Most Drug Companies Gain Thanks to New Products, Foreign Exchange
NEW YORK (AP) _ Most drug companies are reporting strong second-quarter profits, crediting rising sales of newer medicines that promise improved treatment for heart attacks, cancer, epilepsy and other maladies.
Sales were boosted several percentage points by favorable foreign exchange transactions from drugs sold in Europe and Japan. Weakness in the U.S. dollar made sales in those countries more valuable in dollars.
Five drugmakers reported profits Thursday. Merck & Co. and Bristol-Myers Squibb Co. gained 12 percent, Warner-Lambert Co. rose 2 percent and American Home Products Corp. was flat. Schering-Plough Corp. profits dropped 52 percent, but that was mostly due to a loss from the sale of its Wesley-Jensen contact lens business. Otherwise, Schering profits would have gained 13 percent.
In the late 1980s, drugmakers often duplicated each others’ products, then raised prices up to 20 percent a year. But now they’re saying innovations, not price hikes, are driving sales.
``Volume seems to be gaining, I think in part because companies have pruned out older lines and are putting new products on stream,″ said Stephen Buermann, drug analyst with Merrill Lynch.
Merck, which introduced drugs for high blood pressure and glaucoma during the quarter, along with a chicken pox vaccine, earned $858.1 million, or 69 cents per share.
Sales were $4.14 billion, a gain of 19 percent from 1994 after businesses sold since last year were excluded.
Merck’s cholesterol reducer Zocor, which was proven in a recent study to cut the risk of death from heart attacks, gained 74 percent in sales to $470 million.
Pepcid AC, the new non-prescription stomach acid drug being jointly marketed by Merck and Johnson & Johnson, grabbed 14 percent of the dollar share of the U.S. antacid market in June, putting it No. 3 behind mainstay antacids Tums and Mylanta, Merck reported.
Analysts doubted the sales would hold, however, as Pepcid will have competition from two similar drugs within a few months.
Bristol-Myers Squibb, maker of painkillers Excedrin and Bufferin, Clairol hair products and Theragran vitamins, earned $608 million, or $1.20 per share. Quarterly sales gained 16 percent to $3.45 billion.
Bristol-Myers cited sales increases of 53 percent for its cancer drug Taxol; 67 percent for the cholesterol-lowering Pravachol. Consumer health products, medical devices and infant formulas also gained in sales.
Warner-Lambert, which makes prescription drugs, over-the-counter brands like Listerine and Rolaids and candies like Junior Mints, earned $201 million, or $1.49 per share, up 2 percent. Sales rose 16 percent to $1.80 billion.
Warner-Lambert, whose prescription sales had been lagging, saw instead a 24 percent increase, crediting its newer products such as Neurontin, for epileptic seizures, and Cognex for Alzheimer’s disease. Warner’s profits were hurt by higher research costs and taxes, and the devaluation of the Mexican peso, the company said.
American Home Products Corp., maker of Advil, Anacin, Gulden’s mustard and Jiffy Pop popcorn, is still absorbing the costs of its purchase last year of drug and chemical maker American Cyanamid Co.
It earned $300 million or 97 cents per share, about 0.12 percent lower than last year. Sales rose 67 percent to $3.3 billion, reflecting the addition of Cyanamid.
American Home said it did away with traditional end-of-the-quarter drug discounts, prompting a 20 percent decline in U.S. pharmaceutical sales. Executives said the decision should aid profits later this year and next year.
Schering-Plough, maker of Claritin prescription allergy pills and consumer brands like Solarcaine and Dr. Scholl’s earned $116 million, or 31 cents per share on a 16 percent sales gain to $1.33 billion. Schering reported pharmaceutical sales grew 18 percent, led by Claritin; Vancenase, an allergy nasal spray and Vanceril, an asthma inhaler.
In the early 1990s, the threat of government price controls under President Clinton’s ill-fated health reforms prompted a drastic rollback in annual drug price increases. Lately, analysts report prices are beginning to creep up again.
Independent analyst Hemant Shah in Warren, N.J. predicted list prices to wholesalers would rise 4 percent to 5 percent this year, compared with 3 percent last year.
Nonetheless, the drug makers continue to offer discounts to gain business from health maintenance organizations, taking the sting off the price hikes for HMO members, but curbing new revenue to the companies.
Merck, for instance, said price cuts reduced its second-quarter revenue by 1 percent.