The momentum of key drugs and treatments is often a solid indicator for the coming performance of a pharmaceutical firm. Growing competition and other market pressures out of a company’s control can often cause material ebbs and flows in financial performance, making a strong and stable pipeline necessary to sustained success. As we walk through the results from some of the biggest names in the pharmaceuticals industry, let’s get a feel for the trajectory of each firm’s drug portfolio and pipeline moving into the rest of 2016.
AbbVie reported a quarter of strong growth January 29, as adjusted net revenues jumped more than 24% on an operational basis, and GAAP net revenue increase more than 17% from the year-ago period. The firm’s revenue growth in the period was boosted by its leading drug Humira (arthritis, plaque psoriasis), whose global operational sales increased 16% on a year-over-year basis. New drugs Imbruvica (leukemia, lymphoma) and Viekira (hepatitis C) added nearly $2.4 billion in combined sales in the quarter, and US-based Creon (exocrine pancreatic insufficiency) sales jumped 22.8% from the fourth quarter of 2014. The company expanded its adjusted operating margin by more than 4 percentage points from the year-ago period, and adjusted diluted earnings per share leapt 27% as a result to $1.13, excluding intangible asset amortization expense and other specified items.
AbbVie believes its strong fourth-quarter performance is a sign of things to come. The momentum in sales growth, margin expansion, and earnings increases is expected to continue in 2016. The firm will be fighting an uphill battle with Viekira after the FDA warned of a relationship with the drug and an increased chance of liver damage; competition is expected to heat up in the hepatitis C market as well as additional competitors launch similar products. On February 17, for example, Regulus Therapeutics (RGLS) announced favorable phase 2 data of its own HCV candidate RG-101. The outlook for Gilead (GILD) continues to muddy toward the back half of this decade, “Your Hard-Earned Money,” and we don’t want investors to be blindsided. Nevertheless, the firm has high hopes for Imbruvica, for which it has submitted supplemental applications to its treatment of leukemia and lymphoma.
For 2016, AbbVie has guided adjusted earnings per diluted share to be in a range of $4.90-$5.10. We currently value shares of AbbVie at $69 each, “.”
AstraZeneca reported mixed results in its fourth quarter of 2015 February 4; revenue advanced 2% from the year-ago period on a constant-currency basis but fell by 5% as reported in the quarter. The firm’s ‘Diabetes’ segment provided significant revenue growth on a constant-currency basis, as sales increased 24% from the fourth quarter of 2014. As-reported declines in the company’s highest-selling products Crestor (high cholesterol) and Symbicort (asthma) could not be offset by material growth in the smaller-revenue drugs Brilinta (blood thinner), Bydureon (diabetes), and Farxiga (diabetes). Thanks to core SG&A costs falling 11% in the fourth quarter, core operating profit leapt 31% and core earnings per share jumped 26% on a reported, year-over-year basis. Top-line and gross margin growth allowed for continued investment in R&D, which increased 15% in the quarter as reported.
Though AstraZeneca’s financial performance in the fourth quarter of 2015 may not have been outstanding, the firm believes it is well-positioned to reap the benefits of strong R&D spending trends moving forward. It had six regulatory approvals in 2015, and anticipates the submitting six more for approval in 2016. The pipeline will become increasingly more important for the company as it faces the transitional period of patent expiry for Crestor in the US, which reported sales of over $1.2 billion in the fourth quarter of 2015 despite declining by 5% year-over-year.
Oncology has become an increasing portion of the firm’s strategic focus, and drugs such as Tagrisso (lung cancer) and Lynparza (ovarian cancer) are expected to play a growing role in that strategy moving forward. On a constant-currency basis, AstraZeneca is expecting a decline in the low to mid-single digits for both total revenue and core earnings per share in 2016. We value shares at $32 each, “.”
On February 3, Merck reported its fourth quarter 2015 worldwide sales fell 3% from the year-ago period, including a 7% negative impact from currency headwinds, and a 3% favorable impact from acquisitions and divestitures, the latter being primarily attributable to the Cubist acquisition. Gardasil (human papillomavirus vaccine) was a key contributor of growth in the quarter, as its sales jumped an impressive 40% on a year-over year basis, but it could not offset declines in the company’s core products Januvia (diabetes) and Zetia (high cholesterol), who together account for more than a quarter of its pharmaceutical sales. Non-GAAP earnings per share advanced 7% from the year-ago period in the fourth quarter.
In 2016, Merck will prioritize its resources on returning Januvia to positive growth, and has two key launches expected to drive growth in Keytruda (metastatic melanoma) and Zepatier (hepatitis C), both of which were recently approved by the FDA. Its hospital acute care and vaccines businesses will also be areas of emphasis in the year. The company expects full-year 2016 non-GAAP earnings per share to be in a range of $3.60-$3.75, while sales are expected to be between $38.7-$40.2 billion on the year, including a 3% negative impact from currency headwinds. The earnings guidance reflects growth in the low to mid-single digits, while revenue growth is expected to be roughly flat compared to 2015. We value shares at $55 each, “.”
Pfizer reported fourth quarter revenue advanced 7% as reported on a year-over-year basis February 2. The firm’s Global Vaccines segment was a key growth driver in the quarter, as segment revenue jumped 45% from the year-ago period thanks to the strong uptake of Prevnar 13 (pneumococcal bacteria vaccine) among US adults. Increased demand during the flu season and favorable timing of government purchases also helped more than double the vaccine’s sales compared to the fourth quarter of 2014. The company’s Global Oncology segment also contributed to overall sales growth, as the segment’s reported revenue leapt by more than 50% in the period. The February 2015 US launch of Ibrance (breast cancer) provided the majority of the favorable comparable sales numbers. Despite the solid sales growth, reported net income was halved, and reported diluted earnings per share were nearly halved in the quarter due in part to the inclusion of legacy Hospira operations.
Looking ahead to 2016, Pfizer is expecting the integration of the Hospira acquisition and the pending combination with Allergan to strengthen its core business and better position it for sustainable growth. The firm expects continued strength in its Innovative Products segments, such as Global Vaccines and Global Oncology, and multiple late stage developments in late 2015, such as a successful phase 3 study of Eliquis (VTE) and a supplemental filing for Ibrance, give management confidence moving forward. In its 2016 financial guidance, excluding the impact of the Allergan merger, Pfizer is expecting mid to high single digit operational revenue growth on a constant currency basis and adjusted diluted earnings per share in a range of $2.20-$2.30. We value shares of Pfizer at $37 each, “.”
Amgen reported a solid finish to its 2015 on January 28, with 4% total revenue growth in the fourth quarter on a year-over-year basis, and 3% product sales growth thanks to strong growth in nearly all of its drugs, including 8% sales growth from its most-popular drug Enbrel, a prescription medicine used to treat five chronic diseases. Adjusted operating income increased 16%, and adjusted earnings per share leapt 21% from the year-ago period as operating expenses decreased 4% in the quarter thanks in part to favorable changes in foreign currency. R&D expenses dropped 10% from the fourth quarter of 2014 due to savings from transformation and process improvement efforts.
Amgen’s operating leverage in the fourth quarter of 2015 certainly was impressive, and the firm is expecting top-line growth to remain solid into 2016. It has multiple drugs in its pipeline with phase 3 milestones expected in the year, and several key treatments are anticipated to continue their momentum from 2015. Sensipar (kidney disease) is expected to continue a similar trajectory to its 21% total growth in the fourth quarter, Prolia (osteoporosis, hypercalcemia) is anticipated to continue to sustain share gains that helped it to 21% growth in the period, and rapidly growing Kyprolis (multiple myeloma) is projected to maintain momentum in the year as well. However, increased competition for Enbrel could pose a major challenge, and the company’s second-leading selling product Neulasta (neutropenia, non-Hodgkin’s lymphoma) did not have a strong 2015.
Amgen recently increased its guidance for 2016 to total revenue in a range of $22-$22.5 billion and adjusted earnings per share to be between $10.60-$11.00, both of which represent growth in the low-to-mid-single digits. We value shares at $153 each, “.”