Today’s Top Health Care Stories: Intuitive Surgical, Aegerion, and Gilead Sciences

Intuitive Surgical, Aegerion, and Gilead Sciences could make waves across the health care sector this Wednesday morning.

Apr 9, 2014 at 9:23AM


Lets take a look at three stocks -- Intuitive Surgical (NASDAQ:ISRG), Aegerion (NASDAQ:AEGR), and Gilead Sciences (NASDAQ:GILD) -- which could cause a lot of market buzz across the health care sector this Wednesday morning.

Intuitive Surgical's gloomy first quarter forecast spooks investors
Intuitive Surgical has fallen more than 9% in pre-market trading this morning after estimating that its first quarter revenue will come in well below analyst expectations when it reports earnings on April 22.

Intuitive Surgical expects revenue from its flagship da Vinci surgical robots to fall nearly 59% year-over-year to $106 million. Intuitive expects first quarter revenue of $465 million, completely missing the Thomson Reuters consensus estimate of $537.9 million and representing a 24% decline from the prior year quarter.

That's quite a slowdown from the double-digit sales growth of da Vinci units in previous years, which helped Intuitive's stock soar more than 300% over the past five years. Sales of the da Vinci, which is used for minimally invasive surgeries, slowed down due to questions regarding the system's cost effectiveness, tighter budgets for hospitals, other factors. The da Vinci systems generally cost around $1.5 million each and hundreds of thousands more per year in additional maintenance fees.

Although Intuitive Surgical's immediate outlook looks bleak, the company could get back on track with a new version of the system, known as da Vinci Xi, which was approved by the FDA on April 1. The Xi features thinner and more mobile robotic arms, which should allow for smoother operations and reduce the chances of the arms interfering with one another.

Aegerion initiates a phase 3 trial for lomitapide in Japan
Meanwhile, Aegerion just announced that it has initiated patient enrollment in Japan for a phase 3 trial of lomitapide (approved as Juxtapid in the U.S. and Lojuxta in the EU) as an adjunct treatment to reduce "bad" LDL cholesterol in patients with homozygous familial hypercholesterolemia (HoFH). Aegerion was granted an orphan drug designation for lomitapide last year by Japan's Ministry of Health, Labor, and Welfare. Lomitapide was approved in Mexico in January.

HoFH is an extremely rare condition that affects one in a million people, and lomitapide is one of the world's most expensive drugs, costing between $230,000 to $290,000 per patient per year. The drug is Aegerion's only marketed product, and generated $48.5 million in net product sales for the company in fiscal 2013. Analysts believe that lomitapide could eventually generate peak sales of around $500 million in the U.S. and the EU.

However, investors should remember that the FDA and DOJ have both expressed concerns about Aegerion's marketing practices in the past, and that there is a discrepancy in market size projections: from 300 to 3,000 patients in the U.S.

The WHO takes aim at Gilead's Sovaldi
Last but not least, Gilead's Sovaldi, the potential blockbuster hepatitis C treatment which raised concerns with its cost of $1,000 per pill, is now being targeted by the WHO. The WHO issued a statement on Wednesday requesting a "concentrated effort" to reduce prices of new hepatitis C treatments like Sovaldi.

Sovaldi, which was approved last December, has been hit in the U.S. by protesters, lawmakers, and insurers demanding that Gilead lower the price of the drug, which costs $84,000 for a full 12-week course of treatment. Sovaldi is notably the first oral treatment that can be taken without an additional dose of interferon for patients with the type 2 and type 3 genotypes of the virus.

All that controversy dragged down Gilead, which has slumped 10% over the past month. Analysts had originally expected Sovaldi to generate annual peak sales of $7 billion to $9 billion, but with the future price of the drug in question, those forecasts are also called into question.

Investors should also note that the majority of Gilead's revenue is generated by its HIV and antiviral drugs, which were mostly formulated from various combinations of drugs with Viread (tenofovir). The big problem is that Viread goes off patent in 2017 -- which could seriously disrupt the revenue of its antiviral drugs portfolio. Investors will want to stay tuned as more information becomes available.

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Leo Sun owns shares of Gilead Sciences. The Motley Fool recommends Gilead Sciences and Intuitive Surgical. The Motley Fool owns shares of Intuitive Surgical. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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