NEW YORK -
While biotechnology companies are expected to meet or beat Wall Street's first-quarter profit projections, several analysts have voiced concern about slowing sales growth of key blockbuster drugs.
Having spoiled investors and Wall Street over the years with its double-digit growth and better-than-expected results, Genentech Inc. (nyse: DNA - news - people ) found the bar set very high when it kicked off the sector's earnings season last Thursday.
Analysts glossed over the South San Francisco, Calif.-based company's better-than-expected 12 percent jump in profit, and instead focused on slower-than-anticipated growth in sales of cancer drug Avastin.
Avastin is Genentech's key revenue driver, and Wall Street had hoped the Food and Drug Administration's additional approval for the drug's use in breast cancer would drive sales up more than 13 percent as reported.
The success of products including Avastin, Herceptin and Lucentis have fueled Genentech's growth year after year, but as the drugs saturate the market, sales growth is moderating.
Furthermore, Genentech's reliance on just a few drugs to drive revenue expansion has been a nagging issue for Wall Street. The company has multiple late-stage studies ongoing, but they are mostly for new uses of already approved drugs.
"These franchises, combined with more modest growth from existing products, have allowed Genentech to post industry leading growth over the last few years," said Cowen and Co. analyst Eric Schmidt, in a note to investors. "But looking forward, earnings are projected to decelerate significantly, reflecting higher baseline sales and the maturation of several markets."
Thousand Oaks Calif.-based Amgen Inc. (nasdaq: AMGN - news - people ) may also post weaker-than-expected revenue, though Wall Street is mixed on whether sales of its anemia drugs Aranesp and Epogen have leveled off. Sales of the drugs have fallen over the last several quarters because of safety concerns and stricter labeling.
The quarter was a busy one for Amgen. In addition to weathering safety issues, Amgen saw its shares fall to a year-low as Roche Holding (other-otc: RHHBY.PK - news - people ) AG came closer to getting its rival anemia drug Mircera to market. The companies are entangled in a patent dispute over the drug and a federal judge is expected to rule on a permanent injunction against Mircera in June or July.
Meanwhile, Amgen struck a $1.8 billion deal with Takeda Pharmaceuticals in February to sell its Japanese unit and development rights, and also released positive late-stage study data on its osteoporosis drug candidate denosumab.
Amgen is scheduled to release first-quarter results April 24.
When Cambridge, Mass.-based Biogen Idec Inc. (nasdaq: BIIB - news - people ) reports first-quarter earnings on April 23 Wall Street will be watching for a slowdown in sales of its multiple sclerosis drug Avonex, amid tougher competition.
Furthermore, Biogen's controversial MS drug Tysabri received a positive boost during the quarter from the FDA when it was also approved to treat Crohn's disease, but reports of higher rates of liver injury added more concern to a drug with a long safety-issue record.
While its peers are feeling the negative effects of relying on just a few products, Gilead Sciences Inc. (nasdaq: GILD - news - people ) is expected to post another strong quarter of growth from HIV treatments Atripla, a three-in-one drug, and Truvada. Sales could also be helped by a recent study showing a higher risk of heart attack associated with competing HIV treatment abacavir, or Ziagen, made by GlaxoSmithKline (nyse: GSK - news - people ) PLC.
Gilead is scheduled to report first-quarter earnings Wednesday.
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