Big Biotechs To Meet 4Q Net Views Amid Strong Drug Sales
By Beth M. Mantz
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Strong drug sales drove bellwether biotech companies'
fourth-quarter earnings, but most will meet, rather than beat, expectations.
While new uses of existing drugs helped boost revenue, analysts said doctors
had already begun prescribing them for these uses, limiting the gains.
Nevertheless, biotechnology companies enjoyed quite a run in the fourth
quarter with growing product sales, added approvals of biologic drugs and
vaccines, stepped-up research, and record financing raised.
In the quarter, the industry raised more than $12 billion, eclipsing the
total $11 billion fundraising effort for all of 1999, said G. Steven
Burrill, chief executive of Burrill & Co. Human Genome Sciences Inc. (HGSI),
Immunex Corp. (IMNX) and Millennium Pharmaceuticals Inc. (MLNM) netted a
total of more than $4.3 billion in their follow-on offerings.
Additionally, many biotech products - like Genentech Corp.'s (DNA) and Idec
Pharmaceuticals Corp.'s (IDPH) Rituxan non-Hodgkin's lymphoma therapy - have
yet to reach their potential because they are so early in their life cycles.
But "in due course these drugs will age like (Amgen's) Epogen and Neupogen
which have been on the market in excess of nine years," said J.P. Morgan
Chase & Co. analyst Franklin Berger.
Unlike its fellow biotechs, MedImmune Inc. (MEDI) could blow past consensus
estimates of 35 cents a share, according to Prudential Vector analyst Peter
Drake and SG Cowen analyst Bill Tanner, who project earnings of 41 cents and
37 cents, respectively. A year ago, the company earned 23 cents, adjusted
for a 3-for-1 stock split in June.
The company's earnings driver, Synagis, which treats lower respiratory tract
disease in babies, is deep into the illness' season, which began in October.
Tanner expects $204 million in U.S. sales and $12 million in European sales
of the drug in the fourth quarter.
MedImmune has focused on severely premature babies, but broadened its thrust
to treat the 180,000 babies born after 32 weeks to 35 weeks in the womb, and
began looking at treating the 200,000 babies born after 36 weeks, said
Drake.
"The company is nowhere near tapping Synagis' growth," Drake said.
Analysts expect Immunex to earn 8 cents a share, compared with the year
ago's 3 cents, adjusted for a 3-for-1 stock split effective in March.
Lehman Brothers Inc. analyst Rachel Leheny is much more bullish. Expecting
11 cents, she believes Immunex could hit her number with $199.8 million
sales of Enbrel, the rheumatoid arthritis treatment Immunex markets with
American Home Products Corp. (AHP).
Immunex's issue is its capacity to manufacture Enbrel. The capacity is
constrained at $850 million next year, well below her earlier view of $1
billion. The company will control who will receive the drug over the next 12
months until capacity has been increased and new factories are online.
Immunex "will have to convince physicians to give Enbrel to the most
severely-debilitated and convince earlier-stage patients to wait," said
Leheny. This could be problematic with "the marketing campaign's 'treat
early and often"' thrust.
Driven by Rituxan and breast cancer therapy Herceptin, Genentech could earn
16 cents a share, compared with 9 cents a year ago, adjusted for a 2-for-1
stock split in October.
Rituxan was featured prominently at the American Society of Hematology, or
ASH, meeting in December, with data showing benefits from first-line use,
and from treating various leukemias. Some analysts think the data won't
translate into added sales until the first quarter while others believe
physicians have already been using Rituxan for such uses.
"It is a shot in the dark," said Leheny.
Berger expects Genentech will log $123 million in Rituxan sales and $81
million in Herceptin sales for the fourth quarter.
Rituxan will also drive Idec Pharmaceuticals' earnings, which Wall Street
puts at 35 cents, compared with 15 cents a year ago.
Lehman Brothers analyst Michael Wood forecasts $124.5 million in U.S.
Rituxan sales, and earnings of 33 cents. "It is not the same kind of growth
quarter over quarter for Rituxan and the positive data presented at ASH
could have impact, but slightly; likely those sales will show up in the
first or second quarter," he said. Sales could be light due to people
traveling during the holidays, he added.
Amgen Inc. (AMGN) is expected to report 25 cents a share, a penny below the
year-earlier's 26 cents.
Sales of blockbuster Epogen for boosting anemic patients' red-blood-cell
count and Neupogen for fighting low white-blood-cell count continue to fuel
earnings. But "the company has been clear and the trends have shown that the
days of brisk double-digit growth is over," said Berger.
Analysts agree Epogen and Neupogen have become secondary to Amgen as the
focus shifts to NESP, its next-generation Epogen product which will treat
not only anemic patients undergoing kidney dialysis, but also pre-dialysis
and cancer patients. NESP, expected to be approved during the first half of
2001, will lead to a reacceleration of both top- and bottom-line growth,
said SG Cowen analyst Eric Schmidt.
Chiron Corp.'s (CHIR) broad platform has given the company stability. During
the first half of the year, the company enjoyed a $100 million contract from
the British government to inoculate children with its meningococcal C
vaccine Menjugate, but since then Menjugate sales simmered.
Sales of cancer therapy Proleukin and multiple sclerosis treatment Betaseron
have tempered while vaccine sales inch higher. US Bancorp Piper Jaffray
analyst Peter Ginsberg is looking for $35 million in Proleukin sales and $71
million in vaccine sales in the fourth quarter.
Analysts think Chiron needs either a rebound in Proleukin or Betaseron
demand, or license in a late-stage product to treat cancer or infectious
diseases. The only product that Chiron will launch over the next two years
is its procleix screen which simultaneously tests for HIV and hepatitis C
virus. Consensus estimates put earnings at 16 cents a share, compared with
13 cents a year ago.
Biogen Inc. (BGEN), in terms of its stock price, has faced an uphill battle
during the quarter.
Analysts, whose opinions on Biogen range from calling it the most
undervalued bellwether biotech to rating it an absolute sell, agree multiple
sclerosis treatment Avonex has a lot of market potential because about 40%
of diagnosed MS patients are not treated with any drug therapy. Yet
prescription trends are growing slowly from quarter to quarter and market
share is slipping.
Growing demand for Teva Pharmaceutical Industries Ltd.'s (TEVA) Copaxone in
the U.S. and Serono SA's (SRA) Rebif in Europe has hurt Avonex, said
analysts. Additionally, Drake cited Biogen's failure to seize an edge with a
marketing message that Avonex, unlike rivals, has been shown to slow
progression of the disease.
Biogen is expected to report earnings of 46 cents a share, compared with 44
cents earned a year ago.
Genzyme General (GENZ) should post solid sales with earnings of 58 cents a
share, above the year-earlier's 52 cents, analysts said.
Tanner projects $138 million in sales of Gaucher disease drug Cerezyme.
While the drug continues to comprise a big part of Genzyme's revenue,
Renagel has moved into focus as the future driver.
Analysts estimate Renagel could add between $14.7 million to $15.5 million
in sales. Based on his firm's survey, Drake believes Renagel's market share
could double or triple in two years due to growing awareness and new data.
"Absolutely, Renagel is the growth engine for Genzyme," said Drake.
-By Beth M. Mantz, Dow Jones Newswires; 201-938-5287;
beth.mantz@dowjones.com
(END) DOW JONES NEWS 01-05-01 |
