Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Good morning, fellow Foolish investors! Let's check in on the top stories in health care this morning.
AstraZeneca falling on hard times
Shares of Astrazeneca PLC (NYSE:AZN) are down 3.59% in premarket this morning after the company reported an eye-popping 28% drop in earnings last quarter compared to a year ago. Pre-tax profit also fell 57% to $3.3 billion for the year.
As a refresher, AstraZeneca's revenues have been falling for a while now as they've lost patent protection for key drugs in their commercial portfolio. So, this isn't a new or unexpected turn of events.
What is new is the company's worse than expected guidance for 2014 and beyond. Revenues are expected to drop by double-digits percentage-wise, as additional drugs like Crestor and Nexium come off of patent protection. In short, revenues aren't expected return to 2013 levels until at least 2017.
If there was a silver lining in today's earnings release, it was AstraZeneca's decision to keep paying a dividend of $1.90. However, the company will not restart its 2012 share buyback program, choosing instead to focus on putting cash to work in its clinical pipeline.
And that's where AstraZeneca is seeking redemption. AstraZeneca has 11 new late-stage clinical candidates compared to a year ago, and another 19 experimental drugs that could enter late-stage trials soon. So, their pipeline does hold promise for turning things around.
That said, investors might want to pass on AstraZeneca for now. There are several other large pharmas and biotechs that offer smoother sailing for the time being.
Gilead on the rebound?
And one of those large biotechs could be Gilead Sciences. Shares of the giant biotech tumbled yesterday by nearly 5% after the company decided not to give yearly guidance for its new hepatitis C drug Sovaldi during its earnings release last Tuesday.
Despite beating analysts' earnings per share estimates by 5%, the market clearly wanted to know if Sovaldi is the world beater it's being billed as by many experts on Wall Street. With the benefit of a day to digest the lack of guidance, the market is warming up to Gilead again, with shares rebounding over 1% in premarket this morning.
What's key to understand is that even without Sovaldi sales, Gilead shares are still only trading at about 10 times annual revenues. Put simply, Sovaldi's sales should help to boost share price over the long run, even if AbbVie's competing hep C drug is approved later this year. Investors with a long-term outlook may want to keep tabs on Gilead going forward.
Insiders keep selling at Galena
Turning our attention to small-caps, shares of Galena Biopharma (NASDAQ:GALE) may be in for another down day after word hit the Street late yesterday that Director Stephen S Galliker cashed in $1.25 million worth of options this week. Specifically, Mr. Galliker sold 300,000 shares at an average price of $4.17.
Normally a Director selling options as part of his or her overall compensation package wouldn't be newsworthy. The issue at hand is that Galena's insiders have completed over a dozen insider sells over the past two months; some of which have been particularly large, such as CEO Mark Ahn's $3.8 million sell last January. So, Mr. Galliker's latest sale is starting to foment concern among investors.
What's my take? I think there are two ways to look at these insider sales. One view is that insiders are simply taking advantage of the stock's 200% plus rise to put some money in the bank. That's fairly normal and nothing to worry about.
Another view is that insiders are selling stock before their fourth quarter earnings release, when investors will get a better feel for how Abstral is selling. There is some concern that Abstral revenues will be weaker than expected, and the interim analysis for the company's lead clinical candidate, NeuVax, could be delayed until next year. It's hard to say which view is correct at present, so we'll have to wait and see. .
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George Budwell owns shares of Gilead Sciences. The Motley Fool recommends Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.