The drug/biotech sector's performance in the third quarter reporting cycle so far has been mixed. While many bigwigs beat estimates for earnings, sales either missed estimates or remained in line. While most companies raised their earnings growth expectations, not many have increased their sales guidance.
According to the latest Earnings Preview, for the Medical sector, 76.7% of the sector’s total market cap in the S&P 500 index has released Q3 results. Total earnings for these Medical companies are up 11% from the year-ago quarter on 7.2% increase in revenues, with 82.9% beating EPS estimates and 57.1% beating revenue estimates.
A few drug makers reported third-quarter results last week. Pfizer (PFE - Free Report) beat estimates for earnings, while recording in-line sales. The company narrowed its earnings and sales expectations for the full year. Pfizer attributed the lowered sales outlook to weaker-than-expected revenues in the Essential Health segment due to continued shortages in the sterile-injections business and currency headwinds.
Allergan (AGN - Free Report) and Amgen (AMGN - Free Report) delivered solid performance in the third quarter, beating estimates for both earnings and sales, while also raising their full-year guidance. Sanofi (SNY - Free Report) and Glaxo (GSK), both beat estimates for earnings and sales in the third quarter. Meanwhile, both the companies raised the lower end of their full year earnings growth guidance.
Here we have four pharma/biotech companies, which are scheduled to release earnings on Nov 5. While Mylan, Neurocrine and Ultragenyx will release their third-quarter 2018 results, Taro will release fiscal second-qaurter results for the quarter ended Sep 30, 2018. Let's see how things are shaping up for these announcements.
Mylan N.V. (MYL - Free Report)
The company’s performance has been dismal so far, having missed earnings estimates in three of the last four quarters. The company reported average negative earnings surprise of 6.12% over the said time frame. In the last reported quarter, the company missed earnings estimates by 13.01%.
Mylan’s stock has lost 23.3% in the year so far compared with the industry’s decline of 5.9%.
Our proven model doesn’t show that Mylan is likely to beat estimates this quarter. This is because the company has a Zacks Rank #3 (Hold) and an Earnings ESP of -1.12%. The Zacks Consensus Estimate for earnings in the third quarter is pegged at $1.17 per share. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Concurrent with second-quarter results, Mylan lowered its annual outlook as a result of the change in expected product launches and resizing of product opportunities in the United States. The restructuring in Morgantown also impacted guidance.
Mylan expects 2018 total revenues of $11.25-$12.25 billion, down from the previous projection of $11.75-$13.25 billion. The company anticipates adjusted earnings per share around $4.55-$4.90, down from the earlier estimate of $5.20-$5.60.
While Mylan has one of the largest product portfolios among all generic pharmaceutical companies, the company has suffered a few setbacks in recent times. Mylan recently suffered a major setback as rival Teva Pharmaceutical Industries Ltd. (TEVA) won the FDA approval for the first generic version of the former’s EpiPen and EpiPen Jr (epinephrine) auto-injector for the emergency treatment of allergic reactions, including those that are life threatening (anaphylaxis), in adults and pediatric patients. (Read more: Mylan Q3 Earnings: Is a Disappointment in the Cards?)
Neurocrine Biosciences, Inc. (NBIX - Free Report)
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 61.11%. However, Neurocrine’s track record is mixed as it has topped estimates in two of the last four quarters, the average positive earnings surprise being 4.88%.
Neurocrine’s shares have outperformed the industry so far this year. The stock has gained 44.9%, against the industry’s decline of 3.9%.
Our proven model does not conclusively show an earnings beat for Neurocrine in the to-be-reported quarter. This is because the company has a Zacks Rank #3 and an Earnings ESP of -0.42%. The Zacks Consensus Estimate for the third quarter is pegged at 48 cents per share.
Neurocrine is making great progress with the continued adoption of its lead drug Ingrezza (valbenazine) by physicians and patients for the treatment of adults with tardive dyskinesia. This trend is expected to continue in the third quarter. Ingrezza is also being evaluated in a phase IIb study in pediatric patients with Tourette syndrome. Top-line data from this study are expected in late 2018.
Orilissa (elagolix), being developed by the company in partnership with AbbVie, was approved by the FDA in July 2018 to treat endometriosis pain in women. The drug will report sales for the first time in the third quarter.
The company’s pipeline candidates include opicapone, being developed as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in Parkinson's disease patients, and Orilissa (elagolix) for uterine fibroidsand NBI-74788 for the treatment of congenital adrenal hyperplasia (CAH).
The company is expected to provide updates on its pipeline candidates in the third quarter. (Read more: Neurocrine to Report Q3 Earnings: What's in the Cards?)
Ultragenyx Pharmaceutical Inc. (RARE - Free Report)
The biotechnology company’s earnings surpassed the Zacks Consensus Estimate by 10.95%. However, Ultragenyx’s track record is mixed as it has topped estimates in two of the last four quarters and met in one. The average positive earnings surprise is 50.20%.
For this quarter, Ultragenyx has an Earnings ESP of +0.43% and a Zacks Rank #3, indicating a likely positive surprise. The Zacks Consensus Estimate is pegged at a loss of $1.94 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Ultragenyx’s revenues comprise only collaboration/license revenues, and profit sharing and royalty revenues for its newly launched drug Crysvita, which was launched in the United States in April and in the EU in February. Meanwhile, Ultragenyx’s product sales comprise only nominal sales for Crysvita in other regions and some from Mepsevii. Hence, investors’ focus during the third-quarter call will be on Ultragenyx’s update.
The company has a number of products in its pipeline. It is also looking to expand the label of its lead drug, Crysvita. Crysvita is also being developed for the treatment of tumor-induced osteomalacia (TIO). The 48-week data from the phase II TIO study are expected to be announced this year.
The company is expected to provide updates on its pipeline candidates during the third-quarter conference call.
A lead pipeline candidate is synthetic triglyceride-UX007, which is currently in a phase II study for the treatment of long-chain fatty acid oxidation disorders (LC-FAOD). In August 2018, the FDA accepted its most recent proposal to submit a new drug application (NDA) for UX007 based on existing data. The company expects to provide more details on timing, following a pre-NDA meeting that is scheduled later in 2018.
Ultragenyx’s shares have increased 16.8% year to date against the industry’s decline of 16.2%.
Taro Pharmaceutical Industries Ltd. (TARO - Free Report)
The company’s earnings missed the Zacks Consensus Estimate by 26.61% in the last reported quarter. However, Taro’s track record is mixed as it topped estimates in one of the last four quarters, the average positive earnings surprise being 8.55%.
The company has an Earnings ESP of 0.00% and a Zacks Rank #3. The Zacks Consensus Estimate for earnings is pegged at $1.96 per share.
Taro’s shares have decreased 4.8% year to date compared with the industry’s decline of 3.9%.
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