By Ben Hirschler
LONDON (Reuters) - Three of the world's top drugmakers posted healthy quarterly results on Tuesday, underlining the defensive nature of the sector at a time of financial turmoil.
Pfizer Inc
Swiss-based Roche Holding AG
The pharmaceutical sector has seen an increasing inflow of funds in recent weeks, reflecting the industry's relatively secure earnings and dividends at a time when other companies are bracing for a profit slump as recession looms.
"If you look at the earnings of both U.S. and European drug companies they seem pretty rock solid," said Ben Yeoh, a pharmaceuticals analyst at Dresdner Kleinwort.
"Certainly compared to other consumer-related sectors, these stocks are looking pretty good."
U.S. specialty drugmaker Forest Laboratories Inc
In the long term, drugmakers face deep-rooted problems linked to increasingly aggressive generic competition, a dearth of new products and pressure on prices.
But those structural issues are taking a backseat for now as investors warm to the industry's ability to keep sales of medicines ticking over during the slowdown.
The sector also has the ability to cut costs -- one reason for Pfizer's success in delivering earnings of $2.28 billion on barely changed revenue of $11.97 billion.
Excluding special items, Pfizer earnings per share rose 7 percent to 62. Analysts on average had expected 60 cents a share, according to Reuters Estimates. The shares rose three percent in pre-market trading.
CHOLESTEROL WOES
Schering-Plough's third-quarter earnings fell sharply, hurt by special charges and falling demand for its two cholesterol fighting drugs, but the results still beat expectations.
According to industry analysts, U.S. weekly prescriptions for Vytorin and Zetia have fallen 41 percent and 34 percent, respectively, since late last year -- prior to release of studies questioning the effectiveness of the two drugs.
The U.S. drugmaker earned $551 million, or 34 cents per share, compared with $713 million, or 45 cents per share, in the year-earlier period.
Excluding special items, Schering-Plough earned 39 cents per share against analyst expectations of 31 cents.
Seamus Fernandez, an analyst at Leerink Swann, said both Pfizer and Schering-Plough had delivered "solid quarters" and shown the scope for continued earnings-enhancing cost control.
"With the outperformance on the individual earnings lines, I think that shows they probably have a little bit more flexibility via their costs," he said.
"In a challenging economic environment and as other global companies are facing challenges on the top line, these companies are very strong overall defensive plays whether you look at the global companies or the U.S. companies."
Roche's quarterly sales rose 1.6 percent to 11.3 billion Swiss francs ($9.80 billion) for a nine-month total of 33.3 billion, just shy of the 33.4 billion expected. Its shares fell five percent.
Pfizer and Roche both reaffirmed their financial outlook for the full year. Schering-Plough does not give guidance.
BUYING GENENTECH
Roche also confirmed its commitment to a $43.7 billion bid for the rest of U.S. biotech group Genentech Inc
"At this point we would not give any details or further information on how we arrange the financing and where exactly we stand in the negotiating process," Roche Chief Executive Severin Schwan told reporters.
Buying Genentech would give Roche control of all revenues for big-selling cancer drugs such as Avastin and Herceptin, as well as absorbing an attractive portfolio of new medicines.
It highlights the determination of Big Pharma companies to snap up promising biotech assets to refill their product pipelines. Earlier this month, Eli Lilly and Co
(Additional reporting by Sam Cage in Zurich, and Ransdell Pierson and Lewis Krauskopf in New York; editing by Elaine Hardcastle)
