Is Biotech Bouncing Back?

The fall of the biotech sector in 2015 swept significant profits for companies across the board. Furthermore, the start of 2016 was also shaky with biotech stocks sinking lower in February. Still, with the first quarter now solidly behind us, and companies releasing their first quarter results, it is worth taking a look to see if the investors can glean any clues as to which direction the market is headed by the performance of the sector’s biggest names.
Included among biotech’s four biggest companies investors will find:

• Gilead Sciences (NASDAQ:GILD)
• Amgen Inc (NASDAQ:AMGN)
• Celgene (NASDAQ:CELG)
• Biogen (NASDAQ:BIIB)

Listed by current market cap, here’s a look at how these companies performed in 2016 Q1.

Gilead Sciences

Mainstay of the biotech sector, Gilead Sciences announced its first quarter results on April 28. On the whole, the hepatitis C and HIV drugmaker’s revenues failed to impress. Reporting total revenues of $7.8 billion in Q1 is roughly an 8 percent drop from Q4 of 2015. Looking at the same period last year, the company only showed a slight 3 percent increase in performance. According to the Motley Fool, Gilead missed analysts expectations on both revenue and earnings. HCV revenue per patient was also down significantly, with the company providing deeper discounts to payers.
Before investors their investment dollars elsewhere, it is important to understand that lower revenue per patient is a necessary evil for the company. In the company’s QI conference call, Paul Carter, the company’s Executive VP explained that “several of the large commercial payers opened up access to patients regardless of their fibrosis scores during quarter 1. The consequence of that was that they triggered a discount that had been previously negotiated in order to incentivize that opening up of restrictions.”
With that in mind, the company is opening up access to more patients for its HCV blockbusters Sovaldi and Harvoni. Furthermore, Gilead is fighting for the its share of the market with other heavy hitters like Merck (NYSE:MRK) and AbbVie (NYSE:ABBV), so the company has had to discount its drugs in order to stay both relevant and ahead of the curve. “[G]iven that Gilead’s market share remains greater than 90% in the United States, this is a smart move to maintain the company’s dominance and expand the patient pool it can treat. And with non-GAAP operating margin at 69%, Gilead has the room to make it up on volume.” The Fool explained.

Amgen

Amgen’s Q1 results painted a brighter picture than Gilead based on revenue alone. The company announced that revenues increased by 10 percent to $5.53 million in Q1 2015 compared to the same period last year. Amgen noted that the increase in growth was driven mostly by its Enbrel, Prolia, Aranesp, Neulasta, Kyprolis and XGEVA products.
The company managed to beat Wall Street’s expectations, which most investors weren’t too surprised about. As the Motely Fool noted, Amgen’s “Q1 results demonstrate that the company is right on track to meet its long-term goals of improved operating margin and boosting shareholder value”

Celegene

Celgene’s results for Q1 2016 didn’t quite meet Wall Street analyst’s expectations. The company reported a net product sales of $2.51 billion, a 21 percent increase from the same period in 2015, sales were impacted by 2 percent due to currency exchange. Adjusted net income for the quarter was up 19 percent to $1,06 bullion, with earnings per share increasing by 23 percent to $1.23.  Meanwhile, Q1 revenue for the company was also up 21 percent to $2.51 billion compared to the $2.08 billion posted for Q1 2015.
Although the results seemed good, the company’s full-year guidance pointed to possibly trouble ahead. The company did increase its GAAP diluted EPS slightly, from $5.50 to $5.70 in EPS previously to the current $5.60 to $5.70. However, looking at the 2017 figures the company revised its adjusted diluted EPS figures to the range of $6.75 to $7.00 from the previous $7.25. Meanwhile, its net sales for 2017 have also been revised lower to the range of $12.7 to $13 billion from the previous $13 billion to $14 billion.
Still, despite the revised guidance, Credit Suisse analyst Alethia Young remains positive on the company’s performance, “At this current level and confidence around 2016 quarters, we think accumulating shares guidance being lifted is very reasonable.” she said.

 Biogen

Biogen reported its Q1 2016 results on April 21, slightly ahead of other companies in the sector. That said, the company posted total revenues of $2.7 billion, which marks a 7 percent increase over the same period in 2015. The company notes that growth can be attributed to a 15 percent increase in sales of its Tecfidera drug, as well as increased revenues from Eloctate and Alprolix. However, the company’s sales figures for fir first quarter did check in slightly lower than Q4 2015. Still, the company’s results did surpass on earnings expectation.
Like Gilead, Biogen has been looking to taper costs of its drugs. Zacks analysts noted that “Cost control and a lower share count helped boost earnings.”
 
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Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.