Specialty drug developer Alpharma (NYSE:ALO) announced its third-quarter financial results yesterday and gave guidance on what to expect for the rest of the year.
Third-quarter revenue from its marketed drugs was up 22% versus last year. However, sales at its largest division -- animal health products -- gained only 3% year over year. Because of increased input costs and research and development spending, operating margins were down across all three lines of business -- pharmaceuticals, active pharmaceutical ingredients (API), and animal health products. Earnings per share for full year 2007 are forecasted in the $0.90 to $1.00 range.
Alpharma's R&D spending was up 59% this quarter versus last year, but it may pay off in the near term, with phase 3 results for its abuse-deterrent morphine product expected in the fourth quarter and a marketing application with the FDA expected in the first half of 2008.
Alpharma has also been gearing up for the U.S. launch of its non-steroidal anti-inflammatory acute pain patch that it acquired in August for $100 million in upfront cash and warrants. It was quite an acquisitive quarter for Alpharma as it also in-licensed a topical pain gel in phase 3 testing with an FDA marketing application expected in 2009 and product launch in 2011.
In conjunction with its pain patch acquisition, abuse-deterrent morphine compound, and the topical gel pain drug that it in-licensed in September, Alpharma will have gone from one pain drug (KADIAN) to a franchise of at least four products by 2011 if all goes according to plan.
Acquiring or developing a barn full of drugs targeting similar indications is smart, as it saves on sales force costs and allows a drugmaker to achieve a greater marketing reach for complementary products. This is similar to what King Pharmaceuticals (NYSE:KG) and Endo Pharmaceuticals (NASDAQ:ENDP) have done with great success with their pain franchises.
Alpharma stated that the increase in its sales force that will come along with the launching of its pain patch early next year likely wouldn't boost KADIAN sales, but I believe it was being conservative with that statement. While its API and animal health divisions may have slowed down, look to see a renewed growth with Alpharma's pharmaceutical division next year.
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