The earnings outlook for the drug industry looks relatively bright, judging by first-quarter reports from a few major U.S. pharmaceutical producers. These early results show that the industry is on track to come out ahead of chemicals and other business sectors that are bearing the weight of the economic slowdown.

Sales and earnings were up for four of five drug firms reporting so far: Abbott Laboratories, Eli Lilly, Johnson & Johnson, and Pfizer. The exception was Schering-Plough, which reported a 3% decrease in sales and 10% drop in earnings compared with the first quarter of 2000. Manufacturing problems limited supply of some products and thus sales.

Pfizer, the industry leader since its acquisition of Warner-Lambert last year, reported sales up 7% and net earnings up 34%, excluding merger-related charges. Including these one-time costs, net earnings were slightly less but well ahead of a $204 million loss in 2000.

Eli Lilly had strong double-digit increases--sales up 14% and net earnings up 17%--excluding the impact of Y2K-related sales. Taking these additional sales into account, sales in the first quarter of 2001 rose just 10%, while earnings fell nearly 5%.

Abbott's sales and earnings both increased 6% before one-time charges. It completed the purchase of BASF's drug business in March. Including a $1.02 billion charge for acquiring in-process R&D, net earnings were down 86% to $96 million.

J&J, with 41% of its sales outside the U.S., complained, as did the others, of the negative effect of the relatively strong dollar. Unfavorable exchange rates cut 3% off the firm's sales growth, reducing it to 7%. Still, drugmakers can't cry too much. Their industry is largely recession-proof: Consumers need its products in good times and bad.

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