Eli Lilly, Merck top pharma picks in Barclays Q2 preview

Whereas buyers are bracing for yet one more difficult quarter when earnings season kicks off for commercial-stage biopharma later this month, Barclays has picked Eli Lilly (NYSE:LLY) and Merck (NYSE:MRK) as two of probably the most favorably positioned huge pharma shares heading into the Q2 earnings season.

Barclays Q2 2023 earnings preview on biopharma comes at a time when healthcare has turn into a notable laggard within the S&P 500 this yr: Pharmaceutical corporations within the benchmark index have misplaced ~5% YTD.

With difficult backdrops even for corporations with the potential to put up quarterly beats, a sector rebound can be extra of a case of macro components than the upcoming earnings season, Barclays analyst Carter Gould argues.

Here’s a abstract of his feedback on particular person shares.

Eli Lilly: Regardless of an Obese ranking and a $500 per share goal on Lilly (LLY), Gould argues that the corporate, which not too long ago grew to become probably the most precious drugmaker within the U.S., has a tough valuation setup.

The analyst expects LLY to exceed forecasts for diabetes remedy Mounjaro and awaits updates on its provide points and the corporate’s near-term plans to develop its label for weight problems, which he mentioned will assist de-risk the agency’s 2024 estimates for the drug.

Regardless of LLY’s prospects in Alzheimer’s, the analyst doesn’t look ahead to Q2 updates on donanemab, its late-stage candidate for the memory-robbing illness. A key medical assembly the place LLY is scheduled to put up Part 2 outcomes for the drug can be over by the point of its earnings launch.

Merck: Gould expects Merck (MRK) to put up a clear topline beat in Q2, pushed by its best-selling merchandise Gardasil and Keytruda. Nonetheless, he cites issues a few potential earnings miss on account of a cost associated to the corporate’s $11B deal to accumulate Prometheus Biosciences (RXDX).

The analyst questions whether or not even an ex-Prometheus earnings beat can be sufficient to spark investor curiosity, given a seemingly quiet catalyst outlook for Merck (MRK) in H2. Barclays has an Obese ranking and a $130 per share goal on Merck (MRK).

Neurocrine Biosciences: The maker of motion dysfunction remedy, Ingrezza, can be favorably positioned into the earnings season, Barclays argues, with an Obese ranking and a $125 worth goal. Gould expects Neurocrine (NASDAQ:NBIX) to surpass Wall Road forecasts for Ingrezza and problem a full-year steering elevate.

However the uncertainty associated to a topline readout anticipated for crinecerfont, NBIX’s candidate for the uncommon genetic dysfunction congenital adrenal hyperplasia, in early This fall, with shares buying and selling at mid-$90s, “we expect that is a positive threat/reward into the print,” Gould wrote.

Barclays additionally factors to notable pre-earnings setups in different main drugmakers: Regeneron (REGN), Pfizer (PFE), Gilead (GILD), and Amgen (AMGN).

Regeneron: Barclays expects Regeneron (REGN) to fall in need of Road estimates for its blockbuster eye illness remedy Eylea amid competitors from Roche’s (OTCQX:RHHBY) (OTCQX:RHHBF) rival injection, Vabysmo. Nonetheless, the agency maintains its $888 per share goal and Obese ranking.

Within the wake of the current FDA rejection of a high-dose model of Eylea, the analyst is eager to see if REGN, with its Q2 launch, will embody updates concerning its timeline to resubmit a advertising and marketing software.

Amgen: Forecasting Q2 misses for arthritis therapies Enbrel and Otezla, Barclays, with an Underweight ranking on the inventory, initiatives decrease than anticipated income and earnings from Amgen (AMGN).

With the corporate dealing with antitrust issues over its $28B bid to accumulate Horizon Therapeutics (HZNP), the analyst lowers his worth goal on AMGN to $210 from $225, citing the significance of Horizon’s Tepezza gross sales for the inventory.

Gilead: With the pandemic’s impression waning, Gould warns that Gilead (GILD) will decrease its $2B full-year gross sales estimate for COVID remedy Veklury and raises issues over the place the therapy will find yourself within the firm’s pipeline. With an Equal Weight ranking, Gould lowers his worth goal on GILD to $81 from $84.

Pfizer: Regardless of posting a Q1 beat thanks primarily to its COVID franchise in Might, the analyst expects Pfizer (PFE) to report weak gross sales throughout its portfolio for Q2. As a result of this knowledge and given how the pandemic evolves in H2, he anticipates the New York-based pharma big to problem a steering lower. With an Equal Weight ranking on PFE, Gould trims his worth goal to $38 from $40 per share.

The analyst additionally commented on Equal Weight-rated biopharma shares in his protection. Notable projections embody in-line gross sales estimates for AbbVie’s (ABBV) blockbuster arthritis remedy Humira within the U.S. and an in-line quarterly efficiency from Bristol Myers (BMY).

Biogen: Because it rolls out the not too long ago accepted Alzheimer’s remedy, Leqembi Barclays appears to be like ahead to updates on the launch, progress on the corporate’s cost-cutting initiatives, and administration’s feedback on the melancholy remedy zuranolone.

Developed by Biogen (BIIB) and Sage Therapeutics (SAGE), zuranolone is at present underneath FDA precedence evaluate with a goal motion date of Aug. 5.

Extra on bigpharma