Biotechnology stocks suffered a rough week last week. Allergan (NYSE: AGN), which reported results on November 1, rallied but then fell. Regeneron (NASDAQ: REGN), whose stock trades in the $400 range, is continuing its bearish trend since peaking in July.
Allergan reported revenue growth of 11.3% ($4.03 billion) and earnings of $4.15 a share. The stock is now steeply discounted on all metrics. For example, it is trading at a forward P/E of just 10.4 times. Making things worse for the company is its decision to sell Teva Pharma (NYSE: TEVA) stock. Teva plunged 14.4% on the week after it reported a very poor quarter.
The negative trading momentum on AGN stock could last a while.
Management issued 2017 guidance that is in line with market expectations. It expects revenue of up to $16.025 billion and earnings of up to $20.35 a share.
Investors could play the seasonal strength in AGN stock. The fourth quarter is historically a strong quarter for Allergan. In the upcoming holiday season, the company’s Aesthetic unit should do well.
Major Headwind
The Restasis patent invalidation will take out 10% of sales and 15% of EBITDA.
Takeaway
Regeneron does not face the same generic drug competition like Allergan. Though Allergan has a long list of drugs in its pipeline, investors should also look at companies like Regeneron, Synergy Pharmaceuticals (NASDAQ: SGYP), and Kerx Pharma build a diversified biotech stock portfolio.
