Global Insight Perspective | |
Significance | U.S. generic drug-maker Barr Pharmaceuticals yesterday posted a strong set of financial results, which saw its full-year FY 2006 profits surge by 56.5% year-on-year (y/y) to US$336.5 million. |
Implications | This strong bottom-line performance was driven by double-digit percentage revenue growth from the company’s generic and proprietary businesses, as well as US$146 million of alliance, development and other revenues. |
Outlook | Looking ahead, many observers note that Barr is likely to suffer increased competition in the United States to its oral contraceptive franchise. An erosion of the company’s market share in this area, plus increased pricing pressure in the U.S. generics market in general, mean that the company will be under increasing pressure to add growth drivers to its product portfolio. |
Barr Pharmaceuticals, the largest U.S. manufacturer of birth control pills, yesterday reported a strong set of financial results both for the whole of FY2006 and for the fourth quarter of this period. For the full year, the New Jersey-based company reported net earnings growth of 56.5% year-on-year (y/y), to reach US$336.5 million. This compares with net earnings of just US$215.0 million in FY2005. This large boost to Barr’s profits was driven by double-digit percentage sale increases from across all its generic and proprietary businesses, as well as US$146 million of alliance, development and other revenues from its arrangements with Teva and Kos. Overall, the company’s revenues climbed by 25.5% y/y to US$1.3 billion.
In the fourth quarter, Barr’s net earnings almost doubled from the fourth quarter of FY2005, reaching US$82.3 million. According to a Bloomberg report, these rocketing profits were attributable to revenue gains from sales of generic copies of Sanofi-Aventis’s blockbuster allergy drug Allegra, and to sales of contraceptives acquired by the company in the last year.
Barr Pharmaceuticals: Financial Results Q4 and Full Year FY2006 | ||||
Q4 | Full Year | |||
US$ mil. | % Change, Year-on-Year | US$ mil. | % Change, Year-on-Year | |
Net Revenues | 351.7 | 25.4 | 1,314.5 | 25.5 |
Cost of Sales | 98.7 | 25.3 | 352.1 | 15.8 |
Selling, General and Administrative | 113.0 | -3.5 | 334.8 | 12.0 |
Research and Development | 36.4 | 9.6 | 140.2 | 9.2 |
Operating Income* | 103.5 | 101.1 | 487.4 | 54.2 |
Net Income | 82.3 | 95.3 | 336.5 | 56.5 |
Source: Barr Pharmaceuticals, except * Global Insight estimate calculated from Net Revenue minus Cost of Sales, Research and Development and Selling, General and Administrative expenditure | ||||
Double-Digit Sales Growth Across the Board
Barr’s Chairman and Chief Executive Officer heralded fiscal 2006 as an ”extremely successful” year for the company. In a press release, the company noted that it had observed strong sales gains across all of its business areas. It attributed increased sales from its generic products primarily to revenues generated by Desmopressin and Didanosine. Generics account for around 64% of Barr’s revenues. Revenue growth from the company’s proprietary products was driven by sales of the ParaGard Intrauterine device and Mircette (desogestrel/ethinyl estradiol and ethinyl estradiol) oral contraceptive products, which the company acquired during the second quarter of FY2006.
Generic Product Sales
Barr reported generic sales for FY2006 of US$839 million, a 12% y/y increase over the FY2005 period, where generics generated revenues of US$751 million. The company further split these revenues into two sub-categories; revenues attributable to its oral contraceptive products and those generated by other generics. Revenues from Barr’s generic oral contraceptive products remained relatively static compared to FY2005, as these products did little more than hold their ground. However, the company’s other generic products posted strong revenue gains, as their sales increased 24% y/y to US$439 million, compared to US$355 million in FY2005.
Proprietary Product Sales
Sales from the company’s proprietary products rose by 18% to US$330 million for FY2006, compared to US$279 million the previous year. Sales of the company’s flagship extended-cycle oral contraceptive Seasonale increased to US$100 million for FY2006, compared to US$87 million in FY2005. This sales increase came despite the fact that Seasonale posted a sales decline in the fourth quarter of the fiscal year.
Outlook and Implications
Fiscal year 2006 has been strong for Barr. However, observers have noted a number of risks that could halt the company’s progress in the medium-term. These risks are mainly due to an increasingly competitive environment in the U.S. oral contraceptive market. Despite the recent approval of Barr’s next-generation extended-cycle oral contraceptive pill, Seasonique (levonorgestrel/ethinyl estradiol tablets 0.15 mg/0.03 mg and ethinyl estradiol tablets 0.01 mg), it is widely anticipated that Barr will encounter stern competition in this category. The drug-maker claims to have invented this contraceptive category back in 2003, with the launch of Seasonique’s predecessor, Seasonale (levonorgestrel plus ethinyl oestradiol). This competition is likely to come in the form of Wyeth’s Lybrel (90mg levonorgestrel/20mg ethinyl estradiol tablets) which, if approved by the FDA, could offer women the chance to completely eliminate menstrual periods. Increased competition to key oral contraceptive products, and in the U.S. generics market as a whole, means that the company will come under sustained pressure to add more revenue drivers to offset this potential sales erosion. The company noted that it currently has several New Drug Applications pending with the FDA for proprietary products, as well as 40 ANDAs.
Looking further forward, Barr looks to be positioning itself in the potentially lucrative market for generic biotech products, by trying to acquire Croatian-based drug-maker Pliva. If this acquisition goes ahead, it would represent an important move for the company, and would considerably boost its capacity to take advantage of billions of dollars’ worth of biotech drugs destined to drop off patent over the next decade.
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- Croatia: 10 August 2006:Actavis Plays Coy Suitor As Pliva Deadline Approaches
- Croatia: 31 July 2006:Barr Submits Formal Tender for Pliva to Croatia's Financial Services Agency
- United States: 26 May 2006: FDA Approves Seasonique Birth Control Pill