Here we go. It's only a matter of days before Genentech (DNA) kicks off the biotech sector's second-quarter earnings season.
The quarter proved an interesting one --
fended off advances from activist investor Carl Icahn;
closed its deal with
; some of
beleaguered anemia drugs plateaued, and
won a stream of Wall Street upgrades. And now we'll get to see the numbers.
Incidentally, Genentech is the most likely to beat, according to some on Wall Street. But its peers aren't exactly blending into the background. Prescription data suggest Amgen,
and Celgene could deliver better-than-expected product sales.
"Overall, we think that 2Q earnings season could be quite good for large-cap biotech, and we continued to favor large over 'smid' caps going into this fall," wrote JP Morgan's Geoffrey Meacham in a note to investors on Wednesday. The JP Morgan team sees the strongest risk/reward in
and Biogen Idec going into earnings, but they note that Genentech and Celgene should have (expectedly) strong quarters as well.
For a review of what happened in the first quarter, check out the
Below is a table laying out the consensus estimate numbers for earnings per share (which typically factor out one-time items) and revenue for the seven big biotech companies. Please note that consensus targets that analysts use for sales of individual drugs can come from various sources, such as Zacks, FactSet, First Order Analytics, Thomson and the companies covered. (Disparities do exist, so please
email directly if you'd like more information on a particular target.)
Genentech (DNA) -- July 14 (Call: 4:45 p.m. ET)
It might be biotech staple Genentech's turn to provide the biggest and baddest (in a good way) of quarterly results. Genentech, dubbed by Bernstein Research's Geoffrey Porges as best to beat, is also Lazard analyst Joel Sendek's top pick going into earnings based on better-than-expected IMS prescription data, which have heightened expectations for the quarter.
Analysts are marking their expectations for the possible pick-up of sales of cancer drug Avastin, which won U.S. regulatory approval in the breast cancer indication (despite a negative recommendation from a Food and Drug Administration advisory panel) earlier in the year. This, in addition to data presented at the American Society of Clinical Oncology annual meeting in May, could influence Avastin sales.
IMS monthly sales trends suggest the drug's U.S. sales will come in above consensus targets. Credit Suisse analyst Michael Aberman said in a note to investors that the data suggest Avastin sales between $660 million and $680 million.
Deutsche Bank's Mark Schoenebaum said on a Thursday call that he's more comfortable expecting something in the $650 million range.
Prescription data also suggest that sales of Rituxan and Herceptin will surpass targets. Some of this may be due to price increases.
"We are not surprised by the quick up-tick in Avastin sales given approval in breast cancer late in the first quarter," wrote the Credit Suisse biotech team. "However, the strength in Rituxan and Herceptin is unexpected."
Bernstein Research pointed to sales beats all around for Genentech with the one exception of Xolair. The team said Xolair is the only Genentech product it expects to come in below consensus, $116 million vs. expectations for $123 million.
Deutsche Bank cited updated U.S. sales consensus on Thursday of $645 million for Avastin, $634 million for Rituxan, $346 million for Herceptin and $204 million for Lucentis.
Overall, analysts are looking for 86 cents a share on revenue of $3.23 billion, according to Thomson Reuters.
In the first quarter, Genentech delivered a per-share earnings beat of 2 cents but missed on expected sales of lead product Avastin. The company stuck by its 2008 guidance of between $3.35 and $3.45 a share.
"We continue to believe the long-term story for DNA (and the focus for most investors) will continue to be the results of the adjuvant colorectal cancer trial in 2009," wrote Aberman, who has a neutral rating and $80 price target for the stock.
Gilead Sciences (GILD) -- July 17 (Call: 4:30 p.m. ET)
delivered a beat in the first quarter, but investors have worried that inventory stocking in the first quarter might mean a miss in the second quarter.
"This is due to comments from management that there was an unspecified inventory stocking by the AIDS Drug Assistance Programs (ADAP) in Texas and Florida," wrote Citi analyst Yaron Werber who noted that the stocking occurred in non-retail channels, which are not captured by IMS prescription data. Werber has a buy rating and a $60 price target for the stock.
Jeffries and Co.'s Eun Yang, who has a buy rating and a $56 price target, estimates that the stocking buildup was roughly $24 million, noting that it might partially offset some quarter-over-quarter HIV drug sales growth.
Bernstein Research's Porges, however, expects Gilead's U.S. product revenue to come in just slightly above consensus targets based on the prescription data.
The Street's consensus is for $997 million from overall HIV drug sales in the U.S., including $362 million from Atripla, $479 million from Truvada and $149 million from Viread.
Meanwhile, the consensus is $83 million for hepatitis B drug Hepsera and roughly $30 million for hypertension drug Letairis.
Overall, analysts surveyed by Thomson Reuters are looking for earnings of 48 cents a share on revenue of $1.25 billion for the quarter and $1.99 EPS on revenue of $5.17 billion for the year.
Biogen Idec (BIIB) -- July 22 (Call: 8:30 a.m. ET)
In the first quarter, Biogen Idec and Celgene provided the biggest revenue surprises, while most of the other big names came in near consensus.
There's been no shortage of excitement for Biogen this quarter -- the company thwarted attempts by Carl Icahn to jimmy three of its board seats in an effort to re-hang the biotech's for-sale sign.
Aside from the drama, the company has also been selling drugs. Wall Street, on average, is looking for U.S. sales of roughly $302 million to $303 million from Avonex and $623 million from Rituxan, and worldwide sales of $182 million from Tysabri. The consensus for Biogen's share of the Rituxan and Tysabri revenue is $257 million and $133 million, respectively.
Credit Suisse's Aberman, who has a neutral rating and $62 price target on the stock, wrote that Rituxan sales look very strong by IMS data, but despite a modest price increase he speculates about whether there's irregularity in the data because such strong sales were unexpected. "If this acceleration in Rituxan sales is real, we look forward to hearing the reasons for the increase on the quarterly call to gauge whether it signals a meaningful change in the way physicians are thinking of the drug in the RA
rheumatoid arthritis market," he wrote.
JP Morgan's Geoffrey Meacham, who has an overweight rating on the stock, wrote in a Wednesday note to investors that he expects the company to post a solid quarter with anticipated upside from Tysabri sales, due to his belief that consensus Tysabri sales can be met without adding a single patient in the second quarter.
Overall, analysts surveyed by Thomson Financial are looking for earnings of 85 cents a share on revenue of $961.72 million for the quarter and $3.39 a share on revenue of $3.9 billion for the year.
With its first-quarter results, Biogen upped its full-year guidance for adjusted profit to $3.25 to $3.45 a share, from prior guidance of $3.20 to $3.35 a share. The company also predicts total revenue growth of roughly 20% of the prior year, which translates to $3.8 billion, compared to prior guidance of 15%-20% growth, or between $3.6 billion and $3.8 billion.
Earlier this week,
Adam Feuerstein reported that a Genentech spokesperson confirmed the report of a single, fatal case of PML in a rheumatoid arthritis patient enrolled in the Rituxan study dubbed REFLEX. However, a direct link between PML and the drug has been neither established nor ruled out as more investigation is under way. PML is listed on the drug's label as a possible side effect. Investors will be listening on Biogen's call for more information on Tysabri as well, namely safety data regarding PML and new patient numbers.
Genzyme (GENZ) -- July 23 (Call: 11 a.m. ET)
Within the second quarter, Genzyme and
announced that they finalized a license and collaboration agreement for mipomersen, a late-stage cholesterol-lowering antisense drug, despite previously announced heightened regulatory requirements for some of its indications.
On average, analysts are looking for earnings of 97 cents a share on revenue of $1.12 billion for the quarter and $3.94 a share on revenue of $4.58 billion.
Bernstein's Porges estimates Genzyme's total sales could come in roughly 2% above consensus based on IMS analysis of Renegal and Hectoral. However, IMS data capture an insignificant portion of the company's lysosomal storage disorders (LSD) products to use as an indicator. Thus Bernstein warned about the limited ability to project sales.
Wall Street on average is looking for roughly $170 million to $173 million from Renagel/Renvela, $69 million from Myozyme, $309 million from Cerezyme and $122 million from Fabrazyme.
Lazard's Matt Osborne noted that he expects the company to confirm the submission to the FDA of the position paper in support of Renagel/Renvela label expansion for earlier stages of chronic kidney disease when it reports second-quarter earnings. He also expects it to confirm its submission of a biologics license application (BLA) for Myozyme.
Because of the delay in larger-scale Myozyme announced earlier this year, Genzyme scaled back its adjusted profit guidance to $3.90 a share for 2008, compared with $4 a share previously expected, and GAAP earnings of $2.65 a share, also down 10 cents from its prior guidance.
Celgene (CELG) -- July 24 (Call: 9 a.m. ET)
Last quarter, Celgene beat consensus estimates in both EPS (36 cents vs. the consensus estimate of 34 cents) and revenue ($462.5 million vs. $444 million consensus). The Street continued to be impressed with the biotech's prospects in the second quarter, dishing out several upgrades and increasing 2008 revenue predictions for Celgene after competitor
said its Vidaza rival Dacogen failed a late-stage trial in patients with myelodysplastic syndromes (MDS).
Jeffries and Co.'s Yang increased her near-term sales forecasts for Revlimid and long-term predictions for Vidaza and upped her 12-month price target to $81 from $77 on Monday.
This quarter looks good, too. Lazard analyst Matthew Osborne writes, "The company should exceed our revenue estimates for Revlimid, Thalomid, and Vidaza, as well as meet our above-consensus earnings estimate (37 cents a share)."
Consensus sales targets are $310 million for Revlimid, $127 million for Thalomid and $54 million for Vidaza.
Analysts surveyed by Thomson Reuters are predicting earnings of 35 cents a share on revenue of $538 million for the quarter and $1.50 a share on revenue of $2.2 billion for the year.
"Compared to the large-cap peers, CELG has outperformed year to date, up 46%, and we expect this trend to continue, given its high growth prospects," writes Yang.
Amgen (AMGN) -- July 28 (Call: 5 p.m. ET)
In the first quarter, Amgen posted mixed results, still feeling the weight of an anemia drug franchise in decline as Aranesp sales fell 25% and Epogen revenue fell 11%. But results may look better in the second quarter.
Prescription data suggest Amgen's Aranesp and Epogen sales are likely to surpass consensus targets, with Aranesp sales remaining relatively flat and Epogen sales growing 10% quarter over quarter, according to Deutsche Bank's Schoenebaum. Sales of Neupogen/Neulasta and Enbrel look relatively in-line with consensus targets.
However, while dropping sales may have slowed, analysts still expect more decline when the label is updated, likely in the third quarter.
Consensus targets for U.S. sales are roughly $373 million for Aranesp, $582 million for Epogen, $855 million for Enbrel and $815 million for Neupogen/Neulasta.
Analysts, on average, expect the company to earn $1.02 a share on revenue of $3.58 billion for the quarter, and $4.19 a share on revenue of $14.4 billion for the year, according to Thomson Reuters.
Deutsche Bank's Schoenebaum recently upped his price target for the stock to $54 from $52, citing Amgen's partnering potential for denosumab pending positive data, meaningful cancer-market potential for the drug and the company's disaster preparedness.
"Although Amgen shares have risen significantly over the past few weeks, we see additional room for upside as valuation is still attractive and d-mab
denosumab data should be available within 90 days," he wrote.
Analysts agree that Amgen's third quarter will be all about the denosumab data. "We think strong efficacy, coupled with a clean safety profile, could drive the stock into the high $50s, while weak data could put the stock back to the high $30s," wrote Credit Suisse's Aberman.
Cephalon (CEPH) -- July 29 (Call: 5 p.m. ET)
"Cephalon has remained relatively strong in an exceedingly tough health care tape since early June, reflecting what we think is increasing comfort in Cephalon's ability to deliver on its target, given the strong launches of Treanda and Amrix, and no major sources of binary risk on the radar," wrote Natixis Bleichroeder's Corey Davis in a note on Monday, noting that based on IMS data the company appears poised to deliver upside in the second quarter.
Based on prescription data, Davis expects roughly $223 million in U.S. sales from Provigil, which is above Street expectations -- and has also pegged sales above targets from Treanda, Fentora and Actiq.
Analysts, on average, are looking for earnings of $1.07 a share on revenue of $470.6 million for the quarter and $4.57 a share on revenue of $1.89 billion for the year, according to Thomson Reuters.
In May, Cephalon reaffirmed expectations for profit between $3.75 and $3.85 a share, or between $5.10 and $5.20 on an adjusted basis, for the year. The company updated its total sales guidance, raising it to between $1.83 billion and $1.88 billion from a previous range of $1.8 billion to $1.85 billion.
Davis notes that one matter that still has some investors spooked is the risk that there could have already been, or will soon be, a filing of an abbreviated new-drug application, or ANDA, for a generic version of Amrix. But he finds it unlikely. "Given the FDA's standard 60-day ANDA acceptance period, the latest we could learn of an actual pre-patent ANDA filing is on approximately August 15," he wrote.