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Higher Prices, Prescriptions to Boost Big Pharma Profit: Analyst

Analysts from health care equity research firm Leerink Swaan expect major pharmaceutical companies to beat their second-quarter estimates.

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"We anticipate higher-than-expected second-quarter total sales as a result of U.S. price increases and decent (prescription) trends, and strong forex tailwinds," Leerink Swan noted in a report.

The authors of the report also wrote that "new product launches in the first half, including Bristol Myers Squibb's Yervoy, Merck's Victrelis, and Eli Lilly's Tradjenta should provide additional sales upside."

Here are Leerink Swann's top picks:


"Risks to SNY include possible near-term risk of 2011 and 2012 sales estimates that would result from incremental Genzyme manufacturing disruptions, earlier-than expected introduction of Eloxatin generics, and disappointing global product launches from Multaq.


"Good second-quarter sales performance are expected with upside to our $0.93 estimation, possible on Forex tailwinds and a continued solid ophthalmology franchise," the report said.

The note added that some risks to their valuation include the "economic sensitivity of self-pay products [which represent 30% of sales], and a slower than expected launch of Botox migraine.

Leerink Swann also offered its forecast for second-quarter earnings in the sector. Among them:


The note mentioned that solid second sales "could drive upside to our $1.85 estimates."

Health Care: Prescription for Profits


"Based on our discounted cash flow and probability—weighted analyses, which forecast profits through 2017, we believe GSK should trade in a range of 1420p/share, or $47," according to the study.

Eli Lilly

The authors of the notes said,"Over the next year, we expect LLY shares to trade at 8 time our 20011 EPS estimate of $4.35, or in the low to mid $30s. This reflects our concerns about the challenges facing LLY heading into a decade of sequential blockbuster patent expirations starting in 2011."

The note added, "LLY's plan to reduce its cost structure and by extension its workforce in established markets by 5,500 could negatively impact near-term revenue."


"Risks to NVS’ valuation include disappointing product launches from Gilenya and Tasigna," the report included. In additions both those drugs "could face the risk of therapeutic substitution from generic alternatives which could negatively impact our assumptions regarding brand market share"

Forest Laboratories

"Investors' focus remains on the outcome of the Icahn group's proxy battle and the mid-August shareholder meeting," the note read.  "Second quarter looks to be in-line with our $0.99 estimation, which is slightly above the consensus estimate of $0.96 although Viibryd and Daliresp stocking and cost management could drive additional upside."

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