3 Biotech Beats for this Earnings Season
The biotech industry had experienced an incredibly good run over
the last couple of years and was off to a strong start this year as
well. However, things changed from Mar 20, when a letter was issued
(GILD) by the U.S. lawmakers questioning Gilead's pricing of its
recently approved hepatitis C virus (HCV) treatment, Sovaldi.
Gilead's price was considered to be too expensive and came under
The news not only brought down Gilead's stock price, it also
impacted other companies like
(REGN) on concerns that these companies too would find their new
treatments coming under the same pricing scrutiny. The
NYSE ARCA Biotech Index
NASDAQ Biotechnology Index
(^NBI) have declined more than 10% each since then.
But things have been looking up for the biotech industry since last
week with a few biotech companies reporting encouraging first
quarter results. Shares of companies like Gilead, Celgene and
Alexion were up on first quarter earnings. The NYSE ARCA Biotech
Index and NASDAQ Biotechnology Index also gained 4.1% and 2.6%,
respectively, since Apr 25.
Gilead was a clear winner with Sovaldi bringing in sales of $2.3
billion in its first full quarter on the market, beating all
expectations. The sales figure of the drug over-shadowed pricing
concerns thanks to its strong efficacy profile.
Apart from strong earnings, acquisition deals and regulatory
updates on pipeline candidates have also boosted the share prices
of some biotech stocks in the last few days. While
(HPTX) benefitted from its announcement of an acquisition deal
which will expand its orphan drug portfolio,
(SRPT) soared after it announced that it will file for accelerated
approval of eteplirsen by year end.
Although it may be a while before there is a sustained improvement
in the biotech sector, it would be a good idea to zero in on a
handful of biotech stocks that are poised to beat earnings
estimates this quarter. An earnings beat should help these stocks
gain investor confidence and show price improvement.
How to Pick?
Given the huge number of industry participants, pinpointing stocks
that have the potential to beat estimates could appear to be a
daunting task, but our proprietary methodology makes it fairly
simple. One way to narrow down the list of choices this earnings
season is by looking at stocks that have the combination of a
favourable Zacks Rank - Zacks Rank #1 (Strong Buy), #2 (Buy) or #3
(Hold) - and a positive Zacks
Earnings ESP (Expected Surprise Prediction).
Earnings ESP is our proprietary methodology for identifying stocks
that have high chances of surprising in their next earnings
announcement. It shows the percentage difference between the Most
Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the
chance of a positive earnings surprise is as high as 70%.
Below are three biotech stocks we believe are best positioned to
stand out this earnings season.
Acorda Therapeutics, Inc.
) is a Zacks Rank #2 stock with an Earnings ESP of +225.00%. The
Zacks Consensus Estimate for the first quarter stands at 4 cents.
In the past 30 days, estimates (on an average) have inched up by 3
Acorda, an Ardsley, NY based commercial-stage biopharmaceutical
company is focused on the development and commercialization of
novel treatments that improve neurological function in people
suffering from multiple sclerosis (MS), spinal cord injury (SCI)
and other nervous system disorders.
Although Acorda did not deliver positive earnings surprises in
three of the last four quarters, it looks poised to beat
expectations this season. The company is expected to surpass
expectations this quarter on the back of strong Ampyra sales. The
drug is approved for the improvement of walking in multiple
Acorda is expected to report its first quarter earnings on May 6
before the opening bell.
Hyperion Therapeutics, Inc.
) is another Zacks Rank #2 stock with an Earnings ESP of +200.00%.
Hyperion focuses on the development and commercialization of novel
therapeutics for the treatment of orphan diseases and hepatology
The Zacks Consensus Estimate for the first quarter stands at a loss
of a penny. Hyperion has delivered positive earnings surprises in
the three of the last four quarters with an average beat of 127.99%
and is expected to beat expectations in the first quarter as well.
The company is expected to beat on the back of sales from Ravicti
and Buphenyl, both for the treatment of urea cycle disorders.
Hyperion is expected to report its first quarter results on May 6.
Another stock to look out this earnings season is
), carrying a Zacks Rank #3. The San Francisco-based company
focuses on the development of novel small molecule drugs for the
treatment of serious diseases for which there are limited treatment
options. The company has a positive Earnings ESP of 1,033.33%.
Medivation delivered positive earnings surprises in each of the
last four quarters with an average beat of 60.46%. The company
swung back to earnings last quarter and is expected to keep the
earnings streak alive this quarter as well. The company's sole
marketed product, Xtandi is expected to continue with its
impressive performance in the first quarter.
Medivation is set to report its first quarter earnings after market
close on May 8.
Despite the recent sell-off in the biotech sector, fundamentals
remain strong. Strong pipelines, innovative treatments and
impressive results should help the sector rally. A sneak peek at
the space for some outperformers, backed by a solid Zacks Rank and
a positive Zacks Earnings ESP, could be a great idea for investors
to gain this earnings season.
ACORDA THERAPT (ACOR): Free Stock Analysis
HYPERION THERAP (HPTX): Free Stock Analysis
MEDIVATION INC (MDVN): Free Stock Analysis
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