analysts

Will Big Pharma really shift strategy?

Tracy Staton — Thu, 13 Nov 2008 11:26:16 -0500

Are drugmakers all talk and little action? That's what Ernst & Young suggests in a new report. Big Pharma has been promising big changes in strategy, but there's little evidence they've actually, you know, shifted strategy. Most companies haven't even made the organizational changes prerequisite to their strategic overhauls.

The good news? The report also concludes that pharma is more focused on getting new products to market quickly and on jump-starting R&D than they are on simply cutting costs. That shows some future-focused thinking.

Apparently not enough for E&Y, though, which took drugmakers to task for relying on relatively small changes. Focusing on emerging markets, for one thing. Cutting sales forces, for another. Outsourcing admin functions as a third.

"Many of them have not ventured very far down the path of what their (stated) new business model is going to be, and some are still struggling to choose a direction," Mark Hassenplug, global pharmaceutical sector market leader at Ernst & Young, told the San Diego Union-Tribune.

That slow progress makes investors question whether pharmaceutical companies can pull it off, analyst Steve Brozak of WBB Securities said: "The people that got them in this position are the same people that are going to have to lead them out of this." And echoing some pharma execs as well as the E&Y report, Brozak also pointed out that the Big Pharma biz model is not only broken but can't be resurrected. Ouch.

- read the E&Y release
- check out the Union-Tribune article

Pharma is cash rich abroad, but debt will rise

Christe Bruderlin-Nelson — Wed, 15 Oct 2008 10:44:27 -0400

Amidst consistent reports that there is plenty of cash in the U.S. pharmaceutical industry, analysts are fretting about the challenges of accessing that cash--due to the serious tax implications--for use in the U.S.

But will companies need much cash? Well, it's more likely than not, since big pharma as a whole is poised for acquisitions (e.g. Eli Lilly will borrow a few billion to purchase ImClone), particularly in light of the fact that some leading companies have quite weak pipelines and are facing patent expirations.

Overall, Moody says the industry looks fairly safe, despite the U.S. financial crisis, but others say that because of the potential tax hit, U.S. drug companies are more likely to go into debt than to repatriate cash.

The Moody report looked at nine companies; Amgen, Bristol-Myers Squibb, Eli Lilly, Genentech, Johnson & Johnson, Merck, Pfizer, Schering-Plough and Wyeth, noting that almost 70 percent of the companies' rise in investments is in offshore cash and that bring it back could cost nearly 30 percent in taxes.

- see the Wall Street Journal story
- read the related Wall Street Journal blog post

Detractors question Lilly's ImClone buy

Tracy Staton — Fri, 10 Oct 2008 11:17:18 -0400

Eli Lilly's $6.5 billion buyout of ImClone was greeted with great fanfare on Monday--by all but a few analysts who questioned whether Lilly's $70-a-share offer was a bit too rich for the times. Doubters suggested that the unprecedentedly tight credit markets might hinder Lilly's ability to raise $2 billion to $3 billion in financing. "These aren't ordinary circumstances," one analyst pointed out Tuesday in the New York Times.

At the same time, Moody's and Standard & Poor's said they'd be looking at Lilly for a possible debt downgrade. And now, a top stock analyst has downgraded the company. Catherine Arnold of Credit Suisse now rates Lilly "neutral;" before the ImClone deal, the drugmaker rated an "outperform." Her concerns? Possible overpayment for ImClone, for one. For another, if Lilly forks over billions of cash--and assumes billions in debt--to wrap up the deal, it may have to forego future acquisitions.

- read the item at the NYT's DealBook blog

E&Y: Pharma neglects working capital

Tracy Staton — Thu, 02 Oct 2008 10:42:56 -0400

Could Big Pharma ease some of its ills if it just managed itself better? Ernst & Young says drugmakers could free up to $35 billion in working capital just by improving their management of payments and inventories. In fact, the majority of the 16 largest U.S. and European pharma firms "have a significant opportunity" to release cash to the tune of 3 percent to 7 percent of sales, or $17 to $35 billion.

We all know Big Pharma has been suffering under generic competition and pricing pressures. Companies have been cutting costs all over the globe. But, E&Y says, drugmakers haven't paid enough attention to their working capital; pharma lags other industries in working capital management. If drugmakers would just step up and start aggressively tightening payment terms, improving credit billing and collections, and so on, they could see full cash and cost benefits within 12 to 24 months, the firm says.

- see the release from E&Y
- read the story at Pharma Times
- check out the coverage at CNN Money

Analysts get bullish on generics makers

Wed, 19 Dec 2007 06:59:57 -0500

The flip side of Big Pharma's angst over generic competition is growing exuberance about generics makers. Early this week, the Wall Street Journal tipped off investors to Indian generics companies' waxing fortunes. Yesterday, several major generics makers saw sizable stock gains. Meanwhile, individual companies are attracting analyst kudos:

Teva Pharmaceutical got an "outperform" rating from Cowen & Co., which predicted a strong 2008, marked by the exclusive launch of a copycat Risperdal, plus possible shared exclusivity on generic Wellbutrin XL, Lamictal, and Fosamax.
A Banc of America Securities analyst started covering Teva, Mylan, and Barr Pharmaceuticals, rating each a "buy." He called Teva a "Best in Class Generic," setting a price target of $55 on its stock, which currently is trading at around $45. Mylan got an $18 target (its current share price is $13.77), on the strength of three big launches next year. And he cited Barr for its 70 drug apps pending at the FDA.

The WSJ's focus on Indian generics makers emphasized that their stocks have "taken a beating" recently, so they're starting to look cheap. Plus, several companies are on a growth spurt; the country's biggest drug maker, Ranbaxy, for instance, is expected to grow earnings by 41 percent next year.

- read the Wall Street Journal's bullish generics article
- get more on Cowen's report on Teva
- see the Banc of America report

Related Articles:
Patent 'cliff' looms for Big Pharma. Report
Generic competition heats up. Report
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Say goodbye to Big Pharma's gilded age. Report

Merck expects $1.8B hit on Fosamax

Tue, 04 Dec 2007 06:59:58 -0500

We all knew that losing patent protection on Fosamax would cut into Merck's sales next year. We just didn't know how much. Now we do, or at least we know Merck's best estimate: about $1.8 billion. The drug maker issued its initial earnings outlook for 2008 today, and in it specifies Fosamax sales at $1.1 billion to $1.4 billion, down from $2.9 billion to $3.1 billion in 2007.

But Merck expects overall sales to grow by 4 percent to 6 percent through 2010, with a gross margin in 2008 of 77 percent to 78 percent. What drugs will account for this growth? Singulair, for one, and Cozaar/Hyzaar blood pressure meds for another. Vaccines will also contribute to growth. Analysts weren't thrilled with the numbers, though; overall, the forecast fell below market expectations.

Meanwhile, the drug maker is paying $670 million to settle claims that it sold drugs to Medicaid at inflated prices. At issue is "nominal pricing," in which Merck gave big discounts to hospitals that helped grow market share on certain drugs--but didn't give the same discounts to Medicaid as it's required to do.

- see the release from Merck
- read the Wall Street Journal story
- get more on Merck's nominal pricing in the Wall Street Journal's Health Blog

ALSO: Take a look at Merck's pipeline. Report

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Merck profits jump by 62 percent. Report
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BMS starts laying off workers

Thu, 29 Nov 2007 06:59:54 -0500

The ax is starting to fall at Bristol-Myers Squibb. The company has started notifying employees that they'll soon be out of a job. Details on how many jobs will be cut and which areas will feel the most pain are expected next Wednesday during Bristol's conference call with analysts.

Laid-off workers will get severance, plus help finding new jobs. Many of them are probably already looking, considering the fact that CEO James Cornelius (photo) has been talking layoffs since July. The conference call will be webcast for the public, in case anyone wants to hear the news firsthand.

- see the release about the webcast from BMS
- read the Post-Standard report

Related Articles:
BMS to unveil layoffs, manufacturing cuts. Report
Cornelius get big payday for BMS temp job. Report
Better times ahead for BMS? Report

AZ may cut supplies to boost returns

Wed, 21 Nov 2007 06:59:57 -0500

That Crestor patent challenge is coming home to roost. AstraZeneca hit a new 52-week low today as analysts publicly worried about possible generic competition for the cholesterol drug, which recently won a new indication for treatment of hardening of the arteries. "The key issue...is whether Crestor's prescriptions can accelerate on the back of the new atherosclerosis label," a Bear Stearns analyst wrote.

It's just the latest beating from analysts that AZ has taken in recent days. Another issue that has analyst tongues wagging: Inventory. The company may cut back its inventory to shore up returns; though drug makers like to keep 180 days' worth of meds on hand, a Citigroup analyst predicts AstraZeneca will reduce that margin to 90 days. If so, other Big Pharma companies may follow suit. Such a move would free up cash but the risk of shortages, which, of course, could be a PR disaster.

- learn about AZ's stock troubles from CNN Money
- read about the company's inventory decision

Related Articles:
AstraZeneca "worst performer" in pharma. Report
AZ's Crestor flubs key heart failure trial. Report
AZ hit with Crestor patent challenge. Report
Crestor less safe than competing statins. Report
AstraZeneca lays out road map for recovery. Report

BMS to unveil layoffs, manufacturing cuts

Tue, 20 Nov 2007 06:59:58 -0500

Will Bristol-Myers Squibb join the layoff parade just before Christmas? Industry experts think so. A UBS analyst issued a research report yesterday upgrading BMS stock to a "buy," saying that the company plans to announce a 10 percent to 20 percent cut in its workforce over the next three years. The analyst, Roopesh Patel, also predicts that BMS will close or sell off more than half its 38 manufacturing sites.

Meanwhile, the blog Pharmalot thinks BMS will make the cuts formal in two weeks, and the layoffs will include workers in legal, finance, and compliance. The drugmaker will be vacating several floors of its Park Avenue HQ in the process.

Today, Cowen & Co upgraded the stock, this time to "neutral." Though these analysts didn't mention job cuts in their reasoning behind the change, they did allude to "news" expected from the company's meeting with analysts December 10. Which is, of course, about two weeks away.

- read about the UBS analyst report
- check out thee Cowen & Co report at NewRatings
- get more details on the cuts from Pharmalot

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Better times ahead for BMS? Report

Analyst: AZ "worst performer" in pharma

Wed, 14 Nov 2007 06:59:58 -0500

So, Dresdner Kleinwort, tell us how you really feel about AstraZeneca. The investment bank, which just started covering AstraZeneca's stock, minced no words in its first report. The company's in "serious trouble," the analysts said, and quite possibly will be the worst performer in Big Pharma for the next eight years. At best, it'll manage a 1 percent growth in revenue, the analysts estimated; at worst, it'll drop 3 percent.

The basis for this bleak assessment? The company's three biggest sales-generators will get generic competition in the near future, and eight patents expire over the next eight years. Together that amounts to 60 percent of AZ's revenue. Even products ostensibly covered by patents through 2015, such as Nexium, Seroquel, and Crestor, face challenges that could expose them much, much sooner. The analysts weren't cheered by products coming up the pipeline, either.

Like all criticism, stock reports are subjective. Other analysts aren't as negative about AstraZeneca's prospects. And even the Kleinwort analyst said he was "mildly positive" about Crestor's approval for atherosclerosis treatment.

- read about Dresdner Kleinwort's rating at in-Pharma Technologist
- check out this assessment from New Ratings
- get more on Crestor from The Times

Related Articles:
AstraZeneca - Top 5 layoffs of 2007. Report
AstraZeneca lays out road map for recovery. Report
AstraZeneca announces restructuring and buyout. Report
AstraZeneca to continue ambitious deal-making. Report
AstraZeneca snares MedImmune in $15.6B buyout. Report

Bristol CEO: Job cuts, shutdowns continue

Fri, 26 Oct 2007 06:59:55 -0400

It's a layoffs kind of news day. Bristol-Myers Squibb CEO James Cornelius announced that job cuts have begun at the drug maker, and will continue through year's end and into 2008. Facilities will be shut down, too.

Cornelius didn't say just how may jobs would be lost, but he indicated that the cuts will hit all areas of the company. "We have begun a significant productivity initiative across all business units," he told analysts during a conference call about the company's third-quarter earnings (which were up 62 percent, incidentally).

- read the story at Smart Money

Boston Scientific preps for big layoffs

Tue, 16 Oct 2007 06:59:57 -0400

Welcome to the wake, Boston Scientific. The device maker is poised to join its healthcare colleagues in laying off thousands of workers. Analysts that follow the company predict it will cut up to 12 percent of its global workforce, or up to 3,400 people.

Boston Scientific already cut some 500 to 600 jobs this year. Company officials said this summer that they'd announce more layoffs by year's end; that word is expected soon, perhaps this week. The company has been faltering since it bought Guidant two years ago, loaded as it is with debt and beset by falling sales of its drug-coated stents.

- read the article from the Boston Globe

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Read more on: Boston Scientific

Pharma execs practice positive thinking

Tue, 11 Sep 2007 06:59:57 -0400

Throw a bunch of pharma execs into a room with financial analysts, and what do you get? Almost unmitigated hope. Thinking positive is a must when analysts are around, so as industry leaders stand up to address Bear Stearns' healthcare conference this week, they're trumpeting the growth in overseas markets, and soft-pedaling unpleasantness like layoffs and restructuring.

Wyeth EVP Jim Connolly credited the overseas market with the success of its pneumonia vaccine Prevnar, the company's second-biggest seller; he said Prevnar sales rocketed to $1.2 billion in the first half of 2007, a 32 percent increase, and projected annual sales of $3 billion by 2009.
Medtronic CEO William Hawkins predicted double-digit international growth pegging China as the big gorilla of overseas markets. Within 10 years, he said, China will supplant Japan as the company's second-biggest market. Meanwhile, the company's cutting 900 jobs.
Pfizer CEO Jeffrey Kindler said Asian and Latin American markets are growing at twice the rate of those in developed countries, and cited his company's new plants in China and new R&D in India and Korea as part of a strategy to take advantage of that growth. Pfizer, of course, is embroiled in a multibillion-dollar restructuring that includes some 10,000 layoffs.

- check out the report from CNNMoney

Related Articles:
Wyeth stumbles badly trying to develop new drugs. Report
China now leads India in ongoing clinical trials. Report
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