Cowen: In Biotech Earnings We Trust

• Cowen analysts expect most of the biotech companies to report their 3Q results in-line with or ahead of expectations.
• The analysts believe that the Q3 results would highlight earnings growth and visibility in the biotech sector and boost investor confidence in financially driven stocks.

Cowen analysts said that the Q3 earnings season would be a “critical period” for the sector. They expect biotech companies to report impressive results for the quarter.

The analysts mentioned Q3 is typically a seasonally strong period for biotech companies, since it has more calendar selling days than Q1 as well as fewer major holidays than Q4. Currency impact is probably the only unfavorable macro trend.

“While political rhetoric over drug pricing may be keeping investors at bay, we think the Q3 earnings season could highlight the risk of not owning this sector during a period of fundamental growth and innovation,” the analysts wrote.

While politicians have vocal about drug pricing over the last several weeks, managements are likely to “use their Q3 earnings calls to highlight investments in R&D, service to patients, efforts to provide access, and benefits that new drugs provide to society,” the report added.

There are several major products that continue to post steady gains. These include:

1. Soliris from Alexion Pharmaceuticals, Inc. ALXN
2. Denosumab and Kyprolis from Amgen, Inc. AMGN
3. Revlimid from Celgene Corporation CELG
4. Jakafi from Incyte Corporation INCY
5. Eylea from Regeneron Pharmaceuticals Inc REGN

“We think investors may be underestimating the impact that macro factors like Obamacare and an aging U.S. population are having on broader drug utilization,” the report stated.

Cowen expects the following companies to beat the consensus expectations:
Alexion, Amgen, Celgene, Regeneron, Incyte, Emergent Biosolutions Inc EBS, Gilead Sciences, Inc. GILD and PDL BioPharma Inc PDLI

The following companies are likely to report in-line results:
Ariad Pharmaceuticals, Inc. ARIA, Biogen Inc BIIB, BioMarin Pharmaceutical Inc. BMRN, Medivation Inc MDVN, United Therapeutics Corporation UTHR, Vertex Pharmaceuticals Incorporated VRTX and XenoPort, Inc. XNPT

The companies that could disappoint are:
Aegerion Pharmaceuticals, Inc. AEGR and Anacor Pharmaceuticals Inc ANAC