Why Caution Is Prevailing in Biotechs Into and After Earnings

Biotechnology stocks struggled on Wednesday after Biogen Idec Inc. (NASDAQ: BIIB) surprised investors with weaker-than-expected guidance for 2014 earnings.

The struggles also may be due to simple profit-taking. Stocks in the group had huge gains in 2013; the Amex Biotechnology Index jumped 50%. The index is up 8% in January, despite the soft market overall.

Biogen Idec earned $2.34 a share after one-time charges in the fourth quarter, six cents better than expected and up from $1.40 a year ago. The profit jump was due to strong sales of its new multiple sclerosis drug Tecfidera. Revenue jumped 39% to $1.97 billion, ahead of the consensus estimate of 1.93 billion.

The stock slumped after Biogen offered 2014 earnings guidance of $11.00 to $11.20 a share, less than the Street estimate of $11.63. The company sees revenue growing 22% to 25%, better than the Street estimate of 20% growth.

In late-morning trading, the shares were down 58 cents, or 0.2%, to $305.08, after falling to as low as $292.82. Biogen shares soared 91% in 2013.

Biogen’s results came after Amgen Inc. (NASDAQ: AMGN) also beat estimates late Tuesday. Profit was up some 30% in the quarter to $1.81 a share, helped in part by a lower tax rate. That beat the Street estimate of $1.64. Revenue was up 13% to $5.01 billion. The company expects 2014 earnings of $7.90 to $8.20. The Street consensus is $8.18. The guidance disappointed investors who wanted more.

Amgen shares were down 33 cents to $120.37. The shares are up about 5.5% this month after a 32.3% gain in 2013.

Two more important biotech companies will report in the few days.

First up is Celgene Corp. (NASDAQ: CELG), which reports before Thursday’s open. The company is expected to earn $1.54 a share, up from $1.32 a year ago. Revenue is forecast at $1.72 billion, 19.1% higher than a year ago.

Shares were up two cents Wednesday to $160, after falling to as low as $156.28. The shares had gained 115.3% in 2013, but they are down 5.2% this month.

Gilead Sciences Inc. (NASDAQ: GILD) reports after Tuesday’s close. Analysts expect $0.50 per share in earnings, unchanged from a year ago. The consensus revenue estimate is $2.85 billion, up 10.3% year over year.

Shares were down 37 cents, or 0.5%, to $80.37. They are still up about 7% for the month, after a 104.4% gain in 2013.