Top drug companies' earnings beat forecasts

By Ben Hirschler

LONDON (Reuters) - The world's two biggest drugmakers, Pfizer Inc (PFE.N) and GlaxoSmithKline Plc (GSK.L), both beat expectations for quarterly earnings on Wednesday, as did Wyeth (WYE.N), indicating the sector's resilience.

Although all three companies face major threats from generic competition, the latest results show demand for medicines is holding up relatively well at a time of economic downturn.

"The pharma figures are quite encouraging but we shouldn't get carried away," said Justin Urquhart Stewart of Seven Investment Management in London.

"They are better than expected in a weakening economy but the problem with pharma is always the risk you are running the pipeline of new drugs."

Pfizer's quarterly earnings more than doubled on higher sales of its prescription medicines and lower costs, with the U.S. group company earning $2.78 billion, or 41 cents per share, in the second quarter, against 18 cents a year earlier.

Excluding special items, Pfizer earned 55 cents per share. Analysts on average expected 54 cents per share, according to Reuters Estimates.

British-based Glaxo posted a pre-tax profit of 2.02 billion pounds ($4.04 billion), equivalent to a 13 percent jump in earnings per share to 27.2 pence, beating the consensus forecast of 25p.

By contrast, Wyeth's second-quarter profit fell 7 percent to $1.12 billion, or 83 cents per share, from 87 cents a year earlier, due to generic competition faced by its Protonix ulcer drug.

But that was still better than investors had expected and its shares rose more than 4 percent in early U.S. trading. Deutsche Bank analyst Barbara Ryan said investors' fears of a disappointing quarter had proved to be misplaced.

Pfizer stock rallied just over 2 percent, though some of the shine was taken off the profit jump by news that its Chantix quit-smoking drug lost more than a third of its U.S. sales amid safety concerns.

GLAXO CAUTION

Glaxo, however, lost around 1 percent on disappointment that new Chief Executive Andrew Witty, who took over in May, had not raised his profit outlook for the full year and was delaying completion of a share buyback program.

Pharmaceutical stocks have had a rough ride in recent years, reflecting growing anxiety about multiple patent expiries on blockbuster drugs over the next five years, at a time when few new drugs are emerging from company laboratories.

As a result, Pfizer, which faces loss of exclusivity on the world's top-selling drug, Lipitor, for high cholesterol, has seen its shares lose more than a quarter of their value in the past year.

Against that bleak market backdrop, leading drugmakers are rethinking their strategy. Some are bulking up their pipelines by striking ever bigger deals with biotechnoloigy companies, as evidenced by Roche Holding AG's (ROG.VX) offer this week to buy out the remainder of Genentech Inc DNA.N for $43.7 billion.