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KING FALLS AFTER ALTACE GENERICS ERODE 2Q PROFIT -- King Pharmaceuticals Inc. (Bristol TN), the company whose top-selling heart pill Altace has gone generic, lost as much as a fifth of its market value last week after second-quarter revenue and profit missed analysts' estimates. The generic and brand-name drugmaker rebounded later in the week as stocks rallied, closing down 81 cents, or 7% on the week, to $10.71 in New York Stock Exchange composite trading. A court invalidated Altace's patent in September and King reported last week that sales of the drug were little more than one-fourth their year-earlier level. Sales of King's muscle relaxant Skelaxin, which also faces competition from a new drug, fell by about $1 million. Analysts are skeptical about King's plans to recover with new addiction-resistant painkillers. "The numbers came in shy of street expectations, and the clear issue is that Altace has gone generic," said Ian Sanderson, an analyst for Cowen & Co. in Boston. "Their emphasis going forward will be squarely on Remoxy," a pain medicine now under review at the U.S. Food and Drug Administration.
Net income in the latest quarter fell to $43 million, or 18 cents a share, from $64.8 million, or 26 cents, a year earlier. Earnings of 30 cents a share, excluding special items, missed by 3 cents the average estimate of eight analysts surveyed by Bloomberg. Revenue fell 27% to $396.9 million, trailing the analysts' $398 million projection. Sales of Altace, which accounted for as much as a third of King's revenue before the first generic copy went on sale in December, dropped 73% in the quarter to $44 million. Skelaxin fell to $107 million from $108 million. "Skelaxin's an ancient drug, and Cephalon Inc.'s (Frazer PA) Amrix, which is a once-a-day muscle relaxant, was launched last year," Sanderson said. "Cephalon's been pretty aggressive in promoting it." Earnings in the second quarter of 2007 included 22 cents a share from a writedown in the value of a Michigan manufacturing plant slated for sale and two drugs no longer under development. King said in October that it would reduce its staff by 20% to save $90 million this year as part of its shift to painkillers from heart care. The company said it still plans to file applications with U.S. regulators before the end of the year for approval of three new drugs. Remoxy, a tamper-resistant painkiller developed by King and Pain Therapeutics Inc., was submitted to the FDA in June. The other drugs are a second pain tablet targeting abusers and an agent used in medical imaging.REPORT: ROCHE TO BE WORLD'S TOP DRUGMAKER BY 2014 -- Switzerland's Roche Holding AG is set to become the world's biggest drugmaker by sales in 2014, as current market leader Pfizer Inc. (New York) skids down the rankings to sixth place, according to a study released last week. The realignment of the global drugs industry reflects the looming "cliff" of patent expiries, which will see many of the world's top-selling medicines cannibalized by cheap generics over the next five years. U.K.-based forecasting company EvaluatePharma Inc., which uses consensus analysts' sales estimates for its calculations, expects Roche to emerge as top dog in this tough new environment, reflecting its strength in fast-growing biotech drugs and its lack of near-term patent risks. Roche moved to consolidate its position in biotech-based cancer medicines last month by offering $43.7 billion to buy out the 44% of Genentech Inc. (S. San Francisco CA) it does not already own. But even without that deal, which many investors expect to go through at a slightly sweetened price, Roche is on course to overtake all comers, with expected annual drug sales reaching $49.5 billion in 2014, EvaluatePharma said.
Roche will be followed in the rankings by three other European pharmaceutical companies, France's Sanofi-Aventis SA, London-based GlaxoSmithKline Plc and Switzerland's Novartis AG, with Johnson & Johnson (New Brunswick NJ) the only U.S. drugmaker making the top five, according to EvaluatePharma. Industry analysts have long warned that a raft of big-ticket patent losses are about to transform the drugs sector, leading investors to respond by massively off-loading those stocks at greatest risk. As a result, Pfizer shares trade on just 7.3 times forecast 2009 earnings, against 14.9 times for Roche. And Roche's market value is already substantially higher than Pfizer's at around $160 billion against $126 billion. Pfizer is the highest-profile casualty of the patent cliff, with cholesterol fighter Lipitor, blood pressure pill Norvasc, impotence drug Viagra and eye drug Xalatan set to lose a combined $16.7 billion in sales in the seven years to 2014.MEDICAL STOCK SPOTLIGHT
-- Athenahealth Inc. (Nasdaq), the Internet medical billing company run by President George W. Bush's cousin, led advancing issues, jumping $5.54, or 19% on the week, to $34.00 -- the most since its shares were issued after second-quarter profit beat analysts' estimates. Athenahealth reported second-quarter net income of $2.78 million, or 8 cents a share, compared with a loss of $3.41 million, or 68 cents, a year earlier. The company increased the number of medical providers using its online billing services by 29 percent to 13,554 in the last 12 months and opened a center in Maine to handle the work. Elsewhere, Cutera Corp. (Nasdaq) got a $1.77, or 18% boost, to $11.78. The company said that it earned a nickel a share in the recent quarter on revenue that rose 4% year over year to $24.8 million. Analysts were looking for two cents a share on revenue of $23.5 million. And clinical research organization Kendle Inc. (Nasdaq) surged $5.98, or 14%, to $47.62. The company beat second-quarter targets and then upped its 2008 profit guidance to between $2 and $2.15 a share from between $1.90 and $2.07 a share. The company also increased its expectations for service revenue by $40 million to a range of $490 and $500 million. Losing ground, Emergent BioSolutions Inc. (Nasdaq) plummeted $3.01, or 22%, to $10.68. The company said it swung to a second-quarter profit on higher sales of its anthrax vaccine BioThrax. The company earned $1.8 million, or 6 cents per share, compared with a loss of $3.1 million, or 17 cents per share, in the prior year. Revenue rose 88 percent to $43.5 million from $23.2 million. The company said the number of BioThrax doses delivered jumped 98 percent during the quarter, pushing BioThrax sales to $42.3 million. And Exelixis Inc. (Nasdaq) slid $1.31, or 18%, to $5.81. Brokerage Canaccord Adams downgraded the biotechnology company to hold from buy. Also, Lazard lowered its price target for the stock to $10 from $12.