Salomon Downgrades Biotech Sector To Marketweight
Monday January 6, 1:01 pm ET
By Hollister H. Hovey, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Biotechnology stocks likely won't generate much excitement in the coming months, with little significant news expected from medical meetings and the Food and Drug Administration, a Salomon Smith Barney analyst said Monday.
Elise Wang cut her sector recommendation to marketweight from overweight as a result.
While big biotech firms like Amgen Inc. (AMGN) , Celgene Corp. (CELG) , IDEC Pharmaceuticals Inc. (IDPH) and NPS Pharmaceuticals Inc. (NPSP) should persevere in the coming months, she's a bit more bearish on a handful within the group.
Both Biogen Inc. (BGEN) and MedImmune (MEDI) are "companies that reflect heightened risk given their dependency on the sustained growth of one product and accelerating growth with the launch of a new product," Wang wrote in a Monday research note.
She's downgrading both stocks to underperform from in-line.
Wang, the Salomon analyst, is particularly concerned with Biogen's ability to balance slowing sales growth of its multiple sclerosis drug Avonex with an expensive launch of its novel psoriasis drug, Amevive.
She's revising her model to reflect slower sales of the former and higher marketing spending for the latter.
Wang cut her fiscal 2003 earnings estimate for Biogen to $1.70 a share from $ 1.85 a share and lowered her fiscal 2004 estimate to $2.05 a share from $2.23 a share. She also lobbed $6 off its 52-week price target, putting it at $42.
As for MedImmune, the company is dependent on the success of FluMist given the maturity of the market for Synagis, a drug for respiratory syncytial virus, the most common respiratory infection in babies and children, she said.
"In the near term, while we are in the height of the season for Synagis sales, we expect slowing growth for this product," she said. "Furthermore, the company faces the challenges of scaling up commercial production for FluMist and launching the product in a more narrowed indication as recommended by an FDA advisory panel."
On Dec. 17, an FDA advisory panel recommended approval of FluMist, but only for people ages 5 through 49, which leaves out a key patient population: the elderly.
MedImmune has also recently experienced setbacks in its pipeline, with the FDA asking for more tests of its experimental psoriasis drug MEDI-507 and the company canceling its urinary tract infection vaccine program.
She also cut Medarex (MEDX) to underperform from in-line given the lack of any important data announcements or catalysts for the stock in the near-term.
On the brighter side, solid product sales, earnings growth and positive pipeline events should drive up the stocks of Amgen, Celgene, IDEC and NPS Pharma, Wang says.
For Amgen, sales of anemia drugs Aranesp and Neulasta and the re-launch of rheumatoid arthritis drug Enbrel will be critical for enhancing investor confidence.
Amgen already gave a better-than-expected outlook for 2003 in December and Wang expects Amgen to deliver on those goals.
As for Celgene, she's looking for sales growth in cancer drug Thalomid and other products, as well as pipeline progress to generate investor interest.
Sales of non-Hodgkin's lymphoma drugs Rituxan and Zevalin are key for IDEC Pharmaceuticals.
For NPS Pharma, she's looking for positive Phase III results and regulatory filings of secondary hyperparathyroidism drug AMG 073, which it will sell with Amgen, as well as clinical data on osteoporosis drug Preos to generate a stock price increase.
Wang wasn't immediately available to comment on whether she owns any of the biotechnology stocks or whether Salomon has an investment banking relationship with the companies.
For future reference, the share prices at the close of trading yesterday were:
AMGN 49.19
BGEN 41.40
CELG 22.25
IDPH 33.69
MEDI 28.20
MEDX 4.19
NPSP 25.00
BTK 346.39 |
