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By Nancy Weil, IDG News Service

September 15, 2003 | Robust sales, with better performance than expected from some newly approved drugs, led Big Pharma overall to a strong financial showing for 2Q FY2003 -- and created a swell of hope about the rest of the year. 

The biotech sector beat the Dow Jones Industrial Average and Nasdaq in July for the third straight month, indicating that the worst of the industry’s financial slump could be over, said G. Steven Burrill, CEO of Burrill & Company, a life sciences merchant bank in San Francisco.

Though acknowledging that a challenging road remains ahead, Burrill said in a statement analyzing the market that it was likely that “many of the biotechs will continue to build value through clinical progress, partnerships, and licensing deals.”

A case in point: Genentech forecast the possibility of multiple product launches in the coming years. FDA approval for Xolair, Genentech’s novel IgE-blocker for asthma, was a high point in the company’s second quarter: Sales of the first biotech product for asthma treatment started in mid-July, boosting the company’s stock price. Genentech’s performance was also helped by strong sales of cancer drugs Herceptin and Rituxan, up 15 percent and 32 percent, respectively, from the same period last year.

Pharmaceutical vendors, too, have been focusing on their pipelines and licensing deals. Eli Lilly had a banner quarter for sales, with Zyprexa, used to treat schizophrenia and acute bipolar disorder, topping $1 billion. The solid financial showing leaves Lilly able to invest more in products, with the hope of launching four more by year-end, the company said.

Wyeth net income rose to $864 million, compared to $600 million a year ago. This despite lower sales of high-margin products, including the Premarin hormone therapy line for menopausal women: Sales were negatively affected by a study that found serious health risks related to long-term hormone replacement therapy use. Strong sales of the Prevnar vaccine for invasive pneumococcal diseases in children and consumer healthcare products helped boost the bottom line.

Cost Cuts
However, impressive sales at some companies were offset by charges related to acquisitions and cost cutting. Pfizer, for instance, reported a loss of $3.59 billion (a loss of $0.48 per share) for the second quarter, compared to a net income of $1.9 billion ($0.31 per share) a year ago, attributing the drop to costs linked to its purchase of Pharmacia.

Still, the company affirmed its earnings forecast for the full year and predicted revenue of $54 billion next year, emphasizing more than 200 projects under development involving more than 100 new molecular entities, and more than 400 projects in discovery.

Likewise, Novartis forecast that its net financial income for the full year will drop compared to 2002 because of the ongoing “challenging” economic climate, but said that it expects full-year operating and net income to top last year. The company’s R&D spending was up 37 percent, to 15 percent of sales, for the first half of 2003 compared to last year, because of licensing and investments in new research facilities in Cambridge, Mass.

Genzyme’s quarterly loss of $74.5 million, compared to income of $28.3 million a year ago, came from special charges related to selling its Biosurgery cardiothoracic devices business to Teleflex and its acquisition of Biomatrix. But overall, “we feel in very, very good shape right now,” chairman, president, and CEO Henri A. Termeer told analysts.  Last month, Genzyme announced it would acquire SangStat Medical, which focuses on immunology, for about $600 million.

Across the pond, F. Hoffmann-La Roche recorded a drop in half-year net income to 1.3 billion Swiss francs ($964 million, as of June 30) compared to 1.8 billion Swiss francs a year ago, but the decline is attributed to a one-time gain posted in the first half of last year. Roche reported strong results in oncology, with cancer drug sales hitting 2.9 billion Swiss francs, for a 36-percent growth over the first half of last year, and said that the recent quarter indicates “a return to solid earnings performance.”

Biotech market capitalization finished July at $332 billion, the highest level since the end of 2001, when capitalization was $382 billion. “Biotech as a whole has recovered nicely,” Burrill says. As welcome as that news undoubtedly is, there are few signs of a turnaround in the drug-approval process. As of early last month, the FDA had approved only nine new molecular entities for CY2003. 





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