January 28, 2010 / 3:38 PM / 8 years ago

WRAPUP 2-Pharma fails to impress as patent problems loom

* AstraZeneca warns 2010 earnings to fall, cuts jobs

* Bristol-Myers, Eli Lilly 2010 forecasts in line

* Astra, Lilly shares fall, Bristol-Myers up (Adds analyst, Lilly comment, updates shares)

By Bill Berkrot

NEW YORK, Jan 28 (Reuters) - U.S. drugmakers Bristol-Myers Squibb Co and Eli Lilly and Co said on Thursday they expect 2010 earnings growth in line with Wall Street estimates, but Britain-based AstraZeneca signaled tough sledding ahead as all three gird for patent protection losses of important drugs.

AstraZeneca (AZN.L) will feel the pain almost immediately, announcing it will slash an additional 8,000 jobs in a further cost-cutting move as it faces expected generic competition in the United States this year for its breast cancer drug Arimidex and asthma medicine Pulmicort Respules [ID:nLDE60Q0K3].

Bristol-Myers (BMY.N) and Eli Lilly (LLY.N), which will not be hit by key patent losses before next year, posted generally solid fourth-quarter earnings, with Bristol beating Wall Street per share estimates and Lilly missing by just a penny. Bristol shares were up 1 percent, while Lilly slipped 2 percent.

Astra said it expects earnings per share for 2010 in a range of $5.75 to $6.15, down from $6.32 in 2009, and a decline in sales of up to the “mid-single-digit,” sending its shares more than 4 percent lower.

“EPS growth will enter negative territory in 2010 and that will turn sharply negative from 2011 to 2015, leaving the company with what is one of the steepest patent cliffs,” said Sanford Bernstein analyst Tim Anderson in a research note.

Bristol-Myers forecast full-year earnings of $2.15 to $2.25 per share, excluding items, reflecting growth of about 16 to 22 percent. That was roughly in line with Wall Street expectations of $2.19 per share, according to Thomson Reuters I/B/E/S. [ID:nN27138093]

Bristol is staring down the barrel of generic competition for the blood clot preventer Plavix, one of the world’s top-selling drugs, as early as November 2011.

Lilly said it continues to expect profit growth this year of about 5 to 10 percent with earnings of $4.65 to $4.85 per share, excluding special items. That too was in line with analysts’ expectations of $4.73 per share [ID:nN27212519].

But investors are expecting Lilly’s sales and profits to be hit hard by late 2011, when its $5 billion-a-year schizophrenia drug Zyprexa could begin facing competition from cheaper generics.

“Lilly clearly is in a pickle, about to lose Zyprexa, and losing Cymbalta in 2013,” said Jon LeCroy, an analyst with Hapoalim Securities. Cymbalta is a $3.2 billion-a-year treatment for depression, anxiety and fibromyalgia.


Lilly’s fourth-quarter earnings per share missed Wall Street estimates by a penny, while sales topped expectations.

The Indianapolis-based drugmaker had net earnings of $915 million, or 83 cents per share. That compared with a loss of $3.63 billion, or $3.31 per share, a year earlier, when it took hefty charges related to its purchase of Imclone Systems.

JP Morgan analyst Chris Schott said the quarter reflected solid near-term growth and cost management. “Unfortunately, much of this sales growth is being driven by assets with limited remaining patent life, placing increased pressure on the company’s pipeline,” he said.

Analysts also expressed concern that Lilly’s new blood clot preventer Effient will fail to live up to lofty expectations for eventual annual sales of up to $1 billion, and said foreign exchange rates, which have helped the company in past quarters, had a negative impact this time.

Lilly CEO John Lechleiter told analysts he remains enthusiastic about Effient’s prospects and said it was too early to reconsider strong sales forecasts for the drug it began selling just last summer.

Bristol posted fourth-quarter earnings that topped analysts’ expectations by 6 cents per share.

It had net profit of of $8.03 billion, or $4.06 per share, including a $7.2 billion after-tax gain from the split-off of its Mead Johnson nutritionals business late last year.

Some tension between Bristol and Lilly eased as they settled a dispute over a promising experimental lung-cancer drug that Lilly acquired through its purchase of ImClone.

The two will now co-develop the drug. Bristol had a longterm relationship with ImClone through their shared cancer drug Erbitux and Bristol contended it also had rights to the lung drug necitumumab.

Astra said its core pretax profit, which excludes certain restructuring costs and charges, rose 10 percent in the fourth quarter. But its earnings per share of $1.42 missed analysts’ expectations by 15 cents.

Its one bright spot was sales of the cholesterol fighter Crestor, which rose 20 percent to $1.26 billion, topping forecasts.

“The next five years will be challenging for the industry and for the company, as its revenue base transitions through a period of exclusivity losses and new product launches,” Astra said in a statement.

Bristol-Myers shares were up 45 cents, or 1.9 percent, to $24.75, while Eli Lilly shares fell 86 cents, or 2.4 percent, to $35.53, both in late morning trade on the New York Stock Exchange. AstraZeneca shares were off 4.7 percent in London. (Reporting by Ransdell Pierson in New York and Kate Kelland in London; writing by Bill Berkrot, editing by Dave Zimmerman)

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