Biotech Weekly Commentary: Week Ending 7/22/2022
The S&P Biotechnology Select Index is trying to hold the 100 day moving average as earnings season progresses and the FED meeting looms.
Second quarter numbers to date have shown that prescription drug volumes and prices continue to meet or exceed expectations in contrast to the downside revisions seen across much of the broader tech and consumer company universe.
Johnson and Johnson (JNJ), Novartis (NVS) and Roche (RHHBY) all generally put up strong operating results, with FX cited as the key headwind. Hospital numbers came in ahead of depressed expectations while medical device companies are seeing more operational challenges.
Specifically, JNJ reported a 2Q worldwide medical devices revenue fell to $6.90B (-1.1% y/y, est $7.06B) while Intuitive Surgical reported a Q2 EPS miss ($1.14 ex-items vs $1.20) driven by lower revenue from system placements.
SMID cap biopharma earnings may be more volatile as the record number of companies trading at a negative enterprise value (EV = market cap net of cash and debt) disclose strategic, program and financial updates in the coming weeks.
We continue to expect to see more 'creative destruction' as underperforming companies restructure and the potential for more triple digit gainers for those that surprise to the upside.