On Tuesday morning, small cap biotech BioCryst Pharmaceuticals (NASDAQ: BCRX), mid cap healthcare services Omnicare, Inc. (NYSE: OCR) and large cap medical technology stock Medtronic (NYSE: MDT) are all scheduled to report earnings. That means investors and traders alike have one trading day left to add to or reduce a position in these stocks. And while small cap BioCryst Pharmaceuticals’ share performance of the past five years leaves something to be desired, mid cap Omnicare, Inc. is up 20.5% over the past year and up 75.8% over the past five years while large cap Medtronic is up 18.7% over the past year and flat over the longer term. So what should be you be paying attention to heading into these earnings reports?
Starting with small cap BioCryst Pharmaceuticals, it designs, optimizes and develops novel small-molecule drugs that block key enzymes involved in infectious and inflammatory diseases. Specifically, BioCryst Pharmaceuticals has two late-stage development programs: peramivir for the treatment of influenza and ulodesine for the treatment of gout. In addition, BioCryst has two early-stage programs: BCX4161 for hereditary angioedema and BCX4430 for hemorrhagic fevers. On Thursday, BioCryst Pharmaceuticals fell 4.08% to $1.41 (BCRX has a 52 week trading range of $1.08 to $5.95 a share) for a market cap of $71.74 million plus the stock is down 63.3% over the past year and down 63.7% over the past five years.BioCryst Pharmaceuticals was recently forced to dump its Hepatitis C program in the face of inadequate viral load reduction in a rat study last year (which caused the company to initially withdraw its new drug application) and another effort that involved chimpanzees has since failed as well. Moreover, the company has simply fallen too far behind other biotechs with Hepatitis C programs. And while BioCryst Pharmaceuticals’ executives remain upbeat, some analysts have noticed the company admits on its website that hereditary angioedema occurs in about 1 to 10,000 to 1 in 50,000 people. Nevertheless, BioCryst Pharmaceuticals’ CEO said during his last address to investors that the company had “the runway” to reach value-creating milestones and enough cash to survive for 15 to 18 months – something investors need to pay attention to during he coming earnings report and earnings call.
Meanwhile, mid cap Omnicare, Inc. provides a broad array of pharmacy-related services to long term care facilities and to other customers in the health care. On Thursday, Omnicare, Inc. rose 0.81% to $39.74 (OCR has a 52 week trading range of $29.24 to $40.00 a share) for a market cap of $4.39 billion plus the stock is up 20.5% over the past year and up 75.8% over the past five years. This year, Omnicare, Inc. has been steadily hitting new 52 week highs while back in November, the company announced it had agreed to repurchase $250 million in company stock from Goldman Sachs – one of its largest shareholders (As of September 30th, $498 million had been spent on the company stock repurchase program). The last time Omnicare, Inc. reported earnings, it reported a 3% fall in revenue to $1.5 billion as lower sales in the long-term care pharmacy group were partially offset by gains in the specialty-care group; and a 120% net income increase to $61.4 million. Apparently, increased generic drug penetration allowed the company to more than offset a lower level of prescription volumes within its Long-Term Care Group. Omnicare, Inc. also maintained its revenue guidance, but upped its its full-year guidance for adjusted cash earnings per diluted share (excluding special items) from the $3.22 to $3.28 range to the $3.30 to $3.36 range.
Finally, large cap Medtronic calls itself the global leader in medical technology as it has six major businesses focused around the following conditions or therapy types: Cardiac Rhythm Disease Management, Spinal and Biologics, CardioVascular, Neuromodulation, Diabetes, and Surgical Technologies. On Thursday, Medtronic rose 0.38% to $47.17 (MDT has a 52 week trading range of $35.67 to $47.40 a share) for a market cap of $47.71 billion plus the stock is up 18.7% over the past year and up 0.94% over the past five years. On Wednesday, Medtronic announced that the FDA had approved its Advisa DR MRI SureScan, a next generation pacemaker system designed and tested for use with MRI scanners. However, enthusiasm for the device has waned along with concerns about the use of MRIs on patients with pace makers. The last time Medtronic reported earnings, it reported declines in its key pacemaker, defibrillator and spinal divisions, but this decline was offset by growth in its cardiovascular, diabetes and surgical technologies businesses which helped to produce 5% revenue growth (excluding the currency impact). Medtronic also received several FDA approves the last quarter it reported earnings and acquired Chinese medical devices maker China Kanghui Holdings – moves that should help its long-term performance. One storm cloud or uncertainty though will be the medical device tax to pay for Obamacare as that’s not looking like it will disappear any time soon.
The Bottom Line. Small cap BioCryst Pharmaceuticals is probably too risky for any conservative investor who might want to take a look at mid cap Omnicare, Inc. and large cap Medtronic as longer term bets.