Despite some uncertainties, drugmakers have bright future.
According to the Centers for Medicare and Medicaid Services, prescription drug expenditures in the United States rose to $184.1 billion in 2003, a 13.4% increase over the 2002 level. This year that pace is expected to slow slightly, with the total hitting $207.9 billion, a 12.9% advance.
However, there are still some big questions on the horizon for the "Big Pharma" firms, including the effects of patent expirations, a relatively slow rate of product launches and fears of increased government pressure on prices.
"Drugs generating an estimated $35 billion in sales in 2003 have lost or will lose patent protection over the next four years," comments Standard & Poor's drug industry analyst Herman Saftlas. "The flood of patent expirations offers major opportunities for generics manufacturers, especially for those that can obtain 180 days of 'first to file' marketing exclusivity. There is also increasing pressure from health care organizations to allow lower-cost generics to enter their respective markets."
On the regulatory front, the Food and Drug Administration has become much tougher on new drug approvals. Research and development productivity is also lagging, with only 19 new molecular entities OK'd by the agency in 2003. Analysts think that pace also reflects sluggish overall industry research and development productivity in recent years.
Despite near-term uncertainties regarding pricing and patent expirations, the pharmaceutical business remains one of the healthiest and highest-margin industries. Prospects for the longer term are enhanced by demographic growth among senior citizens, who account for about one-third of total prescription sales, and by new therapeutic products spawned by discoveries in genomics and biotechnology. Economies and synergies stemming from mergers and acquisitions should also bolster profits at many companies.
Another factor that will have an impact on drugmakers is implementation of the Medicare reforms enacted by Congress last year.
"The new legislation's impact on drug industry revenues will be muted by what will essentially be a shift in existing spending, since many potential beneficiaries already have coverage through former employers and Medigap," comments Value Line Inc. pharmaceutical analyst George Rho. "All in all, though, we believe the reform package benefits the drug industry.
"Over the long haul it should boost overall revenues and, to a lesser extent, profits. Of a more immediate benefit, the legislation eliminates much of the political uncertainty that had bedeviled the sector for years. We would note, too, that it includes no price controls of any sort. Nor does the law sanction importation of drugs from any other country."
Here is a brief rundown of the outlook for some of the major players in the pharmaceutical and biotechnology sectors:
* Abbott Laboratories offerings include drugs, diagnostic tests, intravenous solutions, laboratory and hospital instruments, prepared infant formulas and nutritional products. Its main brands are Humira, Flomax, Tricor, Similac, Isomil and Murine.
The prospects for the company remain promising. Sales of Humira will likely more than double to $265 million for the year, as the rheumatoid arthritis medicine continues to gain share in the U.S. and is rolled out in foreign markets.
In mid-2004 Abbott hopes to submit an application for an oral formulation of Zemplar for kidney failure. While the company's pharmaceutical business is healthy growth is anemic at some its other business units.
* Amgen Inc. accounts for about 40% of the total market value of the approximately 160 biotechnology stocks. It manufactures and markets Aranesp/Epogen for anemia associated with chemotherapy and chronic kidney failure; Neulasta/Neupogen, a stimulator of the immune system; and Enbrel for rheumatoid arthritis.
The company has three products in late-stage testing, including a treatment for chemotherapy side effects that has generated positive preliminary results. Amgen's outlook is very promising.
* Bristol-Myers Squibb should be significantly aided by the FDA's recent approval of its colon cancer-fighting drug, Erbitux. Much is riding on it, since the company paid $1.9 billion for the American marketing rights to the medication. Some observers think Erbitux will generate annual sales of $750 million.
Exclusivity patents on two of Bristol-Myers' three best-selling, higher-margin drugs--Taxol and BuSpar--expired in 2003, and exclusivity on Glucophage is expected to lapse this year. As such, sales of those three products will continue to deteriorate as generics competition mounts.
Longer-term, Bristol-Meyers is relying heavily on a new diabetes treatment, Muraglitazar, although it is unlikely to be approved by the FDA until 2006. It is different from most other diabetes drugs in that it lowers cholesterol as well as blood sugar.
* Eli Lilly and Co.'s major products include Prozac (an antidepressant), Axid (antiulcer), Kefzol, Ceclor, Lorabid (antibiotics), Zyprexa (schizophrenia), Humatrope (human growth hormone), Humulin (insulin), Reopro (angioplasty) and Evista (osteoporosis). The company launched three drugs last year and will likely introduce three more in 2004. Only Strattera (for attention deficit/hyperactivity disorder) and Cymbalta (depression) have blockbuster sales potential, while the others, including Cialis (erectile dysfunction), are likely to be modest contributors.
* Forest Laboratories Inc. manufactures drugs used for treating depression, pain, and cardiovascular and respiratory disorders. Its important products are Celexa (depression), Aerobid (asthma), Lorcet (pain), Tiazac (hypertension), Monurol (urinary tract infection) and generic drugs using controlled-release technology.
The mid-January launch of Namenda should help fuel a healthy double-digit earnings advance in fiscal 2004. The first, and only, medication approved for the treatment of moderate-to-severe Alzheimer's, which accounts for most patients who suffer from that progressive disease of the brain, was approved by the FDA in October and rolled out several months earlier than had been anticipated.
* Genentech Inc. is a leading biotech company. Its key products are Rituxan for non-Hodgkin's lymphoma, Herceptin for breast cancer and Pulmozyme for cystic fibrosis.
The supplier launched the asthma medicine Xolair last July and a psoriasis drug, Raptiva, in November. The three new drugs that many think will achieve meaningful sales levels are Xolair, Raptiva and an anticancer medication, Avastin, which should be introduced in the first quarter of 2004.
* GlaxoSmithKline PLC (GSK) is a major research-based drug company. Its top products are Paxil, Wellbutrin and Imitrex (central nervous system); Seretide, Serevent, Flovent, Ventolin and Becotide (respiratory); Augmentin (antibacterial); and Trizivir, Combivir and Epivir (antivirals).
GSK has a deep, well-diversified pharmaceutical product pipeline, but its realization goes well beyond 2006-2008. In the interim, look for the company to derive some sales growth from Bexxar (non-Hodgkin's lymphoma) and Levitra (erectile dysfunction).
* Ivax Corp. is one of the largest manufacturers of generic drugs and is expected to benefit from the large number of branded products coming off patent. Analysts say Ivax will continue to file abbreviated new drug applications (ANDAs) for those compounds where it has an expertise in manufacturing or an advantage through a distributor.
And the company is expected to get FDA approval for its fair share of those products, doing its best to gain six-month marketing exclusivity by being first to file their ANDA. The latter point is important, because it gives the company the opportunity to establish its generic drug in the market and to garner greater profits before competitors enter the fray and slash prices.
* Johnson & Johnson (J&J) should have a good year. The primary driver of revenue growth at the company is expected to be Cypher, a drug-coated stent that was approved by the FDA last April. The product has generated $489 million in sales since its commercial launch.
Other key contributors to the top line include Duragesic, a transdermal patch for chronic pain; Remicade, a biologic for rheumatoid arthritis and Crohn's disease; Risperdal, an antipsychotic drug; and Yopamax, a treatment for epilepsy.
J&J is pumping up its product pipeline. It is on track to submit AP48, the second generation of Duragesic, for FDA approval when Duragesic loses its patent exclusivity in 2005.
* Merck & Co.'s major products include Vasotec and Prinivil (angiotensin-converting enzyme inhibitors for high blood pressure and angina), Mevacor and Zocor (cholesterol-lowering agents), Fosamax (osteoporosis), Vioxx (an antiarthritic), Crixivan (HIV/AIDS), Singulair (asthma), and Prilosec (gastro-intestinal disorders).
The company's joint venture with Schering-Plough Corp., marketing Zetia for use with statins, is expected to turn a profit this year. And given recent filings with the FDA, the launch of Arcoxia (next-generation Vioxx) and a Zetia/Zocor combination pill are slated for later this year.
Analysts say that Merck's earnings visibility diminishes sharply beyond next year. The preeminent concern is the mid-2006 loss of U.S. market exclusivity for Zocor, which racked up sales of $5.6 billion in 2002. Significantly, too, management will have to contend with the patent expiration of another blockbuster drug, Fosamax, the following year.
* Mylan Laboratories Inc., a leading generic drugmaker, has 131 prescription products in 39 therapeutic areas.
Many major drugs are coming off patent over the next few years, and Mylan is expected to take advantage of that development. Indeed, it has about 30 ANDAs, representing around $20 billion in annual branded revenue, pending with the FDA.
* Pfizer Inc. is the world's largest pharmaceutical firm. Its important products include Norvasc (cardiovascular), Zoloft (antidepressant), Zithromax (antibiotic), Lipitor (cholesterol), Aricept (Alzheimer's), Cardura (cardiovascular), Diflucan (antifungal), Zyrtec (antihistamine), Viagra (impotence) and Celebrex/Bextra (rheumatoid arthritis and osteoarthritis).
Pfizer is set to launch several new medicines this year and next. One is Inspra, a selective aldosterone receptor antagonist that is approved for the treatment of hypertension and heart failure. Another is Caduet, a combination of two huge sellers, Lipitor and Norvasc. It will become available in the first half of this year.
Poised for launch in 2004's second half is Pregabalin, a gamma-aminobutyric acid inhibitor that is being evaluated by the FDA for a broad range of indications, including epilepsy, neuropathic pain and anxiety. In 2005 Pfizer should begin to see top-line contributions from Macugen (for treating macular degeneration and edema), Indiplon (insomnia) and Spiriva (chronic obstructive pulmonary disease).
The company's product pipeline is well stocked with interesting mid- and early-stage prospects, which are supported by both a massive ($7 billion-plus) R&D budget and by acquisitions and/or licensing deals.
* Schering-Plough Corp.'s pharmaceutical business is still facing a test as it tries to preserve some of the sales from the patent expiration of its blockbuster Claritin (for allergy symptoms) and the likely introduction of generic versions of Rebetol (for hepatitis C). The company ought to get a growing benefit from Zetia/Zocor. The cholesterol-lowering combination pill, the product of a Schering/Merck joint venture, was filed with the FDA last November and could be launched in the second half of 2004.
|Printer friendly Cite/link Email Feedback|
|Publication:||Chain Drug Review|
|Date:||Apr 26, 2004|
|Previous Article:||Supplementary prescribers win certification in Britain.|
|Next Article:||CAPDM marks 40 years of 'representing excellence, innovation'.|