Ebb & Flow

With all the big names accounted for in the 2Q07 earnings season, the Street has rendered its verdict on the prospects going forward, punishing big pharma while giving big biotech at least the benefit of the doubt.

Indeed, the pharma space saw more than $35 billion of aggregate market cap disappear in the wake of the quarterly results posted by their top names. Biotechs, on the other hand, added about $800 million of market cap.

Part of the problem with the pharma stocks, said Max Jacobs of Mehta Partners, was that "there were big expectations built into their earnings because of all their cost cutting measures" in previous quarters. He also noted that Pfizer dragged the group down.

Indeed, PFE was the only company among both big cap biotech and pharma that missed its consensus EPS estimate. The company surprised investors with lower than expected sales of blockbuster cholesterol drug Lipitor atorvastatin, and was hit by generic competition for Norvasc amlodipine for hypertension and depression/anxiety drug Zoloft sertraline.

The week of PFE's earnings announcement, the company shed $7 billion of market cap, a 4% drop. Biggest biotech Amgen (AMGN) also gave ground following its earnings report, losing $635.5 million of market cap, a 1% drop.

Unlike PFE, however, AMGN announced its 2Q07 results during a sour week for the overall markets. The week of AMGN's earnings, the S&P 500 plunged 4.9%, while the Dow Jones and NASDAQ dropped 4.2% and 4.7%, respectively. Thus, AMGN held up well given the overall equity selloff.

Oliver Marti of Columbus Circle

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