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Drug and Device Manufacturers Post Mixed Quarterly Results

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Drug and Device Manufacturers Quarterly Results

Notable manufacturers of many dangerous drugs and medical devices have reported a variety of earnings results for their most recent quarters.

While Stryker Corp. reported a 34 percent drop in total net earnings following a recall of its Rejuvenate and ABG II hip implants that has cost the company $210 million in legal costs, other companies known for manufacturing and marketing products like transvaginal mesh, knee and hip implants, diabetes drugs and anticoagulants, reported increases in overall sales.

However, this growth often accompanies layoffs and increases in litigation expenses. Joint manufacturer Biomet reported a 6 percent net sales growth, but is still the target of nearly 500 pending federal lawsuits related to its M2a Magnum hip device. It also will lay off 260 Swiss employees by July 2014.

Hip and Knee Manufacturers

While manufacturers such as Smith & Nephew and Wright saw overall growth over the last quarter, sales of their hip and knee segments are down and legal costs are up.

On the other hand, Stryker, which has set aside millions of dollars to handle litigation related to hip implant recalls, reported a substantial loss in its second quarter. In its 10-Q form filed with the U.S. Securities and Exchange Commission (SEC), the company stated that, as far as future related costs go, the “final outcome of this matter is dependent on many variables that are difficult to predict.”

Biomet, Inc.

Biomet announced a preliminary fourth-quarter net sales growth of 6 percent over 2012. Despite this growth, the company announced in July that it plans to lay off 230 workers within a year as a result of closing a manufacturing facility in Switzerland. Biomet cited the reasons for the closure and resulting layoffs as “declining global prices for medical devices and a challenging economic environment.”

Biomet also had 493 pending federal lawsuits related to the M2a Magnum hip implant filed against it as of July 10.

Smith & Nephew PLC

Coming off the heels of a $22 million settlement for a foreign bribery case in 2012 with the SEC and the U.S. Department of Justice, Smith & Nephew saw a 3 percent underlying revenue increase during the second quarter.

However, Smith & Nephew’s revenue from their knee and hip implant franchises — including products such as the OXINIUM knee implant and R3 Acetabular System hip implant — decreased 1 percent, while the estimated market rates for those devices grew by 2 and 3 percent, respectively.

Stryker Corp.

Stryker, which recently acquired a year-long contract from the Department of Defense worth up to $85 million toward hip and knee products, reported net earnings down 34 percent compared with the second quarter of 2012. This dip stems from $210 million in charges incurred during the first and second quarter related to the recall of Stryker’s Rejuvenate and ABG II hip implants.

According to Stryker’s SEC filing on the recall, “The ultimate cost to entirely resolve this matter may be materially different than the amount of the current estimate and accruals and could have a material adverse effect on our financial position, results of operations and cash flows.” The company expects the total cost related to the recalls, before third-party insurance recoveries, to be between $400 million and $660 million.

Wright Medical Technology Inc.

Wright reported net sales of $60.6 million for the second quarter — a jump of almost 17 percent from the previous year. Despite its overall sales growth, these numbers accompany an 18.4 percent drop in hip sales and an 11.9 percent drop in knee sales compared with 2012.

In June, the company announced plans to sell its OrthoRecon unit, which includes its knee and hip implant business, for $290 million to MicroPort Medical B.V. Wright expects the sale will be finalized before the end of 2013.

Alongside news of the pending sale, lawsuits have been filed over Wright hip products, such as the CONSERVE, CONSERVE Plus and PROFEMUR Z implants, that have been implanted in thousands of patients.

Zimmer Holdings Inc.

Zimmer reported a 29 percent decrease in net earnings in the second quarter — dropping sales from $214 million to $151.7 million. The company recognized a total of $450.2 million in liability costs related to its Durom Cup hip implant, including $47 million in the second quarter.

A federal judge in August ordered Zimmer to pay Stryker $210 million for patent infringement over its products, including items from Zimmer’s Pulsavac Plus line.

Vaginal Mesh Manufacturers

Manufacturers of transvaginal mesh implants primarily reported decreases in revenue when compared with the same quarter in 2012, as well as a substantial amount of legal costs. There are tens of thousands of product liability lawsuits filed against the companies.

Boston Scientific

Boston Scientific reported $1.8 billion in quarterly sales — a decrease of about 1 percent from 2012. In its SEC filing, the company also stated the “increase in our legal accrual was primarily due to $130 million in litigation-related charges recorded during the first half of 2013.”

The company faced 4,622 federal mesh lawsuits as of July 10. The first federal mesh trial against Boston Scientific is scheduled for February 2014.

C.R. Bard

C.R. Bard reported a 2 percent increase in sales for the second quarter, but a net loss of $161.6 million. The company cited “product liability matters” as the primary reason for the loss.

The financial report preceded a recent verdict to pay $2 million to a plaintiff claiming permanent injury from one of its mesh products, as well as a second related case that Bard settled for an unspecified amount. As of July 10, there were 3,399 federal lawsuits filed against C.R. Bard.

Endo Health Solutions

For its second quarter, Endo reported $767 million in total revenue, a 2 percent drop from its 2012 numbers. As of July 10, Endo’s American Medical Systems unit, which manufactures transvaginal mesh products, had 7,227 federal lawsuits filed against it. The first federal trial against AMS is slated to begin in December.

Other Manufacturers

Other manufacturers, including makers of diabetes drugs and contraceptives, reported across-the-board numbers based on a variety of factors.

All of the following groups are currently involved in legal matters — some involving upcoming federal trials.

Bayer Group

Bayer reported second-quarter net income of 1.1 billion — an increase of almost 75 percent over the second quarter of 2012. However, its pharmaceuticals division, which includes contraceptives Yaz and Mirena, only reported a 5.5 percent increase in sales — from 3.6 billion to 3.8 billion.

As of July, Bayer had agreed to settle claims related to Yaz for around $1.4 billion.

Boehringer Ingelheim

In its second quarter, Boehringer Ingelheim’s sales increased 3.1 percent from 2012, with its type 2 diabetes drug Pradaxa responsible for much of the growth. Despite this hike in sales dollars, the company announced in August that it plans to close a Virginia plant in 2013, putting 240 people out of work.

GlaxoSmithKline

The London-based manufacturer GlaxoSmithKline reported $10.2 billion in total revenue in the second quarter. Its asthma medication, Advair, accounted for $2.1 billion of those earnings. About half of those sales were generated in the United States.

Adovart was the company’s second-biggest revenue generator in the second quarter, earning it $340 million. The medication is used to treat urinary problems related to an enlarged prostate.

The company has also settled for $229 million with the attorneys general of eight states to resolve lawsuits relating to the marketing and manufacturing of Avandia. The settlement also applies to a separate action from the Louisiana Attorney General’s Office that relates to other GSK products.

Johnson & Johnson

Johnson & Johnson posted a total net earnings of $3.8 billion for its second quarter — a 172.2 percent increase over the second quarter of 2012. The company also spent $69 million on litigation costs related to its ASR hip implant.

There are 7,117 federal cases pending against Johnson & Johnson related to its vaginal mesh products, manufactured by its subsidiary Ethicon. The first federal mesh trial against Ethicon is set for January 2014.

Merck & Co.

For the second quarter, Januvia and NuvaRing manufacturer Merck reported a loss of 49 percent in net income —$906 million from $1.8 billion in 2012. The decrease comes after the company lost its patent in 2012 for asthma drug Singulair in the United States. It also lost its European patent in February.

In July, Merck agreed to pay $23 million to settle claims in the United States related to marketing Vioxx for unapproved uses and misrepresenting its cardiovascular safety. Merck has also been named as a defendant in legal matters concerning Vioxx in Canada, Brazil, Israel and Europe. For all related claims in Canada, Merck has agreed to pay a minimum of $21 million, but not more than $36 million.

Novo Nordisk

Novo Nordisk, Danish makers of type 2 diabetes drug Victoza, reported a net profit of $2.3 billion for the first six months of 2013 — a 30.7 percent increase from 2012. Litigation is expected against the company related to side effects of Victoza, a drug similar to Byetta, which has been the target of lawsuits.

Pfizer

The largest pharmaceutical company in the world, Pfizer, hit total quarterly revenue of $13 billion, dropping 7 percent from 2012.

The company’s cholesterol medication Lipitor took the greatest hit, due to Pfizer’s loss of exclusivity over the drug in November 2011, with quarterly revenue down more than 55 percent. Currently, Pfizer is the target of multiple lawsuits related to Lipitor, alleging the company failed to warn about increasing blood glucose levels and the risk of developing type 2 diabetes.

In March 2013, Pfizer announced it would spend $288 million to settle 2,700 claims relating to Chantix, a drug to help people quit smoking.

Takeda Pharmaceuticals

Japanese manufacturer Takeda saw a quarterly drop in net income of 66.8 percent — from $888.2 million to $294.9 million. Its popular type 2 diabetes drug Actos alone experienced a 20.3 percent decrease in sales.

There are more than 2,500 federal Actos lawsuits pending against Takeda. The first related federal trial is scheduled for January 2014.

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