Biotech investors have been taken on a roller coaster ride over the past few months as stratospheric gains in the fourth and first quarters have been realized to pay tax bills and rebalance to other industries.
While Foolish investors should never focus too much attention on short-term news that can move stocks up or down week to week, such moves can be tied to important developments that may impact investors over the long term, too.
1. United Therapeutics
Between mid-February and April 28th, United Therapeutics shares slumped 15% to $89. However, a solid first-quarter earnings report has jolted new life into share prices, sending them up 17% since.
That enthusiasm stems from United Therapeutics reporting that more patients were prescribed its pulmonary arterial hypertension, or PAH, drugs last quarter. That allowed United Therapeutics sales to climb 18% from a year ago to $289 million in the first quarter.
Sales Remodulin -- United Therapeutics' top-selling drug -- grew almost 19% to $136 million. Tyvaso and Adcirca, which is now being prescribed in two out of every three pulmonary hypertension patients, were also strong performers, with year-over-year sales advancing 13% and 22%, respectively.
Overall, analysts expect United Therapeutics to generate full-year 2014 EPS of $8.28, which gives United a P/E of less than 13. Shares may prove even cheaper if new drugs capture market share. United Therapeutics' recently won approval for Orenitram, an oral dose of prostacyclin.
Actelion already markets Tracleer for PAH patients, and Tracleer generated sales of $437 million during the first quarter -- more than all three of United Therapeutics' drugs combined.
Last fall, Actelion launched Opsumit and the company expects to update investors on phase 3 results for its oral PAH drug, selexipag, soon as well. Given those two new drugs, the indication is likely to be more competitive this year than it was last year.
2. Cubist Pharmaceuticals
Cubist Pharmaceuticals also made a big move last week following its earnings release. Shares advanced 14% after Cubist Pharmaceuticals reported adjusted EPS of $0.10 instead of an expected loss.
The EPS surprise came thanks to Cubist's sales advancing 14% to $261 million. Earnings would have been even higher except that one-time items knocked them down by $0.20.
Investors took Cubist shares down from $80 in early March to the low $60s ahead of the earnings report on concerns over Cubicin, a drug for bacterial infection. Cubicin isn't recommended for use in pneumonia patients, so the first quarter is typically its weakest given pneumonia is more common in the cold weather months.
As a result, Cubicin's sales fell 14% between the fourth and first quarters. However, Cubicin's sales were still up 5% year over year, reaching $212 million in the quarter, despite U.S. volume falling 3.6% because of the seasonal headwinds.
In addition to looking beyond Cubicin's first-quarter results, investors seem encouraged by the potential for two new drug approvals.
In March, Cubist won unanimous support from a key advisory panel for Sivextro, a drug for acute bacterial skin infections like MRSA. The FDA is expected to make a decision on approval on June 20th, and if approved, Cubist thinks Sivextro's less frequent dosing and shorter treatment regimen can help it win market share from Pfizer's Zyvox.
Cubist also filed ceftolozane/tazobactam, a drug used to treat complicated urinary tract and intra-abdominal infections, for approval on April 21st.
Overall, Cubist expects sales to total $1.19 billion to $1.275 billion this year, which has Wall Street analysts projecting EPS of $1.94. Longer term, Cubist's management has set a goal of $2 billion in sales and non-GAAP operating income of $700 million in 2017.
3. Incyte Corporation
Incyte's shares jumped nearly 14% last week, despite reporting a first-quarter loss.
That suggests investors were more than happy to look beyond sales and earnings that missed estimates to focus on the potential for Incyte's fast growing myelofibrosis drug Jakafi. Jakafi's sales climbed 44% to nearly $70 million in the first quarter.
Thanks to positive phase 3 results, Incyte plans to file Jakafi for FDA approval as a treatment for polycythemia vera, a rare bone marrow disorder, by mid year.
However, Jakafi's opportunity isn't limited to myelofibrosis and polycthemia vera. The company has launched a phase 3 trial in pancreatic cancer, too.
Since pancreatic cancer remains a very tough to treat cancer with a significant unmet need, Incyte could see Jakafi gain a foothold there, too, if the data are strong. That has analysts thinking Incyte may turn the corner to profitability as early as next year.
Further out, Incyte and co-development partner Eli Lilly may have an opportunity in baricitinib, a rheumatoid arthritis drug that put up solid results in mid-stage studies. Baricitinib is currently in phase 3 trials with results expected in 2015.
Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned. The Motley Fool recommends Cubist Pharmaceuticals. The Motley Fool owns shares of Cubist Pharmaceuticals. 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.