Important note: Information in this article was accurate in 1996. The state of the art may have changed since the publication date.
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The Wall Street Journal - 16 April 1996
Jesse Eisinger
Meanwhile, two members of the elite, Biogen Inc. and Genzyme Corp., are spending heavily on products for which the companies expect Food and Drug Administration approval soon.
Centocor Inc. and BioChem Pharma Inc. are among those biotechs on the verge of steady earnings on the strength of new products, Wall Street anticipates. The premier biotechs, perennially solid Amgen Inc. and frequently volatile Chiron Corp., are expected to report strong growth in earnings in the first quarter, analysts said.
Wall Street will be watching the biotech sector's performance closely. If the industry disappoints, some analysts say, it could scare away some of the new investors who had spectacular gains last year, but are more jittery this year.
Biogen, of Cambridge, Mass., should post a loss of about eight cents a share, according to the average in a survey taken by First Call Inc., compared with earnings of eight cents a share in the first quarter of last year.
The company continues to spend heavily in anticipation of its launch of Avonex, a drug for multiple sclerosis that was recommended for approval by the FDA late last year. Analysts expect an Avonex approval and launch sometime this quarter. Many expect the drug to be a huge seller, with Rachel Leheny of Hambrecht & Quist Inc. estimating Avonex sales approaching $700 million in 1999.
"The company lives and dies by Avonex," said Jeffrey Swarz, an analyst from CS First Boston. "If it doesn't meet expectations, it's not going to be a pretty picture."
Joyce Lonergan, an analyst for Cowen & Co., said Biogen may not earn money even in the quarter that it launches Avonex. But Wall Street expects the company to have a profitable year, earning 89 cents a share, compared with 16 cents a share last year, according to First Call.
Genzyme, also of Cambridge, should post strong quarterly results, despite that it is gearing up to sell its Seprafilm product to prevent adhesions, said Mr. Swarz. The company garnered a recommendation for approval for Seprafilm from an FDA panel in late March.
Mr. Swarz estimates that Genzyme earned 51 cents a share in the quarter, a couple of cents above consensus, and eight cents above last year's quarter. Mr. Swarz estimates that sales were strong for its treatments for the enzyme disorder Gaucher disease, called Ceredase and Cerezyme.
BioChem Pharma, based in Laval, Quebec, had a break-even quarter, but should be profitable from now on, says David Crossen, an analyst at Montgomery Securities. That company had a loss of a penny a share in the first quarter of 1995.
Sales of BioChem's drug 3TC, which is marketed by Glaxo Wellcome PLC, are stronger than expected, Mr. Crossen said. He initially saw 3TC sales in 1996 of $208 million, but the "sales trend has been steadily up and up and up," Mr. Crossen said. If sales remain at the rate 3TC is selling at now, the drug could have sales of more than $250 million this year, Mr. Crossen said. BioChem's world-wide royalty rate on 3TC is 14%.
Centocor, whose stock has made a phoenix-like rise, may not be long for the development stage either. ReoPro, a drug that the company developed, finally seems to have started to catch on after a year of disappointing sales.
Centocor, Malvern, Pa., is expected to post a loss of 13 cents a share for the first quarter, compared with 14 cents last year. Analysts expect the company to have a profitable second half, according to First Call.
Amgen should have had solid quarterly earnings growth, logging 50 cents a share, compared with 39 cents in the first quarter a year ago, according to First Call. Wall Street long has had concerns about slowing sales of the Thousand Oaks, Calif., company's white blood cell growth factor, Neupogen. Mr. Swarz of CS First Boston sees world-wide Neupogen sales at $242 million, up 14% year over year.
Finally, Chiron, of Emeryville, Calif., is expected to report earnings of 24 cents a share, compared with a loss of $1.70 last year.
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