Pharma report: The good (PFE), the so-so (GSK) and the ugly (GENZ)
On a day full of pharmaceutical companies reporting, it's actually quite surprising to find Pfizer (PFE) in the lead. The world's largest drugmaker reported second-quarter financial results this morning, and despite profits tumbling 19 percent, they slightly exceeded analysts' estimates. Revenue was largely impacted by unfavorable foreign exchange, the company said, but at the same time it boosted its 2009 forecast. The company also said it has achieved "significant milestones" regarding the pending Wyeth acquisition. PFE shares gained two percent by midday trading.
Pfizer wasn't the only one beating expectations, but it was the one least expected to do so.
GlaxoSmithKline (GSK), the world's second-biggest drugmaker, also beat expectations on both top and bottom lines. Not only that, but Glaxo said the second half of the year should get a boost from growing sales of new products and its portfolio of flu products, offsetting the heavy impact of generic competition for other drugs which lost patent protection. The results, favorably impacted by foreign exchange, didn't inspire investors following Pfizer's results today and Merck's upbeat results yesterday, and GSK shares were slightly lower.
Eli Lilly & Co. (LLY) too reported better-than-expected quarterly earnings. Lilly made adjustments to overseas inventory and increased prices of a few drugs during the quarter, helping results and allowing it to raise its 2009 profit forecast. But concerns over its margins going forward caused investors to depress the stock somewhat.
Genzyme Corp. (GENZ) ran into some problems during the second-quarter with a virus infection in one of its plant affecting production of two of its drugs. The stock was hammered as a result. Today, Genzyme reported that both its earnings and revenue rose, coming inline with estimates. But the rare diseases drugmaker cut its 2009 outlook to reflect the halted production at its Boston manufacturing plant making two key products: its Gaucher disease treatment and its Fabry disease drug. GENZ shares declined some 7.7 percent by midday today.
Finally, St. Jude Medical Inc (STJ) actually reported higher quarterly earnings that matched the Street's view, but its shares also fell about 8 percent in afternoon trading as investors were concerned about softness in its cardiac rhythm management unit, the company's biggest business.
It seems most pharmaceuticals today and throughout this earning period actually report better-than-expected earnings, but there seem to be softness in the sector as a whole. Not only do the same concerns regarding competition from generics remain, a new concern is adding pressure. Investors are worried health care reform will further crimp revenue at drug companies, with many executives weighing in on conference calls about the issue, usually expressing similar concerns themselves. Then there is the issue of the cyclicality of pharmaceuticals and the current economic cycle we're in. Usually deemed defensive, pharmas may remain stagnant should investors think the growth cycle has begun.