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Challenging second quarter for big pharma

Published on 31/10/03 at 10:46am

Generic competition and wholesaler de-stocking are among the problems besetting two of the industry's biggest hitters, GlaxoSmithKline and AstraZeneca.

Deutsche Bank analysts expect US wholesaler de-stocking and the weak dollar to push GSK's second quarter pharmaceutical sales growth down to 4%, half the increase seen in the first quarter.

GSK previously noted in its first quarter figures that some of its products had benefited from higher-than-normal wholesaler inventories, particularly Paxil and Avandia, and, as a result, analysts expect sales of these products to suffer in the second quarter.

There is some good news for the company, with analysts anticipating 40% growth from the company's asthma drug Seretide and expect GSK to raise its 2003 share earnings guidance to reach double digits later in the year, probably when its third quarter results are released.

AstraZeneca's second quarter results are also expected to be hit hard by the effects of a $400 million round of stock building that occurred earlier this year, and is likely to show the worst second quarter earnings of any European pharma company.

Generic competition in the US for the company's ulcer treatment Prilosec, its heart treatment Zestril and the cancer drug Nolvadex will all take their toll on second quarter performance.

Chief executive Tom McKillop has previously warned that 2003 would be a trough year, and its mid-term prospects now hinge on approval for its anti-clotting drug Exanta and the US launch of its cholesterol treatment Crestor, both expected in the third quarter.

Meanwhile, Novartis has bucked the trend with robust sales growth in the quarter, although this translated to only a 2% increase in profits due to heavy R&D investments.

The company's profits were also depressed by a $269 million hit in the first half of 2003 year from the CHF 4 billion loss reported in 2002 by Roche, in which Novartis holds a 32.7% stake.

Novartis, Europe's second largest pharma company behind GSK, posted strong pharmaceutical sales growth of 10% to $7,600 million, led by 13% growth in the US and profits of $1.32 billion.

The company ramped up R&D spending by 37%, an increase that will now see the company plough back 19% of its sales back into searching for new products, higher than any other pharma company. The decision, Deutsche Bank said, may well pay dividends over the longer term.

Daniel Vasella, Chairman and chief executive of Novartis, said: "For the remainder of the year, we forecast continued strong sales growth, with earnings supporting our strategy to bolster research and development and bring innovative medicines to patients".

Novartis maintained its 2003 sales outlook for growth in the high single to low double-digit percent range in local currencies, to allow for new product rollouts.

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