This piece re-iterates what we had been discussing earlier - that the top-tier biotechs now have earnings momentum:
Biotechs Expected To End Brutal Year On Positive Note
- Jan 10, 2003 07:45 AM (Dow Jones Business News)
- finance.lycos.com
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By Adam L. Freeman
Of DOW JONES NEWSWIRES
(This was originally published Wednesday afternoon.)
NEW YORK -(Dow Jones)- Most of the nation's large biotechnology companies are
set to end a disappointing year on a bright note when they announce positive
fourth-quarter results reflecting, in part, a possible end to federal foot-
dragging as well as strong sales.
"It's been a very good quarter," said Matthew Geller, an analyst with CIBC
World Markets Corp. "There's been a very high percentage of (product approvals)
."
Despite the year's pain, some analysts see the latest quarter as the first
step toward healing bruises received during 2002. They cited regulatory
approvals as well as company filings for Food and Drug Administration review of
proposed products. Most analysts expect large-cap companies to announce results
with few surprises.
Amgen Inc. (AMGN) aided in the healing process last month when it raised its
estimates for 2003, citing strong drug sales. The company sees 2003 earnings
between $1.70 and $1.80 a share.
For 2002, Amgen said it expects product sales to increase in "a low-40% range"
from a year ago. That number is up from its previous outlook of an increase in
the high-30% range.
This will result in adjusted earnings of $1.37 to $1.39 a share for 2002, the
company said. The average estimate of analysts is now $1.38 a share for the year
and 35 cents a share for the fourth quarter, according to Thomson First Call.
"Amgen will report a good quarter," said Frank DiLorenzo, an analyst will
Standard & Poor's. The company "should meet (consensus estimates) or go a penny
above." Amgen earned 30 cents a share in the 2001 fourth quarter and $1.18 a
share for the year.
Perhaps the defining event during the quarter occurred in December, when the
company received a green light for its Rhode Island manufacturing facility. The
approval allows Amgen to boost supply of its popular inflammation drug Enbrel in
the first quarter as previously planned. The news eased worries about supply
constraints for 2003.
"With the Enbrel capacity overhang behind them, we feel increasingly confident
in our $1.25 billion 2003 Enbrel sales estimate," Merrill Lynch & Co. analyst
Eric Ende said. Amgen said it will report fourth-quarter results on the evening
of Jan. 23.
Another milestone event for the quarter was MedImmune Inc. (MEDI) receiving
approval from a federal advisory panel for its inhaled influenza vaccine
FluMist. The product, which will be co-marketed with Wyeth's (WYE)
pharmaceutical unit, is dispensed by a four-inch, syringe-looking sprayer that
pumps a weak form of the virus into each nostril to protect against the highly
contagious germ. By some estimates, the drug will bring in $500 million a year.
Besides FluMist, MedImmune is relying on Synagis, which combats lower
respiratory tract disease caused by respiratory syncytial virus in children.
Morningstar Inc. analyst Jill Kiersky views the product as "mature," implying
that its growth prospects could be limited. But Geller, the analyst with CIBC
World Markets, said the company could possibly beat earnings expectations on the
strength of the drug, given that it's been a "serious RSV season."
Geller doesn't own any stock in the biotech companies he covers. CIBC,
however, does have a recent history of investment banking with Xoma Ltd. (XOMA).
MedImmune expects to report adjusted fourth-quarter earnings of 31 cents to 33
cents a share. The average analyst estimate is 33 cents a share, according to
Thomson First Call. In 2001's fourth quarter, the company earned 45 cents a
share. MedImmune is slated to make a before-the-bell earnings announcement on
Jan. 30.
Waiting For Amevive Decision
Biogen Inc. (BGEN) should report robust earnings that are in line with
estimates or perhaps a penny above, RBC Capital Markets analyst Jennifer Chao
said. The view is based on a less-than-expected market share loss for its
multiple sclerosis drug Avonex. Chao, who doesn't deny her reputation as Wall
Street's biggest Biogen bull, said she's awaiting likely FDA approval of
psoriasis treatment Amevive before the company issues its earnings on Jan. 28.
The drug, which could be approved in a matter of days, would add a potentially
lucrative medicine to Biogen's mix and prompt the company to issue 2003
estimates, she said. But Merill's Ende, who has a sell rating on the stock,
recently wrote that Amevive's market size is "smaller than many are projecting."
Chao owns no Biogen stock, and her firm hasn't recently acted as an investment
banker for the concern. A Merrill Lynch disclosure statement says at least one
analyst on Ende's research team owns securities under their coverage. The firm
also said it has conducted business with a number of biotech companies,
including Biogen and Amgen.
The Cambridge, Mass., concern is expected to report quarterly earnings of 41
cents a share, according to First Call. In 2001, the company reported fourth-
quarter earnings of 48 cents a share. For 2002, profits are forecasted at $1.57
a share, down from $1.90 a share a year ago.
Genzyme Works Off Renagel Supply
Another Cambridge, Mass., company, Genzyme General, a unit of Genzyme Corp. (
GENZ), ameliorated some investor worries Tuesday when it said it was working
through a glut of kidney dialysis drug Renagel. The problem prompted the
company to slash 2002 projections in September.
Genzyme said Renagel sales for the quarter slipped to $51 million from $56
million, reflecting the reduction of product inventory.
For the year, the company said it will meet its lowered expectations with
Renagel sales of $157 million, down from $177 million.
Genzyme "appears to have worked (inventory) down to a manageable level," said
Bear Stearns & Co. analyst Ron Renaud, who owns no stock under his coverage. The
analyst also said his firm has no banking relationship with the company.
Analysts expect the company to announce fourth-quarter profits of 35 cents a
share and $1.08 a share for the year, compared with 29 cents and $1.17 a year
earlier. Genzyme is expected to report comprehensive results on March 5 before
the opening bell.
Genentech's Pipeline Causes Concern
Genentech Inc. (DNA) also created some 11th-hour buzz in December when it
submitted marketing applications for Raptiva, a psoriasis treatment developed
with Xoma, and for Xolair, an allergic asthma drug developed with Novartis AG (
NVS).
But Rituxan, the company's non-Hodgkin's lymphoma drug it markets with Idec
Pharmaceuticals Corp. (IDPH), drove earnings during the fourth quarter,
according to Renaud.
Bolstered by sales of Rituxan, Genentech is "going to have a very solid
quarter," Renaud said.
The analyst said that Idec, for the same reason, should report a good quarter.
Genentech said it is comfortable with the full-year average analyst estimate
of 92 cents a share, which would equate to fourth-quarter operating income of 24
cents a share. In 2001, the company earned 76 cents a share for the year and 20
cents a share in the fourth quarter.
Analysts are forecasting Idec to report a fourth-quarter profit of 22 cents a
share, up from 16 cents a share the previous year. The company is scheduled to
report results after the close of trading on Jan. 30.
But it's the weakness of Genentech's pipeline, rather than the strength of
Rituxan sales, that concern investors.
"With a slowdown in the sales of its core products, Genentech has become
increasingly dependent on its pipeline," analyst Ende wrote in a research note.
Ende said the company is leaning heavily on Avastin, a cancer drug with a likely
success rate of only 30%, for future growth.
"Therefore, there is significant potential that Avastin may never reach the
market," the analyst said.
That would reduce Genentech's projected earnings per share growth rate to
approximately 15% by 2005, he said.
Ende also referred to Xolair, Raptiva and Tarceva medicines for cancer as
representing small market opportunities, small profits or being "extremely risky
projects."
Genentech said it will report quarterly earnings on Jan. 15 after the close of
the trading bell.
-By Adam Freeman, Dow Jones Newswires; 201-938-5023
Dow Jones Newswires
01-10-03 0745ET
Peter |
