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.
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.
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.