow Growth
Wall Street Journal 2004 Oct 20

Full text:

Pfizer Inc.‘s net income rose nearly 50% in the third quarter, and Wyeth swung to a profit. But much of the companies’ gains came in comparison with big charges in the year-earlier period, and a slowdown in price increases during this election year suggests restrained growth ahead for many drug makers.

Pfizer reported anemic growth in sales but managed to post strong earnings in the third quarter, compared with the year-earlier period, when expenses stemming from the acquisition of Pharmacia Corp. depressed results.

The New York drug maker reported net income of $3.34 billion, or 44 cents a share, up 49% from $2.24 billion, or 29 cents a share, a year earlier. Excluding charges, largely related to acquisitions and an asbestos settlement, Pfizer would have earned $4.16 billion, or 55 cents a share, up 13% from earnings on the same basis of $3.68 billion, or 48 cents a share, in the year-earlier period.

Revenue rose 4% to $12.83 billion from $12.34 billion in the year earlier period.

Sluggish results from several of Pfizer’s biggest drugs marred the quarter. Revenue from Viagra slumped 15% to $403 million under heavy competition from rival impotence drugs Cialis from Lilly Icos LLC and Levitra, sold by GlaxoSmithKline PLC and Bayer AG. Norvasc, a blood-pressure pill that is Pfizer’s second-biggest product, slipped 6% to $1.04 billion. Sales of antidepressant Zoloft, which along with other antidepressants is under a cloud from concerns about their side effects in children, sagged 3% to $802 million.

Surging demand for Lipitor, the world’s best-selling prescription drug, helped the company weather the downturn in other medicines, with sales up 11% to $2.74 billion.

Arthritis drugs provided another bright spot. Sales of Celebrex rose 14% to $797 million, and Bextra sales climbed 37% to $324 million. Merck & Co. withdrew Vioxx on the last day of the third quarter, after a company study found the arthritis drug doubled the risk of heart attacks and strokes. That action, too late to influence the third quarter, is likely to boost sales of Pfizer’s drugs this quarter. Yet doubts about the safety of the entire class, called Cox-2 inhibitors, could slow enthusiasm for the medicines over the long haul.

Last week Pfizer said two studies of Bextra, its second-generation Cox-2 pill, indicated the drug increased the risk of heart attack and stroke in patients taking the drug for acute pain immediately after heart bypass surgery. The company said available data show no increased risk for patients taking Bextra for arthritis.

Pfizer acknowledged in a statement that the loss of patent protection from several important drugs would have a “substantial impact” on the company’s performance in 2005. Generic competitors to antifungal Diflucan and epilepsy medicine Neurontin appeared during the third quarter. Next year, Pfizer expects generics competition to blood-pressure pill Accupril, and antibiotic Zithromax. All told ,from these medicines, more than $5 billion in sales will feel pressure from generic competition next year.

Wyeth Revenue Rises 10%

Wyeth, of Madison, N.J., reported net income of $1.42 billion, or $1.06 a share, compared with a loss of $426.4 million, or 32 cents a share, a year earlier, which included an after-tax charge of $1.3 billion, or 98 cents a share, on a settlement of litigation over Wyeth’s Redux and Pondimin diet drugs.

Revenue rose 10% to $4.47 billion in the quarter, compared with $4.08 billion a year earlier. Pharmaceutical sales rose 13% in the quarter to $3.6 billion, while consumer health-care revenue slipped 1% to $651.1 million.

Sales of Wyeth’s Effexor antidepressant rose 38% to $893 million. However, as with Pfizer’s Zoloft, concerns have soared about the risk of increased suicidal tendencies in young people taking antidepressants since an FDA labeling committee recommended in September that antidepressants get a tough “black box” warning. Though sales of Effexor were on track to top $3 billion this year, the company warned that sales could begin to slump in the fourth quarter.

Chief Financial Officer Kenneth Martin said Wyeth thinks its net profit will be less than anticipated in the fourth quarter. In the fourth quarter last year, the company booked $63 million in “other income,” but only expects to book a negligible amount of revenue on this basis in the current fourth quarter. “As a result the growth in net income and EPS is expected to be less than the anticipated strong growth in operating income,” Mr. Martin said, speaking on a conference call.

The company still expects to be able to produce 20 million to 23 million doses this year of its Prevnar vaccine for children to protect against pneumococcal bacteria that can cause meningitis, blood infections and ear infections. Of that output, it expects to sell a little over 20 million doses and use the rest to build up inventory for 2005. The company had faced manufacturing glitches earlier, so the government was forced to limit the number of vaccine shots that kids received. Since those glitches have been cleared up, the U.S. and European governments have gone back to recommending that children get all four doses.

Some analysts were worried about the degree of price cuts the company has had to make on its heartburn drug Protonix. The prescription market for these heartburn drugs has slowed ever since AstraZeneca PLC’s Prilosec lost its patent protection and became an over-the-counter drug.

Protonix revenue fell 7% to $378 million in the third quarter, but prescriptions were up 22%. Also, one health-maintenance organization stopped ordering during the quarter in favor of a generic drug.

The Politics of Pricing

With few new products and rising pressure from generic drugs, makers of branded pharmaceuticals have in recent years gotten a boost from price increases. But this year, intensified scrutiny on prices and fear of legislative action has restrained the prices increases usually taken during the summer.

Pfizer says it hasn’t raised prices on any drugs since Jan. 2.

More than half of the 50 biggest-selling brand drugs have had lower price increases thus far this year than in 2003, according to Delta Marketing Dynamics, a health-care-marketing research company in East Syracuse, New York.. Of the top 15 brands, seven had greater price increases in 2003, and five had greater price increases this year.

The wholesale-acquisition price of Bristol-Myers Squibb’s Plavix rose 7.89%, the highest price increase in the top 25 brands thus far this year. The increase is modest compared with 2003, when there were eight increases ranging from 7.9% to 14.3%.

Congress is widely expected to revisit the Medicare in-drug benefit created last year. Democrats are pushing to give the federal government the authority to negotiate directly with drug makers for lower prices on prescription drugs for Medicare beneficiaries. The current law forbids the government from such direct action and leaves price negotiation for the benefit, which takes effect in 2006, in the hands of private insurers and pharmacy-benefit managers. The American Medical Association and AARP, among others, have said direct negotiations by the government would help lower drug prices.

A spokesman for the Pharmaceutical Research and Manufacturers of America, the Washington industry association for branded drug companies, said, “What gets lost in that whole debate is that it’s not actual negotiation. It’s price control. Price controls will stifle innovation for searching for new medications.”

Manufacturers are trying to defuse criticism in the months leading up to the presidential election, analysts said. Drug companies “are very conscious of the fact that they are the subject of a lot of political debate and discussion,” said Bill Little, president of Delta Marketing Dynamics. “As a result, they are managing their pricing decisions in a way that doesn’t call a lot more attention than they have already been given.”

Bernard Poussot, president of Wyeth Pharmaceuticals, disagreed, saying, “The election has not had anything to do with pricing strategy.”