Cowen & Co Weighs in on Biotech Ahead of Earnings: Biogen Inc (BIIB), Celgene Corporation (CELG), Incyte Corporation (INCY)

Cowen and Co.’s Eric Schmidt covers several companies in the biotechnology sector. The top-ranked analyst has provided insight into the following three biotech stocks ahead of earnings: Biogen Inc (NASDAQ:BIIB), Celgene Corporation (NASDAQ:CELG), and Incyte Corporation (NASDAQ:INCY). When measured over one year and no benchmark, Schmidt has a 91% success rate recommending stocks with a +61.9% average return per rating.

Biogen will be reporting earnings on July 24 before market open and Schmidt anticipates total quarterly revenue of $2.69 billion, which is generally in-line with expectations. Second quarter earnings will be focused on Tecfidera, a therapy to treat multiple sclerosis. Schmidt believes the drug is “unlikely to resume a meaningful growth trajectory in the U.S.” Even though the “MS market did grow faster in Q2 than in Q1,” Biogen gained little of this new market share. The analyst estimates second quarter worldwide sales from the drug to be about $952 million, higher than the general analyst consensus of $931 million.

Schmidt points to data from IMS Health that demonstrates the deceleration of Tecfidera scrips in the quarter. He attributes the slow down to several reasons, including, “a slowdown in new patient starts following a period of rapid switching within the MS market.” Schmidt’s analysis shows that the number of Tecfidera pills dispensed in the quarter grew 5% compared to the prior quarter. He also notes that Biogen enacted a 5.5% price increase in March. The analyst concludes, “Although Tecfidera’s sales growth has slowed, we expect it to become the leading MS drug with peak worldwide sales of [approximately $6 billion].”

Aside from Tecfidera, Schmidt is looking to Biogen’s other available therapies drugs such as Alprolix, Eloctate, Plegridy, Zinbryta to support “near-term growth.” The analyst points out aducanumab as a promising pipeline drug aimed at treating Alzheimer ’s disease. With Biogen’s promising pipeline, Schmidt views the company “as one of the cleaner long-term growth stocks and expects its share price to appreciate as investors gain added confidence in… pipeline assets”

Eric Schmidt currently has an Outperform rating on Biogen with a $494 target price. Schmidt has an 86% success rate rating the stock with a +15.7% average return per BIIB rating when measured over one year with no benchmark.

Celgene will report earnings on July 23 before market open and Schmidt is forecasting total revenue of $2.249 billion, compared to the company’s guidance of $2.278 billion. Last week, Celgene announced it will be acquiring Receptos for more than $7 billion. In conjunction with this announcement, Celgene raised its 2020 revenue guidance from $20 billion to upwards of $21 billion thanks to the positive impact the acquisition will have on its I&I franchise.

The analyst will also be focusing on Revlimid, Otezla, and GED-0301 in Crohn’s disease in the company’s earnings report. Schmidt expects Revlimid, a therapy for multiple myeloma, to rake in $1.38 billion in quarterly revenue and sees possible upside thanks to “strong seasonal rebound and greater uptake from NDMM label (U.S., Germany, Luxembourg).” Schmidt notes that the drug “looks to have a bright future, including much remaining patent exclusivity and the opportunity to grow its [market] penetration.”

Separately, Otezla was launched last April to treat specific forms of arthritis. Schmidt notes, “Although initial sales of the drug fell well below expectations, the late 2014 approval in psoriasis accelerated prescriptions and revenue growth.” Celgene is optimisitic about the drug due to “better-than-expected formulary coverage” and “the fact that 85% of Otezla patients were coming from non-steroidals, corticosteroids, oral DMARDs or were naive to therapy, while only 15% were coming from biologics.” Lastly, Schmidt notes that GED-0301 for Crohn’s disease testing is underway and a decision on the drugs Breakthrough Status is expected in the second half of the year.

Eric Schmidt currently has an Outperform rating on Celgene with a $146 price target. The analyst has an 100% success rate recommending the stock with a +29% average return per CELG rating when measured over one year and no benchmark.

Incyte will release earnings on August 4 before the market opens. Eric Schmidt estimates quarterly revenue of $151 million, of which $131 million will come from Jakafi; Incyte’s approved therapy to treat polycythemia vera (PV).

Schmidt believes Jakafi’s net price will benefit from several factors, including, “Medicare patients exiting out of the donut hole, leading to lower gross-to-net discounts” and “a 4.7% March price increase.” The drug is marketed by Novartis outside of the United States and it recently “secured MF reimbursement… in Japan and much of Europe.” Demand for the drug has grown organically in the past two quarters and Schmidt forecasts that it could “post organic growth of 9% or better.” Overall, the analyst views the drug “as an excellent drug with striking efficacy and project >$1B in 2019 U.S. sales, where Incyte holds full rights.”

Aside from Jakafi, Incyte has partnered baracitinib with Eli Lilly for development in rheumatoid arthritis. Data from recent trials is expected later in 2015 and the company expects to file for a New Drug Application at the end of 2015. The drug is also being tested to treat diabetic nephropathy. Although Eli Lilly has not announced future plans for this line of therapy, Schmidt notes that the “emerging profile appears promising.”

Eric Schmidt currently has an Outperform rating on the stock, though he does not provide a price target. Schmidt currently has a 100% success rate recommending INCY with a +70.4% average return per recommendation when measured over a one-year horizon with no benchmark.

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