After rallying over the past few sessions, several biotech names hit a wall Monday as an earnings downgrade and a patent dispute prompted investors to take some money off the table.
came under pressure after Bear Stearns cut its earnings estimate on the stock and
fell sharply after U.S. drug authorities said an unnamed company is attempting to challenge the firm's patent on its blood-thinning drug Lovenox. IDEC shed 4% to $35.35 while Aventis was down amost 5% to $44.
Bear Stearns cut its first-quarter earnings estimate on IDEC Monday, saying that "wholesaler inventory issues" could reduce sales of its anticancer drug Rituxan. Analyst Ronald Renaud said wholesalers probably built up their inventories in February in anticipation of a price hike in March.
"We believe that wholesalers may then have used March to draw those inventory levels back down to standard levels," he said. "We would also point out that difficulty with reimbursement of both Rituxan and Zevalin in the hospital outpatient setting may also be playing a role in our first-quarter estimates."
Renaud cut his Rituxan sales estimate to $315 million from $323 million and sliced his sales forecast for IDEC's other key cancer drug Zevalin to just $6.5 million from $9 million. The reduction in Zevalin sales stems from conversations with physicians "who have indicated that Zevalin uptake continues to be quite slow." IDEC is now expected to report a profit of 23 cents a share down from 25 cents, according to Renaud. Analysts surveyed by Thomson Financial/First Call are looking for a 24-cent profit.
The news was confusing to investors given that Banc of America made positive comments about IDEC and its marketing partner
just last week. Analyst Michael King told clients on Thursday that earnings would benefit from "strong" first-quarter sales of Rituxan, sending shares up 6%.
"IDEC traded very strong into the tail end of last week due to expectations for a robust quarter," Jennifer Chao, an analyst at RBC Capital Markets. "I think we're seeing some profit-taking today off of those gains."
Chao said IDEC is trading at a slight premium compared with the rest of the group, with a price-to-growth rate of 1.4 compared to 1.3 for its peers. "We do expect that IDEC will report solid Rituxan sales this Wednesday after the close but once
the stock crosses the $36 threshold we expect investors to take profits," she said.
In another development, the Food and Drug Administration published an application by an unnamed firm challenging Aventis' patent protecting its best-selling drug Lovenox. The patent on Lovenox is supposed to last until 2012. Aventis is also facing challenges from five other companies who want to make cheaper generic versions of its top-selling hay fever drug Allegra.
An Aventis spokeswoman said the company hadn't received the formal FDA letter yet but would vigorously defend its intellectual property.
Still, other stocks in the biotech group continued to advance Monday. Shares of
rose another 1.6% after climbing 19% last week. The company raised its first-quarter earnings outlook Wednesday, citing strong interest for its new psoriasis drug Amevive. Shares of
also rose even though Bear Stearns cut its sales estimate for the firm's Actimmune drug, citing inventory build up in the fourth quarter.
"We've had a string of favorable news that's played well with the group," Chao said. "The classic catalysts for the sector including solid top and bottom line results, visibility on product approval and positive developments on the clinical pipeline are at the forefront of investors' minds."
The biotech sector has climbed more than 11% since March 11.