As we head into the thick of earnings season some analysts are putting out their preview notes for clients. And a couple of interesting ones about the kings of biotech, Genentech and Amgen , have come into my inbox over the past couple of days. Genentech reports after the bell next Monday, October 15. And Amgen comes out, also after the bell, ten days later on the 25th.
FBR's biotech analyst Jim Reddoch is out with a note titled, "Hazardous Q3 Coming; Lowering Estimates to below Consensus." He is raising a red flag about revenue coming up short, in his analysis, by about $100 million--$2.8 billion versus the consensus of $2.9 billion. Reddoch writes, "Particularly surprising to investors will be likely declining quarter-over-quarter U.S. sales among the big 4 (i.e. Avastin, Herceptin, Rituxan, and Lucentis)."
But he isn't confining his pessimism to the third quarter. Reddoch is also dropping his revenue and earnings estimates "in the out-years" through 2009. Investors should assume that FBR wants to bank DNA. The market may already be coming to Reddoch's way of thinking as the stock is down about two bucks over the past couple of weeks.
And he's not alone. Bernstein biotech analyst Geoffrey Porges is also telling clients in a research note today, "We believe that Genentech's U.S. product revenue could come in just short of consensus…based on weaker than expected sales of Herceptin, Rituxan, and Lucentis. Avastin appears to be in line with consensus." He's basing his analysis on prescription data that he and many other analysts get from IMS Health which keeps track of that stuff.
And in what could come as a surprise Porges is forecasting upside for the beleaguered Amgen. The company and the stock have been under tremendous pressure this year regarding the safety, marketing and insurance reimbursement for its huge anemia drug franchise--Aranesp and Epogen.
Porges writes, "Surprisingly, AMGN trends also strong. Amgen's revenue remains difficult to predict given all of the issues surrounding the (anemia drug) business. Our IMS based analysis suggests Amgen could report overall US revenue 4% above consensus, with revenue coming in in-line to above for all key products."
But here, too, the market may be anticipating a beat as the beaten-down shares of AMGN are up about seven bucks over the past month-and-a-half or so.
Bernstein or another part of the company owns at least one percent of DNA. And it makes a market in DNA and AMGN.
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