Large Cap Biotech Earnings Preview

By Billy Fisher | October 16, 2009 AAA

In the coming days, a few of the largest biotech companies in the U.S. will report their Q3 earnings. Biotech has traditionally been a sector that has fared better than most during economic downturns. We will soon see if that trend remains to be the case. Here is what to expect when these companies announce their quarterly performance.

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Wheelin' and Dealin'
When Biogen Idec (Nasdaq: BIIB) presents its Q3 results on Tuesday before the financial markets open, analysts will be expecting the biotech company to report EPS growth of 5.1% on a 1.8% gain in sales when compared to its year-ago quarter. Shares of Biogen Idec are presently trading right around where they were at the outset of 2009, although the company has been active in seeking out avenues for future growth.

In May, Biogen Idec and Genentech submitted supplemental applications to the FDA for RITUXAN, the company's therapy for lymphoma and rheumatoid arthritis. This summer it announced a partnership with Acorda Therapeutics (Nasdaq: ACOR) to develop and commercialize a therapy for multiple sclerosis (MS).

Most recently, Biogen Idec has proceeded with a tender offer in an attempt to take out Facet Biotech (Nasdaq: FACT) in hopes that the transaction will mean future synergies for the company's MS and solid tumor business.

Record Results
The consensus is that Gilead Sciences (Nasdaq: GILD) will check in with EPS growth of 11.9% on a 27.2% pop in sales when the company reports its Q3 results after the market close on Tuesday. Shares of Gilead are down 10.5% on the year, but the stock was actually up 10.7% in 2008 while the rest of the market was taking it on the chin.

Gilead is coming off of a record Q2 that was attributable to robust sales growth from the company's antiviral franchise as well as incremental revenue provided by its recent acquisition of CV Therapeutics. Antiviral product sales increased 25.9% to $1.41 billion in Q2 of 2009 from $1.12 billion for the same period in 2008. Gilead is hoping to use the acquisition of CV Therapeutics to expand its product offerings in the area of cardiovascular diseases.

Clinical Showdown
The biotech giant Amgen (Nasdaq: AMGN) is expected to announce EPS growth of 3.3% on a 2.3% decrease in sales when it reports its Q3 figures on Wednesday. This stock also trades at a price similar to that which it traded at in the beginning of 2009. However, shares of Amgen have rallied 34.7% since hitting a 52-week low in mid-April.

In Q2, the company felt the adverse impact of product label changes that occurred in the second half of 2008 for Amgen's anemia therapy, Aransep. Year over year, sales of Aransep were down 16%. The company has more cards up its sleeve though. Amgen reported that a recent phase three head-to-head trial indicated that its Denosumab demonstrated superiority over Zometa in delaying bone metastases complications in patients with advanced breast cancer. Zometa is manufactured by Novartis (NYSE: NVS).

The Bottom Line
In many instances, organic growth may not be off the charts on a year over year basis in the biotech industry for Q3, but each of these three companies is due to report fundamentally sound results that are especially impressive given the current economic environment. The industry continues to innovate despite a greater focus being placed on cost control. None of these particular companies appear to be putting on the brakes when it comes to seeking out growth opportunities - rather just the opposite. (For more, check out The Ups And Downs Of Biotechnology.)

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