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Biotech Stock Earnings Preview

A sneak peak at which names in the sector will be reporting results in the coming two weeks.

Third-quarter earnings are kicking off on the heels of September's impressive biotech stock rally -- a traditional autumnal move higher. But as JPMorgan analyst Geoffrey Meacham notes in a report Thursday, the

S&P 500

and the

Dow Jones Industrial Average

rallied as well. (The Amex biotechnology index rose 11% since mid-August, compared with 10% and 9% rises for the Dow and S&P respectively).

Other sectors are now preparing for

dismal third-quarter earnings -- but in the biotech sector, predictions are for a "mixed" quarter. Some soft prescription data and high expectations may be followed by upside for these stocks into the conference season, according to analysts.

Here's a quick look at what's to come in third-quarter earnings for




Gilead Sciences

(GILD) - Get Report


Biogen Idec

(BIIB) - Get Report






(CELG) - Get Report



TST Recommends

(AMGN) - Get Report

-- which will divulge results in that order throughout the next two weeks.

Genentech (Oct. 15 after market close)

Genentech's stock has been buffeted ahead of its earnings by

concerns about prescription trends, data that prompted some analysts to lower expectations. The consensus is 72 cents a share for the third quarter, but RBC Capital and Jefferies are expecting 74 cents a share, although that's still scaled back from RBC's prior estimation of 76 cents.

This will be the first full quarter in which the effects, or non-effects, of a dose reduction in Avastin, for use as a lung cancer treatment will be visible. The consensus target for Avastin is $586 million. This could be a non-issue as sales have continued to grow. Also, the drug is up for a panel review for metastatic breast cancer in December ahead of a potential February approval (the FDA's goal for a decision is Feb. 24), and data are expected for Avastin in colorectal cancer in 2008.

Aside from Avastin, Genentech is expected to miss targets at least slightly for Rituxan and Lucentis on the basis of recent prescription data.

One thing to keep in mind is that Genentech's non-GAAP earnings guidance for fiscal 2007 -- in the range of $2.85 to $2.95 a share, a 28%-32% increase in comparison to 2006 -- was considered conservative; the consensus of $2.95 is at the peak of that range. Thus, solid third-quarter earnings would put the company in line to beat its full-year guidance, and a miss may not throw it terribly off track.

Gilead (Oct. 18 after market close)

Analysts are speculating now that Gilead's Atripla's sales and lower spending could push the company over the consensus earnings. (Although analysts polled by Thomson Financial had expected 39 cents a share.)

The company is expected to provide an update on HIV treatment Atripla in the E.U., shedding light on whether there will be an approval by year-end, and it's also expected to give an update on how many patients are being treated with Letairis for pulmonary arterial hypertension. Merrill Lynch analyst Eric Ende noted that because a number of patients are receiving it free for 30 days, the number of third-quarter sales may not be terribly indicative of future sales -- he's looking for sales of $6.6 million in the quarter.

Expectations increased for the company's HIV franchise last week on the basis of prescription data. Ende said Atripla sales and Truvada U.S. sales are tracking above his estimates -- at $243 million and $195 million respectively. JPMorgan's Meacham is looking for 44% year-over-year growth of the franchise, and he raised his sales estimate to $801 million from $788 million in a report Thursday.

Biogen Idec (Oct. 23 before market open)

While the consensus for Biogen was 67 cents a share, some expect closer to 62 cents a share in light of weaker sales (with the exception of Tysabri) and a $50 million payment made to Cardiokine that was recognized in the quarter.

The consensus target for Biogen's multiple sclerosis drug Tysabri is $96 million. But JPMorgan's Meacham expects $105 million. Safety concerns related to two cases of a central nervous system disorder (progressive multifocal leukoencephalopathy) that occurred in clinical studies have dented Tysabri, a drug that Biogen shares an equal interest in for multiple indications with




The drug was approved in 2004 but was pulled from the market in 2005 after the patients in clinical studies died of the disease. Tysabri was allowed back to market, but patients now must register with a safety monitoring program. On Wednesday the company gave a safety update, allaying some of these concerns, saying that 17,000 patients are now taking Tysabri and that no new cases of a rare and incurable nervous system disease have been reported.

While pre-earnings analyst estimates for Tysabri were promising, analysts have not been as confident in sales of Rituxan for rheumatoid arthritis, which Genentech will report. Merrill Lynch and JPMorgan scaled back Avonex estimates to $449 million, lower than the consensus of $468 million, given lower U.S. Avonex sales of $257 million (consensus $273 million) implied by IMS sales. JPMorgan is forecasting international sales of $191 million, compared with the consensus of $194 million.

In late-breaking news Friday, Biogen revealed that Carl Icahn was among third-parties that

expressed interest in acquiring the company. The statement didn't make clear if Icahn had presented a specific buyout offer to Biogen Idec's board, or if Icahn was pressing the company to put itself up for sale, but shares bounded more than 17% in after-market trading.

Genzyme (Oct. 24 before open)

The consensus estimate for earnings is 86 cents a share, and investors will be looking for strong sales numbers in Renagel, indicated for patients with chronic kidney disease (CKD), suggested by promising script data and despite approval of competitor Fosrenol in Europe, according to a Robert Baird & Co. report. Baird analyst Christopher Raymond notes that an October 16 cardio-renal advisory panel that will review phosphate binders in predialysis could represent a wild card for the stock by possibly raising questions about Renvela's regulatory timetable. But he continues to like Genzyme for the quarter, he said in the report.

Celgene (Oct. 25 before open)

The consensus for Celgene is 28 cents a share, with its sales of its lead product Revlimid, indicated as a combination therapy with dexamethasone as a second-line therapy for multiple myeloma patients, estimated at $215 million. JPMorgan's Meacham said in his Thursday report that strong Revlimid data in first-line multiple myeloma and continued penetration in refractory multiple myeloma as well as of label indications for chronic lymphocytic leukemia (CLL) and non-Hodgkin's lymphoma (NHL) will drive Celgene's third-quarter performance with a minor impact from non-U.S. sales.

He predicts Thalomid sales of $111 million, compared with the consensus of $106 million, and upped his estimates slightly, now predicting Revlimid sales of $218 million and earnings of 29 cents a share, but noted that Celgene shares could be under pressure if Revlimid sales aren't markedly above the Street consensus because buy-side expectations are high at $215 million.

Risks could include competition from Millennium's Veclade or disappointing data from Celgene's Revlimid clinical trials in MS and MDS, and also the generic filing of thalidomide in the U.S.

Amgen (Oct. 24 after close)

Trading down 17% from a year ago and having cut staff and suffered from new reimbursement guidelines this summer, Amgen should be interesting stock to watch. The consensus target is $1.02, and while analysts are predicting a miss on Aranesp sales, they still believe the company will meet earnings-per-share expectations. The effect of new guidelines from the Centers for Medicaid and Medicare Services (CMS) on U.S. sales of Anaresp, for chemotherapy-induced anemia, will give some clue as to what the longer-term effects will be -- estimates have been pulled back severely and then fluffed up a bit in light of opposition to the guidelines.

The consensus sales estimate for Amgen's Epogen is $613 million. An FDA advisory panel on Sept. 11 -- in determining the use of anemia drugs in chronic kidney disease patients -- voted against hard targets that would've further restricted the drug's use in dialysis and pre-dialysis patients. Rather, they opted for a range to guide the use of anemia drugs in these patients that is seemingly flexible enough to hold off steep drops in sales.