The Wall Street Journal - 11 October 1996
Jesse Eisinger, Staff Reporter of The Wall Street Journal

Biogen Inc., Centocor Inc. and Biochem Pharma Inc. are three of the biotechs riding the success of their new drugs.

One of the most closely watched biotech firms these days, Biogen, of Cambridge, Mass., is in the middle of launching its first product, the multiple sclerosis drug Avonex. Signs indicate that Avonex is off to a strong launch, though it will take several more quarters to tell if the drug can hit the top end of analysts' predictions of $500 million to $750 million in annual sales.

This week, Biogen posted third-quarter net income of $45.05 million, or $1.21 a share, up from year-earlier net of $1.13 million, or 3 cents a share, boosted by brisk sales of Avonex and two large one-time gains. Revenue was $100.86 million, of which $27.51 million was sales of Avonex, which was approved in April; year-earlier revenue was $38.18 million.

The biotechnology company said that Avonex, its first commercial product, has seen "rapid acceptance" by doctors and patients, in part due to fewer side effects and a more convenient injection schedule than competing drug Betaseron.

It is already clear that Biochem Pharma's anti-AIDS drug, 3TC, is having a monster launch, which should push the Laval, Quebec, company's earnings to 10 cents a share, said David Crossen, an analyst for Montgomery Securities Inc. 3TC is becoming a necessary component of the cocktail of drugs used to treat AIDS, analysts said.

Biochem Pharma developed 3TC and licensed it to Glaxo Wellcome PLC, which sells it under the brand name Epivir. Biochem gets a royalty on sales of the drug, which should be about $16 million in the quarter, estimates Mr. Crossen of Montgomery. And future sales look to be strong, analysts said. In fact, Glaxo has pushed through a 4% price increase on 3TC, said David Molowa, an analyst for Bear, Stearns & Co.

However, Atlanta's Emory University received a U.S. patent on 3TC in the quarter and filed an infringement case against Biochem Pharma. If Biochem Pharma loses the challenge, the company's royalty rate for the drug could be reduced.

Hurt slightly by a slowdown in its sales of diagnostic products, Biochem Pharma should post earnings of 10 cents a share in the third quarter, estimates Mr. Crossen, who recently reduced his number from 16 cents. First Call Inc.'s consensus estimate is 9 cents a share.

Not all new biotech products thunder out of the gate like Avonex and 3TC, however. Centocor's ReoPro, a platelet blocker that is sold by Eli Lilly & Co., stalled in 1995, its first year on the market. It finally found its legs on the strength of two studies at the end of last year, and now ReoPro is selling briskly.

Today, Centocor is on the brink of profitability. Mr. Molowa expects the drug to have $46 million in sales this quarter, half of which goes to the Malvern, Pa., biotech firm. That means Centocor should lose a penny a share, its last losing quarter, he predicts.

The results of the past quarter should prove mixed among the first-tier biotechs, but may not garner too much attention, analysts predicted.

Chiron Corp., usually full of fireworks, is expected to report muted third-quarter results. Chiron's business typically hits a seasonal low in the late summer months, said Mr. Molowa. Last quarter, poor operating performance and worries about Chiron's pipeline -- long held to be strong -- hurt the biotech's stock, and the shares have languished for months.

Mr. Molowa predicts total revenue of about $321 million and earnings of seven cents a share, compared with $275 million and a split-adjusted two cents a share a year earlier. Edward Penhoet, Chiron's president and chief executive, has said the company should earn a minimum of 25 cents a share this year, which is below the average of analysts' expectations of 31 cents a share, according to First Call.

Meanwhile, Chiron probably took about $16.5 million in research and development money from its 49.9% owner Ciba Geigy AG, Bear Stearns's Mr. Molowa predicted. Investors closely monitor the amount Chiron takes in Ciba money as a gauge of how strong the company's underlying businesses are.

Is this the breakout quarter for Chiron? "No, we're still waiting for that," said Mr. Molowa.

Amgen Inc., the 800-pound molecule maker, had yet another solid quarter, analysts believe. The Thousand Oaks, Calif., company should post earnings of 59 cents a share, up from 51 cents in the same quarter last year.

Another company in the top tier is Cambridge, Mass.-based Genzyme Corp. Mr. Molowa expects the company to post total revenue of $147 million, up from $94.5 million a year earlier. Genzyme should report sales of about $65 million, up from $55 million, for the company's flagship drugs, Ceredase and Cerezyme, for the treatment of the enzyme disorder Gaucher disease, Mr. Molowa predicted. Earnings per share should be 27 cents, compared with a split-adjusted 25 cents a year earlier, according to First Call.

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