) --Biotech investors looking for outsized returns in 2010 failed to find them in "Big Five" large-cap biotech stocks. Only
yielded double-digit returns over the past 12 months, the former boosted by
takeover efforts and the latter helped by an earnings boost stemming more from cost-cutting and drug price hikes than top-line sales growth.
managed to eke out just a 5% return in 2010 while
shares were flat and
stock fell 14%.
By comparison, the biotech sector as a whole rose 17% over the past 12 months, as measured by the iShares Nasdaq Biotechnology ETF.
Here's a look at what's in store for the large-cap biotech stocks in 2011, including the most important catalysts and biggest risks:
12-month stock performance: 30%
Consensus 2011 revenue/earnings estimate: $5.65 a share on revenue of $4.69 billion.
Consensus 2011 estimated earnings growth: 13.5%
What are the most important catalyst(s) or event(s) for Biogen in 2011?
Jason Zhang, BMO Capital Markets: "BG-12 oral multiple sclerosis data read out from the DEFINE phase III study in first half 2011 and the CONFIRM phase III study in second half 2011."
What does Biogen have to do in order for the stock to trade higher in 2011?
Zhang: "Biogen has to show continuous growth of Avonex and Tysabri for the stock to trade higher."
What is the biggest risk to Biogen and its stock price in 2011?
Zhang: "The biggest risk is an FDA or European label revision of Tysabri to reflect the higher risk of progressive multifocal leukoencephalopathy (PML)."
12-month stock performance: 45%
Consensus 2011 revenue/earnings estimate: $4.07 a share on revenue of $5.09 billion
Consensus 2011 estimated earnings growth: 116%
What are the most important catalyst(s) or event(s) for Genzyme in 2011?
Mark Schoenebaum, ISI Group: "Campath phase III data in multiple sclerosis, by far."
Michael Yee, RBC Capital Markets: "Increased supply of Fabrazyme in first half 2011 and ramp of Fabrazyme/Cerezyme in first half 2011; strong phase III Campath data in mid-2011; and completion of the Framingham, Mass., factory at the end of 2011."
Bill Tanner, Lazard Capital Markets: "Phase III data for Campath in multiple sclerosis are important but I doubt there will be surprises on the efficacy front. Obviously, selling the company would be important. How well Genzyme recovers in the Gaucher/Fabrazyme markets is a rounding error. Valued in the $50s, I suspect people would want to see how well Lumizyme rolls out. With the stock up here, the transaction with Sanofi-Aventis is the main thing."
What does Genzyme have to do in order for the stock to trade higher in 2011?
Schoenebaum: "The Campath data must be perfect."
Yee: "Post better than expected Fabrazyme/Cerezyme sales to prove market share loss wasn't permanent; better than expected Campath data (robust EDSS improvement); strong Lumizyme/Myozyme sales."
Tanner: "Sell the company. Period. Fundamentally, I don't think there's any way for them to get the stock higher without a sale unless there's some kind of auction, perhaps."
What is the biggest risk to Genzyme and its stock price in 2011?
Schoenebaum: "The Sanofi-Aventis deal falls through."
Yee: "A virus or other manufacturing issue causing shut down of factory, or problems at the new Framingham facility."
Tanner: "Not selling the company. Period. Stock is way overvalued on a fundamental basis. Discounted cash flow suggests high $50s. All the comments about the bid multiple versus 2011 EPS is just math. Sanofi isn't thinking about what the price-to-earnings multiple should be; it's looking at something like enterprise value/EBITDA."
12-month stock performance: -14%
Consensus 2011 revenue/earnings estimate: $4.04 a share on revenue of $8.41 billion.
Consensus 2011 estimated earnings growth: 10%
What are the most important catalyst(s) or event(s) for Gilead in 2011?
Rachel McMinn, Bank of America Securities: "Quad data, rilpivirine (TMC278) combo launch, and hepatitis C pipeline progress."
Katherine Xu, Wedbush: "Btripla launch and subsequent uptake, quarterly earnings, hepatitis C combo early data and strategy, acquisitions."
What does Gilead have to do in order for the stock to trade higher in 2011?
McMinn: "Meet earnings estimates and advance its hepatitis C pipeline in a convincing way."
Xu: "Deliver good quarters, augment pipeline meaningfully to help with patent cliff (Hep C pipeline too early and lead candidates not competitive; acquisition of
or the like may make sense.)"
What is the biggest risk to Gilead and its stock price in 2011?
McMinn: "HIV drug pricing pressures, hepatitis C pipeline failure."
Xu: "Further bad news from macro environment, missing quarters, lackluster Btripla uptake, good data from other HIV agents (ViiV's integrase inhibitor and potential nuke-sparing regimen) that could threaten Gilead's HIV franchise before patent cliff."
12-month stock performance: flat
Consensus 2011 revenue/earnings estimate: $5.32 a share on revenue of $15.23 billion.
Consensus 2011 estimated earnings growth: 4%
What are the most important catalyst(s) or event(s) for Amgen in 2011?
Geoff Meacham, JPMorgan: "Approval of Xgeva in cancer bone metastases prevention, which we assume has an 80% probability of success."
What does Amgen have to do in order for the stock to trade higher in 2011?
Meacham, JPMorgan: "Good guidance, beat pretty low Prolia/Exgeva expectations."
What is the biggest risk to Amgen and its stock price in 2011?
Meacham: "Doing a big, stupid deal."
12-month stock performance: 5%
Consensus 2011 revenue/earnings estimate: $3.37 a share on revenue of $4.42 billion.
Consensus 2011 estimated earnings growth: 20%
What are the most important catalyst(s) or event(s) for Celgene in 2011?
Eric Schmidt, Cowen: "European approval (or a recommendation for approval) of Revlimid in continuous therapy maintenance for multiple myeloma. This will serve as a surrogate for eventual FDA approval. Europe is the geography with the most growth potential."
Maged Shenouda, Stifel Nicolaus: "Data on progression-free survival and overall survival from the phase III study of Abraxane; 2011 guidance in January; and a status update on pomalidomide."
What does Celgene have to do in order for the stock to trade higher in 2011?
Schmidt: "More beats and raises could trigger modest stock performance (similar to 2010), but I can't see the stock working in a big way. Substantial upside would require a new multi billion-dollar opportunity, something that is unlikely to materialize during 2011."
Shenouda: "Show continued robust revenue growth for Revlimid in the U.S. and Europe."
What is the biggest risk to Celgene and its stock price in 2011?
Schmidt: "Stock will get hammered if Revlimid sales slow down or if Celgene makes a bad acquisition."
Shenouda: "Significant growth deceleration of Revlimid in either the U.S. or Europe; or any disruption in the filing/approval of Revlimid for the treatment (with maintenance) of front-line multiple myeloma."
--Written by Adam Feuerstein in Boston.
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