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Biotech Stock Mailbag: NeoStem, Gilead and the Importance of Big-Cap Biotech Earnings


Okay, off my soap box. When Gilead reports first-quarter earnings next Tuesday, all eyes will be on the reported Sovaldi sales. Forget about the official sell-side consensus estimate of $950 million, it's way too low based on prescription data. The more realistic consensus expectation for Sovaldi sales in the March ranges from $1.5 billion to $2 billion (encompassing patient demand and wholesaler inventory.)

Think of about that range for a moment: Sovaldi sales will exceed $1 billion in the first three months since commercial launch. There has never been a faster drug launch in history, as far as I can tell. [Yes, I know, investors are more worried about the Sovaldi tail.]

The Gilead consensus earnings estimate stands at 85 cents per share, but of course, that's too low as well given Sovaldi sales.

On the conference call, Gilead executives will be asked about Sovaldi pricing. I hope to hear a stirring defense although the company is somewhat limited in what it can say because the hepatitis C drugs deemed most competitive to Sovaldi et al (Abbive, Merck, Bristol-Myers Squibb) are not yet approved and therefore have no listed sales price. We don't know if these companies intend to price their drugs at a significant discount to Sovaldi in order to win market share.

Must Read: Conatus Pharma Deserves a Look by Investors in Love With Liver Disease Stocks

We all know competition in hepatitis C is coming and it's likely to be intense, so maybe Gilead will use next week's call to talk about how it views hepatitis C long term and how the company intends to spend the mountain of cash it will generate in the next few years.

I stand with the FDA advisory committee of December 2012, which voted against Zohydro's approval, largely due to concerns about the abuse potential of the drug. [Zohydro is not formulated with any abuse-deterrence measures.]

The FDA should not have approved Zohydro. Instead, the agency should have told Zogenix (ZGNX - Get Report) to resubmit for approval if or when the development of an abuse-resistant version of Zohydro was completed.

I understand Zogenix's point about the need for a single-entity hydrocodone product, which eliminates extended acetaminophen exposure and reduces risk of liver injury. But given the epidemic of narcotic abuse in this country, there is no excuse for introducing a product without proper safeguards.

Follow Adam Feuerstein on Twitter.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.
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