Cowen Highlights 4 Biotech Stocks Ahead of Earnings: Gilead Sciences, Inc. (GILD), Merrimack Pharmaceuticals Inc (MACK), ACADIA Pharmaceuticals Inc. (ACAD), Exelixis, Inc. (EXEL)


As earnings season rolls to the foreground and key biotech players like Gilead Sciences, Inc. (NASDAQ:GILD), Merrimack Pharmaceuticals Inc (NASDAQ:MACK), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), and Exelixis, Inc. (NASDAQ:EXEL) prepare to report fourth-quarter results, analysts from Cowen are chiming in with a mixed preview of what to expect.

Let’s dive in:

Gilead’s HCV Franchise to Plateau, But HIV Franchise Shines

With Gilead set to deliver fourth-quarter earnings on February 7th after market close, Cowen analyst Phil Nadeau offers a double-take on the biotech giant’s franchises. Though the analyst sees obvious problems plaguing GILD’s HCV franchise, he remains largely bullish on the giant’s strong suit: its HIV franchise.

As such, ahead of the print, the analyst reiterates an Outperform rating on shares of GILD with a $100 price target, which represents a 38% increase from where the stock is currently trading.

Nadeau underscores, “Following particularly poor performance during the first three quarters of 2016, we anticipate investor focus will continue to be on GILD’s HCV franchise as investors look for signs that revenue has begun to stabilize. Unfortunately, Q4 trends and GILD’s recent commentary about 2017 patient volumes suggest that the HCV franchise has yet to plateau.”

Meanwhile, spotting a dead-end ahead for the HCV franchise, the analyst predicts outlook for 2017 could take a hit, explaining, “Based on GILD’s recent commentary that it is getting increasingly difficult to drive patients onto therapy, we suspect our 2017 worldwide HCV estimate of $10B holds little upside, and we think this is likely to be reflected in Gilead’s 2017 guidance. Gilead’s HIV franchise remains a bright spot as the launch of Gilead’s TAF-based regimens has put GILD’s HIV business on firmer footing.”

“Therefore, overall, we expect a mixed quarter from Gilead. We suspect that after the quarter and 2017 guide investors will continue to debate at what price is the uncertainty around the durability of GILD’s HCV franchise fully priced into shares,” Nadeau concludes.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, three-star analyst Phil Nadeau is ranked #1,881 out of 4,350 analysts. Nadeau has a 45% success rate and earns 1.2% in his annual returns. However, when recommending GILD, Nadeau loses 7.2% in average profits on the stock.

TipRanks analytics exhibit GILD as a Buy. Out of 15 analysts polled by TipRanks in the last 3 months, 11 are bullish on Gilead stock and 4 remain sidelined. With a return potential of nearly 32%, the stock’s consensus target price stands at $94.83.

Merrimack: Best to Stay on the Sidelines

Top analyst Eric Schmidt at Cowen is setting lukewarm expectations on Merrimack ahead of the firm’s fourth-quarter earnings estimated to be due February 23rd. Particularly devoid of enthusiasm in regards to the company’s oncology pipeline’s prospects, the analyst remains sidelined, reiterating a Market Perform rating on MACK without listing a price target.

Merrimack plans to hone its resources on developing the following three candidates: MM-121 (seribantumab), a HER3 mAb; MM-141 (istiratumab), a bispecifci tetravalaent antibody targeting IGF1-R and HER3; and MM- 310, an antibody-directed nanotherapeutic containing a docetaxel prodrug that targets the EphA2 receptor. However, the analyst notes, “While we commend Merrimack’s new focus on maximizing shareholder value, we lack conviction in any of these three assets.”

Additionally, MACK intends to close the deal later this quarter where the company will divest pancreatic cancer drug Onivyde to Ipsen for a $575MM cash payment as well as up to $50MM in regulatory milestones. For Schmidt, this is particularly worthy of note, as the fourth-quarter results will be the last full quarter of sales reported by the firm. The cash from the deal will go towards paying off 2022 Notes, in which MACK will give back money to shareholders through a special dividend, and “invest in a more focused pipeline.”

Schmidt is critical, asserting, “Onivyde sales has been disappointing, leading to downward sales revisions. We expect Q4 sales to fall short of the $20.8MM consensus estimate. While Merrimack has made the decision to restructure operations, conserve cash, and invest only in pipeline programs with the best potential for return, meaningful clinical data readout from these programs are at least 12 months away.”

Overall, “With meaningful de-risking data from Merrimack’s pipeline at least 12 months away, we see no reason to be encouraged about MACK shares and remain at Market Perform,” Schmidt surmises.

Eric Schmidt has a very good TipRanks score with a 54% success rate and a high standing of #77 out of 4,350 analysts. Schmidt garners 21.0% in his yearly returns. When recommending MACK, Schmidt gains 19.8% in average profits on the stock.

TipRanks analytics demonstrate MACK as a Hold. Based on 4 analysts polled by TipRanks in the last 3 months, all 4 maintain a Hold on MACK stock. The 12-month average price target stands at $6.00, marking a nearly 97% upside from current levels.

ACADIA Pharmaceuticals: Odds of a 4Q Revenue Miss is Unlikely

Cowen analyst Ritu Baral outlines a bullish perspective on ACAD in a preview of its anticipated fourth-quarter results likely to surface on March 6th.

Positive on Nuplazid, the firm’s pipeline drug approved for use in treating Parkinson’s disease psychosis (PDP) and in trials for the indication of Alzheimer’s disease psychosis (ADP), the analyst reiterates an Outperform rating on ACAD with a $42 price target, which represents a just under 34% increase from where the shares last closed.

Baral highlights, “Following approval, we are focused on commercial uptake of Nuplazid and ongoing development of pimavanserin in expanded indications.”

More confident than consensus, the analyst sees shining opportunity ahead for the drug, as she believes, “We continue to expect a slow launch for Nuplazid as prescribers build familiarity with the drug via substantial sampling programs. We think the 3Q16 revenues of $5.3MM (vs. consensus of $2.7MM) reflect the first initial shift of patients off the 5 week total free drug supply and are indicative of robust early uptake leading ultimately to strong commercial success. We continue to model strong commercial growth and estimate $9.0MM of Nuplazid revenues in 4Q16 (vs. consensus $8.9MM); management already indicated consensus estimates are in line with their expectations, which suggests to us the odds of a revenue miss for 4Q16 are very low.”

With early clinician feedback weighing in Nuplazid’s favor and barely any payor pushback, if any, Nuplazid’s forecast has Baral increasingly optimistic.

Furthermore, on the heels of “surprise positive data” from the Phase 2 trial in ADP, the analyst is likewise encouraged on pimavanserin’s prospects.

Moving forward, Baral expects a Phase 3 registrational trial in ADP will commence by the middle of 2017, with the Phase 2 top-line data read-out to follow with a presentation in the second half of 2017.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, four-star analyst Ritu Baral is ranked #1,018 out of 4,350 analysts. Baral has a 37% success rate and realizes 3.7% in her annual returns. When recommending ACAD, Baral yields 2.2% in average profits on the stock.

TipRanks analytics indicate ACAD as a Strong Buy. Out of 8 analysts polled by TipRanks in the last 3 months, 6 are bullish on ACADIA stock and 2 remain sidelined. With a return potential of nearly 15%, the stock’s consensus target price stands at $36.00.

Exelixis and Cabometyx’s Golden Brick Road

Even amid competition, Eric Schmidt sees full steam ahead for Exelixis, estimated to release its fourth-quarter print on March 6th, and accordingly reiterates an Outperform rating on EXEL without suggesting a price target.

Schmidt opines, “Despite the presence of competitive agents like Bristol’s Opdivo, physician enthusiasm for Cabometyx appears high. We believe the rapid adoption of Cabometyx continued through Q4 with sales in the quarter likely to exceeding the consensus estimate of $42.7MME. Cabometyx is now launching in Europe, though initial royalties from Ipsen will be modest. Cometriq has essentially penetrated its MTC market and future growth is likely to be driven only by pricing. We expect Q4 sales to be in line with consensus’ $8.2MME as Cabometyx’s launch continues to curtail off-label use.”

“Exelixis also holds significant financial interest in Cotellic, Roche’s MEK inhibitor for treating BRAF positive melanoma patients in combination with Zelboraf. Given a small and increasingly competitive melanoma commercial opportunity, and the profit share nature of the deal, we expect Exelixis to book minimal ex-U.S. royalties in Q3 (one quarter lag),” Schmidt contends.

Considering feedback from renal cell carcinoma (RCC) experts, the analyst continues to commend a “robust and differentiated profile” from Cabometyx that will further bolster its accelerated adoption.

According to TipRanks, when recommending EXEL, top five-star analyst Eric Schmidt attains 191.8% in average profits on the stock.

TipRanks analytics show EXEL as a Strong Buy. Based on 3 analysts polled by TipRanks in the last 3 months, all 3 rate a Buy on EXEL stock. The 12-month average price target stands at $18.50, marking a nearly 4% upside from where the shares last closed.

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