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Firms seek new wonder drug
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April 19, 1999: 2:17 p.m. ET
With blockbuster drugs slumping, industry looks to regain momentum
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NEW YORK (CNNfn) - With sales of two headline-making drugs feeling some pain, some of the leading pharmaceutical companies are looking for a new prescription.
Eli Lilly & Co. (LLY) said Monday that sales of Prozac, the world's leading antidepressant, slipped 4 percent in the first quarter, largely because of increased competition from Celexa, made by Warner-Lambert Co. (WLA) and Forest Laboratories Inc. (FRX).
Analysts had expected that Prozac, which helped bring depression treatment into the mainstream and accounts for more than half of Lilly's earnings, would register sales of about $650 million for the quarter. But sales only totaled $589.9 million. Still, Lilly's earnings rose 12 percent, in line with predictions, on the strength of the anti-schizophrenia medication Zyprexa and other new drugs.
Last week, Pfizer Inc. (PFE) said sales of its anti-impotency medication Viagra were slowing, and warned that its second-quarter growth should only be "in the single digits" because the results would have to be compared to last year, when Viagra was launched with blockbuster sales, a flurry of prescriptions and unprecedented media attention.
As a result of Pfizer's comments, which came amid a healthy profit report well within analysts' expectations, investors immediately began to sell.
And neither company's stock was doing so well on Monday. Eli Lilly was down 8 at 74-5/16, while shares in Pfizer were down 6-15/16, at 120-1/8 in early afternoon trading.
"Basically, Viagra last year helped inflate expectations for the pharmaceutical group and it's made it more difficult for the drug companies this year to live up to expectations," said Michael Krensavage, a pharmaceutical analyst at Brown Brothers Harriman, who has a "neutral" rating on both Pfizer and Lilly. Even before Viagra was launched in April 1998, Pfizer's share prices shot up 30 points in anticipation.
"The environment is changing for the drug stocks, and investors are becoming more bearish on them," he said.
The industry is awaiting the expected launch of four major new drugs later this year, Krensavage said. Two are anti-diabetes medications: Actos, which Lilly will market in conjunction with Takeda Chemical Industries Ltd. of Japan, and Andia, from SmithKline Beecham (SBH).
The other two entrants are anti-arthritis drugs Celebrex; from Pfizer and Monsanto Co. (MTC), and Merck & Co. 's (MRK) Vioxx, which is to be reviewed by the Food and Drug Administration on Tuesday.
But none of those drugs is likely to receive as much interest as Viagra or Prozac.
In its first-quarter earnings report Monday, Lilly's CEO, Sidney Taurel, said the company was placing "a high priority" on improving Prozac's sales. "At the same time," he said, "we are concentrating on driving productivity improvements in every area of our business from research and development to sales and marketing."
The company's strategy includes marketing Prozac to those who suffer panic attacks or pre-menstrual syndrome, Mariola Haggar, an analyst with Deutsche Bank Securities, told CNNfn's "Business Day." The company is also introducing a one-a-day version of the pill - something that will distinguish Prozac from the competition.
"I do believe that for the second half of this year this will be a good stock," she said.
Wall Street is awaiting earnings from other drug companies this week, including Merck, SmithKline Beecham and Bristol Myers Squibb Co. (BMY). But for many investors, the sector has lost its glow, Krensavage said.
"There were people who tried Viagra and the next morning called their brokers," said Krensavage. "Now, reality is setting in." 
-- by staff writer Martha Slud
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Pfizer
Eli Lilly
Merck
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