Why Big Biotech Stocks May Get An Earnings Boost

Many big biotech stocks have been lagging smaller rivals, but their shares are likely to get a giant boost during this earnings season, Barron's reports. According to Yatin Suneja and his team of analysts at SunTrust Robinson Humphrey, these big biotechs are most likely to report better than expected sales in the first quarter: Alexion Pharmaceuticals Inc. (ALXN), BioMarin Pharmaceutical Inc. (BMRN), Celgene Corp. (CELG), Exelixis Inc. (EXEL), Regeneron Pharmaceuticals Inc. (REGN), and Sarepta Therapeutics Inc. (SRPT). Geoffrey Porges, director of therapeutics research at Leerink Partners LLC, indicates that these two also are likely to beat consensus estimates, per another Barron's story: Gilead Sciences Inc. (GILD) and Vertex Pharmaceuticals Inc. (VRTX).

Key Growth Drivers

Suneja sees price increases, the falling value of the U.S. dollar, and moderate expectations among analysts as the main reasons for optimism, Barron's notes. Porges also mentions pricing and currency moves as positives, per Barron's, while adding inventories and underlying demand for these companies' products as other reasons to be upbeat. 

From its all-time closing high on January 26, the S&P 500 has fallen by 5.8%. The S&P Biotechnology Select Industry Index (SPSIBI) peaked later, on March 12, and is down by 6.1% since then, per S&P Dow Jones Indices.

For the eight biotech stocks highlighted above, here are their market capitalizations, year-to-date stock price performance through the April 17 close, forward P/E ratios, and the main types of treatments that they are producing or investigating, per Yahoo Finance:

• Alexion: $25 billion, -5.3%, 13.5x, rare genetic disorders
• BioMarin: $15 billion, -5.3%, 384.2x, rare genetic disorders
• Celgene: $69 billion, -12.7%, 9.0x, cancer and inflammatory diseases
• Exelixis: $6 billion, -28.7%, 16.6x, cancer
• Regeneron: $35 billion, -14.2%, 15.3x, eye diseases, cardiovascular diseases, arthritis
• Sarepta: $5 billion, +43.5%, 286.5x, rare neuromuscular diseases
• Gilead: $99 billion, +6.1%, 11.4x, HIV, liver diseases, blood cancers, hypertension
• Vertex: $42 billion, +10.1%, 36.0x, cystic fibrosis, rare blood disorders, pain management

SunTrust Robinson Humphrey has buy ratings on Alexion, BioMarin, Exelixis, and Sarepta, but only hold ratings for Celgene and Regeneron, per Barron's. Meanwhile, Geoffrey Porges of Leerink Partners thinks that Celgene has a high risk of delivering disappointing results, Barron's notes.

Selected Biotech Stories

Much of the big jump in Sarepta's stock this year is attributable to the setback faced by a rival firm in developing a treatment for one form of muscular dystrophy. The stock reached overbought levels on the news, and may be poised for a pullback. The consensus estimate calls for a loss of 32 cents per share, down from a profit of $1.50 a year ago, but the consensus estimate also anticipates stellar revenue growth of 295% year-over-year (YOY), per Yahoo Finance. (For more, see also: 3 Hot Biotech Stocks Facing Sharp Declines.)

The consensus for Celgene is a 17% increase in EPS, from $1.68 to $1.96, along with 17% YOY growth in sales as well, also per Yahoo Finance. Technical analysts see positives building for Celgene and Gilead. (For more, see also: 4 Biotechs Ready for Big Rebounds.)