Earnings season is more than halfway over, and it hasn't been easy to keep pace with hundreds upon hundreds of earnings reports, sometimes all hitting within the same day.
Continue Reading Below
Much of the healthcare sector, especially big pharmaceutical companies, better known as "Big Pharma", have already gone before the firing squad of Wall Street analysts and investors and released their fourth-quarter earnings results. Of course, as you might have expected, the results varied wildly from company to company even though the overwhelming trend of this industry has been focusing on the patent cliff, or the loss of exclusivity on branded drugs.
You could certainly spend time combing through earnings reports for the next hour or two and looking at how big pharma performed on an individual basis. I certainly wouldn't discourage that, since staying abreast on what's going in with the industry is always a good thing. However, you could also simply keep reading, because I've outlined the one sentence from 10 of the largest pharmaceutical companies' earnings reports that tells you everything you need to know about each company.
Johnson & Johnson
OK, I cheated -- this is one sentence and a second mini-sentence. But there's a reason I snuck that domestic sales figure in there. The U.S. is the most lucrative market for pharmaceutical products in the world; thus Johnson & Johnson's delivering 25% year-over-year sales growth is a big thing. J&J's pharmaceutical division comprises nearly all of its margin and profitability growth over the last half-decade. So, this growth is great news for investors.
Source: Gilead Sciences.
Surprise (or perhaps not)! Gilead's hepatitis C wonder drugs accounted for $3.84 billion of the company's $7.22 billion in Q4 revenue, with newly launched cocktail drug Harvoni reigning supreme as expected with $2.1 billion in sales in its first quarter. Having put a number of HCV supply deals in place in recent weeks, it's likely Gilead's revenue could head even higher -- but its margins could suffer a bit as these deals came with advantageous price cuts for the pharmacy-benefits managers. As Foolish biotech guru Brian Orelli opined, however, Gilead may be able to make up its lost margin with an increase in product sales.
Yes, Pfizer did manage to hurdle some very low estimates for 2014, but its strategy moving forward remains the same: buy back stock, pay dividends, and purchase growth in order to counteract ongoing established product patent losses. We did see Pfizer announce the acquisition of Hospira, an infusion and biosimilar powerhouse, for $17 billion just last week, and I highly doubt that'll be its last transaction. Keep in mind, though, buying growth is no long-term substitute for a lack of organic growth.
Source: Amgen via Flickr.
Talk about telling it like it is! Amgen's management team hides nothing in its Q4 report when it notes that increasing demand for its products -- and to a lesser extent price -- were the primary reasons its product sales jumped 8% during the quarter. There's nothing wrong with having pricing power, but growing demand is a far better indicator of the strength of a business, and certainly more sustainable.
Blame Gilead and AbbVie, but competition among hepatitis C is growing, and the Food and Drug Administration no longer feels that Merck's HCV doublet is worthy of the breakthrough designation. While that could delay its review a bit, Merck is nonetheless on track to submit its new drug application by mid-year. I wouldn't worry too much here, as the HCV market opportunity is still enormous.
Why even bother mentioning the ramp up of Otezla, an anti-inflammatory drug that did just $70 million in sales last year? Simple: cancer drug Revlimid produced nearly $5 billion of Celgene's $7.56 billion in annual revenue, and the company needs to diversify its revenue stream if it hopes to ward off Revlimid's eventual loss of patent exclusivity many years down the road. This sentence gives us a solid clue that Otezla's launch is going well, and its peak annual sales forecast of $1.5 billion-$2 billion could eventually be achievable. Of course, its ultimate success will be determined by how many new indications it can land.
I'll rarely say this, but forget the actual earnings figures themselves. It was the typical quarter you'd expect from Biogen Idec anyway, with multiple sclerosis drug Tecfidera running wild on the competition. Instead, pay attention to Biogen Idec's numerous catalysts, especially BIIB037 for Alzheimer's disease and anti-LINGO-1 for acute optic neuritis. Both drugs are risky, but each could carry peak annual sales potential, according to analysts, of nearly $10 billion.
Source: GlaxoSmithKline via Facebook.
GlaxoSmithKline is facing a monstrous uphill battle, with Advair expected to be exposed to biosimilar competition in the U.S. by 2016, meaning the potential loss of billions of dollars in sales. Glaxo responded by cutting the price on Advair and its newly launch inhaled respiratory therapies Breo Ellipta and Anoro Ellipta to boost their formulary coverage, which appears to be working. Unfortunately, it could come at the expenses of Glaxo's margins. Advair sales are expected to tumble 20%-25% in in the U.S. in 2015.
Like Biogen, there wasn't much to see here when it comes to the actual earnings figures. Instead, Bristol-Myers is middling along and waiting for cancer immunotherapy Opdivo to come to its rescue. A recent promising late-stage study that pitted Opdivo against docetaxel in patients with metastatic squamous cell non-small cell lung cancer was stopped early by an independent committee based on strong efficacy, which was improved overall survival (or "superior overall survival" as Bristol-Myers put it). This is looking like it has every bit the making of a megablockbuster drug.
Translation: Expect AstraZeneca to be a mess for at least the next two years. AstraZeneca is dealing with the exclusivity loss of schizophrenia and bipolar drug Seroquel, heartburn medication Nexium, and cholesterol-lowering drug Crestor. Without a boost from these prior top-sellers, AstraZeneca can't grow its top-line, even owning a gigantic diabetes-focused portfolio. I wouldn't rule out a buyout here, as investors could get mighty feisty waiting around for two more years until they see growth.
Did I miss your favorite big pharma? If so, post the one sentence you believe encompasses its earnings report in the comments section below.
The article 1 Sentence That Tells You Everything You Need to Know About Each of These 10 Big Pharma Earnings Reports originally appeared on Fool.com.
Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool owns shares of, and recommends Gilead Sciences and Johnson & Johnson. It also recommends Celgene. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
Continue Reading Below