How Are Earnings Panning Out in the Biotech Sector?http://www.fool.com/investing/general/2014/02/04/how-are-earnings-panning-out-in-the-biotech-sector.aspx George Budwell
February 4, 2014
Last week saw earnings season start in earnest in the health care sector. So, with several other health care companies expected to report soon, I think it's a good idea to look at what's transpired so far and see if any trends are forming.
To do so, I'll first take a brief look at how AbbVie, (NYSE: ABBV), Alexion Pharmaceuticals (NASDAQ: ALXN), and Celgene Corporation (NASDAQ: CELG) fared last quarter. In a follow-up article, I'll recap the earnings highlights of three other biotechs that hit the tape last week and give my take on how earnings are shaping up across the sector.
AbbVie's earnings hit the mark
Looking ahead, AbbVie is projecting 2014 revenues of around $19 billion or around $3.10 per share on an adjusted basis. The good news is that this estimate does not include any potential revenues from the company's experimental hepatitis C drug, ABT-450, which will be up for FDA approval later this year. So, there is a good chance AbbVie will increase guidance if the drug is approved.
That said, I think there is a better than average chance ABT-450 will get approved this year after showing functional cure rates of 96% in late-stage clinical trials. In fact, ABT-450 could become a serious rival to Gilead's Sovaldi in the hepatitis C space. That's certainly welcome news for AbbVie investors, because Humira will start to come off of patent protection as early as 2016. In short, the company needs a megablockbuster to replace all the revenues that will eventually fall victim to the patent cliff.
Alexion's earnings increased by leaps and bounds -- sort of
But what got the shares moving last week was Alexion's strong outlook for 2014. In particular, Alexion stated that earnings should increase by a handsome 9.5% over Wall Street's estimates. Breaking this down further, however, it turns out this dramatic upshot in projected earnings is the result of a lower than expected tax rate in 2014, not surprisingly strong revenues. So, while Alexion's only approved drug Soliris is indeed selling nicely since its launch, this upside surprise is mostly about retained earnings via tax breaks.
Celgene underwhelms investors, but maybe that's the plan?
Despite Vidaza's poor sales, there were some bright spots. Sales of the company's new cancer drug Abraxane, for example, increased 90% in the