3 Biotechs Whose Q2 Reports Exceeded Expectations

Published: Aug 08, 2017

3 Biotechs Whose Q2 Reports Exceeded Expectations August 7, 2017
By Mark Terry, BioSpace.com Breaking News Staff

Most biopharma companies recently released or are about to release their second-quarter financial statements. Shannon Jones, writing for The Motley Fool, takes a look at three biotech companies that recently exceeded projections for their second quarters.

1. Sarepta Therapeutics

Last year marked probably the most dramatic story in biopharma, with the roller-coaster-ride approval of its Exondys 51 for Duchenne muscular dystrophy (DMD). Despite concerns about the drug’s efficacy, it’s really the only game in town—and patients are clearly giving it a shot. Company revenue jumped $35 million in the second quarter, far exceeding projections of $22 million. As a result, the company’s management raised 2017 profit guidance to $125 million to $130 million for the year, much higher than its earlier $95 million guidance.

Sarepta also settled a patent dispute with BioMarin Pharmaceutical , paying a one-time $35 million fee upfront plus royalty and milestone payments on its exon-skipping platform. This will free up Sarepta to expand Exondys 51’s market.

Jones writes, “In all, Sarepta has tremendous upside. But investors should be mindful of the post-marketing requirements for Exondys 51. As a stipulation of approval, which came following arguably limited data, a well-controlled study is required to solidify Exondys 51’s clinical benefit. Failing to show effectiveness could lead the drug to get pulled from the market. Assuming the drug passes muster, analysts say annual sales could top $1 billion, making this $2.3 billion market cap company ripe for M&A action.”

Sarepta is currently trading for $38.47.

2. Biogen

For the second quarter, Biogen reported revenue of $3.08 billion, or $4.07 per share, which far exceeds analyst projections of $2.81 billion. Earnings were hampered by higher costs, but its profit forecasts for this year are from $11.5 million to $11.8 million, higher than its $11.1 million to $11.4 million projections.

The key here is Spinraza, the recently approved drug for the rare disease, spinal muscular atrophy (SMA). The launch of the drug went better than expected, but Jones notes that already two-thirds of people in the U.S. with SMA have been treated, so uptake is likely to slow.

And, as has been the case for a while, Biogen’s dominant multiple sclerosis (MS) franchise is being battered by competition. Growth for the quarter was five percent, driven by a 13 percent increase in sales of the oral Tecfidera. But Roche recently launched Ocrevus, the only drug approved for patients with primary progressive MS, and the drug is given only once every six months.

Jones writes, “Given the challenges ahead, management laid out a $400 million restructuring plan to reduce costs while returning the company back to its neuroscience roots, hopefully with M&A deals. But what we didn’t get from earnings is a clear, long-term path to growth. Until then, expect this stock to remain volatile as investor uncertainty looms.”

Biogen is currently trading for $289.78.

3. Gilead Sciences

For the second quarter, Gilead reported revenue of $7.1 billion, exploding past analyst estimates of $6.3 billion. As a result, management realigned profit guidance to $24 billion to $25.5 billion for the year, up from a previous range of $22.5 billion to $24.5 billion.

Gilead is also struggling with its dominant hepatitis C (HCV) franchise. Total product sales were up 6 percent, mostly the result of its still strong HIV treatment sales, which grew 16 percent to $3.6 billion. In HCV, Harvoni and Sovaldi brought in $2.9 million, which was down 27 percent year over year. No one expects HCV growth rates to grow, largely because Harvoni and Sovaldi, as well as other drugs in the market, are so effective now they’re essentially curing the disease.

Jones writes, “Uncertainty remains for Gilead. The company is still in need of meaningful, long-term top-line growth drivers. Current products and late-stage clinical candidates won’t offset continued declines from HCV in the near term. In the company’s earning call, management reaffirmed (again) the commitment to pursue strategic deals. Until this happens, though, I expect short-term gains to be short-lived memories.”

Gilead is currently trading for $73.24.

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