Original Story: USAToday.com
LONDON — Fears that a proposed $106 billion takeover of British pharmaceuticals firm AstraZeneca by Pfizer, its New York-based rival that makes the erectile dysfunction drug Viagra, would lead to job losses and tax sidestepping is ruffling political feathers on both sides of the Atlantic even as merger activity in the pharma sector hits record levels. A San Francisco M&A Lawyer says this will affect the U.S.
Since the start of the year, the value of deal-making maneuvers in the global pharmaceutical sector has hit nearly $240 billion, making 2014 the busiest year ever, according to Thomson Reuters data.
"What the Pfizer bid for AstraZeneca has done is to highlight that the next cycle in the bio-pharmaceutical business is M&A," says Basil Petrides, an analyst at Beaufort Securities, a London-based wealth management company.
"There are always synergies to be had in terms of minimizing overlap, but the deals we have seen recently are not necessarily all about cost-cutting either," he says. "Intellectual property rights on drugs only last for a certain amount of years and after that they are opened up to other manufacturers. Pfizer has been circling this deal for a long time. Its pipeline of drugs is slowly eroding and the easiest way to get value for shareholders is to take over companies that have 'pipe' and proven technology."
In addition to Pfizer's spurned cash and stock bid for AstraZeneca on May 2 — worth a bit less after shares in Britain's second-largest drugs firm closed down 2.4% Friday — Germany's Bayer agreed to purchase New Jersey-headquartered Merck's consumer care business on May 6 for $14.2 billion.
On April 22, activist investor Bill Ackman teamed up with Canada's Valeant Pharmaceuticals for a $47 billion bid for Allergen, the maker of Botox. That same day, Novartis of Switzerland and Britain's GlaxoSmithKline said they would swap assets and combine units in a deal valued at around $16 billion. A New York M&A Lawyer is not surprised by the numbers.
Pfizer's so-far rebuffed interest in AstraZeneca is confronting particularly intensive scrutiny in Britain though. The pharmaceutical industry is thought of, by Prime Minister David Cameron's coalition government and key by opposition parties, as a "jewel in Britain's scientific and industrial crown," as the Association of the British Pharmaceutical Industry (ABPI) has put it.
The ABPI, whose current president is Pfizer's managing director in Britain, declined to comment on the proposed deal, but did provide data showing that the pharmaceutical industry directly employs 73,000 people in Britain and as a sector "represents 25% of all expenditure on R&D in U.K. businesses" — a figure that fell to about $29 billion in 2012, according to the Office for National Statistics.
Critics of the deal say losing AstraZeneca, which employs around 6,700 workers in Britain and makes a sizable contribution to its R&D efforts, would weaken Britain's claim to being a major global player in science and technology. Foes of the proposal, including the opposition Labour Party leader Ed Miliband, accuse Cameron of being a "cheerleader" for the takeover, arguing that Pfizer has failed to provide sufficient assurances that it won't shed jobs or gut a planned research center AstraZeneca is building in the technology hub of Cambridge.
''Let me be absolutely clear — I'm not satisfied. I want more. But the way to get more is to engage," Cameron has said, responding to allegations he has been too supportive of the proposal.
Others, including some from the prime minister's Conservative Party, have voiced suspicions that Pfizer is concerned chiefly with lowering its tax liabilities by shifting its domicile to the United Kingdom, where the corporate tax rate is lower, and have called for a public interest test.
"If such a test were applied in this case, then I believe Pfizer's bid would fail. It doesn't have a great track record in honoring its undertakings and the suspicion remains it is primarily interested in reducing its tax bill," David Davis, a senior Conservative politician, told the Times of London.
On Tuesday and Wednesday, Ian Read, Pfizer's Scottish-born CEO, and Pascal Soriot, AstraZeneca's French boss, will appear before two separate panels of British lawmakers to face questioning about the deal's potential impact.
One relatively recent test case that may arise is U.S. foods company Kraft's 2010 takeover of British chocolate maker Cadbury. "Kraft implied it was going to keep staff on at Cadbury, but as soon as the deal was done it didn't," says Petrides, the Beaufort analyst. A factory that was slated to remain open was also closed.
Anders Borg, Sweden's foreign minister, already warned this week that Pfizer failed to live up to pledges it made over keeping jobs in that country following its acquisition of drug maker Pharmacia in 2002.
"Our experience shows that their track record is not very convincing and I think one should take these kind of promises not only with a pinch of salt but a sack full of salt," Borg said, speaking on British radio.
Capitol Hill is paying attention, too. Sen. Carl Levin, D-Mich, said Thursday he would push for legislation aimed at closing a loophole that permits companies to re-incorporate in overseas territories with lower tax bases.
"Companies that exploit this loophole benefit from the protections and services the federal government provides, including patent protection, research and development tax credits, national security and more," said Levin. Senate Finance Committee chairman Ron Wyden, D-Ore., supports Levin's initiative.
Also Thursday, Delaware Gov. Jack Markell and Maryland Gov. Martin O'Malley sent a letter to Pfizer's Read, expressing concern over how a deal with the British drug maker may affect the 5,700 workers in their states.
"Our states have invested substantially to make AstraZeneca a success in our communities. Elected officials and the public have a right to know Pfizer's intentions with respect to the key U.S. operations of AstraZeneca and the thousands of employees in our states whose jobs may be jeopardized by Pfizer's desire to reduce its tax liabilities," they wrote.
In a video posted on Pfizer's website over the weekend, Read shot back at critics who have called into doubt his firm's motives, saying the deal would be a "win-win" for society and investors. He has previously written to Cameron, confirming a commitment to Britain's science sector.
Read said Saturday that gaining access to AstraZeneca's R&D was a key motivation for the bid. "When we looked at AstraZeneca, we liked their science. We liked where their science is being done, which is in the U.K., and we know we have good science in the U.K. in Cambridge, Oxford, London and other universities," he said. No new pledges were made.
Since rejecting Pfizer's bid as "inadequate" and subsequent comments from Soriot that shareholders have been "supportive" of that move, AstraZeneca has made few public comments.
Showing posts with label Pharmaceuticals. Show all posts
Showing posts with label Pharmaceuticals. Show all posts
Monday, May 12, 2014
Thursday, May 24, 2012
Pharma Companies Battle for Takeover
Meda AB, Sweden’s biggest publicly traded drugmaker, is offering one of the best deals in the world for pharmaceutical companies looking to replenish their pipelines by swallowing up rivals.
The $2.78 billion company is trading at 5.4 times its projected cash flow in 2013, cheaper than 95 percent of specialty drug companies with market values larger than $1 billion, according to data compiled by Bloomberg. Meda is also valued at a discount of more than 70 percent to its competitors relative to sales and net assets, the data show.
While Meda in February said margins will suffer this year as it boosts spending on marketing, earnings are projected to reach a record in 2013, helped by sales from drugs such as its Dymista allergy medicine, which won U.S. approval this month. With Dymista poised to become the company’s top seller and at least six more drugs set to reach the market in coming years, Solna, Sweden-based Meda could lure suitors such as Valeant Pharmaceuticals International Inc. and Takeda Pharmaceutical Co., according to Nordea Bank AB.
Margin Squeeze
Meda’s products, focused on respiratory, cardiology, dermatology, central-nervous-system, pain and inflammation treatments, generated sales of 12.9 billion Swedish kronor ($1.8 billion) in 2011.
Meda’s earnings before interest, taxes, depreciation and amortization climbed 9 percent in 2011 to 4.7 billion kronor, or more than 36 percent of sales. The company said it expects Ebitda margins will be closer to 30 percent this year as it increases spending to market new drugs, introduce over-the- counter medicines in Europe and expand in emerging markets. While that would approach a five-year low, Meda is projected to resume margin growth next year and in 2014, when analysts project record Ebitda of 5.28 billion kronor, at more than 35 percent of estimated sales, according to data compiled by Bloomberg.
Growth Potential
They have interesting products and their potential is probably not reflected in the estimates until we see more of their progress. A takeover bid is “definitely” possible.
Shares of Meda closed yesterday at 65.55 kronor, down 8.5 percent for the year and 49 percent from its all-time high of 127.58 kronor in December 2006. At 5.4 times its projected 2013 cash from operations after deducting capital expenses, Meda was trading at a cheaper multiple than 63 of the 66 other specialty pharmaceutical companies with a market value larger than $1 billion, according to data compiled by Bloomberg. The median for the group was about 16 times.
The company was also less expensive than competitors relative to its 2011 sales, trading at 1.5 times revenue compared with the average for the group of 6 times, the data show. Meda traded at 1.3 times its book value, versus an average 4.6 times for peers.
Meda rose 2.3 percent to 67.05 kronor at 9:14 a.m. in Stockholm.
‘Prove-It’
On valuation, the stock’s really cheap. The main reason it’s cheap is they’ve re-based people’s margin expectations. They’re saying they’re making these investments, so now it’s kind of a prove-it story and they have to really show that they’re coming to the market and really are generating organic growth.
Meda may attract bigger rivals as they seek new products to replace those losing patent protection, Les Funtleyder, a health-care portfolio manager in New York at Miller Tabak & Co., which manages $800 million and doesn’t own Meda, said in a telephone interview. Globally, the drug industry faces the possible loss of more than $21 billion in sales this year from patent expirations, according to data compiled by Bloomberg.
Pipeline Power
What do most pharma companies need these days? Product or pipeline or both. Meda has a number of products that could make it salable and this new one, Dymista, is an additional revenue generator.
Dymista, a prescription nasal spray for treating seasonal allergies, could become the company’s top-selling treatment, with revenue potentially reaching 2.37 billion kronor in 2016, Luisa Hector, an analyst at Credit Suisse Group AG, wrote in an April 30 report. The drug will be available later this year in the U.S., where about 60 million people are affected by seasonal allergic rhinitis, according to Indianapolis Pharmaceutical Drug Litigation Lawyers familiar with the story.
Meda is seeking approval for two dermatology products, Zyclara and a combination product containing clindamycin and tretinoin. The company also acquired Antula Holding AB for 1.8 billion kronor last year, adding several over-the-counter products to its portfolio and a pipeline that may result in four new products in the coming years, according to its annual report.
Valeant Deals
There is a dividing line between pharmaceutical companies that have new products and those that do not. Meda has a valuable pipeline of products that are also close to market.
Meda and Valeant have a history of doing deals together. Valeant, based in Mississauga, Ontario, last June bought the rights to sell two of Meda’s medicines in the U.S. and Canada. In 2008, Valeant sold its European drug business to Meda, giving the Swedish company access to the faster-growing eastern European markets.
Given that they have so many collaborations, integration would be relatively straightforward.
Valeant may also want access to Meda’s geographic coverage in Europe, where Meda has expanded sales since buying the business from Valeant. About 63 percent of Meda’s 2011 sales were generated in western Europe, the company said in its annual report. That compares with 19 percent for Valeant, according to according to a regulatory filing in February.
Looking for Opportunities
Valeant feels that they can continue to find really interesting opportunities, acquisitions at good prices, and add them and at the end of the year have a pretty significant impact on the top line and bottom line.
Valeant approached Meda last year, two people familiar with the matter said in July.
Takeda, Asia’s biggest drugmaker, is also considering more takeovers as its best-selling diabetes treatment Actos loses patent protection this year. The Osaka-based company in September bought Swiss drugmaker Nycomed for 9.6 billion euros.
No Blockbusters
They have said publicly they are looking at more acquisitions, and it was rumored last year that they were also looking at Meda when they bought Nycomed. So they might still be interested.
Takeda's priority was integrating Nycomed. However, they are looking into all options including acquisitions that strengthen the foundation of the business or boost pipelines.
While Meda has a number of products, none are the type of standout drug that big pharmaceutical companies look for when considering acquisition targets.
Meda has a portfolio of successful smaller market drugs, but no blockbusters. Large pharmas really want the latter. Even Dymista will compete in a crowded allergy-medicine market where generics are available.
An acquirer would be buying a company with more debt relative to Ebitda than 95 percent of its competitors, according to data compiled by Bloomberg.
‘Manageable’ Debt
Still, Meda’s net debt, at 3.5 times Ebitda in 2011, is down from its peak of 13 times in 2005, the data show.
It’s actually kind of mid-range of where it’s been historically. It’s definitely manageable.
Even without a takeover, Bassion predicts the company’s shares could reach 85 kronor, almost 30 percent more than yesterday’s closing price. A buyer could offer another 30 percent on top of that, he said, which would value the company at more than 33 billion kronor, or $4.7 billion.
There’s certainly some aspects that would be attractive to other companies, given Meda’s product pipeline and historical growth trends.It’s basically a chance to get a pharma company at very cheap valuations.
The $2.78 billion company is trading at 5.4 times its projected cash flow in 2013, cheaper than 95 percent of specialty drug companies with market values larger than $1 billion, according to data compiled by Bloomberg. Meda is also valued at a discount of more than 70 percent to its competitors relative to sales and net assets, the data show.
While Meda in February said margins will suffer this year as it boosts spending on marketing, earnings are projected to reach a record in 2013, helped by sales from drugs such as its Dymista allergy medicine, which won U.S. approval this month. With Dymista poised to become the company’s top seller and at least six more drugs set to reach the market in coming years, Solna, Sweden-based Meda could lure suitors such as Valeant Pharmaceuticals International Inc. and Takeda Pharmaceutical Co., according to Nordea Bank AB.
Margin Squeeze
Meda’s products, focused on respiratory, cardiology, dermatology, central-nervous-system, pain and inflammation treatments, generated sales of 12.9 billion Swedish kronor ($1.8 billion) in 2011.
Meda’s earnings before interest, taxes, depreciation and amortization climbed 9 percent in 2011 to 4.7 billion kronor, or more than 36 percent of sales. The company said it expects Ebitda margins will be closer to 30 percent this year as it increases spending to market new drugs, introduce over-the- counter medicines in Europe and expand in emerging markets. While that would approach a five-year low, Meda is projected to resume margin growth next year and in 2014, when analysts project record Ebitda of 5.28 billion kronor, at more than 35 percent of estimated sales, according to data compiled by Bloomberg.
Growth Potential
They have interesting products and their potential is probably not reflected in the estimates until we see more of their progress. A takeover bid is “definitely” possible.
Shares of Meda closed yesterday at 65.55 kronor, down 8.5 percent for the year and 49 percent from its all-time high of 127.58 kronor in December 2006. At 5.4 times its projected 2013 cash from operations after deducting capital expenses, Meda was trading at a cheaper multiple than 63 of the 66 other specialty pharmaceutical companies with a market value larger than $1 billion, according to data compiled by Bloomberg. The median for the group was about 16 times.
The company was also less expensive than competitors relative to its 2011 sales, trading at 1.5 times revenue compared with the average for the group of 6 times, the data show. Meda traded at 1.3 times its book value, versus an average 4.6 times for peers.
Meda rose 2.3 percent to 67.05 kronor at 9:14 a.m. in Stockholm.
‘Prove-It’
On valuation, the stock’s really cheap. The main reason it’s cheap is they’ve re-based people’s margin expectations. They’re saying they’re making these investments, so now it’s kind of a prove-it story and they have to really show that they’re coming to the market and really are generating organic growth.
Meda may attract bigger rivals as they seek new products to replace those losing patent protection, Les Funtleyder, a health-care portfolio manager in New York at Miller Tabak & Co., which manages $800 million and doesn’t own Meda, said in a telephone interview. Globally, the drug industry faces the possible loss of more than $21 billion in sales this year from patent expirations, according to data compiled by Bloomberg.
Pipeline Power
What do most pharma companies need these days? Product or pipeline or both. Meda has a number of products that could make it salable and this new one, Dymista, is an additional revenue generator.
Dymista, a prescription nasal spray for treating seasonal allergies, could become the company’s top-selling treatment, with revenue potentially reaching 2.37 billion kronor in 2016, Luisa Hector, an analyst at Credit Suisse Group AG, wrote in an April 30 report. The drug will be available later this year in the U.S., where about 60 million people are affected by seasonal allergic rhinitis, according to Indianapolis Pharmaceutical Drug Litigation Lawyers familiar with the story.
Meda is seeking approval for two dermatology products, Zyclara and a combination product containing clindamycin and tretinoin. The company also acquired Antula Holding AB for 1.8 billion kronor last year, adding several over-the-counter products to its portfolio and a pipeline that may result in four new products in the coming years, according to its annual report.
Valeant Deals
There is a dividing line between pharmaceutical companies that have new products and those that do not. Meda has a valuable pipeline of products that are also close to market.
Meda and Valeant have a history of doing deals together. Valeant, based in Mississauga, Ontario, last June bought the rights to sell two of Meda’s medicines in the U.S. and Canada. In 2008, Valeant sold its European drug business to Meda, giving the Swedish company access to the faster-growing eastern European markets.
Given that they have so many collaborations, integration would be relatively straightforward.
Valeant may also want access to Meda’s geographic coverage in Europe, where Meda has expanded sales since buying the business from Valeant. About 63 percent of Meda’s 2011 sales were generated in western Europe, the company said in its annual report. That compares with 19 percent for Valeant, according to according to a regulatory filing in February.
Looking for Opportunities
Valeant feels that they can continue to find really interesting opportunities, acquisitions at good prices, and add them and at the end of the year have a pretty significant impact on the top line and bottom line.
Valeant approached Meda last year, two people familiar with the matter said in July.
Takeda, Asia’s biggest drugmaker, is also considering more takeovers as its best-selling diabetes treatment Actos loses patent protection this year. The Osaka-based company in September bought Swiss drugmaker Nycomed for 9.6 billion euros.
No Blockbusters
They have said publicly they are looking at more acquisitions, and it was rumored last year that they were also looking at Meda when they bought Nycomed. So they might still be interested.
Takeda's priority was integrating Nycomed. However, they are looking into all options including acquisitions that strengthen the foundation of the business or boost pipelines.
While Meda has a number of products, none are the type of standout drug that big pharmaceutical companies look for when considering acquisition targets.
Meda has a portfolio of successful smaller market drugs, but no blockbusters. Large pharmas really want the latter. Even Dymista will compete in a crowded allergy-medicine market where generics are available.
An acquirer would be buying a company with more debt relative to Ebitda than 95 percent of its competitors, according to data compiled by Bloomberg.
‘Manageable’ Debt
Still, Meda’s net debt, at 3.5 times Ebitda in 2011, is down from its peak of 13 times in 2005, the data show.
It’s actually kind of mid-range of where it’s been historically. It’s definitely manageable.
Even without a takeover, Bassion predicts the company’s shares could reach 85 kronor, almost 30 percent more than yesterday’s closing price. A buyer could offer another 30 percent on top of that, he said, which would value the company at more than 33 billion kronor, or $4.7 billion.
There’s certainly some aspects that would be attractive to other companies, given Meda’s product pipeline and historical growth trends.It’s basically a chance to get a pharma company at very cheap valuations.
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Tuesday, November 9, 2010
Pfizer 3Q Profit down 70 Percent due to Charges
Associated Press
Pharmaceutical giant Pfizer Inc.'s mega-acquisition of Wyeth boosted its third-quarter revenue 39 percent, but hefty charges and a higher tax rate, both related to that $68 billion purchase, dragged its profit down 70 percent, the company said Tuesday.
The New York-based maker of cholesterol blockbuster Lipitor and impotence pill Viagra posted net income of $866 million, or 11 cents per share. That's down from $2.88 billion, or 43 cents per share, a year earlier.
Excluding one-time items totaling $3.51 billion, or 43 cents a share, the world's largest pharmaceutical company by revenue said net income would have been $4.37 billion, or 54 cents per share. That topped Wall Street expectations by 3 cents.
Pfizer raised its 2010 profit forecast, to a range of $2.17 to $2.22 per share excluding one-time items, from the prior guidance of $2.10 to $2.20 per share. Analyst expect $2.22 per share. But it lowered the top end of its revenue projection by $1 billion, to a range of $67 billion to $68 billion.
Revenue, while up from $11.62 billion in 2009's third quarter because of Wyeth's products, came up short of expectations at $16.17 billion. Analysts surveyed by Thomson Reuters were expecting, on average, revenue of $16.68 billion.
In afternoon trading, Pfizer shares fell 33 cents, or 1.9 percent, to $17.29.
Pfizer is the last major U.S. drugmaker to report its results. Because of the weak global economy and demands from European health programs for price cuts, Pfizer - as did many of its peers - missed Wall Street revenue expectations but managed to beat muted earnings-per-share expectations. That was the case for Johnson & Johnson, Eli Lilly and Co., Bristol-Myers Squibb Co. and Abbott Laboratories. Biotechnology company Amgen Inc., which makes anemia drugs, bucked the trend, narrowly beating revenue expectations and handily topping EPS forecasts.
"Their results followed the same pattern we've seen with peers, missing on the top line but beating EPS estimates due to cost controls," Credit Suisse analyst Catherine Arnold wrote to investors.
Pfizer's one-time items included $499 million for acquisition-related restructuring, $1.16 billion for the gradual decline in the value of intangible assets such as trademarks and brand names and $1.48 billion for asset writedowns related to buying Wyeth on Oct. 15, 2009.
The company also set aside a $701 million reserve for asbestos litigation related to a Pfizer subsidiary, Quigley Co., which is in a long-running bankruptcy reorganization. Quigley was acquired by Pfizer in 1968 and, until the early 1970s, sold products containing asbestos such as linings for furnaces and incinerators.
Sales of prescription drugs, Pfizer's biggest division, jumped 31 percent to $13.95 billion, boosted by the addition of new products from Wyeth such as biologic drug Enbrel for rheumatoid arthritis, Prevnar vaccine against ear and blood infections, and Premarin hormone replacement pills.
Lipitor sales were down 11 percent at $2.53 billion, as competition from generic versions of other cholesterol drugs such as Zocor continues to erode sales. Lipitor, the world's top-selling drug, loses U.S. patent protection in November 2011, and its sales are expected to fall sharply after that. Still, Pfizer reaffirmed its financial guidance for the following year, saying it expects 2012 sales of $65.2 billion to $67.7 billion and earnings per share, excluding one-time items, of $2.25 to $2.35.
Top sellers were Enbrel, at $799 million; Prevnar and a successor vaccine that prevents more strains of pneumococcal disease, with a combined $914 million; and pain treatment Lyrica, up 7 percent at $757 million. Sales were down for Viagra, anti-inflammatory pain reliever Celebrex and blood pressure drug Norvasc.
Sales of veterinary medicines rose 27 percent to $860 million and revenue from Capsugel, which makes capsules for oral medicines and dietary supplements, were flat at $176 million. Pfizer is considering selling that unit.
Pfizer also reported sales of $673 million from consumer health products such as Chap Stick and Centrum vitamins, and $441 million from nutrition products - both Wyeth businesses.
"For the third consecutive full quarter since we closed the Wyeth deal, we are reporting solid operating results," Chief Executive Jeffrey Kindler told analysts during a conference call.
He said Pfizer will expand its pain treatments, a priority area, with its pending $3.6 billion purchase of King Pharmaceuticals Inc., which makes abuse-resistant narcotic painkillers. Kindler noted other deals to expand its sales in emerging markets and its portfolio of drugs for rare diseases.
Analyst Dr. Timothy Anderson at BernsteinResearch, who rates the stock an "Outperform," wrote that Pfizer "has more interesting, immediate pipeline prospects ahead of it, and we are assuming that (Pfizer) will execute on most of these opportunities."
Pfizer shareholders have seen the company's dividend slashed to pay for Wyeth and its share price fall from $48 10 years ago to the high teens now.
Asked how the company will satisfy shareholders, Chief Financial Officer Frank D'Amelio said in an interview that the stock has climbed over the past three months, while Pfizer has been investing in new businesses, boosting sales of older products, buying back stocks and pushing late-stage experimental drugs toward approval. Those include ones to prevent stroke and to treat a genetically based lung cancer.
He said Pfizer's board in December is expected to raise the dividend, now 18 cents per quarter. Pfizer also aims to boost the dividend yield - the annual dividend divided by earnings per share - over the next three years from 33 percent to the industry average of 40 percent.
For the first nine months, net income was $5.37 billion, or 66 cents per share, down from $7.87 billion, or $1.16 per share in the January-September period of 2009. Revenue jumped 50 percent to $50.25 billion, thanks to the addition of sales of Wyeth products.
CVS Caremark Profit falls 21 Percent in 3Q
Associated Press
CVS Caremark Corp. reported a 21 percent drop in third-quarter profit Wednesday as its pharmacy benefit unit continued losing business from previously canceled contracts.
The company said net income fell to $809 million, or 59 cents per share, from $1.02 billion, or 71 cents per share, in the prior-year period. The company's 2009 earnings benefited from $156 million in tax benefits, or 11 cents per share.
Excluding one-time acquisition costs in the most recent quarter, the company would have earned 65 cents per share. That's in line with the average estimate of analysts polled by Thomson Reuters.
The company's revenue fell 3.1 percent to $23.88 billion partly because of lost pharmacy benefit contracts.
CVS lowered the upper range of its full-year guidance to between $2.68 and $2.70 per share. The company previously forecast earnings per share between $2.68 and $2.73. The company attributed the revision to costs for streamlining its pharmacy benefits management unit.
Analysts expect full-year earnings of $2.71 per share, on average.
In the past year, CVS has reported billions in lost contract revenue for its Caremark unit, which provides prescription drug purchasing, customer service and other pharmacy services.
Investors and analysts are still questioning the wisdom of CVS's 2007 acquisition of Caremark for an estimated $26 billion. The combination of the two companies was designed to bring more business to CVS pharmacies in the form of Caremark-covered patients filling prescriptions.
Pharmacy benefits managers handle drug benefits for health plan members and sponsors. They buy large amounts of drugs to fill prescriptions, which is one way they can save money for clients.
In the latest quarter, CVS said pharmacy services revenue fell 8.5 percent to $11.9 billion. Besides canceled contracts with private employers, CVS said it has also lost patients from its Medicare drug coverage plans.
Revenue from CVS pharmacies was $14.2 billion, with sales at locations open at least a year - a key measure of a retailer's health - increasing 2.5 percent. The company said sales were negatively pressured by the introduction of more low-cost generic drugs.
CVS Chief Financial Officer David Denton said pharmacy shoppers are still spending conservatively, though he added that the trend has benefited CVS-brand products.
"We think it's a pretty cautious consumer out there and in fact it's one of the reasons that's driving our private label and proprietary products, as well as our proximity to their homes and the value proposition overall," Denton told analysts on an earnings conference call.
Friday, March 5, 2010
Bristol-Myers Plans to Release 5 New Drugs by 2012
Bloomberg
Bristol-Myers Squibb Co. said it plans to introduce five new drugs, including treatments for cancer, diabetes and heart disease, by 2012, as its top-selling medicine, the blood-thinner Plavix, loses patent protection.
The company also said today in a statement that earnings, excluding some costs, will drop to as low as $1.95 a share in 2013 from projected 2010 profit, topping the average estimate of analyst by 7 cents.
The five new drugs may generate more than $4 billion by 2016, according Seamus Fernandez, an analyst with Leerink Swann & Co. Bristol-Myers is meeting with investors today in New York to detail its plan to overcome the loss of as much as $11 billion in annual sales to generic competition over the next six years. Lamberto Andreotti, 59, named March 2 to replace Chief Executive Officer James Cornelius in May, said he will make acquisitions and has as much as $10 billion to spend.
“Like other drug companies, Bristol-Myers may also acquire its way to its stated financial targets if needed,” Tim Anderson, an analyst with Sanford C. Bernstein & Co. in New York, said today in a note to investors. “Although it has been steadfast in saying it would only pursue smaller deals as part of its ‘string of pearls’ approach, we continue to wonder whether a larger transaction might ultimately occur.”
New treatments expected to reach the market are apixaban for blood clots, belatacept for kidney transplants, brivanib for cancer, dapagliflozin for diabetes and ipilimumab for skin cancer, the New York-based drugmaker said today in statement.
Skin Cancer Drug
Bristol-Myers said it plans to seek regulatory approval this year for the experimental melanoma treatment ipilimumab. The company may also ask regulators to clear an added use of its cancer drug Sprycel and an injectable form of Orencia for rheumatoid arthritis.
Copies of the company’s top-selling Plavix and the blood- pressure medicine Avapro are set to flood the market in 2012, erasing $7.4 billion in sales, or about 40 percent of 2009 revenue. Plavix generated $6.1 billion of those sales. The company will lose an additional $3 billion in annual revenue from its antipsychotic Abilify by 2016 from generic competition.
Sales of the HIV treatment Sustiva are also expected to fall by $800 million from 2014 to 2015, according to Steve Scala, an analyst with Cowen & Co.
In 2013, analysts were expecting Bristol-Myers to report earnings of $1.88 a share, on average, according to a survey by Bloomberg. Bristol-Myers said it plans to have “sustained growth” starting in 2014. The company projects 2010 adjusted earnings of $2.15 a share to $2.25 a share.
The earnings estimate for 2013 excludes the potential impact of legislation overhauling the health-care system and acquisitions or licensing deals, the company said in the today’s statement. It also assumes additional cost cutting, strong sales of its current products, and U.S. approval of medicines now in late-stage testing.
The company also said today in a statement that earnings, excluding some costs, will drop to as low as $1.95 a share in 2013 from projected 2010 profit, topping the average estimate of analyst by 7 cents.
The five new drugs may generate more than $4 billion by 2016, according Seamus Fernandez, an analyst with Leerink Swann & Co. Bristol-Myers is meeting with investors today in New York to detail its plan to overcome the loss of as much as $11 billion in annual sales to generic competition over the next six years. Lamberto Andreotti, 59, named March 2 to replace Chief Executive Officer James Cornelius in May, said he will make acquisitions and has as much as $10 billion to spend.
“Like other drug companies, Bristol-Myers may also acquire its way to its stated financial targets if needed,” Tim Anderson, an analyst with Sanford C. Bernstein & Co. in New York, said today in a note to investors. “Although it has been steadfast in saying it would only pursue smaller deals as part of its ‘string of pearls’ approach, we continue to wonder whether a larger transaction might ultimately occur.”
New treatments expected to reach the market are apixaban for blood clots, belatacept for kidney transplants, brivanib for cancer, dapagliflozin for diabetes and ipilimumab for skin cancer, the New York-based drugmaker said today in statement.
Skin Cancer Drug
Bristol-Myers said it plans to seek regulatory approval this year for the experimental melanoma treatment ipilimumab. The company may also ask regulators to clear an added use of its cancer drug Sprycel and an injectable form of Orencia for rheumatoid arthritis.
Copies of the company’s top-selling Plavix and the blood- pressure medicine Avapro are set to flood the market in 2012, erasing $7.4 billion in sales, or about 40 percent of 2009 revenue. Plavix generated $6.1 billion of those sales. The company will lose an additional $3 billion in annual revenue from its antipsychotic Abilify by 2016 from generic competition.
Sales of the HIV treatment Sustiva are also expected to fall by $800 million from 2014 to 2015, according to Steve Scala, an analyst with Cowen & Co.
In 2013, analysts were expecting Bristol-Myers to report earnings of $1.88 a share, on average, according to a survey by Bloomberg. Bristol-Myers said it plans to have “sustained growth” starting in 2014. The company projects 2010 adjusted earnings of $2.15 a share to $2.25 a share.
The earnings estimate for 2013 excludes the potential impact of legislation overhauling the health-care system and acquisitions or licensing deals, the company said in the today’s statement. It also assumes additional cost cutting, strong sales of its current products, and U.S. approval of medicines now in late-stage testing.
Tuesday, January 26, 2010
New Novartis Chief Needs Surgical Skill
The Wall Street Journal
A fresh face for Novartis could be just what the doctor ordered. Investors took the Swiss drugs group's surprise decision Tuesday to replace incumbent Novartis CEO Daniel Vasella with pharmaceuticals head Joe Jimenez in their stride, as stronger than expected 2009 earnings helped push the share price 1.5% higher. Mr. Vasella will stay on as chairman in the new structure.
Mr. Jimenez inherits a solid set of full-year results, including a 54% rise in fourth quarter net profits, boosted by sales of swine flu vaccines that beat analyst forecasts by 20%. But concerns over future growth remain: the company faces imminent price cuts in U.S., Japanese and Turkish markets, as well as generic competition on key drug Diovan this year. There are also question marks over its pipeline, including worries over U.S. approval of the much-hyped multiple sclerosis treatment, and the huge cash drain of some 40 drugs in phase-III clinical trials.
There's also uncertainty over the ultimate cost of the $50 billion acquisition of U.S. eyecare group Alcon. Court action by minority shareholders could force Novartis to raise the almost $11 billion it offered in stock for their stake earlier this month. Given the minorities include many employees, a protracted dispute could undermine efforts to integrate the business. Novartis investors used to 13 consecutive dividend increases could balk if dividend growth is sacrificed to divert cash elsewhere.
Mr. Jimenez inherits a solid set of full-year results, including a 54% rise in fourth quarter net profits, boosted by sales of swine flu vaccines that beat analyst forecasts by 20%. But concerns over future growth remain: the company faces imminent price cuts in U.S., Japanese and Turkish markets, as well as generic competition on key drug Diovan this year. There are also question marks over its pipeline, including worries over U.S. approval of the much-hyped multiple sclerosis treatment, and the huge cash drain of some 40 drugs in phase-III clinical trials.
There's also uncertainty over the ultimate cost of the $50 billion acquisition of U.S. eyecare group Alcon. Court action by minority shareholders could force Novartis to raise the almost $11 billion it offered in stock for their stake earlier this month. Given the minorities include many employees, a protracted dispute could undermine efforts to integrate the business. Novartis investors used to 13 consecutive dividend increases could balk if dividend growth is sacrificed to divert cash elsewhere.
Given these concerns, Mr. Jimenez's priority should be to cut costs. Inefficiencies in areas such as IT
remain, offering scope for savings across the board. Tuesday's management changes, which include the elimination of three executive positions, offer some encouragement on this score. Mr. Jimenez has already
helped deliver a three-year cost overhaul ahead of schedule while still achieving significantly higher operating margins in pharmaceuticals. New chief financial officer Jon Symonds, who joins from Goldman Sachs in February, also has a reputation as a cost-cutter.
Even so, Novartis shares now trade at 11.6 times this year's earnings—an 8% premium to the average of major European pharmaceutical groups, according to Credit Suisse. Plus the market is already pricing in further cost-cutting. In addition to a swift resolution to the Alcon deal, Jimenez will need to show he is a skilful corporate surgeon to justify any further re-rating.
Even so, Novartis shares now trade at 11.6 times this year's earnings—an 8% premium to the average of major European pharmaceutical groups, according to Credit Suisse. Plus the market is already pricing in further cost-cutting. In addition to a swift resolution to the Alcon deal, Jimenez will need to show he is a skilful corporate surgeon to justify any further re-rating.
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