Market Spotlight: Biotechnology Earnings Preview

Large-cap biotechnology companies, whose shares have outperformed an overall weak market during the second quarter, are poised to meet or beat Wall Street profit forecasts, according to most analysts. Industry drug sales data has foreshadowed strong results for several key players.

"With second-quarter earnings expected to be down across multiple sectors due to the U.S. economic slowdown, biotech looks particularly attractive given its independence from the broader economy," said Credit Suisse analyst M. Aberman, in a note to investors Monday.

Biotech companies and their pharma peers are often considered sheltered from stormy economic times, since drugs for cancer, hepatitis and HIV remain necessities for consumers regardless of the health of global markets.

Genentech Inc. will likely reap second-quarter rewards from sales of Avastin as a breast cancer treatment, while catching a revenue boost from a price increase for cancer drug Herceptin. Most Wall Street assessments place the South San Francisco, Calif.-based company at the top of the pack when it comes to earnings performance.

"Genentech appears to be having the strongest rebound during the second quarter," said Lehman Brothers analyst Dr. Jim Birchenough in a June 30 note to investors.

The company will kick off the sector's earnings season on Monday. On average, analysts polled by Thomson Financial expect profit of 86 cents per share on revenue of $3.23 billion.

Thousand Oaks, Calif.-based Amgen Inc. could also beat forecasts, several analysts say, due to a healthy turnaround in its anemia drug franchise in the wake of regulatory and reimbursement issues. While Wall Street had been worried that increased safety labeling and reimbursement cuts would severely impact anemia drugs such as Amgen's Aranesp, a full-scale exodus from the drug class hasn't materialized.

Lehman Brothers analyst Dr. Jim Birchenough cited UnitedHealth Group Inc.'s recent decision to maintain its insurance coverage for the drug, despite a change in policy by the Centers for Medicare and Medicaid Services, which many thought would prompt private insurers to cut reimbursement levels.

"We continue to believe that CMS restrictions are at odds with good clinical practice and are encouraged to see private payers agreeing," Birchenough said, in a note to investors Monday.