12:00 AM
Nov 11, 2002
 |  BioCentury  |  Finance

Ebb & Flow

Cephalon (CEPH) and Shire (LSE:SHP; SHPGY) put an exclamation point to the end of biotech's third quarter earnings season. Both provided upside surprises, bringing to 14 the number of profitable biotechs that beat their Street consensus numbers for the quarter. Four of the other five profitable product-based biotech companies hit their numbers, leaving only one - Genzyme (GENZ) - to miss the consensus (see "Third Quarter Biotech Profit Scorecard," Online Links, A11).

The list excludes is Elan (ELN): analysts were all over the map with their estimates because the company has not provided guidance while it restructures. But even ELN turned heads as its revenues were above prior guidance and the company said it was ahead of the game in raising a planned $1.5 billion through asset sales.

CEPH walloped the consensus by $0.07 (25%), posting third quarter EPS of $0.35, thanks to strong sales growth of Actiq oral fentanyl for breakthrough cancer pain. SHP beat consensus by $0.02 with an 18% increase in third quarter revenue that featured an 11% increase in sales from its Adderall franchise for attention deficit hyperactivity disorder (ADHD)(see "And That's a Wrap").

While CEPH was rewarded for its numbers - last week adding $4.74 (10%) to $54.55 - SHP was somewhat mired in fallout from the announcement that CEO Rolf Stahel was leaving (see below).SHP added 16.5p to 524.5p on the week, while SHPGY gained $0.42 to $24.67 on NASDAQ.

Asset grazing

All three of CEPH's U.S. products come from outside sources, leading to questions in last week's conference callabout President and CEO Frank Baldino's plans to add a fourth product. But while Baldino noted that a number of opportunities exist, he cautioned that few can have a significant impact on the bottom line.

"Our job is to find those opportunities that fit our mix, so we can leverage our sales force in the CNS, oncology and pain areas." Baldino said. "We've found a number of accretive actions over the last few years, and we hope that some of the ones we're looking at now will be in that category going forward."

CEPH got Actiq oral fentanyl for breakthrough pain from its 2000 acquisition of Anesta. It in-licensed Provigil from Laboratoire L. Lafon, which CEPH acquired in toto last year.And it got Gabitril tiagabine for epilepsy from Abbott (ABT) (see BioCentury, June 14, 1999, July 24, 2000 & Dec. 10, 2001).

CEPH could pay for a new product with cash or stock. It had $636.6 million in cash and investments at Sept. 30, and the stock has held up well in the bear market. The stock is down $21.03 (28%) on the year, far better than the 46% decline in the BioCentury 100.

CEPH was up $4.74 (10%) to $54.55 last week after adding $5.16 (10%) to $55.41 on 8.9 million shares on Thursday's earnings news.

Earning watch

Other companies working their way toward an annual profit had stock-driving earnings news as well.

Kos (KOSP) was up $3.90 (26%) to $19.13 on the week after gaining $2.10 (13%) to $18.79 on 412,455 shares on Thursday's news that third quarter revenues increased 76% to $45.5 million, up from $25.9 million in the 2001 quarter, thanks to strong growth of its cholesterol management business. KOSP now expects full year revenue to increase 85% from 2001's $91.4 million instead of the 75% growth previously expected.

In Europe, investors played catch-up to news that Actelion bumped up 2002 sales guidance for Tracleer by 15% to CHF115-CHR120 million ($78-$82 million). The pulmonary arterial hypertension (PAH) drug posted third quarter sales of CHF35.7 million ($24.3 million), up 42% from CHF25.2 million in the second quarter. ATLN, which slipped CHF1.15 to CHF60.85 on Tuesday, rebounded to close the week up CHF 5.40 to CHF 66.05. Its market cap is CHF 984.8 million ($671.5 million).

LifeCell (LIFC) was up $0.69 (34%) to $2.75 on the week after adding $0.48 (22%) to $2.64 on 207,470 shares on Thursday after posting its fourth consecutive quarter of net income. Third quarter EPS came in at $0.02 on $8.7 million in sales, 35% above the $6.5 million posted in the quarter last year,...

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