3 Biotech Favorites With Noteworthy Drug Data
Sherrie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Three of the biggest names in biotechnology have reported earnings, and their quarters involved very important drug-related information for investors. In this article, let's look at which of these stocks might be presenting an investment opportunity.
Far Too Early For Decelerated Growth
Alexion Pharmaceuticals (NASDAQ: ALXN) has traded higher by 22% over the last month, giving the company a market cap of $21 billion.
Alexion markets an orphan drug called Soliris, which treats both a genetic and a blood disorder. Soliris is Alexion’s sole product, and it's being tested in five other clinical studies to evaluate its ability to treat other rare diseases.
Since Soliris is the company’s sole product, and the most expensive drug in the world at $500,000 annually, investors were eager to see its growth rate. Unfortunately, Soliris was a bit disappointing, as total sales grew just 35% year over year.
Alexion’s revenue growth of 35% is its slowest pace in several years. The company is currently guiding for full-year sales of $1.52 billion. Wall Street expects Soliris to exceed $3 billion in peak sales, but with growth decelerating, investors may worry whether expectations will ever become a reality.
An Unwatched Growth Driver
Celgene (NASDAQ: CELG) has a market cap of almost $60 billion and has traded higher by 110% over the last year.
Celgene’s multiple mylenoma drug Revlimid is the company's bread and butter, contributing $1.05 billion of its $1.59 billion in quarterly sales.
Revlimid grew 13% year over year during this last quarter, showing there’s still upside for the blockbuster drug.
Over the last month, there had been whispers among investors that Revlimid sales could struggle to produce double-digit growth. However, Celgene proved that Revlimid sales are still strong, with full-year sales guidance of $4.3 billion.
On a side note, I was interested to see the performance of its new multiple myeloma drug Pomalyst, for the treatment of those who have failed two prior therapies. Analysts peg peak sales for the drug at $1 billion annually, and due to synergies with Revlimid, many believe it could spark Celgene's next round of growth.
Therefore, I was quite encouraged with $66 million in Pomalyst's first quarter of sales, which is far above my expectations of $50 million. Hence, Pomalyst will be interesting to watch throughout this year as a possible growth driver.
Closely Watched Drug Launch Delivers
Biogen (NASDAQ: BIIB) has rallied 60% in the last year, and now has a market cap of $54 billion.
For its second quarter, sales totaled $1.7 billion, representing growth of 21% year-over-year. While there are many important drugs to Biogen, investors were most interested in its new multiple sclerosis drug Tecfidera.
Tecfidera is expected to produce peak global sales in excess of $4 billion annually by 2018, and Biogen’s second quarter was our first glance at the drug’s performance. Analysts' consensus for Tecfidera’s first quarter of launch predicted $90 million in sales, but Biogen doubled that number with $192 million.
Tecfidera’s peak sales alone will double Biogen’s last 12 months of revenue. Therefore, the drug’s performance is very encouraging, and suggests faster-than-expected fundamental growth for Biogen in the future.
Of these three biotech favorites to already report earnings, sales for Tecfidera are without question the biggest headline thus far.
Tecfidera has the most upside and is the most important to its company's future fundamental growth. However, all the drugs mentioned above are important. Celgene’s Pomalyst is a dark horse to produce growth, and Revlimid’s sales suggest continued investor confidence.
Lastly, Soliris’ deceleration of growth is a reason to worry. Celgene and Biogen have other marketed products; Alexion relies solely on Soliris' growth to support its valuation.
Alexion trades with the greatest premium to sales among these three biotechs. Therefore, I view Alexion as too expensive, and wouldn't touch it. However, both Celgene and Biogen's top-line growth is looking very attractive after earnings.
Sherrie Stone has no position in any stocks mentioned. The Motley Fool recommends Celgene. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!