Big Pharma's New Business Model?
As several of the major pharmaceutical companies struggle through a period of a relative dearth of big, new products, the job casualties and the share buybacks are piling up this earnings season. Today, Sanofi-Aventis is joining the group. The French drugmaker announced it will buy back more than $4 billion of its stock and get rid of even more sales reps.
Many analysts have been saying for a long time now that there are way too many boots (or high heels) on the ground selling pills to doctors. Sanofi recently suffered a major setback when an FDA Advisory Committee slammed the door on SNY's hoped-for weight loss blockbuster Zimulti. Today, the company said it has not given up on the drug also known as Acomplia. Yesterday, Johnson & Johnson said it will get rid of nearly 5,000 jobs.
Out here in the Silicon Valley where I happen to be on assignment this week, JNJ is essentially gutting the once-large offices of Alza and Scios, both of which it bought earlier this decade. Last week, GlaxoSmithKline said that over the next two years, it will spend $25 billion dollars on its own shares. That's the biggest-ever share buyback program in big pharma.
Bristol Myers Squibb last week said it will cut jobs and close plants with details (numbers) to come at a later date. AstraZeneca is doubling the size of its previously announced "workforce reduction" program to more than 7,000. The list goes on. It is becoming increasingly apparent that more and more companies in the sector are scrambling to weather this downturn and to bolster their near-term profits through cost cuts and share buybacks. What are your thoughts, is it penny-wise and pound-foolish or fiscally responsible? Send them to firstname.lastname@example.org.
Meantime, shares of biotech Amgen are getting slammed for the second day in a row. They hit a new 52-week low earlier today. Investors are inflicting the damage in the wake of Medicare cracking down on when and how much it will pay for treatment with Amgen's drugs to combat chometherapy-related anemia. Those drugs account for about half of the company's profits.
Recent reports have raised safety issues about patients being overtreated with Amgen's Aranesp and JNJ's Procrit (JNJ shares have not suffered like AMGN since the company is so much bigger and diversified than Amgen and, as mentioned above, the company coincidentally announced its massive job cuts the same day the Medicare news broke.)
Some analysts say Amgen's future now hinges on the success of an osteoporosis drug, denosumab, that would only need to be given to patients twice a year. Yep, twice a year. What are called pivotal, late-stage test results are expected on D-mab (mab, by the way, stands for monoclonal antibody), for short, sometime next year.
Questions? Comments? Pharma@cnbc.com