Drug Makers Report Strong Fourth Quarter

Major drug makers reported strong fourth-quarter profits that met or exceeded analysts’ expectations, as consumers followed advice given in a barrage of new ads and asked their doctors for more prescriptions.

In other blue-chip earnings reports, Coca-Cola Co. said its profit fell in line with lowered expectations, while McDonald’s Corp. posted an 8.8% increase in earnings, in line with expectations.

Schering-Plough Corp. led the profit growth among the drug makers, with a 22% surge to $419 million, or 28 cents a share, matching forecasts, on a 16% rise in sales to $2.06 billion.

Merck & Co., the world’s largest drug company, said its profit grew 13% to $1.4 billion, or $1.15 a share, a penny higher than estimates, as sales jumped 21% jump to $7.53 billion.

Johnson & Johnson said its earnings grew 10% to $693 million, or 50 cents a share, in line with estimates, as the company sold more of the schizophrenia medicine Risperdal, which is less likely to cause side effects than are older, less expensive generic drugs for schizophrenia. Risperdal provides an example of how drug makers are adding to profits by bringing out improved medicines.

Sales at Johnson & Johnson gained 13% to $6.37 billion as strong demand for its drugs made up for lagging sales of coronary stents to hospitals and anemic growth in its consumer products division.

American Home Products Inc., maker of Robitussin cough syrup and Advil pain reliever, lagged the other major drug makers. Its profit before one-time items rose 3% to $590.12 million, or 44 cents a share, a penny lower than estimates. Worldwide drug sales dropped by 6% due to the discontinuation of several products as well as competition from generics.

Doctors say patients are requesting more brand-name drugs since the U.S. Food and Drug Administration loosened its rules in 1997 on what drug makers could say about prescription medicines in television ads. Health insurers have helped feed demand with prescription plans that let patients pay as little as $5 or $10 for drugs that cost much more.

“It is easy for the consumers to say ‘I want Claritin’ when the managed-care company is paying for 90%,” said Todd Richter, an analyst at Morgan Stanley Dean Witter, who covers health insurers such as Aetna Inc.

Still, the pace of growth in U.S. drug sales could slow over the next few years as health insurers try to pass more drug costs on to customers, analysts said.

At a Glance

* Coca-Cola, the world’s largest soft-drink maker, said its profit dropped 27% in the latest quarter to $597 million, or 24 cents a share, as recessions and currency devaluations clipped results in Latin America, Asia and Eastern Europe. The results--the biggest percentage decline in earnings this decade--matched recently lowered expectations.

Revenue fell 5.2% to $4.46 billion. The Atlanta-based company’s case sales fell 1%, contrasted with a 10% gain a year ago. Sales rose 5% in the United States, where the company derives 30% of sales and 25% of profit. In Latin America, a key market, sales declined 4%.

The company warned on Dec. 11 it would earn 24 cents to 25 cents a share, less than estimates at the time of 30 cents.

In the past, Coca-Cola was able to overcome a slumping economy in one part of the world with strong markets elsewhere, allowing it to report steadily growing earnings for most of this decade.

But with so many regions having economic problems, Coke was unable to meet its target of 7% to 8% sales growth in 1998. Sales increased 6% to almost 16 billion cases.

* McDonald’s, the fast-food giant, reported net income of $447.1 million, or 64 cents a share. The results matched the average estimate of analysts polled by First Call Corp., which ranged from 62 cents to 66 cents.

Increased sales in the U.S. and Europe, which account for three-fourths of McDonald’s business, overcame reduced demand for its hamburgers and fries in Asia, Brazil and elsewhere.

Revenue rose 9.1% to $3.22 billion, with U.S. sales up 4.9%. Combined sales at its 24,800 restaurants worldwide rose to $9.32 billion from $8.53 billion. The company also announced plans to split its stock 2 for 1.

McDonald’s European sales surged 17% to $2.43 billion.

Please see EARNINGS, C4