Updated with additional information.
BOSTON ( TheStreet) -- Sell-side analysts have been jumping over each other to upgrade and raise price targets on almost all biotech stocks in a desperate attempt to stay ahead of the raging bull market that has pushed large-cap biotech stocks to record highs.
But now that Amgen (AMGN - Get Report) has turned in lousy first quarter earnings -- disappointing top-line sales but an earnings beat only due to one-time tax benefit -- the same analysts are rushing to make excuses for why first quarter earnings don't matter. They don't want generalist investors -- big buyers of biotech stocks this year -- to panic and sell at the first sign of trouble.
The Nasdaq Biotechnology Index (NBI) is up 28% this year, far outpacing the broader market indices. But while many biotech stocks are trading at all-time highs, analysts have been keeping their feet smashed against the accelerator pedal, arguing stocks are still cheap given accelerating earnings and growth rates.Wednesday, the biotech bull market developed a slow leak, with the NBI down almost 3% near the close of trading and all the large-cap biotech stocks in the red. At least for one day, investors weren't heeding the advice of analysts. RBC Capital Markets analyst Michael Yee: As more generalist investors come in to these stocks for the long-term story, we do remind investors that large-cap biotech can see short-term Q1 weakness due to 1) inventory drawdown due to inventory buy-in during Q4 ahead of typical Q1 price increases that don't get well reflected by IMS, 2) donut hole (an insurance gap paid by patient not gov't) impact in Q1 (e.g., CELG Revimid and AMGN Enbrel). In short-term that may present some risk as stocks have had strong runs but if they pull back it could be a buying opportunity because there is no impact on the long-term thesis we have on these stocks. Yee goes on to warn that Gilead Sciences (GILD - Get Report) and Celgene (CELG - Get Report) could both have "less robust" first quarter earnings when they report later this week. Despite Amgen's bad quarter, Yee actually raised his price target on the stock Wednesday because he blames the poor top-line performance on "seasonality" and not shrinking demand for the company's drugs. Credit Suisse analyst Ravi Mehrota is urging investors to give the biotech sector a "hall pass" for "minor financial wobbles" like Amgen's disappointing top-line performance. Mehrota: It's probably too early to don the "End of the (Biotech bull run) world is nigh" sandwich board, but concede that (1) given AMGN is 1 out of 4 large cap biotech stocks that is not a 2013 product ramp/PIII data story, it was the one company we did not want wobbles from (2) there is now more pressure on BIIB/CELG (4/25th) and GILD 5/2nd) to deliver at least some good news. And here's UBS analyst Matt Roden: We expect weakness in AMGN shares, and suspect it may impact sector sentiment considering F/X, Medicare donut hole, one less selling day y/y, and scheduled price increases could impact 1Q performance elsewhere. However, we caution against over-interpretation of these results since AMGN product sales have been historically subject to seasonal effects due to its contracting and ordering patterns. ISI Group analyst Mark Schoenebaum hopes Eli Lilly's (LLY) "generally good quarter" reported this morning will assuage investor concerns that biotech stocks have moved too far, too fast. Hopefully, this reasonably "clean" print