Throughout the next couple of weeks, Wall Street will see quarterly results from some of the leading companies in biotech, starting Tuesday afternoon with Genentech ( DNA).

Genzyme ( GENZ) will report July 12, and the following week, on July 20, Gilead Sciences ( GILD) and Amgen ( AMGN) will release their results.

Big things are expected out of the big names. While earnings per share growth is only anticipated to rise 0.6% in the quarter for the biotech industry, the four stocks mentioned above are projected to sharply exceed the broader sector.

Genentech is expected to see earnings growth of 57% and a revenue increase of 39%, while at Genzyme, earnings are forecast to advance 24% on sales growth of 16%. Gilead should post a 29% profit increase and a 33% sales improvement, and Amgen's earnings are expected to climb 7% on a 10% top-line expansion.

If these companies deliver, confidence may be restored and a meaningful rally may ensue, lifting the entire group. However, significant misses may send investors who already have sustained a great deal of pain in 2006 scurrying for the exits.

Genentech's Potential

I wouldn't be surprised if Genentech's numbers come in higher than the consensus. Cancer-fighter Avastin is expected to bring in roughly $440 million in sales during the quarter, with a range of $417 million to $480 million. However, analysts often use prescription data from sources that aren't particularly accurate.

For example, over the past five quarters, NDC, a drug sales-tracking service, only captured 82.4% of Avastin sales. Adding a June monthly Avastin sales estimate of $152.3 million from Friedman Billings Ramsey to the April and May estimates by NDC, the projection for Avastin sales in the quarter is $438 million. However, assuming NDC again accounts for only 82.4% of Avastin's sales, it's probably a good bet that the drug's revenue comes in near the top of the range.

The FBR June estimate assumes a 3% decline in sales because of stocking issues. Genentech said some orders in April were pushed out into May. If the drug sold faster than expected, June's numbers should be better than the consensus.

Wall Street will also be paying attention to any new information on Lucentis, a treatment for the eye disease called wet age-related macular degeneration. The drug was approved June 30. Some analysts estimate Lucentis could bring in $80 million to $85 million in sales in the second half of the year. The sales teams are already in place, and it will be interesting to hear a status report on the launch of the drug.

For the breast cancer-therapy Herceptin, torrid growth is expected for the rest of 2006. Rodman & Renshaw believes the drug will attain 72% growth in the U.S., while FBR sees worldwide Herceptin growth of 83%. That figure could be aided by a recent approval for label expansion in Europe.

Though the consensus estimate is 47 cents, I suspect Genentech's earnings will come in closer to 50 cents.

Will Genzyme Recover?

One of the keys to Genzyme's quarter will be whether sales will rebound and enable the company to hit its full-year guidance of $3.1 billion to $3.3 billion.

Last quarter, Genzyme missed the consensus estimate by 4 cents when it reported earnings of 59 cents a share. Revenue of $731 million was also light.

Investors will likely key in on sales figures for kidney-disease fighters Renagel, which has been holding on to a narrow lead in marketshare all year, and Hectorol, which missed analyst estimates by about $5 million last quarter.

Cerezyme, an enzyme-replacement therapy for Gaucher disease, is a significant revenue driver. Last quarter, Genzyme sold $239 million worth of the drug, in line with consensus estimates.

Truvada's Torrid Growth

Perhaps more than the EPS number, Gilead investors will be scrutinizing the sustainability of the growth track for the HIV treatment Truvada. Last quarter, 62% of new patients opted for Truvada. According to data-tracker IMS, 232,000 prescriptions were written for Truvada in the second quarter through June 23, a 15% increase from the first quarter. Add in a 6% price increase at the beginning of the quarter, and growth should be impressive.

Truvada has a reputation for being more effective and convenient for patients, and Gilead bulls love the revenue stream the drug provides.

"The magic is that people with HIV are not dying anymore," said one analyst whose hedge fund is long Gilead. "There is an annuity to it for 10 to 20 years." The analyst, who didn't want his name used, believes Gilead's HIV franchise is chronically underestimated. Meanwhile, Morningstar figures Gilead's HIV business will rack up $1.9 billion in sales this year, slightly ahead of management's guidance of $1.825 billion to $1.875 billion.

Tamiflu could also be worth watching, because Gilead has negotiated a higher royalty stream from Roche. Considering all of the bird-flu hype in recent months, it wouldn't be surprising if Tamiflu sales were quite strong.

Gilead probably won't make many comments regarding the future other than some information about the regulatory hearing in September for a combination Truvada-Sustiva pill. Sustiva is an anti-HIV medication from Bristol-Myers Squibb ( BMY). The combination pill could be approved and on the market later this year.

More of the Same

As for Amgen, I'm not expecting anything unusual this quarter. Since posting a 22% earnings surprise in the June quarter of last year, Amgen has been within 2 cents of consensus in each of the past three quarters. I believe we'll see more of the same. However, I do expect Amgen to make its numbers, aided by some restocking of shelves by wholesalers who let inventories wane in the first quarter.

While investors will certainly be keeping an eye on Amgen's erythropoietin products such as Epogen and Aranesp, which boost red-blood cell production, they might be more interested in any comments that management has to offer about Cera, a competing Roche drug.

On Friday, a U.S judge at the International Trade Commission ruled that Roche could import CERA for clinical trials. Roche is hoping for approval from the Food and Drug Administration this year. Amgen believes that Cera violates its patents, and it's attempting to block the drug from entering the lucrative anemia market. Epogen and Aranesp are expected to chalk up sales of $1.6 billion in the second quarter, roughly 46% of Amgen's total forecast revenue.

Enbrel, used for arthritis and psoriasis, is projected to have sales of $692 million in the second quarter. However, that figure could come in higher, as distributors may have stocked up in advance of a price increase this month.

This batch of reports could be pivotal for biotech stocks. The feeling on Wall Street is that the large biotech companies should post impressive numbers. Stay tuned.
In keeping with TSC's editorial policy, Lichtenfeld doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.

Marc Lichtenfeld was previously an analyst at Avalon Research Group and The Weiss Group and a trader at Carlin Equities. He holds NASD 86,87, 7 and 63 licenses. His prior journalism experience includes being a reporter/anchor for On24 in San Francisco and a managing editor of InvestorsObserver, a personal finance Web site. He is a graduate of the State University of New York at Albany. He appreciates your feedback; click here to send him an email.

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