Several Big Pharma companies have revised revenue/earnings estimates for latter quarters in 2010 and the year 2011 as reported in the WSJ Health blog due to new requirements that the industry pay bigger rebates to Medicare.
Companies weighing in with reduced earnings estimates are:
Abbott indicated that it will cut its earnings estimate for 2010 by about $0.07 per share to $4.13 to $4.18. Revenues are estimated to be down by $230 M in 2010 and $200 in 2011.
Johnson & Johnson expects 2010 earnings to be reduced by a nickel per share and revenues to drop between $400 - $500 M.
Lilly cut its 2010 earnings estimate by $0.30 to $0.35 per share. It expects revenue to fall by $350 M to $400 M in 2010 and by $600 M to $700 M in 2011.
According to analysts, not all companies will be affected alike. It depends heavily on product mix. BMS purportedly has the highest potential Medicaid bill with 10-15% of its revenues covered under the program. AstraZeneca looks a lot like Lilly.
Another unknown, rebate rates vary for managed Medicaid plans and fee-for-service plans. So a Company's mix here too makes a difference. The price details of the two forms have not been spelled out yet under the reform bill.
Again, we're seeing significant changes in the enviroment that will only further spur the industry to changes its business and development models. One can expect the industry to continue to shake-out and consolidate as pharma and biopharma coalesces.
Posted by Bruce Lehr April 22nd 2010