Top Biotechs With Upside Ahead of Earnings (GILD, AMLN, ARIA, INCY, JAZZ, DNDN, HGSI, ILMN, AMGN, CELG, BIIB, BMRN, LIFE, REGN, AMLN, CBST, ONXX, THRX, VPHM)
Earnings season is afoot and we wanted to see how the analysts are ranking the top biotech stocks before these companies begin their earnings reports. We pulled the top biotech and biohealth related stocks which have market caps of $1 billion and higher and we broke these out into three separate groups by size. The large-cap biotechs are ranked in descending order by size. The stocks under $10 billion in market cap and then under $3 billion were broken out in alphabetical order.
We have compiled some color on selected names, but we also listed the current trading prices, the implied price targets from Thomson Reuters, gave multiples of earnings estimates (from Thomson Reuters) for the forward year (2012 in most cases), showed the trading history and listed a price-to-book ratio. We did not take any merger news into consideration so that we could just show an as-is model here.
Of the large cap stocks in biotech, Gilead Sciences, Inc. (NASDAQ: GILD) was the leader. Several other standouts in the biotechs under $10 billion with a high degree of expected upside were as follows: Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA), Incyte Corporation (NASDAQ: INCY), and Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ). Other biotechs such as Dendreon Corporation (NASDAQ: DNDN), Human Genome Sciences, Inc. (NASDAQ: HGSI) , and Illumina, Inc. (NASDAQ: ILMN) also screen out as those with the most upside, but that is because of huge share price drops of late.
THE $10 BILLION AND OVER IN MARKET CAP
Amgen Inc. (NASDAQ: AMGN) is the largest of the independent biotechs and it remains stuck like Chuck. At $56.71, the consensus target is $64.85 and the stock trades at a mere 10-times 2012 earnings estimates. Its 52-week range is $47.66 to $61.53 and its market cap is north of $52 billion. It is also worth about 2-times book value. Implied Upside: 14.3%.
Gilead Sciences, Inc. (NASDAQ: GILD) trades around $40.37 and estimates have a consensus price target of $47.96. This forward earnings multiple is only about 9.0 now. The 52-week range is $35.28 to $43.49, the market cap is $31.1 billion and the company trades at more than 5-times book value. Implied Upside: 18.5%.
Celgene Corporation (NASDAQ: CELG) trades at $64.97 and the consensus price target is about $71.86. This one is more expensive than many of the established biotech players at more than 15-times forward earnings. Celgene’s 52-week range is $48.92 to $67.01, its market cap is $29.8 billion, and it trades at nearly 5-times book value. Implied Upside: 9.8%.
Biogen Idec Inc. (NASDAQ: BIIB) remains the big-cap recovery stock of biotech. At $102.00, its consensus price target is $110.36, and it trades at close to 16-times forward earnings. The market cap is about $24.7 billion, the 52-week range is $57.58 to $109.63, and the company is worth about 4-times book value. Implied Upside: 8.5%.
UNDER $10 BILLION IN MARKET CAP
BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) trades at $33.05 and analysts have a consensus price target of $36.25. Unfortunately, this one is expected to lose money this year at -$0.31 EPS and next year’s earnings are expected to be -$0.04. The 52-week range is $21.70 to $34.50, its market cap is $3.7 billion, and it is listed as trading at close to 5.0-times book value. Implied Upside: 9.6%.
Illumina, Inc. (NASDAQ: ILMN) trades around $26.56 and the consensus price target is about $42.90. The company trades at more than 18-times next year’s earnings estimates, its 52-week range is $25.57 to $79.40, its market cap is about $3.3 billion, and it trades at almost 2.9-times its book value. Implied Upside: 62%.
Life Technologies Corporation (NASDAQ: LIFE) may be difficult to compare after a huge run higher followed by a recent tank in the share price. It is also on the equipment side. Shares are back down around $37.24 and the consensus analyst price target is now down to $52.66. The company now trades at barely 9-times forward earnings, if you trust the “E” in that P/E ratio. LIfe’s 52-week trading range is $35.30 to $57.25, its market cap is about $6.7 billion, and the stock is worth about 1.5-times the stated book value. Implied Upside: 41%.
Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) trades around $60.00 after a large drop due to a $400 million convertible note offering. The consensus price target is about $66.14. The company is also expected to lose as much as $2.00 per share in 2012. It has a 52-week trading range of $24.29 to $79.90, its market cap is $5.5 billion, and it trades at more than 12-times its previously stated book value. Implied Upside: 10.1%.
UNDER $3 BILLION IN MARKET CAP
Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN) trades around $10.14 and the consensus price target from analysts is $13.44. The 52-week trading range is $8.03 to $21.23, its market cap is about $1.5 billion, and it is worth about 4.6-times book value. Implied Upside: 32.5%.
ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) trades around $10.25 and the consensus price target is $15.44. The company is expected to have losses this year and next. Its 52-week trading range is $3.51 to $13.50, its market cap is $1.35 billion, and the book value at the last report was barely positive. Implied Upside: 50%.
Cubist Pharmaceuticals, Inc. (NASDAQ: CBST) was another big winner earlier in the year and its shares are now at $36.71 versus a consensus price target of $40.82. This used to be a value stock but now trades at closer to 22-times next year’s earnings estimates. The 52-week range is $20.81 to $39.29, the market cap is $2.24 billion, and it trades at just over 3-times book value. We once considered this a biotech buyout target, but that is in the past. Implied Upside: 11%.
Dendreon Corporation (NASDAQ: DNDN) shares are now around $9.40 and the consensus analyst target has come down all the way to $13.72. The company has no forward P/E ratio now as it is expected to lose money. The 52-week range is $7.81 to $43.96, its market cap is down to $1.4 billion, and it is listed as being worth more than 3-times its own stated book value. Implied Upside: 45%. Shares have fallen far from grace, so analyst targets and the ratios may all look a bit off. We also cannot count on estimates since the analysts and the company got this one so wrong on the end demand for Provenge. Now we have to hope that Provenge can have many more expanded uses outside of prostate cancer or this is a hard one to follow. What is odd is that Provenge is being tested for other uses and those could reignite interest if more promising data ever comes out. If not, let’s just say this was a painful lesson in biotech.
Human Genome Sciences, Inc. (NASDAQ: HGSI) is now up around $12.81 after buyout rumors and the consensus target is still listed as being roughly $24.00. The company trades at about 24-times next year’s earnings estimates, its 52-week range is $10.40 to $30.15, its market cap is now under $2.5 billion, and it is worth about 5.3-times its book value. Implied Upside: 87%.
Incyte Corporation (NASDAQ: INCY) trades around $14.04 and anlaysts have a consensus price target of $22.92 on the stock. It is expected to lose money this year and next year and the 52-week range is $12.58 to $21.15. While there is a $1.77 billion market cap, Incyte’s is listed as having a negative book value as laibilities exceed assets. Implied Upside: 63%.
Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ) trades around $40.00 after a sharp drop due to an FDA warning. That may make the figures a bit distorted. The consensus price target is $54.00 but that does not include the FDA impact. Jazz trades at only about 10.6-times next year’s earnings estimates. Its 52-week range is $10.51 to $47.88, its market cap is almost $1.7 billion, and the company trades at close to 16-times an implied book value. Implied Upside: 35%.
ONYX Pharmaceuticals, Inc. (NASDAQ: ONXX) trades at close to $34.50 and the consensus target is closer to $44.60. It is one which is also expected to lose money this year and next year. The 52-week trading range is $26.17 to $45.90, its market cap is $2.2 billion, and the stock trades at close to 3.5-times its book value. Implied Upside: 29.2%.
Seattle Genetics, Inc. (NASDAQ: SGEN) trades around $20.50, above the $19.15 consensus analyst price target. The company is expected to lose money in 2011 and 2012. With a 52-week range of $12.29 to $22.37, its market cap is $2.35 billion, and it trades at close to 9-times book value. Implied Upside: NEGATIVE by -6.5%.
Theravance, Inc. (NASDAQ: THRX) trades around $21.40 and analysts have a price target of $27.43 for the stock. The company is another one expected to lose money this year and next. The 52-week range is $16.44 to $28.95, the market cap is $1.8 billion, and it is another one that trades with a negative tangible asset level. Implied Upside: 28%.
ViroPharma Incorporated (NASDAQ: VPHM) trades around $19.00 and the consensus price target is $23.54. Due to an expected drop in royalties, its earnings are expected to be halved in 2012 versus 2011. Its 52-week range is $14.39 to $22.16, its market cap is about $1.45 billion, and it trades at about 1.5-times its stated book value with a large portion of assets as intangible assets. How this one looks on a standalone basis through time is a guess. Implied Upside: 24%.
On all of these implied upsides, please be sure to do your own research. We encourage our readers to challenge Wall Street analysts rather than merely following them blindly. Many cases have been there before were the analysts were just dead wrong. We also cannot help but notice how the biotech sector often has two very same observations based upon the exact same set of data, yet one analyst will say “Buy” and the other will say “Sell.”
JON C. OGG
Gilead Sciences, Inc. (NASDAQ: GILD) has been fighting an image of being “dead money” for biotech investors for a year. Now the company has disclosed after the close on Friday that it has received a subpoena from the Department of Justice.
The exact office is the United States Attorney’s Office for the Northern District of California.
We actually have very little as to what the details are but the company said that the DOJ has requested documents related to the manufacture, and related quality and distribution practices of the company. Specifically noted were Atripla®, Emtriva®, Hepsera®, Letairis®, Truvada®, Viread® and its investigational fixed-dose combination of Truvada and EdurantTM.
Here is where the issues is going to arise… Gilead said that it “is cooperating in this civil and criminal investigation.”
CRIMINAL?????? When investors see a civil charge that is one thing. Including “criminal” in the wording with the documents pertaining to just about all of its major products and some of its research candidates is not going to fly well.
That is not exactly what shareholders want to hear about. Shares closed down 2.26% at $40.23 and its 52-week trading range is $31.73 to $42.93. The after-hours has shares trading down some 2.25% more around $39.25.
It appears that someone was concerned, or worse, today in the options trading. There was not a highly unusual share trading volume in stock during the trading day but there is elevated trading in the following PUT options:
- JUNE $40 PUTS 2,264 contracts versus a prior open interest of 2,552 contracts;
- JULY $38 PUTS 2,295 contracts versus a prior open interest of 1,361 contracts;
- JAN12 $37.00 PUTS 500 contracts versus a prior open interest of 500 contracts.
This is not highly unusual options contract trading but it does stand out at least some.
JON C. OGG
Bioheath Investor is creating some ongoing outlook pieces as 2010 ends so we have an outline of what to expect for 2011. We have already given the “Best of Big Biotech in 2010″ and now we want to focus on “The Big Biotechs With The Most Upside for 2011.” Using “Big Biotech” implies market caps of those with a market cap of $1 billion or higher. It was surprising that many of those big biotechs are actually trading much higher than their projected price targets.
Our screen generated 7 of the pack with implied upside of more than 15% for 2011. Those making the screen were Amgen Inc. (NASDAQ: AMGN), Gilead Sciences, Inc. (NASDAQ: GILD), Celgene Corporation (NASDAQ: CELG), Human Genome Sciences, Inc. (NASDAQ: HGSI), Dendreon Corporation (NASDAQ: DNDN), Incyte Corporation (NASDAQ: INCY), and Acorda Therapeutics, Inc. (NASDAQ: ACOR) made the grade for those with the most implied upside to the average analyst price targets with a one-year horizon.
We did create a brief table showing the tickers, the current price, the implied analyst consensus price target from Thomson Reuters, the implied upside to that target, and the 52-week trading range. More importantly, we gave an added breakdown on each with supporting data and color for building such an outlook.
|Stock||Current||Target||Implied Gain||52-Week Range|
|AMGN||$56.13||$65.39||16.5%||50.26 – 61.26|
|GILD||$36.54||$44.67||22.2%||31.73 – 49.50|
|CELG||$60.28||$70.48||16.9%||48.02 – 65.79|
|HGSI||$24.63||$35.17||42.8%||20.56 – 34.49|
|DNDN||$35.81||$52.73||47.2%||25.78 – 57.67|
|INCY||$16.81||$21.08||25.4%||8.50 – 17.48|
|ACOR||$27.60||$33.58||21.6%||24.99 – 40.48|
Amgen Inc. (NASDAQ: AMGN) has been range-bound for so long that we have called it a Big Pharma company masquerading as a biotech. It is THE largest of all U.S.-based biotechs out there. The 16.5% implied upside to a consensus target of $65.39 would mean a multi-year high as this one has been greatly range-bound in a $50 to $60 range. We’ll be looking forward to more data on its prostate cancer indication possibilities. The market cap here is well over $50 billion and it has so far survived its political risks and reimbursement risks from Washington D.C. What else is there really to add?
Gilead Sciences, Inc. (NASDAQ: GILD) has a high implied upside of more than 22% and it ranks among the biggest biotechs in the world with its $29.6 billion market cap. The implied target of $44.67 has already been breached before as the 52-week high is $49.50. Gilead even peaked at $55 back in 2008 before the meltdown. Its recent loss may have become InterMune’s gain.
Celgene Corporation (NASDAQ: CELG) has become harder and harder to evaluate on its valuation versus growth, but grown it has… even if shares have been range-bound. Its market cap is north of $28 billion based on REVLIMID, THALOMID, and others. If it makes that near-17% upside to $70.48, that will be a new 52-week high and will be within striking distance of the 2007 and 2008 highs.
Human Genome Sciences, Inc. (NASDAQ: HGSI) is the #2 stock of the implied upside stocks worth more than $1 billion. The implied event is the FDA review of Benlysta for lupus in March 2011 and if approved it would be the first lupus treatment in the last 50 years. While the implied upside is almost 43% to $35.17, Human Genome shares have already traded as high as $34.49 over the last year. Two recent analyst calls could not have been more opposite.
Dendreon Corporation (NASDAQ: DNDN) won the pole position as #1 with the most implied upside. Dendreon is a 2011 story as it telegraphed that its Provenge is likely to see a later in the ramp up and back-ended growth cycle as more capacity comes on line. The company is also seeking expanded Provenge manufacturing approval. While the implied upside is 47% to the $52.73 target, shares have traded north of $57.00 this year. We recently saw a very bullish outlook from a research report here.
Incyte Corporation (NASDAQ: INCY) is expected to have some 25% upside to its $21.08 consensus target, and it should be noted that it has a 52-week high of only $17.48. Thomson Reuters expects a decline in 2011 revenues and the story is still one that can go either very well or could backfire as its losses mount. Incyte’s market cap is still north of $2 billion and its cash is in excess of $400 million as of its September 30, 2010 balance sheet. Keep in mind that at the time of that balance sheet, debt and deferred liabilities already offset that cash balance. Incyte is one that could be a huge wild card ahead.
Acorda Therapeutics, Inc. (NASDAQ: ACOR) is one that is close enough to the 52-week lows that the implied upside may not be believed by many investors. The implied upside to the $33.58 target is still over 21%, but shares have come off the yearly highs by more than 30% so far in 2010. Its market cap is barely over the $1 billion line at $1.08 billion and we’d rate this another wild card for biotech investors.
As far as how these big biotech targets compare with a fresh initiation from Credit Suisse, that can be seen here. Keep your eyes out for both Human Genome Sciences and Dendreon in 2011. Those are both exponential winners and were up for review in late 2010 as they were among the field of ten-baggers with implied gains of 1,000% or more.
JON C. OGG
Gilead Sciences, Inc. (NASDAQ: GILD) terminated its ARTEMIS-IPF Phase III trial which was ongoing for its ambrisentan in patients with idiopathic pulmonary fibrosis. This is not one of those good halts. The trial was halted due to lack of efficacy.
This is potentially a huge win for InterMune Inc. (NASDAQ: ITMN). We recently noted the situation driving it up and called it a quest for ten-baggers after Europe’s EMA adopted a positive opinion that recommended granting marketing approval for its Esbriet (pirfenidone) in adults for treating mild to moderate idiopathic pulmonary fibrosis. That EMA decision was after the FDA in the United States rejected the drug despite a positive indication in a panel review.
Last week there was a come-along analyst call in InterMune from Wedbush calling for a $55 target due to this new unexpected development.
Sometimes smaller companies win on accident over their larger rivals. Gilead shares are down 1.1% at $35.95.
InterMune shares are up 1% at $36.70 versus a 52-week range of $8.34 to $49.46. It was just as recently as December 16 that InterMune shares were down at $14.27.
Long live the ten-baggers!
JON C. OGG
Top BioHealth Analyst Upgrades & Downgrades (AMGN, AZN, BAY, BIIB, CELG, EXAM, GILD, GSK, HGSI, LH, NVS, PFE, UTHR, WCRX)
We have seen many research calls from Wall Street analysts with upgrades, downgrades, and initiations this Tuesday in the world of biotech, pharmaceuticals, and biohealth. Some of the key calls we have seen are as follows:
Amgen Inc. (NASDAQ: AMGN) Started as Neutral w/ $58 target at Credit Suisse.
AstraZeneca (NYSE: AZN) Cut to Underperform at Credit Suisse.
Bayer AG (NYSE: BAY) Raised to Outperform at Credit Suisse.
Biogen Idec Inc. (NASDAQ: BIIB) Started as Neutral w/ $68 target at Credit Suisse.
Celgene Corporation (NASDAQ: CELG) Started as Neutral w/ $60 target at Credit Suisse.
Celgene Corporation (NASDAQ: CELG) Maintained Buy with $68 price target at BofA/ML.
Examworks Group Inc. (NASDAQ: EXAM) Started as Outperform w/ $22 target at Credit Suisse.
Gilead Sciences Inc. (NASDAQ: GILD) Started as Outperform w/ $52 target at Credit Suisse.
GlaxoSmithKline plc (NYSE: GSK) Raised to Neutral at Credit Suisse.
Human Genome Sciences Inc. (NASDAQ: HGSI) Started as Outperform w/ $31 target at Credit Suisse.
Lab Corporation of America (NYSE: LH) Started as Neutral w/ $89 target at Credit Suisse.
Novartis (NYSE: NVS) Raised to Outperform at Credit Suisse.
Pfizer Inc. (NYSE: PFE) Maintained Outperform at Credit Suisse.
United Therapeutics Corp. (NASDAQ: UTHR) Started as Neutral w/ $57 target at Credit Suisse.
Warner Chilcott plc (NASDAQ: WCRX) Reiterated Buy at BofA/ML.
You can join our free daily email distribution list from 24/7 Wall St. to hear more about broader analyst upgrades and downgrades, top day trader and active trader alerts, news on Warren Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.
JON C. OGG
Things have changed in the last week. The mid-term elections took away the majority of the House of Representatives, and the Senate now no longer has the super-majority which could get laws passed no matter what they included. Now it seems that the tax cuts may be extended for another year or maybe two years, which could imply a permanent change ahead if the 2010 election trends remain close to the same in 2012. Quantitative easing from the FOMC is meant to drive investors into riskier assets and create a higher pricing environment to avoid deflationary pressure. Generally speaking, those riskier assets are commodities, and broader stocks tied to industrial, exports, financials, and more. But what about biotech and emerging pharma? So far, QE2, tax extension, and the reversal of ‘the new normal’ has not highlighted biotech in the slightest.
Biotech HOLDRs (NYSE: BBH) and SPDR S&P Biotech (NYSE: XBI) are classic examples of underperforming ETFs in the last week as you can see in the chart below. The Biotech HOLDRs actually fell during the rest of the market gains, while the SPDR S&P Biotech ETF significantly underperformed the PowerShares QQQ (NASDAQ: QQQQ).
A research call this last Thursday came from Goldman Sachs and it was cautious in Celgene Corporation (NASDAQ: CELG) and Gilead Sciences Inc. (NASDAQ: GILD); and the call was very cautious in Amgen Inc. (NASDAQ: AMGN) and Biogen Idec Inc. (NASDAQ: BIIB). Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) was the one that Goldman Sachs liked, and despite its large gains so far in 2010 the stock performed well after rising from about $68 early Tuesday to close the week out at $72.72.
MannKind Corp. (NASDAQ: MNKD) is one of those companies that will have nearly zero impact from Quantitative Easing nor from who is in control of the House, Senate, or White House. Alfred Mann’s inhalable insulin candidate took a hit because of fraud allegations from a terminated employee who brought up study misconduct concerns. Shares went from $6.20 on Thursday early morning to close the week out at $5.54 for roughly a 10% drop. The 52-week range is $4.76 to $11.12, and the general theme is that AFREZZA is farther and farther away from approval.
Human Genome Sciences Inc. (NASDAQ: HGSI) has lost some of its high-flyer status compared to 2009 and early 2010, and this week brought about a negative cloud on teh company even though the company itself was not at fault. The SEC charged a French research doctor with insider trading that allowed a hedge fund to dump 6 million shares after a tip that the drug Albuferon for Hepatitis C had negative test results. The problem is that the incident goes back to 2007. Human Genome shares were nearly at $27.00 at the start of the week and they closed at $25.31 versus a 52-week range of $20.56 to $34.49.
VIVUS Inc. (NASDAQ: VVUS) was started as Buy at Roth Capital this last week with a $12 price target, yet it did not hold much of the large gains from the week before. VIVUS shares rose a week earlier from $6.13 ti $7.75 after the FDA denied its Qnexa weight loss drug but after most issues seemed to be within working conditions without the need for a new round of drug trials. Shares did not close on the lows Friday, but the loss was close to 10% at $7.12 on the week. If this is approved, we have seen some research that indicates many patients will probably pay out of pocket on their own for this if insurance reimbursement rates do not cover it.
Dendreon Corporation (NASDAQ: DNDN) was another dud this week. The company’s loss was more than $79 million due to ongoing product expansion and promotion costs for PROVENGE. The drug is selling less than expected so far. The company sold $20.2 million and sales grew each month, but analysts were looking for nearly $24 million in sales. Dendreon gave sales projections of $46 to $47 million in 2010 revenue. It said it expects $350 to $400 million in revenue in 2011, but 2011 is expected to be very back-end loaded as capacity comes on line. That implies that any delay will push revenues further and further out, perhaps as more prostate cancer competition can come on the market. Analyst expectations were more like $62.6 million in 2010 and over $400 million in 2011. Shares peaked at $39.00 during the week but closed down at $35.07; its 52-week range is $25.05 to $57.67.
Most investors consider biotech and emerging pharma to be risk-based assets. These are a different sort of risk. Some of the pressure from Washington D.C. may abate, but Republicans have vowed to address some of the cost side of the equation when it comes to healthcare. If Washington can figure a way for hospitals to not charge $25 for administering an aspirin tablet or an ibuprofen pill, it seems logical that $20,000 to $90,000 treatment regimens could remain under scrutiny.
So far, biotech and emerging pharma is being discounted entirely despite the winds of change feeling a tad less abrasive.
JON C. OGG
Goldman Sachs is taking a very cautious view on many of the large biotech leaders in a new coverage call. While there is a silver lining call in one, the bulk of the research has a very cautious stance due to revenue woes that could lie ahead for the large biotechs.
Amgen Inc. (NASDAQ: AMGN) started with a “SELL” rating.
Biogen Idec Inc. (NASDAQ: BIIB) started with a “SELL” rating.
Celgene Corporation (NASDAQ: CELG) started with a “NEUTRAL” rating.
Gilead Sciences Inc. (NASDAQ: GILD) started with a “NEUTRAL” rating.
Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) is the standout stock this morning and the exception to the rule. Alexion shares were started on the CONVICTION BUY LIST and the stock is up 2% at $71.94 and close to challenging the 52-week high of $72.45.
JON C. OGG
There have been some mixed results from biotech stock giants so far this earnings season. In some cases, these actually mimic Big Pharma stocks, but that is still out for debate. We have seen some research outlining some of the top biotech shares from Zacks Investment Research. Gilead Sciences, Inc. (NASDAQ: GILD) was called its BULL OF THE DAY pick. Unfortunately, shares are down 1% at $39.21 but that is not a call based upon a one-day reaction.
Zacks notes the following:
Gilead Sciences, Inc. (NASDAQ: GILD) third quarter 2010 earnings of $0.85 was well above the year-ago earnings of $0.74. The improved showing was mainly attributable to strong sales of antiviral products.
Gilead, a leading player in the HIV segment, has continued to increase its patient base. We remain optimistic about growth of HIV franchise drugs Truvada and Atripla. Moreover, the FDA approval of Cayston earlier this year is also a positive. The addition of Cayston to the company’s portfolio should boost Gilead’s revenue stream further.
We are also encouraged by Gilead’s progress with its pipeline. These positive catalysts cause us to upgrade the stock to Outperform. Based on the third quarter performance, we have raised our earnings estimate for 2010 by $0.06 to $3.50 and 2011 estimates by $0.28 to $3.94.
GILEAD SCIENCES (GILD): Free Stock Analysis Report
Everyone is familiar with the manufacturing woes of Genzyme Corporation (NASDAQ: GENZ) that helped lead to its poor share performance before Sanofi-Aventis decided to make an acquisition offer for the company. There is a new FDA warning, this heading to Gilead Sciences Inc. (NASDAQ: GILD).
The FDA has warned Gilead about quality control violations at one of the company facilities that is located out in California. While Gilead had disclosed this, a FDA warning letter was posted with several problems discovered by regulators and inspectors at the San Dimas facility.
Gilead was flagged for not having written procedures to help prevent bacterial contamination and it was also noted that Gilead failed on multiple occasions to investigate when batches of its pills failed on visual inspections. Another flag was a failure to properly clean and maintain equipment in the facility.
Gilead had responded to earlier FDA criticism back in March, but the FDA report shows that the response failed to take proper actions to correct the issues. The FDA has asked for a complete response within 15 days of the letter.
The prior filing noted that the letter could impact Gilead’s shipments of AmBisome to fungal infections, but this shoould not impact HIV drugs of Atripla and Truvada shipments.
This is not expected to turn into a Genzyme-like scenario. Otherwise the stock would be lower rather than higher on the day. Late in the session, Gilead is up almost 2% at $36.04 versus a 52-week trading range of $31.73 to $49.50.
JON C. OGG
Pharma-Biotech Major Research Alerts (TEVA, AMGN, ACOR, CELG, HGSI, BIIB, GILD, EXAS, ZGEN, DYAX, IDXX, VPHM)
Biotech and pharma research calls from Wall Street research firms have come out of the wood work this Thursday.
Teva Pharmaceutical Industries Limited (NASDAQ: TEVA) is one of our recent “Defensive Stocks for the Next Bear Market” picks based upon valuation. This morning Oppenheimer raised the rating to OUTPERFORM on hope and expectations that it will see a big boost in the second half from its Effexor sales.
STIFEL NICOLAUS started many key biotech stocks with coverage this morning:
- Amgen Inc. (NASDAQ: AMGN) and Acorda Therapeutics, Inc. (NASDAQ: ACOR) and Celgene Corporation (NASDAQ: CELG) and Human Genome Sciences Inc. (NASDAQ: HGSI) were all started with BUY ratings;
- Biogen Idec Inc. (NASDAQ: BIIB) at SELL;
- Gilead Sciences Inc. (NASDAQ: GILD) at HOLD.
EXACT Sciences Corp. (NASDAQ: EXAS), a molecular diagnostics company focused on the early detection and prevention of colorectal cancer, is soaring by 13% after being started with new coverage as a Buy rating by Jefferies ahead of next week’s presentations at the Rodman & Renshaw 12th Annual Healthcare Conference and at the Baird’s 2010 Health Care Conference.
ZymoGenetics Inc. (NASDAQ: ZGEN) was hit with a cut to Neutral at UBS, but that is because of the Bristol-Myers Squibb buyout.
Dyax Corp. (NASDAQ: DYAX) and IDEXX Laboratories, Inc. (NASDAQ: IDXX) were both started as MARKET PERFORM and ViroPharma Inc. (NASDAQ: VPHM) as OUTPERFORM at Leerink Swann.
JON C. OGG