for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up
Healthcare

RPT-WRAPUP 1-Glaxo, Lilly sales weak; Novartis bucks trend

(Repeats to add link to graphic)

* Drugmakers top Q3 profit views

* Glaxo warns of Europe price cuts

* Cost controls help Lilly

* New products buoy Novartis

* Glaxo off 1 pct, Lilly down 0.5 pct, Novartis up 0.1 pct

By Lewis Krauskopf and Ransdell Pierson

NEW YORK, Oct 21 (Reuters) - Drugmakers GlaxoSmithKline Plc GSK.LGSK.N and Eli Lilly and Co LLY.N posted weaker-than-expected quarterly revenue, continuing a industry theme and underscoring challenges from price cuts and a lack of new products.

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

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

Lilly shares fell 0.5 percent, while Novartis edged up 0.1 percent, compared with a 0.2 percent gain for the Arca Pharmaceutical Index of large U.S. and European drugmakers .DRG .

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 pressure, and utilization pressure.”

Earlier this week, Johnson & Johnson JNJ.N and Abbott Laboratories ABT.N reported revenue below Wall Street targets, hurt by recalls of consumer products for children and infants.

Roche Holding AG ROG.VX last week reported a 3 percent decline in quarterly sales, missing estimates, as its top-selling Avastin cancer drug lagged in the United States.

Drugmakers have still been able to post profits ahead of expectations as they shore up their bottom lines with cost cuts.

“Everyone is talking about price pressures in Europe and healthcare reform in the U.S., but some companies are still able to beat consensus and even edge up earnings guidance,” said analyst Mike Ward of Ambrian Partners in London. “Companies are adapting to the tough environment by squeezing operations and coming up with extra cost savings.”

For a graphic on the pharmaceuticals sector, click r.reuters.com/xaw97p.

BY THE NUMBERS

Glaxo’s earnings slipped 1 percent, hit by the cost of writing off stocks of Avandia and increased generic competition for herpes drug Valtrex, although the results topped estimates. [ID:nLDE69J1NA]

Last month, European regulators suspended Avandia and severe restrictions were placed on its U.S. sales, following evidence of a heart attack risk. Glaxo took a third-quarter charge of 147 million pounds for the drug.

Revenue edged up 1 percent to 6.81 billion pounds ($10.73 billion). Analysts had forecast 6.85 billion pounds, according to the Thomson Reuters I/B/E/S.

Glaxo Chief Executive Officer Andrew Witty warned that drug price cuts in Europe could average about 5 percent in 2011, up from 3.5 percent to 4.0 percent this year.

“They are flagging some price reductions for this year and next year which are somewhat more aggressive than we’d factored in,” Matrix Corporate Capital analyst Navid Malik said.

Tight cost controls helped Indianapolis-based Lilly report profit ahead of expectations. [ID:nN21267529]

Net income rose 38 percent to $1.3 billion from a year earlier, when Lilly took a number of special charges. Excluding items, profit of $1.21 per share topped estimates by 6 cents.

But while revenue rose 2 percent to $5.65 billion due to higher prices in the United States, it missed Wall Street expectations of $5.77 billion. Lilly cited lower prices in international markets.

Wall Street’s eye is trained beyond this quarter, as Lilly is expected to lose patent protection on its top medicines starting next year.

Novartis’ core earnings per share rose 16 percent to $1.36, topping estimates by 7 cents. Notably, its sales rose 13 percent to $12.58 billion, about $150 million ahead of estimates. [ID:nLDE69J13F]

Novartis' newest products generated 20 percent of quarterly sales, and the company saw strong demand for its new generic version of Sanofi-Aventis' SASY.PA blood thinner Lovenox as well as for cancer drug and blockbuster hopeful Afinitor.

Novartis, which is seeking to buy out the rest of U.S. eyecare company Alcon Inc ACL.N, also won a recent boost with the U.S. approval for multiple sclerosis drug Gilenya. Its shares are now trading at a premium to crosstown rival Roche. (Additional reporting by Ben Hirschler in London and Katie Reid in Zurich; Editing by Lisa Von Ahn)

for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up