Major pharma firms post weaker than expected quarterly revenue

DRUGMAKERS GlaxoSmithKline and Eli Lilly posted weaker than expected quarterly revenue, continuing an industry theme and underscoring challenges from price cuts and a lack of new products.

Novartis AG proved a standout, with sales topping estimates as the Swiss company benefited from new drugs for cancer and blood clots.

Glaxo shares fell 1% in New York after the British drugmaker warned of European price cuts and said it had received a subpoena from the US Department of Justice over its controversial Avandia diabetes drug.

The drug industry overall is suffering as older products lose patent protection and governments and health insurers push back on pricing.

“You have mature brands everywhere, no real new big blockbusters coming out, so you’re not getting that growth,” said Hapoalim Securities analyst Jon LeCroy.

“You’ll see continued pressure as mature brands go generic. The other brands then face more pricing and utilisation pressure.”

Glaxo’s earnings slipped 1%, hit by the cost of writing off stocks of Avandia and increased generic competition for herpes drug Valtrex, although the results topped estimates.

Glaxo’s revenue edged up 1% to £6.81 billion (€7.67bn). Analysts had forecast £6.85bn. Glaxo chief executive Andrew Witty warned that drug price cuts in Europe could average about 5% in 2011, up from 3.5% to 4.0% this year.

Eli Lilly net income rose 38% to $1.3bn (€927m) from a year earlier, when Lilly took a number of special charges, while revenue rose 2% to $5.65bn due to higher prices in the United States.

Novartis’ core earnings per share rose 16% to $1.36, topping estimates by 7 cents. Notably, its sales rose 13% to $12.58bn (€8.97bn), about $150 million ahead of estimates. Novartis’ newest products generated 20% of quarterly sales, and the company saw strong demand for its new generic version of Sanofi-Aventis’ blood thinner Lovenox as well as for cancer drug and blockbuster hopeful Afinitor.