Last Thursday, Celgene ( CELG), the last of six biotech bellwethers to report third-quarter results, closed out what proved to be a strong period for the sector. Biotech stocks have no doubt suffered along with the rest of the market, but for the group, from an earnings standpoint at least, it seems to be business as usual. Gilead ( GILD), Biogen Idec ( BIIB) and Amgen ( AMGN) delivered notable profit beats, while most of the six had better-than-expected sales. Genentech's ( DNA) employee-retention plan, GlyCart collaboration, and expenses related to the impairment of certain assets in the company's investment portfolio affected GAAP and non-GAAP earnings by about 13 cents in the third quarter. But sales of its key products, led by cancer drug Avastin, came in ahead of Wall Street's targets and generated enthusiasm for the biotech earnings season. Genentech rejected a takeover bid in July from the Swiss pharma company Roche, which has yet to respond. In the meantime, Genentech executives said they would continue operating normally, including assessing opportunities to acquire companies or products. After Genentech, Gilead exceeded analysts' third-quarter top- and bottom-line projections as sales of its HIV-fighting drugs surpassed estimates, and the company announced an accelerated $750 million share-buyback plan. Analysts had anticipated that negative data on GlaxoSmithKline's ( GSK) Abacavir could be aiding the European launch of Atripla. The company confirmed on its conference call that it's starting to see the effects. Spending on research and development and selling, general and administrative expenses increased more than expected. Last quarter, Gilead raised its forecast for operating expenses by about $50 million for the remainder of the year, primarily in those areas.
Biogen started the second week of earnings by trouncing profit targets with help from its own set of upbeat sales. In the third quarter, the company reported the first two confirmed cases of brain infection progressive multifocal leukoencephalopathy -- a known risk of the drug Tysabri -- since its relaunch in 2005. The Food and Drug Administration expanded the product's label to include the risk of the infection with the drug when is used alone. Tysabri sales came in ahead of expectations, but shares declined as investors weighed comments by management regarding Biogen's goal for patients on the MS drug. The company said growth would have to accelerate in order to reach 100,000 patients on the drug by 2010, although it is sticking to the target. Genzyme ( GENZ) beat profit estimates, but it fell short on individual product sales. Of the big biotechs, Genzyme had the weakest quarter, but that was mostly due to unfavorable foreign exchange translations, said Deutsche Bank analyst Mark Schoenebaum. Foreign exchange added 6 percentage points of growth to Genzyme's revenue in the first half of the year, thus the strengthening dollar stood to negatively affect the company's third quarter. A Food and Drug Administration advisory panel recently voted to recommend approval of a 2000-liter scale manufacturing facility for Genzyme's Pompe disease drug Myozyme. The agency will meet on Nov. 29 to decide whether to approve the Myozyme that will be manufactured at that scale, but the company warned with its earnings that product supply is expected to remain tight until an even larger-scale (4000-liter) plant is cleared in Europe. That's expected in the first half of next year.
Meanwhile, Amgen beat expectations and upped its guidance for the year. A $54 million benefit from an accounting change and some help from foreign exchange gave a boost to Aranesp sales, which otherwise would've declined 8%. Sales of Amgen's other products came in above consensus as well, while the company also spent less than analysts had predicted. Investor focus remains on Amgen's late-stage bone-drug denosumab, it's most promising pipeline product. Positive data were announced earlier this year in women with postmenopausal osteoporosis, and additional findings should be available in the coming months. Amgen, which is holding a business review meeting on Nov. 7, said it was very close to submitting a regulatory application for the drug. Celgene wrapped up big biotech's earnings with an upbeat quarter. The company topped targets and said it expects to exceed its prior guidance of $1.50 a share and $2.2 billion in revenue for the year. On its call, Celgene management said Revlimid's performance in Europe, where the multiple myeloma drug is still being rolled out, was solid even with negative foreign currency effects. In the U.S., quarterly Revlimid prescription volume increased more than 7% sequentially despite a typically sluggish summer and heightened competition from Japanese drug maker Takeda's Velcade. Celgene is pursuing an aggressive strategy to expand Revlimid's use into two new blood cancers, chronic lymphocytic leukemia and non-Hodgkins lymphoma. Here's a look at how biotech's biggest names fared in the third quarter.
|Biotech Earnings Review |
A quick look at the third quarter numbers
|Company||Adj. EPS/ consensus*||Revenue vs. consensus||2008 Guidance Adjustments||2008 consensus|
|Genentech (DNA)||81 cents / 88 cents||$3.4B / $3.36 B||Narrowed to $3.40 to $3.45/share, from $3.40 to $3.50/share (Adj)||$3.43/share and $13.3B rev|
|Gilead (GILD)||55 cents/ 49 cents||$1.37B/ $1.32B||Maintained sales $4.9B to $5B||$2.03/share and $5.33B rev|
|Genzyme (GENZ)||$1.04/ $1||$1.16B/ $1.18B||Maintained $3.90/share (Adj.)||-$3.97/share and $4.62B rev|
|Biogen (BIIB)||98 cents/ 89 cents||$1.09B/ $1B||Above $3.50 a share (Adj.), on rev growth above mid-20% over 2007||$3.62/share and $4.1B rev|
|Amgen (AMGN)||$1.23/$1.08||$3.88B/ $3.7B||Upped to $4.45 to $4.55/share (Adj.), on rev of $14.9B to $15.2B.||-$4.53/share and $15B rev|
|Celgene (CELG)||40 cents/ 39 cents||$592.5M/ $$588.8M||Upped to above $1.50/share and rev of $2.2B||$1.55/share and $2.25B rev|
|*Consensus estimates typically factor out one time charges and special items. |