Many growth investors with an increased appetite for risk are attracted to the enormous potential biopharma companies bring to the table. If a Biopharma company receives an FDA approval or surpasses analyst estimates for the quarter, the stocks can see enormous upside. That said, I want to focus on two biopharma names that are set to report earnings on August 2nd.
PDL BioPharma, Inc. (PDLI) trades in a 52-week range of $5.15 (52-week low) and $7.10 (52-week high), and closed trading at $6.64/share on Wednesday as the company prepared to announce its quarterly EPS numbers on August 2nd. Analysts are expecting PDLI to earn $0.49/share on revenue $125.14 million for the June quarter, and if the last quarter was any indication of what we can expect from PDLI, shareholders may actually be quite happy with the results.
The company not only has a great track record with 9 EPS surprises in the last 14 quarters, but there are two other variables to consider when considering a position in PDLI. First, the company currently yields 8.80% ($0.60), which is something of a rarity considering not many sub-$1 billion dollar pharmaceutical companies even pay a dividend. The second variable to consider is the company's profit margin, which is 54.78% over the last 12 months and when compared to the -100.61% profit margin of Seattle Genetics, Inc. (SGEN), is certainly pretty impressive.
ABIOMED, Inc. (ABMD) trades in a 52-week range of $9.98 (52-week low) and $26.17 (52-week high), and closed trading at $22.97/share on Wednesday as the company prepared to announce its quarterly EPS numbers on August 2nd. Analysts are expecting ABMD to earn $0.04/share on revenue $37.00 million for the June quarter, and if the last few quarters were any indication of what we can expect, ABMD shareholders may actually be quite happy with the results.
The last four quarters have been pretty good consisting of monster EPS surprises in the September 2011 and December 2011 quarters, an in-line result for the March 2012 quarter, and a significant miss for the June 2011 quarter. I wouldn't be too worried about the June quarter as the following three quarters certainly demonstrated a promising EPS trend. One thing potential shareholders should consider is the company's total debt to total cash ratio, which is zero. Over the last 12 months ABMD has carried absolutely no debt and roughly $77 million dollars on its books, which in my opinion is a very positive catalyst.
The biggest catalyst for companies is growth. Analysts are expecting both PDLI and ABMD to grow significantly during the June quarter and even for the full year, and if both companies can beat on the top and bottom lines, we can see the growth numbers easily surpassed.
PDLI is expected to grow 25.60% for the June quarter and 22.20% for the full year, which can be easily surpassed if it reports better-than-expected EPS numbers and revenue numbers. ABMD, on the other hand, is expected to grow 133.30% for the June quarter and 600.00% for the year, which in my opinion is pretty significant considering its recent EPS trends.
Potential investors should remain a bit conservative when considering positions and even the slightest miss on the top or bottom for either company could result in a larger-than-expected downward spiral.
Disclosure: I am long PDLI.