Business roundup: September 2010

Falling sales at Johnson & Johnson ’s (J&J) consumer healthcare division have hurt the pharma giant’s US sales, which fell 2.8 per cent compared to the same period last year.  

Globally, sales for the company’s consumer goods division fell 5.4 per cent to $3.6 billion (£2.3 billion) - partly due to the fallout from a number of recalls made by its McNeil Consumer Healthcare unit that manufactures the painkiller Tylenol (paracetamol) and Benadryl (diphenhydramine) allergy tablets. 

Between September and January a number of drugs were recalled because of a musty smell, with some patients experiencing nausea, vomiting, stomach pains and diarrhoea. The culprit was found to be 2,4,6-tribromoanisole - formed by the breakdown of the fungicide 2,4,6-tribromophenol, which can be found in the wooden pallets used to transport packaging materials. Then, at the end of April, a large number of children’s medicines were recalled, as they could have contained either too much active ingredient or tiny metal particles (see Chemistry World  July 2010, p18). 

Regardless of these setbacks, worldwide sales managed to inch up 0.6 per cent to $15.3 billion. And despite J&J’s operating profits falling 1 per cent to $4.2 billion, the company’s net earnings were up 7.5 per cent to $3.5 billion. 

Pharmaceutical sales increased 1 per cent to $5.6 billion during the quarter, despite generic competition eating into sales from many of its key product lines. Sales from its medical devices and diagnostics division reached $6.1 billion - an increase of 4.1 per cent. 

J&J has admitted that its manufacturing problems are likely to knock some $600 million off its full year sales and that pricing pressures in Europe could knock up to $200 million off its sales of pharmaceuticals during the year. 

’Remedial actions to address the quality issues at McNeil Consumer Healthcare are ongoing and of high importance,’ said chief executive William Weldon. ’At the same time, we continue to make significant investments in acquisitions, strategic partnerships and in advancing our pipeline, positioning us well for future growth.’ 

Matt Wilkinson 

Pharmaceuticals

Sales soar at Pfizer and Merck

Pfizer, the world’s largest drugmaker, has seen its second quarter sales increase 58 per cent to $17.3 billion (£11.1 billion) thanks to the contribution of drugs acquired with its $68 billion purchase of Wyeth in January 2009. 

Operating profits increased 30 per cent to $4.0 billion while research and development costs increased 29 per cent to $2.2 billion. Lipitor (atorvastatin) maintained its position as Pfizer’s biggest selling drug, amassing sales of $2.8 billion during the quarter - although with the patent on the drug soon to run out, the company will be looking for sales from its other drugs to ramp up. 

But its not all good news for the pharma giant as Pfizer’s pipeline has taken a bit of a knock. It has been asked by the US Food and Drug Administration (FDA) to suspend yet more clinical trials into the efficacy of its experimental pain drug tanezumab. In June, the agency asked the company to suspend an osteoporosis trial of the drug after ’a small number of patients’ in the trials reported worsening of the condition, leading to joint replacement. And now Pfizer has been asked to suspend trials studying the monoclonal antibody’s efficacy for chronic lower back pain and painful diabetic peripheral neuropathy. 

The company’s biggest rival, Merck & Co. saw its second quarter sales increase 92 per cent to $11.3 billion following its purchase of Schering-Plough. But its operating profits for the quarter were down 37 per cent at $1.2 billion. The company ascribed this to costs related to the Schering-Plough buy-out, as subsequent restructuring ate away at its increased sales. 

Its top-selling drug was once again its asthma and allergic rhinitis drug Singulair (montelukast) which had sales of $1.3 billion during the quarter. 

Shire chomping at the bit

Speciality pharmaceutical company Shire has seen its second quarter revenues increase 35 per cent to $849 million, with sales from ’core products’ increasing 39 per cent to $684 million. 

Shire’s top seller continued to be its attention deficit hyperactivity disorder drug Vyvanse (lisdexamfetamine), which had sales of $148 million - up 30 per cent compared to the same period in 2009. Operating income increased 233 per cent to $270 million. 

In a bid to help maintain this momentum, Shire has made a €19 (£15.5) per share bid for Belgian gastrointestinal drug specialist Movetis - valuing the firm at €428 million. The offer marks a 55 per cent premium on its initial share price of €12.25 when it floated on the stock exchange in December. Movetis’s board has accepted the offer and according to pharmaceutical analysis company Evaluate Pharma, two key shareholders with a combined stake of 38.9 per cent have already agreed to sell their shares to Shire. 

Legal costs dent GSK results

Despite seeing sales grow 4 per cent to reach £7 billion during the quarter, GlaxoSmithKline (GSK) slipped into the red after restructuring and legal charges wiped out its profits. Those profits had already been dented by rising costs at the company which caused its operating profits to fall 80 per cent to £641 million during the quarter. 

Major restructuring charges, knocked £590 million off this figure and legal costs associated primarily with the settlement of lawsuits related to its antidepressant Paxil (paroxetine) and its diabetes drug Avandia (rosiglitazone) caused the company to record a net loss of £304 million for the period. 

Andrew Witty, GSK’s chief executive, announced the company had decided ’to progress five new assets into Phase III development. These include two oncology candidates targeting melanoma, and potential new assets for HIV and for Duchenne Muscular Dystrophy.’ 

AZ goes steady

During the second quarter of 2010 AstraZeneca’s (AZ) sales reached $8.2 billion - an increase of 1 per cent compared to the same period in 2009. While sales to the US fell 4 per cent, with generic competition hitting sales of a number of its drugs. Increased sales to emerging markets helped balance the losses. Following the completion of the successful Jupiter clinical trials, sales of AZ’s cholesterol drug Crestor (rosuvastatin) rose 27 per cent to $1.4 billion during the quarter, as patients started to take the drug as a prophylactic against heart attacks. 

However, the company incurred charges of $565 million as a result of its major restructuring efforts, which diminished its net earnings. 

The race is on for hepatitis C

US-based Vertex Pharmaceuticals has released results from a Phase III clinical trial of its experimental hepatitis C therapy, telaprevir, that show it can cure 72 per cent of previously untreated patients - many of them in six weeks less than the standard 48 week treatment regime. 

That reduction in time could prove to be a key selling point for the drug, as many patients suffer from unpleasant side effects from the standard treatment, which more often than not fails to cure the condition. However, telapravir still needs to be taken with the recognised treatment, which combines a -interferon with the general antiviral therapy ribavarin. 

The results seem to place Vertex’s therapy ahead of Merck & Co.’s competitor, boceprevir. But regardless of which drug turns out to be more effective, HCV sufferers are likely to have a better prognosis if either drug makes it to market - and that could happen early next year. 

Sandoz wins Lovenox race

Novartis’s generics unit Sandoz has won the race to gain marketing approval for a copycat version of Sanofi-Aventis’s blockbuster anti-clotting drug Lovenox (enoxaparin). 

Sales of the drug brought in $2.7 billion for Sanofi in 2009, but now that Sandoz and its collaborator Moment have gained approval for their rival drug, those figures are bound to slump. Novartis is unhappy at losing such a valuable source of revenue, and has said it has ’reservations’ about the approval of generic versions of such a ’complex biological product’ and that it was considering its legal options. 

Meanwhile, Israeli generics giant Teva has said that it believes its copycat version of enoxaparin should also be approved, saying that it ’believes that it has demonstrated to the US FDA that its version of generic Lovenox meets their criteria’. 

Elan postpones EDT divestment

Irish biopharma firm Elan has decided to postpone the sale or spin-off of its drug delivery unit Elan Drug Technologies (EDT) as ’market conditions at this time are not conducive to an appropriate valuation’. 

The company has said that while it will not start a process to pursue the separation of the EDT business from its BioNeurology business it may look to do so in the future. In the meantime, the company said it ’will continue to focus on growing the EDT business in terms of revenues, profits, and cash flow’ and that it is ’committed to consolidating its position as the world’s leading drug delivery business’. 

The company has also said it plans to restructure its debt and aims to pay off $500 million of outstanding debts that will mature in November. 

Industry

Lanxess back on track

German plastics and rubber expert Lanxess has said its second quarter sales have raced up 48 per cent to €1.8 billion (£1.5 billion), compared to the same period last year. The company attributed the strong sales growth to its ’strategic positioning in the emerging markets’, which now account for nearly 60 per cent of its sales.

Lanxess said its performance polymers segment was its key growth driver, which increased its sales by more than 71 per cent compared to the second quarter of last year to reach €958 million. Its earnings before interest, taxation depreciation and amortisation (EBITDA) more than doubled to reach €269 million and its net income increased more than seven-fold to reach €131 million.

As a consequence of the company’s positive business development, it has decided to partially halt its ’challenge 09-12’ programme, which was designed to see it through the recession. More than 6000 non-managerial German employees will receive their full Christmas allowance again this year, and the majority of non-managerial staff will return to a full working week as of 1 January, 2011.

Demand boosts chemical sector

Thanks to the improving business environment leading to higher demand, the world’s largest chemical company, BASF saw its second quarter sales increase 30 per cent compared to last year, reaching €16.2 billion (£13.7 billion). The company’s operating profits increased 94 per cent to €2.2 billion. BASF said it was continuing to gain momentum, and that recent acquisitions - such as the purchases of Ciba and, more recently, Cognis - were starting to pay off. 

Meanwhile, US chemical giant Dow Chemical also attributed its 26 per cent year-on-year increase in second quarter sales to the improving economic environment. Its sales for the quarter reached $13.6 billion (£8.7 billion) with growth driven by a 7 per cent increase in volume demand and a 19 per cent increase in selling prices. The increased revenue helped the company return to making a second quarter profit of $790 million - compared to an operational loss of $683 million in the same period in 2009.

’We continue to have confidence that momentum is gradually building, and we have not changed our view of a sustained global recovery led by Asia, slowly helped by the US recovery, but with Europe lagging,’ said Andrew Liveris, Dow’s chief executive. 

Second quarter sales at DuPont also increased 26 per cent to hit $8.6 billion. The increased sales volumes and higher selling prices led to a 52 per cent increase in operating profits which reached $1.6 billion. Sales from its electronics and communications division more than doubled during the quarter to reach $700 million, while sales from its performance materials unit increased 45 per cent to reach $1.6 billion. 

Dutch chemical courage

Dutch life science and materials company DSM has increased its outlook for the year after sales continued to increase, driving the company to record operating profits. Sales of €2.3 billion were up 28 per cent compared to the second quarter of 2009 and 10 per cent compared to the first quarter of 2010. The company’s operating profits were up 188 per cent at €246 million compared to the same period in 2009 and Feike Sijbesma, DSM’s chief executive, hailed the quarter as the best in the company’s history. 

The company has also finally found a buyer for its special products business unit, after its attempt to sell the business in 2008 to Arsenal Capital Partners was thwarted by the European Commission. This time Emerald Performance Materials has said it would buy the unit, which produces benzoic acid and other chemicals derived from the oxidation of toluene. 

Meanwhile, Dutch paint expert AkzoNobel is ’cautiously optimistic in spite of continuing economic uncertainty’ after seeing its revenues soar 13 per cent to €3.9 billion during the second quarter of 2010. Operating profits rose 27 per cent compared to the same period last year, reaching €466 million. 

Sales from its performance coating division grew 19 per cent to €1.26 billion, while sales from its speciality chemicals unit grew 14 per cent to €1.26 billion. The company also said that now the integration of ICI was complete it could ’concentrate fully on accelerating our growth agenda’. 

Dow Corning’s record sales

Dow Corning has seen its second quarter sales reached record levels of $1.5 billion - an increase of 30 per cent compared to the second quarter of 2009. The company, which is equally owned by Dow Chemical and Corning and does not report full financial details, said its net income increased 91 per cent compared to the same period in 2009, reaching $220.7 million. 

’Dow Corning’s second quarter sales marked a record for the company as we continue to put the global recession behind us,’ said Donald Sheets, Dow Corning’s chief financial officer. Meanwhile, in a bid to secure access to more of its critical feedstocks, Dow Corning has agreed to buy a 49 per cent stake in Timminco’s silicon metal manufacturing facility in Bécancour, Canada. The facility will initially produce 47,000 tonnes of ’silicon metal’ of which Dow Corning will receive 49 per cent for its investment of around $40 million. 

Sabic on the up

Saudi Basic Industries Corporation (Sabic) has seen its gross operating profits for the second quarter of 2010 increase 91 per cent to SAR11.9 billion (£2.1 billion), compared to the same period in 2009. 

Net income for the quarter rose 177 per cent to SAR5.0 billion compared to the same period last year, but compared to the first quarter of 2010 net income fell 8 per cent, which the company ascribes to a ’decrease in the prices of major products, higher feedstock cost, and higher prices of raw materials’. 

Appetite for risk returns

Clean technology and life science companies in the US have been reaping the rewards of increasing investment from venture capitalists (VCs) in the first half of 2010, according to the MoneyTree report from consultancy firm PricewaterhouseCoopers and the National Venture Capital association (NVCA). More than $11.4 billion (£7.5 billion) was invested in the first 6 months of the year - a 49 per cent increase compared to the first half of 2009 when only $7.7 billion was invested.

Investment in clean technologies doubled in the second quarter of 2010 compared to the first 3 months of the year - breaking the quarterly record for the sector and reaching $1.5 billion. Life sciences companies saw VC investment increase 52 per cent to $2.1 billion compared to the first quarter of the year. 

’As the exit market begins to show signs of life, VCs are now able to look increasingly at new investments outside their existing portfolio. This translates into momentum in the seed and early stage sectors where valuations remain reasonable and opportunities are great,’ says Mark Heesen, president of NVCA. 

Agrochemicals

Fertilising the future

Canada-based agrochemical company Agrium has said its second quarter sales have increased 7 per cent to reach $4.4 billion, with chief executive Mike Wilson commenting that ’the second quarter started at a hectic pace’ which helped the company to deliver ’excellent second quarter results, the highest in our history’. 

The increased sales led to its operating profits jumping 35 per cent to $732 million which the company ascribed to ’higher retail crop nutrient gross profit and wholesale potash sales volumes’.The company said that after it decided to pull out of its pursuit of CF Industries in March it made $52 million by selling the shares it had already bought in CF. 

But while Agrium appears to have profited from pulling out of its acquisition of CF, CF has seen its profits hit hard by its acquisition of Terra Industries. Despite sales increasing 32 per cent to $1.3 billion, increased cost of sales and restructuring charges caused CF operating profits to fall 11 per cent to $350 million.

Syngenta stifled

Despite seeing its sales rise by 1 per cent during the first half of 2010 to $6.7 billion, agrochemical giant Syngenta, saw its operating profits fall 13 per cent to $1.6 billion, compared to the first 6 months of 2009. 

The company, which does not provide detailed second quarter results, says that sales of seeds are accelerating and that investment in emerging markets has led to sales to those regions increasing 15 per cent. ’After a slow first quarter start, demand for our products has increased significantly in 2010, following a 2009 season characterised by low pest pressure and credit constraint,’ said Mike Mack, the company’s chief executive. 

Yara back in the black

Norwegian fertiliser producer Yara has seen sales fall almost 3 per cent to NOK15.7 billion (£1.6 billion) in the second quarter of 2010 compared to the same period last year. But that didn’t stop the company turning an operating loss of NOK85 million during the second quarter of 2009 into a second quarter operating profit of NOK1.9 billion in 2010. 

The company’s net income for the quarter more than trebled to NOK3.7 billion, benefitting from an after tax gain of NOK2.6 billion for the sale of Yara’s shares in the Brazilian phosphate producer Fosfertil. ’Fertiliser demand is backed by strong consumption growth for agricultural products and concerns that last year’s record yields following favourable weather may not be repeated.’ said Jürgen Haslestad, Yara’s chief executive.

In brief

Charles River cancels WuXi deal

US-headquartered contract research organisation (CRO) Charles River Laboratories has bowed to shareholder pressure and cancelled its plans to buy Chinese rival WuXi Pharmatech for $1.6 billion. The decision will cost Charles River $30 million. 

Novo sales up

Danish diabetes expert Novo Nordisk has seen its sales increase 14 per cent to DKK29.1 billion (£3.2 billion) - driven by a 22 per cent increase in modern insulin sales and a good start for its new diabetes drug Victoza (liraglutide), Victoza, a long-acting glucagon-like peptide-1 (GLP-1) analogue, has taken 27 per cent of the GLP-1 market. Operating profits at the company increased 19 per cent to DKK9.4 billion with net profit increasing 21 per cent to DKK6.9 billion. 

Galapagos reclaims rights

Belgian drugmaker Galapagos has reacquired the rights to the arthritis drug GLPG0634, a small molecule drug that had been part of its arthritis alliance with GlaxoSmithKline (GSK). Galapagos has said it is starting a Phase I trial of the orally available drug which selectively targets Janus kinases (JAK) 1 and 2. 

Teva’s generics sales soar

Teva’s quarterly sales for the 3 months ending 30 June 2010, have increased 12 per cent to $3.8 billion compared to the same period in 2009. A 10 per cent increase in European sales and a 13 per cent increase in sales of its market leading multiple sclerosis therapy Copaxone (glatiramer acetate) buoyed the results and pushed operating profits at the company up 22 per cent to $1.2 billion.

Abbott performs ’reliably’

Abbott Laboratories has seen its second quarter sales increase 18 per cent year-on-year to $8.8 billion (£5.7 billion). But despite this the company saw its operating profits fall 3.9 per cent to $1.6 billion, as increased costs and R&D spending outstripped sales growth.

Teijin rewrites the book

Japanese chemical giant Teijin has bought US nanoparticles expert NanoGram for an undisclosed amount. The two companies had been working together since April 2009 to develop NanoGram’s printed silicon ink technology for printed electronics - a development that could rewrite the book for e-readers and also prove useful for making solar cells and LCD TVs.

Huntsman to buy Indian chemicals business

Huntsman has agreed to buy the chemicals business of Laggans Petrochemicals for an undisclosed amount. The business, based in Ankleshwar, India makes amines and surfactants and has annual sales of around $45 million. Huntsman expects the deal to increase its total annual sales into India to $260 million - around 3 per cent of its global sales figure. 

Praxair floats higher

US-based industrial and speciality gas supplier Praxair has seen its second quarter sales increase 18 per cent to $2.5 billion compared to the same period in 2009. While demand grew in all geographic regions, the company said that growth was strongest in South America and Asia, particularly for customers in the chemicals, metals and electronics arenas. Operating profits grew 22 per cent to $547 million. 

Air Products up the ante

Following Airgas’s decision to reject Air Products $63.5 per share hostile takeover bid, Air Products has written to Airgas shareholders urging them to tender their shares if they ’do not support the Airgas Board’s "just say no" approach’ to the takeover bid. Airgas has responded by saying the offer is ’grossly inadequate’.