Pharmaceutical Sector’s Thrilling Q3: Can We Expect Another Wild Ride Next Quarter?
Over the past decade, I’ve had the opportunity to cover earnings. In every quarter, I’ve tuned in for the calls that companies hold with their investors, and I’ve also collaborated with reporters on these topics. I’ve sifted through countless reports, assessing the newsworthiness of various developments. Yet, I cannot recall a single earnings quarter that has been as chaotic for Big Pharma, with every player facing challenges that do not seem to affect their counterparts.
Take Eli Lilly, a company we’ve discussed extensively. In its Q3 call a couple of weeks ago, CEO David Ricks indicated that wholesale stocking impacted the sales of the weight loss sensation Zepbound and its diabetes drug Mounjaro. This unforeseen obstacle caused the drugs to fall short of analyst expectations by 18%, resulting in the stock’s plunge of 13%. Furthermore, Lilly found itself at the mercy of wholesaler stocking decisions, which Ricks noted was beyond their control.
Meanwhile, competitor Novo Nordisk appeared unfazed by the wholesaler concerns, asserting that its own drugs, Wegovy and Ozempic, were performing well. However, the Danish company did report a revenue miss, prompting it to revise its revenue and profit forecasts downward. In the past month, its stock has decreased by 10%, including a drop on the day of earnings.
Bayer also reported disappointing numbers in the third quarter. CEO Bill Anderson confessed during the call that “the current numbers aren’t that pretty,” following the patent expiration of its blood thinner Xarelto. The figures were indeed grim: Bayer experienced a 37% decline in EPS, a 26% drop in EBITDA, and a reduction in free cash flow from €1.6 billion (.7 billion) to €1 billion (.06 billion). Consequently, Bayer’s shares dropped by 12%.
AstraZeneca’s earnings day wasn’t as harsh, mainly due to prior events. A week earlier, it was reported that a top executive had been arrested in China, leading to an 8% decrease in AstraZeneca’s shares, erasing billion from its market cap. However, on earnings day, the stock slightly rebounded as the UK-based pharma announced revenues of .6 billion, exceeding analyst expectations by 4%.
AbbVie faced instability outside its Q3 earnings report. On Halloween, the company announced strong earnings with revenue of .46 billion, a 3.8% increase and surpassing consensus by 1%. However, they were troubled by the upcoming results from emraclidine, acquired in the nearly billion deal for Cerevel Therapeutics last year. The results were disappointing, as the drug failed two Phase II trials, leading to a 12% drop in stock price.
Amgen was also hit abruptly when new data indicated its obesity drug candidate MariTide might affect bone mineral density, hinting at a potential increase in fracture risk. This finding, identified by a Cantor Fitzgerald analyst, caused Amgen’s shares to fall by 7%, erasing billion in market cap. On October 31, Amgen had promised to provide Phase II data for the drug before the year concludes, but the recent findings were not the expected news.
These instances demonstrate how quickly the earnings landscape can shift. Even more intriguing, these events diverged from the usual earnings narrative where discussions of the Inflation Reduction Act, currency challenges, and regulatory obstacles take center stage. Investors typically engage executives with inquiries about development timelines and competitor strategies. This quarter, however, multiple companies contended for attention, showcasing the unpredictable nature of biopharma.
Such a vivid illustration of the industry dynamics has made this quarter particularly engaging. And that’s why I find such excitement in earnings. In fact, I even planned my 2016 wedding around the earnings season. I can only wish that the next quarter brings equally intriguing developments.