Remember when biotech stocks like Gilead Sciences (GILD) and Celgene (CELG) were getting creamed and everyone was wondering if the biotech boom was finished? Yeah, neither do I.
We’d better refresh our memories, however. The iShares Nasdaq Biotechnology ETF (IBB) has rallied 20% since dropping 21% from the February 25 through April 11. And large-cap biotech stocks now trade at 16.3 times 2015 earnings versus the S&P 500′s 14.8 times. That, says Nomura’s M. Ian Somaiya and team makes beating earnings forecasts an imperative, who says “lackluster 1Q earnings have increased reliance on solid 2Q results to maintain momentum in the group.”
Somaiya points to Gilead Sciences, Alexion Pharmaceuticals (ALXN), Celgene and Incyte (INCY) as the biotech companies most likely to beat earnings:
For Gilead Sciences, we believe Sovaldi sales reach $3bn, almost 2x our $1.6bn and above the Street's $2.6bn estimates, based on strength of prescription data. For Alexion Pharmaceuticals, we believe upside will come from a higher-than-expected rate of patient starts in ROW territories for PNH, a $1-2bn opportunity, and Europe for aHUS. For Celgene, we believe 2Q revenue estimates could be understated due to 1Q seasonality and inventory drawdowns, setting up for a potential beat in Revlimid, Pomalyst and Abraxane. For Incyte, we expect Jakafi sales to bounce back in 2Q, given inventories returned to the low end of the normal range, gross-to-net returns to the 9-10% guidance, and a 4.75% price increase on 1 April. In addition, data presentations at ASCO could have increased off-label usage in pancreatic cancer and PV.
Shares of Gilead Sciences have gained 1.4% to $89.96 at 1:26 p.m., Alexion Pharmaceuticals has risen 0.6% to $164.22, Incyte has advanced 1% to $51.34 and Celgene has fallen 0.8% to $84.46. The iShares Nasdaq Biotechnology ETF is up 0.6% at $258.33.
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