4 Top Drugmakers Deliver Solid Doses Of Earnings Growth

Investor's Business Daily

Four highly rated drugmakers beat analysts' second-quarter estimates Tuesday, but they generally followed this season's trend of guiding conservatively. Specialty/generics giant Actavis' (ACT) earnings rose 70% vs. a year earlier to $3.42 a share, beating forecasts by 5 cents. Sales rose 34% to $2.67 billion, more than $100 million above estimates.

The company offered its first guidance since it bought Forest Laboratories, which nearly doubled its size. It guided second-half sales at around $7 billion — on the low side of analysts' $7.29 billion. For the full year, it forecast EPS of $13.02 to $13.32, missing the Street's average of $13.73.

Actavis Guidance So-So

Preliminary 2015 guidance calls for sales of about $15 billion, with EPS of $15.60-$16.80. Analysts had expected sales of $15.59 billion and EPS of $16.61.

On a conference call with analysts to discuss results, new CEO Brent Saunders said the spending guidance may be higher than some expected, but he emphasized that continuing to invest in new products is "the right thing to do" for long-term value.

It was less clear why the topline target was short, but Sterne Agee analyst Shibani Malhotra noted that Actavis has a history of conservative guidance. After the call, she sounded reassured that the company could reach its "aspirational" EPS target of $20 by 2017.

"2015 appears to be an investment year as management expects to work to get the most out of the combined company in the long term," Malhotra wrote in a flash note to clients.

Actavis stock lost more than 3% intraday but closed down just 0.5% at 214.67.

Smaller generics firm Akorn (AKRX) said Q2 earnings rose 79% over a year earlier, eclipsing estimates by 5 cents. Sales climbed 96% to $150.7 million, which is more than $5 million above Wall Street expectations.

Akorn raised its 2014 sales guidance to $580 million to $600 million vs. consensus of $576 million. The new EPS range of $1 to $1.05 was far above analysts' 85 cents.

Akorn shares leapt 9% but settled for a gain of 2% to 34.93.

On Akorn's call, management said they're benefiting from price increases for the topical steroid clobetasol, sold as an ointment for eczema, psoriasis, poison oak and other skin inflammations. CEO Raj Rai said the maker of the brand-name version raised the price. Generic firms, including Akorn, followed. The benefit of these increases should really kick in during Q4, Rai said.

Rai also said that the integration of Hi-Tech Pharmacal, which Akorn bought for $640 million in April, is going better than expected and producing cost efficiencies and cross-selling benefits.

Regeneron's (REGN) Q2 sales rose 45% to $665.7 million, topping consensus by $18 million. Earnings grew 43% to $2.47 a share, beating by 18 cents.

The big biotech affirmed its guidance of $1.7 billion to $1.8 billion in U.S. sales of its lead drug Eylea this year. It raised its R&D spending forecast but lowered sales, general and administrative cost guidance, so the effect was basically in line.

Deutsche Bank and Leerink lifted their price targets on the stock, in response to Q2 results and July 31 news that Regeneron had acquired an FDA priority-review voucher from BioMarin Pharmaceuticals (BMRN) for its anti-cholesterol candidate alirocumab. As a result, alirocumab could come out at the same time as Amgen's (AMGN) evolocumab, which had been assumed to have first-mover status.

Regeneron rose 2% to 333.20.

Jazz Trumpets Strong EPS

After the market close, Jazz Pharmaceuticals (JAZZ) reported EPS rose 43% to $2.05 — 13 cents above estimates. Sales rose 40% to $291.2 million, about $18 million more than consensus.

For the full year, Jazz affirmed its EPS guidance of $8.00-$8.25, but raised and tightened its revenue guidance to $1.125 billion to $1.165 billion.

Jazz shares rose 3% late after closing down 1.5% at 135.80.

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