The Wall Street Journal-20080215-Publicis Posts 2- Rise in Net- Misses Growth Target
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Publicis Posts 2% Rise in Net, Misses Growth Target
Full Text (494 words)Hurt by a ripple effect, advertising company Publicis Groupe SA fell short of its 2007 growth targets because several pharmaceutical clients didn't get new drugs cleared in the U.S.
One of the big blows was obesity drug Acomplia, which Sanofi-Aventis SA withdrew from the Food and Drug Administration's approval process in June after a medical panel advised against clearing the drug. Sanofi had hired Publicis to market the drug to doctors, and expected it to generate annual sales of $1 billion, Publicis Chief Executive Maurice Levy said in an interview.
The drug industry has become a critical source of business for some ad agencies. Publicis also has a division, Publicis Selling Solutions, that provides sales representatives to call on doctors. This lets pharmaceutical companies market new drugs without hiring additional staff. But drug companies have been cutting back their sales outreach to doctors.
A Sanofi spokesman said Publicis was already helping market Acomplia in some 50 countries outside the U.S., where Sanofi planned to resubmit the drug for approval.
The FDA hasn't approved several high-profile drugs in the past year, either rejecting them or sending the companies back to do additional testing. The agency has also asked several companies to remove drugs from the market or add warnings to labels because of safety concerns, damping sales.
Publicis Selling Solutions, based in Lawrenceville, N.J., has had to cut its sales staff by about 20% to 600 over the past two years, said Nick Colucci, who oversees the division as CEO of Publicis Healthcare Communications Group. One strategy for reviving revenue is to hire nurses to market drugs directly to patients. "Obviously it's been painful," Mr. Colucci said. "We're looking for niche approaches to allow us to hang in till the market picks up."
Mr. Levy said he expected the problems at Publicis Selling Solutions to affect Publicis's profit well into this year. Paris-based Publicis is better known for its big ad agencies, including Saatchi & Saatchi and Leo Burnett Worldwide, than for health marketing.
Net income edged up 2% to 452 million euros ($658.5 million) last year from 443 million euros a year earlier. Revenue rose 6.5% to 4.67 billion euros from 4.39 billion euros. Fourth-quarter revenue rose 4% to 1.3 billion euros from 1.25 billion euros a year earlier. Like many French companies, Publicis doesn't break out quarterly net-profit figures.
A closely watched metric -- revenue after stripping out the effects of currency changes, disposals and acquisitions -- rose 3.1% last year. Publicis had forecast a rise of 4%.
Mr. Levy apologized for missing the company's growth target but said investors should welcome improvements in profit margins and cash flow. "We did not expect the crisis in the pharma industry to have its impact and consequence," he said in a call with analysts and reporters. "I'll publicly express my apologies because I gave some guidance in 2007 and was betrayed by the facts."
Publicis shares fell to 23.10 euros, down 1.15 euros, or 4.7%.
