fwiw...
ecom.zacks.com
With talk about a double-dip recession, and the markets continued downward spiral, investors should be cautious with their money. However, the truth is Americans are getting older and biotech companies are making remarkable breakthroughs everyday. Using the experience of professionals like Nadine Wong, editor of the Biotech Sage report has been helping investors profit during bull and bear markets. Regardless of the overall market direction, there are still individual securities that are profitable. The challenge is finding which ones are set to make money, and which ones to avoid. Today, Nadine reviews the recent biotech companies' earnings news and which companies have products in the pipeline that should profit investors.
Commentary August 5, 2002
In the past few months the overall markets have taken a beating. Investors have experienced one down day after another in the market. And it's not just technology stocks- any publicly traded company that hints of cooking the books, warns of forthcoming earnings disappointment, or whose share price drops in value dramatically. In this type of market, you would think the only stocks worth owning are large, conservative, slow growing stocks that pay dividends.
But is it all really justified?
For the biotech sector, Genentech (NYSE: DNA ) kicked off the earnings season by announcing a steep second-quarter loss due to a half-billion dollar jury verdict against the company. Excluding that charge, Genentech's cancer drugs, Rituxan and Herceptin, continue to show strength as revenue rose 26 percent to $652.3 million. Now, we're deep in the earnings seasons. Amgen (NASDAQ: AMGN ) has led the way for the biotechs. Amgen's share price gained significant ground following a better-than-expected earnings announcement - up +27% - and the FDA approval of Aranesp for treatment of chemotherapy-induced anemia. Looking ahead, the company has revised its earning expectations and expects profits, excluding the effects of the Immunex acquisition, to increase at a mid-20% rate versus an earlier forecast of a low 20% rate.
On July 10th, both the American Stock Exchange Biotech Index (^BTK) and the NASDAQ Biotech Index (^NBI) reached their lowest point for the year, levels that we have not seen since late 1998. But, higher than expected second quarter earnings in the biotechnology industry revived investors' confidence and pushed both the American Stock Exchange Biotech Index and the NASDAQ Biotech Index up almost +14% in the past 6 days. This could finally mark a turning point for some of the beaten-up biotechs that sold for discount prices just days ago.
Along with Amgen, most of the biotech index companies including Gilead Sciences (NASDAQ: GILD ), IDEC Pharmaceuticals (NASDAQ: IDPH ) and Chiron (NASDAQ: CHIR ) posted strong second-quarter earnings that beat Street estimates and fueled the indices' upward trend.
Gilead announced a second quarter net profit of $19.7 million or 10 cents per share, compared with a net loss of 17 cents per share a year earlier. Revenue also rose +115 % to $109.4 million from $50.7 million last year. Sales of Gilead's Viread, recently launched for the treatment of HIV totaled $44.7 million, while sales of AmBisome, a fungicide rose +23% to $47.7 million from a year earlier.
Chiron reported second quarter earnings rose +47% with revenue up +15% to $299 million from $261 million. The company attributed this increase to higher sales of several products: the inhaled antibiotic Tobi used for treating infections in cystic fibrosis patients, the HIV/Hepatitis C test Procleix and the multiple sclerosis drug Betaseron. Chiron said that it still expects the full-year earnings to rise approximately +20% to between $1.10 and $1.20 per share.
IDEC reported a total revenue surge of +50% to $97.1 million, fueled by a +43% increase in Rituxan sales as well as revenue stemming from the recently approved non-Hodgkin's lymphoma drug Zevalin. Second-quarter net income was up +40% to $35.4 million, or 20 cents per share compared to 15 cents per share a year earlier.
Only a minority of the biotech companies reported lackluster earnings for the second quarter, Biogen (NASDAQ: BGEN ), Medimmune (NASDAQ: MEDI ), and Genzyme (NASDAQ: GENZ ). Though a poor earnings report would usually lower the value of a stock, the overall indices performance and investor enthusiasm sheltered these biotech stocks and kept them in positive territory.
Even though we see a light at the end of the tunnel, there are still downdrafts along the way that could influence the recovery of the stock market. More specifically, on August 14th, CEOs need to sign an oath certifying their business dealings and accounting practices. Followed by the one-year anniversary of 9-11. Then there is the continued release of economic indicators. Undoubtedly these events will bring out the skeptics causing investors to scatter - except hedge fund managers who will be covering their short sales producing volatility in the markets.
However, it is not too late to profit from the recent biotech uplift, and there are still biotech companies trading at prices near cash levels. One most promising company is Millennium Pharmaceuticals (NASDAQ: MLNM ) and it's currently trading at about 2 times cash.
Millennium has a robust pipeline, growing sales of their cardiovascular drug, Integrilin, a strong balance sheet with an estimated $1.9 billion in cash and their novel proteasome inhibitor, Velcade in Phase III clinical trials to treat multiple myeloma. Moreover, the company announced second-quarter revenues of $91.9 million as compared to $59.1 million for the same period in 2001 based on $46.9 million in strategic alliance revenue and $44.9 million in revenue from worldwide sales of Integrilin. With the biotechnology sector gaining ground, Millennium represents an enticing prospect for investors.
The market's irrational pessimism can create opportunities, but on a stock-by-stock basis. |
