Big Pharma had plenty of drama to keep journalists busy this quarter, which painted an accurate portrait of the wild and wonderful world of biopharma.
I’ve been covering earnings for 10 years. Every single quarter, all 38 of them, I’ve listened to the calls the companies hold with investors or worked with the reporters covering them. I’ve paged (digitally) through hundreds of reports, saying yay or nay to coverage of this and that. And I can’t remember an earnings quarter this turbulent for Big Pharma, all of them battling forces that don’t seem to be impacting their peers.
Let’s start with Eli Lilly, which we’ve written about at length. On the company’s Q3 call a couple of weeks ago, CEO David Ricks revealed wholesale stocking had impacted sales of weight loss blockbuster-to-be Zepbound and its related diabetes counterpart Mounjaro. The unexpected hurdle meant the drugs missed analyst expectations by 18%, which in turn sent the pharma’s shares tumbling 13%. It also meant that Lilly was at the mercy of wholesalers’ stocking decisions, which Ricks said “we really don’t control and don’t attempt to.”
Fierce competitor Novo Nordisk essentially shrugged at the wholesaler issue, saying its rival drugs Wegovy for weight loss and Ozempic for diabetes are flowing just fine. But the Danish company did take a hit on earnings, reporting that total revenue missed analyst expectations. Novo has narrowed its guidance for revenue and operating profit. Over the past month, the stock has fallen 10%, including the loss of about $5 from the share price on earnings day.
Bayer was another Big Pharma to announce a miss in the third quarter. CEO Bill Anderson admitted on the call that “the current numbers aren’t that pretty,” as the company deals with the fallout from blood thinner Xarelto losing patent exclusivity. And they really weren’t: Bayer reported that EPS declined 37%, EBITDA dropped 26% and free cash flow fell from €1.6 billion ($1.7 billion) for the same period a year ago to €1 billion ($1.06 billion) now. Bayer’s shares fell 12%.
AstraZeneca didn’t have as dramatic a fall on earnings day, mainly because the damage had already been done a week earlier when news broke that a high ranking executive in China had been arrested. That development sent AstraZeneca’s shares down 8%, wiping out $14 billion in market cap. The shares tipped upward ever so slightly on earnings day as the U.K. pharma reported total revenues of $13.6 billion, which beat analyst consensus by 4%.
AbbVie had a similarly rocky few weeks for reasons outside of its Q3 earnings. Indeed, the company reported pretty clean earnings on Halloween, as Skyrizi and Rinvoq continued to pick up the slack from Humira. Revenue rose 3.8% to $14.46 billion, landing 1% above consensus. But hanging over AbbVie was an upcoming readout for emraclidine, which was picked up in the nearly $9 billion acquisition of Cerevel Therapeutics last year. And unfortunately for AbbVie, that readout was a spectacular disappointment. The drug failed two Phase II trials, sending the company’s stock plummeting 12%.
Another sudden share loss outside of earnings hit Amgen this week, when a tiny scrap of data amid a larger previously published dataset suggested its highly anticipated obesity candidate MariTide may have impacts on bone mineral density. This could suggest a greater fracture risk than previously revealed. The disclosure, discovered by a Cantor Fitzgerald analyst, sent Amgen’s shares down 7% and wiped out $12 billion in market cap. On Oct. 31, Amgen had promised Phase II data for the asset before the year is up, but this wasn’t exactly what executives were hoping for.
These examples highlight that what investors are getting as executives rattle off numbers on the quarterly conference calls is merely a snapshot. Everything can change in a few days.
Even more fascinating about these events is that they all broke the earnings mold. Typically, we hear about the Inflation Reduction Act, currency challenges and regulatory hurdles. Investors pepper executives with questions about minute drug development timelines and try to provoke CEOs with questions about much-maligned competitors. Sometimes they even bite (see Lilly). Sometimes there’s one or two crazy disclosures or Earth-shattering trial results that make for exciting headlines, but this quarter there were myriad companies competing for above-the-fold space.
We don’t always get such a portrait of the wild and wonderful world of biopharma as we have this quarter.
And that, my friends, is why I love earnings. I mean, really love earnings. I even scheduled my 2016 wedding around the earnings period. (True story.) I can only hope that next quarter will be as much fun.
