- Large pharmaceutical companies are recording stronger-than-expected sales for the third quarter, surpassing Wall Street forecasts even as legal challenges mount for some and legislative efforts aimed at curtailing rising drug prices advance in Congress.
- On Tuesday, Pfizer and Merck & Co. posted sales that beat market predictions and joined a growing list of large drugmakers that have raised their estimates for the year. Johnson & Johnson, Roche, Novartis and AstraZeneca have all said they now expect stronger growth in 2019 than previously anticipated.
- Yet while pharma financials appear rosy, the threats facing the industry have arguably grown more pronounced, with the introduction of major drug pricing bills in the Senate and the House of Representatives. Litigation around the opioid crisis, meanwhile, could result in large financial payouts from J&J, Teva and several smaller drug companies.
Strengthening sales in the third quarter contrasts with earlier this year, when a number of large pharmas rolled out financial forecasts that disappointed investors on Wall Street.
New drug sales have helped companies like AstraZeneca, Novartis and Roche overcome the effects of generic competition to top-selling products, while Merck and Pfizer have benefited from continued growth from blockbuster cancer medicines Keytruda (pembrolizumab) and Ibrance (palbociclib).
Of the seven traditional large pharmas to report third quarter earnings through Tuesday, only Eli Lilly missed Wall Street's sales expectations. (And even that shortfall was by only $20 million.) All seven raised their guidance for 2019 in some fashion, signaling faster growth.
GlaxoSmithKline, Bristol-Myers Squibb, Sanofi, Novo Nordisk and AbbVie are all scheduled to read out earnings results this week.
Large drugmaker sales mostly outperformed Wall Street expectations in Q3
|Company||Q3 revenue, millions||% growth, YOY||vs. Wall Street forecasts||Raised sales guidance?|
|Eli Lilly||$5,477||3%||Miss||No, but raised EPS estimate|
*Growth rates in constant currency SOURCE: Companies, consensus forecasts compiled from Stifel, RBC Capital Markets, Cowen and Cantor Fitzgerald
Yet pharma's outperformance comes as lawmakers in Congress contemplate legislation that the industry's top trade group has compared to "nuclear winter."
Democrats in the House of Representatives are advancing a bill that would allow Medicare to negotiate prices on up to 250 drugs, while threatening steep penalties for non-compliance. The legislation, called H.R. 3, would also set a ceiling on negotiated prices at 120% of the average price paid in a selection of foreign countries.
An estimate from government forecasters put total savings from H.R. 3 at more than $300 billion, but cautioned it could result in between eight and 15 fewer new drugs approved over the 10-year time period analyzed.
Senators, meanwhile, are working on their own bill that would also target drug prices, although less severely than what's contemplated by the House Democrats' plan.
If the Senate bill were to become law — principally affecting only government insurance programs — on average 15% of global pharma company earnings per share in 2020 would be at risk, analysts at Cowen estimated in a recent note to clients. But if the House plan were enacted — bringing changes to both government and commercial plans — that figure would rise to 44%.