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12:00 AM
Aug 06, 2007
 |  BioCentury  |  Finance

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 Investors noted that many large cap biotechs, including AMGN, "were already down with low expectations heading into their respective quarters." While the biotechs were sold off in front of their results, pharma companies were bid up beforehand, then fell after the 2Q07 numbers came in (see "Big Pharma Beat Down," A17).

Speaking frankly

CV Therapeutics (CVTX) plunged $2.55 (23%) to $8.74 last week as investors digested the company's 2Q07 sales of its Ranexa ranolazine cardiovascular drug along with news it had engaged Lehman Brothers Vice Chairman Fred Frank to help it seek alternatives. Not helping the stock was a downgrade by Needham analyst Mark Monane, who lowered his rating to "hold" from "buy."

On the earnings call, Chairman and CEO Louis Lange said the company began thinking about its alternatives "after the MERLIN data" for Ranexa, which the company was hoping would lead to a first-line indication in acute coronary syndrome (ACS). The drug is marketed as second-line therapy for angina.

MERLIN missed its primary endpoint. But there was no adverse trend in death or arrhythmias in patients on Ranexa. The company said those safety results could be used to support a label expansion to include first-line therapy for angina. The company plans to submit an sNDA in September or October (see BioCentury, March 12).

Lange suggested the MERLIN data "allays concerns about the safety of Ranexa." Thus, he said, the company recognized it had a "significant commercial opportunity and yet limited resources with respect to growing the franchise...

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