The global economic recession appears to taking a bite out of biotech drug sales.

How much so remains to be seen, but Celgene's ( CELG) warning Tuesday night of a worse-than-expected first quarter was no April Fool's Day joke. The company is blaming macro-economic issues for lower drug sales and profits in the quarter just ended.

The big-cap biotech group is typically immune to pre-announcements of earnings shortfalls, so the Celgene warning comes as something of a shock. We'll have to wait for first-quarter earnings to roll in from the rest of the big-cap group before we know just how much the global economy is hurting biotech drug sales, if at all.

Some perspective is probably in order. Celgene said Tuesday that first-quarter earnings will only grow 20% year over year. How many companies out there would kill for that kind of growth in this economy?

Biotech Select

Unfortunately, the Street was expecting 25% year-over-year profit growth from Celgene. But then, Celgene, at its Tuesday (pre-warning) close of $44 was trading at 20 times 2009 estimated earnings - a premium multiple that demands premium growth.

Celgene shares plunged to $39 in Tuesday night's after-hours trading session. The stock was down 13.3% to $38.49 Wednesday morning.

Explaining the reasons for the first-quarter shortfall, Celgene blamed increases in its insurance co-pay assistance and free drug programs. Even cancer patients seem to be having trouble paying for drugs or facing delays in treatment due to loss of employer-based insurance. Wholesalers are also drawing down inventory, which may presage a slump in demand.

While rising unemployment and the loss of health insurance are sure to hurt prescription drug sales overall, there is still reason to believe that drugs that treat serious diseases will be relatively protected. (Emphasis on "relatively.")

Cancer patients or those with HIV need to find a way to pay for their drugs in order to live; an aging Baby Boomer can probably do without her regularly scheduled Botox injection if money is tight.

This should insulate Gilead Sciences ( GILD) and its market-leading HIV drug franchise reasonably well. Prescription trends, as tracked by IMS for January and February, suggest that Gilead's U.S. sales are in-line to slightly above investors' expectations for the first quarter, according to various analyst reports.

(Gilead has other issues with diversification outside of HIV and sagging investors confidence, which I outlined in a column that can be read here.)

Amgen ( AMGN) could be more vulnerable since it relies on drugs in the supportive cancer care market like Neulasta and Aranesp. The company's rheumatoid arthritis drug, Enbrel, also struggles with an increasingly competitive market. In Amgen's favor, however, is the fact that the stock is already trading at a discount to the big-cap biotech group.

The biotech group begins to report earnings in the third week of April so the market will wait to see if the "Celgene disease" spreads to other biotech and drug stocks, including Genzyme ( GENZ), Biogen Idec ( BIIB), OSI Pharmaceuticals ( OSIP) and Cephalon ( CEPH).

At the time of publication, Feuerstein's Biotech Select model portfolio was long Celgene, Gilead Sciences and Amgen.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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