January 10, 2002
Dow Jones Newswires
Biotechs Seen Posting Solid 4Q Results, Few Surprises
By BETH M. MANTZ
DOW JONES NEWSWIRES
NEW YORK -- Large-cap biotechnology companies are expected to post rising profits and sales for the fourth quarter, in line with Wall Street expectations.
While the economy faltered in the fourth quarter, patients continued to receive treatments, and biotechnology companies that have developed marketable drugs continued to put muscle into their promotional efforts.
"Their business seems to be refractory to anything," said SG Cowen analyst Eric Schmidt. "We expect the numbers to be good, but (there is) not much juice left" for further product growth.
So the biotechnology companies have looked inward in planning for future growth. In most cases, they did what they always have done and plugged away at research and development to advance new drugs through the pipeline.
In other cases, they went on a buying spree of companies with late-stage medicines or marketable drugs, a trend that David Deming, J.P. Morgan H&Q's managing director and head of health care banking, expects to continue.
In an important deal for the industry, Amgen Inc. (AMGN) recently agreed to acquire Immunex Corp. (IMNX) in order to add the potential multibillion-dollar drug Enbrel to its portfolio of products and establish a rheumatoid arthritis franchise.
Also, MedImmune Inc. (MEDI) agreed to acquire Aviron (AVIR) in a deal for the flu nasal spray FluMist, which has yet to be approved. Millennium Pharmaceuticals Inc. (MLNM) agreed to buy Cor Therapeutics Inc. (CORR) for Cor's anti-clotting drug Integrilin, which is already on the market and could bring Millennium to profitability by 2004. Cephalon Inc. (CEPH) acquired French pharmaceuticals firm Group Lafon to gain worldwide rights to its daytime sleepiness medicine Provigil and manufacturing facilities in France.
Until their deals close, these biotechnology companies will have to rely on their current base of marketed products and pipelines of late-stage medicines.
Among the biotech drug makers, Cephalon, of West Chester, Pa., was the only company analysts mentioned as having the chance to beat the consensus earnings estimate. The company is expected to earn 14 cents a share, according to a survey of analysts by Thomson Financial/First Call. A year ago, Cephalon lost 29 cents a share.
The company, which is fairly new to profitability, has "done a great job in selling its franchises," according to CIBC World Markets analyst Matt Geller. "They have been aggressive and effective," added Geller, who projects $39 million in sales for Provigil and $16 million in sales for the cancer pain treatment Actiq will generate earnings of 17 cents a share.
Epogen, Aranesp Sales Boost Amgen Profits
The rest of the biotechnology drug makers are not likely to post any earnings surprises based on IMS Health research data and surveys of physicians.
Amgen, Thousand Oaks, Calif., is expected to post earnings of 31 cents a share, above the year-earlier's 24 cents, on sales of anemia-fighting Epogen and its longer-acting version Aranesp, and white blood cell-boosting Neupogen. Schmidt expects combined Epogen and Aranesp sales of $610 million, helped by the first full quarter of U.S. Aranesp sales and a reversal of negative wholesaler trends. He also sees Neupogen sales of $340 million, benefitting from favorable currency exchange rates and a refocused sales message, and about $10 million in sales of its rheumatoid arthritis treatment Kineret, which was approved in November for those who have tried other treatments that failed.
Genentech Inc. (DNA), of South San Francisco, Calif., and its U.S. co-promotion partner Idec Pharmaceuticals Corp. (IDPH), of San Diego, should see profits rise from increasing demand for the non-Hodgkin's lymphoma therapy Rituxan. Throughout the past two years, a steady flow of medical studies has continued to convince oncologists that Rituxan fights a variety of blood cancers beyond its approved use of low-grade non-Hodgkin's lymphoma. Salomon Smith Barney analyst Elise Wang is expecting total Rituxan sales of $232.1 million, representing 9.1% sequential quarterly growth, and U.S. Rituxan sales of $224.5 million, representing 9.5% sequential growth.
The consensus estimate of analysts puts Genentech earnings at 20 cents a share, above the year-earlier's 16 cents, and Idec earnings at 16 cents a share, compared with 12 cents a year ago, reflecting a 3-for-1 stock split last January.
Biogen, of Cambridge, Mass., should see its earnings inch higher from its flagship multiple sclerosis treatment Avonex, which has gained patients in the U.S. and Europe, where its biggest competitor, Serono SA's (SRA) Rebif, sells. Despite six-month data from a head-to-head study suggesting less relapses and fewer lesions occurred in patients given Rebif compared with those given Avonex, Avonex sales are growing, said Schmidt, who estimates Avonex sales of $253 million, up 24% year-over-year. He forecasts earnings of 48 cents, matching consensus estimate and a penny ahead of the year-earlier's results.
Synagis Could Drive MedImmune Sales Higher
MedImmune, of Gaithersburg, Md., has endured a plateau in sales of its flagship drug Synagis, which treats lower respiratory tract disease in babies, but Geller says the product still has legs if the sales force promotes the use in even more premature babies. The fourth quarter kicks off the Synagis season of October to early spring. After two quarters of minimal Synagis sales, Wang said Synagis should log U.S. sales of $234 million, which would drive earnings to about 45 cents a share, within the company's forecasted range of 45 cents to 46 cents. A year ago, MedImmune earned 37 cents a share.
Genzyme Corp.'s General Division (GENZ), of Cambridge, Mass., already has reported a 30% rise in revenue to $264 million, led primarily by Renagel, a treatment for elevated phosphate levels in patients with end-stage renal disease. Although Renagel sales of $56 million more than doubled from a year ago, they showed just slight growth from the third quarter.
Gaucher disease treatment Cerezyme sales rose 7% to $146 million. Genzyme did not report earnings, and many analysts did not change their forecasts for the quarter following the revenue increase. The First Call consensus estimate stayed at 30 cents a share, matching the year-ago period's earnings, which were adjusted for a 2-for-1 stock split.
Immunex, of Seattle, still suffers from a production capacity problem for its flagship rheumatoid arthritis therapy Enbrel, in spite of initiatives to enhance production yields. The company is in the midst of revamping a factory in Rhode Island, which is not expected to be operational until the second half of this year. However, with the supply the company has, Immunex has been able to add patients off of its registry for Enbrel.
In satisfying some of the patient demand and raising Enbrel prices 4.9%, Immunex raised its fourth-quarter projections for Enbrel sales to between $205 million and $215 million, from $200 million. Geller is expecting earnings of 6 cents a share, 2 cents below the analysts' consensus, on sales of $205 million. A year ago, the company earned 9 cents.
Chiron Corp. (CHIR), of Emeryville, Calif., is expected to earn 26 cents a share, compared with adjusted pro forma earnings of 10 cents a share a year ago, which excludes write-offs of purchased in-process technologies, amortization expenses related to the acquisition of PathoGenesis and compensation for past hepatitis C virus diagnostic sales. Wang anticipates total product sales of $220 million, rising 34% year-over-year, with sales contributions of $27 million from the cancer medicine Proleukin, $23 million from the multiple sclerosis treatment Betaseron, $32 million from the cystic fibrosis medicine Tobi, $48.7 million from nucleic acid testing systems and $113 million from vaccines.
-By Beth M. Mantz, Dow Jones Newswires; 201-938-5287; beth.mantz@dowjones.com
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