Getting Ready for Biotech Earnings

The equity market bounced back in a big way on Tuesday as trade tensions appeared to ebb, at least for a day. Today, futures are down on concerns on what it looks to be an upcoming military strike on Syria. Well, investors can't complain the market is 'boring' right now if nothing else. As always, my main focus continues to be the biotech sector. I am watching two things right now. The first is signs of life in the M&A market. It has been an encouraging week for the part of the market this week. Novartis acquired AveXis Monday for nearly $9 billion on Monday which included an over 80% buyout premium. Today, we have Alexion Pharmaceuticals making a smaller purchase, snapping up privately held Wilson Therapeutics for just over $850 million. The other items I will be watching closely are the first quarter earnings reports crossing the wires in the coming weeks. While this sector will not benefit nearly to the extent that more domestically focused parts of the economy, like homebuilders, will from the 40% drop in the corporate tax rate; that should still be a tailwind for profit growth. Here are some of the companies I will be examining this quarter. Let's start with Celgene , whose shareholders could use some good news after its COO departed and it receiving a Refusal to File letter from the FDA for its key pipeline candidate recently. I am sure investors will be tuning into the conference call is hear from management how it intends to get that program back on track. They will also be looking intently to see if company's blockbuster Revlimid can continue to drive growth while the company develops its pipeline and integrates its recent purchase of Juno Therapeutics . Revlimid's sales expanded 17% in the fourth quarter. Continued growth in the mid-teens would be encouraging. Results should post late this month. Keeping up with a smaller name, I will also be keen to see if ANI Pharmaceuticals can keep up its rapid pace of growth when it reports in late May. Last quarter saw an over 20% boost in sales and the company should have a solid bottom line boost from tax reform as well. This 'off the radar' growth name has been mentioned as a take-out candidate on and off again for a year now and the stock is also quite cheap. Finally, I will be awaiting the latest results from Progenics Pharmaceuticals . This firm is still unprofitable so will not benefit from tax reform yet. However, the company seems to be going through an 'inflection point' here in 2018. Sales of Relistor, which is marketed and distributed by Valeant Pharmaceuticals , jumped from $17 million to $25 million last quarter. The company gets a $10 million milestone payment when sales hit $100 million in a calendar year and $15 million when it does $150 million. Investors will be monitoring how this product is growing. They will also look for progress developing cancer imaging agent 1404 which is on track to be approved in 2019. Most importantly, they will be looking for management to provide reassurance on Azedra. This is the most important compound for the company's near and medium-term future. Its PDUFA was recently moved back three months by the FDA to late July as the agency had questions that seemed centered on its manufacturing process, not trial results. Leadership needs to impart confidence that these inquiries are being addressed effectively and everything is on track for Azedra to be approved this summer.

Getting Ready for Biotech Earnings

Now that M&A is picking up in the sector, here's what to watch as earnings releases begin to hit.

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