The biggest pharmaceutical companies, based on market capitalization, continued to rally in 2018, with the majority raising their earnings guidance for 2018 and beating Wall Street estimates for the third quarter.
Although pricing pressure persisted during the third quarter, with several of the largest drugmakers vowing to keep prices where they are till the end of the year, sales were minimally affected — so far. The fourth quarter and the coming year could see those effects increase as bipartisan efforts to moderate drug costs play out on Capitol Hill.
In terms of Wall Street expectations, Bristol-Myers Squibb Co., Bayer Aktiengesellschaft and Gilead Sciences Inc. all beat analysts' estimates by more than 10% in earnings. In Bristol-Myers' case, earnings per share were almost 20% above expectations.
Despite pricing concerns, 19 of the top 20 largest pharma companies came out of the third quarter with earnings higher than expected. Only Danish drugmaker Novo Nordisk A/S came up short.
New York-based Bristol-Myers' third-quarter sales were bolstered by its shared blood clot drug with Pfizer Inc., Eliquis, which leaped 28% year over year to become the number one oral anticoagulant in the U.S. The company's cancer drug Opdivo sold 42% higher than the year before, but analysts still wondered whether it could keep up with Merck & Co. Inc.'s Keytruda, which was a moneymaker for the New Jersey-based pharmaceutical giant as it continued to rack up new indications for several types of cancer.
For Gilead, hepatitis C generics gave the company trouble, shrinking the sector's sales by 59%. But what analysts had not been expecting was a 12% bump in HIV product sales.
Bayer, meanwhile, saw pharmaceutical sales grow 2.4% year over year, even as it defended its Monsanto unit's weed-killer Roundup in legal battles inherited after the acquisition of the agrochemical company.
Sunny forecasts
From the beginning of the year, Eli Lilly and Co., Bristol-Myers and Amgen Inc. led the pack in guidance increases, raising their forecasts each and every quarter so far. AbbVie Inc., Allergan PLC and Merck were in the same boat.
Eight of the top 15 drugmakers raised their guidance from last quarter. Shire PLC was the only one to lower its forecast in the third quarter, reflecting the sale of its oncology franchise and Takeda's ongoing £46 billion acquisition of the Irish company.
For Lilly, new products and its diabetes unit led to the strongest quarterly volume performance in a decade, according to CFO Joshua Smiley. Reflected in its increased guidance were the performances of diabetes drugs Trulicity and Jardiance, inflammation medicine Taltz and cancer treatment Verzenio, which more than offset generic competition to erectile dysfunction blockbuster Cialis.
It was also the first quarterly earnings report that did not include the company's animal health unit, which spun off and become public in September as Elanco Animal Health Inc., which saw a 9% growth in revenue.
Biosimilars play a part
The growing role of biosimilars in U.S. pharmaceutical sales was a detractor to some old blockbusters, but companies like Amgen stand to benefit from them with the launch of copycats of Roche Holding AG's breast cancer drug Herceptin and AbbVie's anti-inflammatory Humira in Europe.
A pipeline of biosimilars of best-selling drugs also drove a guidance raise and signaled "a potentially multibillion-dollar business unit," Amgen CEO Robert Bradway said.
The U.S. Food and Drug Administration, following a blueprint from President Donald Trump, has upped its approvals of biosimilars to address drug costs and catch up with regulators from Europe and Asia that have historically been more lenient in giving them the go-ahead.
Among those losing from biosimilar competition were Johnson & Johnson, which saw a 15% drop in sales of its rheumatoid arthritis drug Remicade, and Teva Pharmaceutical Industries Ltd., with two biosimilars of its multiple sclerosis drug Copaxone entering the market.
In addition, a few big generics loom large for companies like Mylan N.V., whose EpiPen will see competition from the launch of Teva's cheaper version in the fourth quarter, and Pfizer, which has been bracing for the loss of exclusivity on its best-selling nerve pain and seizure drug Lyrica in December.
Currency fluctuations
Foreign exchange rates and tariffs entered the conversation for several companies as they reported third-quarter earnings.
In particular, Danaher Corp. and Abbott Laboratories noted lost sales volume as a result of currency fluctuations, specifically a stronger U.S. dollar.
Danaher CEO Thomas Joyce Jr. said the currency fluctuations were "likely to continue as we see it today." Abbott CEO Miles White said that exchange rates were "the only elephant in the room."