|
Drugs have few side effects
|
 |
January 27, 1998: 1:54 p.m. ET
The strong dollar may lower revenue, but drug firms are inoculated to Asia
|
NEW YORK (CNNfn) - Several major pharmaceuticals firms reported strong quarterly earnings Tuesday despite the surging dollar's effect on their sales.
Dow component Merck & Co. Inc. said it earned $1.24 billion, or $1.01 per diluted share, during the fourth quarter, besting analysts' expectations of $1.02 per share.
Merck (MRK) had its strongest sales with its Zocor cholesterol-reducing drug and also with its Pepcid line of stomach acid products, the Whitehouse Station, N.J.-based company said.
However, Merck said its overall sales were affected by what is becoming an increasingly common enemy among corporate America; Southeast Asia.
Asian side effects
As currencies in Asia have fallen, the dollar has conversely strengthened, making U.S. goods and services more expensive.
Merck estimated that currency valuations resulting in a strong dollar reduced its fourth quarter and yearly sales growth by 2 percent.
Investors shouldn't jump to the conclusion that the fundamentals of U.S. drug companies are being threatened, explained Samuel Isaly, pharmaceutical analyst at OrbiMed Advisors LLC.
Isaly said that currency valuations are an inescapable fact of life for any multinational company. "That's something that comes and goes. Sometimes it's positive. Sometimes it's negative," he said.
Isaly went on to say that the Asian market is not as crucial to drug companies as the United States market, which accounts for about 35 percent of the world market and more than 50 percent of the sales of most major U.S. drug firms.
"Outside Japan, these companies do 5 or 10 percent of their business in Asia and, if that goes wrong, it doesn't have much impact on the companies because it's not a big part of their profit base."
The fourth-quarter results of Schering-Plough Corp. would seem to underline that assessment.
The Madison, N.J.-based company (SGP) said Tuesday its sales growth was held back by 4 percent due to the strong U.S. dollar.
However, that didn't change the fact that the company had fourth-quarter earnings of $343 million, or 47 cents per share, beating Wall Street's predictions of 45 cents per share.
Schering said that its earnings were lifted by strong sales growth led by its allergy drug Claritin. Its worldwide sales growth pushed ahead 27 percent during the quarter, despite the drag of reduced demand in Asia.
American Home Products Corp. (AHP) said Tuesday that its fourth-quarter income of $572 million, or 88 cents per share, rose 14 percent from the same period a year ago even when fluctuations associated with currencies are taken into account.
AHP estimated that its quarterly sales of $3.6 billion were held back by 4 percent due to the strengthening of the dollar.
Drug stocks looking healthy
The positive prognosis from drug companies translated into stronger results in afternoon trading Tuesday.
Merck's shares (MRK) were 1-3/16 higher at 115-3/16, contributing to a stronger showing for the Dow Jones industrial average. Schering stock (SGP) was up 1-7/8 to 73-3/8. American Home Products (AHP) leapt 2-7/16 to 92-15/16.
Drug stocks' 12 month performance
(Click to see chart)
Merck | Schering-Plough
AHP | Warner-Lambert
Warner Lambert (WLA), whose pharmaceutical segment makes up the largest part of its business, rose 2-1/16 to 141 after it said its fourth-quarter net income rose 38 percent to $236 million, or 87 cents per share, in line with expectations.
|
|
|
|
|
 |
|
