What to watch in biotech earnings this week

When times get rough in biotech, as they have this last month, analysts recommend returning to the safety of earnings-driven large cap names. So with the Nasdaq Biotech Index down 6 percent in the month through Thursday, this week is key, since all of the Big Four biotechs—–Gilead Sciences, Amgen, Biogen Idec and Celgene—report earnings.

The bonanza kicks off Tuesday with Gilead and Amgen after the bell. Biogen reports Wednesday morning, Celgene Thursday morning. Here's what you need to know going in.

All eyes will be on performance of Sovaldi, Gilead's new drug for hepatitis C, which has become a barometer for investor sentiment about biotech.

Expectations are sky high. Analysts are looking for first-quarter revenue from the drug of $1.05 billion, putting it on track to draw an estimated $4.78 billion for the year, according to FactSet estimates. And even those might be low, according to Michael Yee, an analyst at RBC Capital Markets. He puts first-quarter Sovaldi revenue at $1.7 billion and full-year sales at $7 billion or more.

"Sovaldi," Yee pointed out in an April 15 research note, "is on its way to become the biggest launch in drug history."

Expectations for the drug rose even more Thursday, after insurer UnitedHealth said it spent more than $100 million to cover Sovaldi in the first quarter, vastly more than what it expected. Gilead rose 1 percent as the rest of biotech declined on that news.

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The drug has been the subject of scrutiny because of its $84,000 price tag, equating to about $1,000 a day for a 12-week course of treatment. The debate over pricing pressure has weighed on biotech stocks, particularly following a letter Congress sent to Gilead last month.

"Investor focus will be almost entirely on Sovaldi sales and reimbursement," analysts at Cowen wrote in a research note. "Perhaps just as important will be management's commentary about future trends, and reimbursement."

Also Tuesday after the bell, Amgen has been deemed the "defensive biotech" by RBC's Yee, who noted the stock was relatively flat year-to-date compared with declines for two of its Big Four brethren, Celgene and Gilead.

The only one of the Big Four to pay a dividend, Amgen occasionally resembles more of a Big Pharma than a traditional biotech, though Cowen analysts point out it's trading at a discount to the average U.S. pharma price-to-earnings multiple.

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"We believe this discount is best explained by Amgen's lower dividend yield, and expect Amgen's multiple to expand as the company follows through on its plans to increase its dividend payout ratio," Cowen wrote.

Beyond the dividend, investor focus at Amgen is on the pipeline, with potential data or updates coming this year on cancer drugs Kyprolis and blinatumomab; ivabradine for angina; and evolocumab for high cholesterol, the analysts said.

The story at Biogen is Tecfidera, the multiple sclerosis pill that hit the market last year and was the industry's drug launch darling before Sovaldi came on the scene. Analysts are looking for $439 million in first-quarter Tecfidera revenue and $2.2 billion for the year, according to FactSet estimates.

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The company also has a series of catalysts this year, from three new drugs expected to reach the market in hemophilia and MS and data on experimental medicines for MS, lupus, Alzheimer's and other diseases. That makes Biogen a favorite to help drive interest back to biotech.

"The rally will start with the Amgens, the Biogens, the Gileads, Celgenes, Alexions of the world," Cowen's Eric Schmidt said in an April 9 telephone interview. "If you want me to pick one, it would be Biogen. I think this company will maintain its position as the cleanest long-term growth story for the next three to five years."

While Celgene's got a new drug on the market, Otezla for psoriatic arthritis, the overwhelming focus this year is on a patent challenge to the company's top-selling medicine, Revlimid.

A hearing is set for May 15, and Robert W. Baird analyst Chris Raymond said he expects the company may prevail or at least reach a settlement to put the matter to rest; that would provide upside "at least to the $180s," he wrote in an April 9 research note. The stock closed at $141.51 on Thursday.

For the quarter, analysts are expecting Revlimid sales of $1.16 billion. Attention will also likely focus on the performance of Otezla since its March 21 approval, according to Cowen, in addition to efforts to expand use of Revlimid and uptake of Abraxane in pancreatic cancer.

—By CNBC's Meg Tirrell.