By: Momei Qu

Contributor, Stock Traders Daily

Real Time Trading Reports:  Included are detailed trading reports designed to help investors realize opportunities in these companies as earnings are released.  The reports are linked to the stock symbols in the article below.

(La Jolla, CA)  While most companies made headlines throughout the year with news of layoffs or bankruptcies, healthcare companies have been making headlines with acquisitions that are significant in size. So is this a sign that healthcare companies are emerging from the recession stronger than before? We’ll find out soon when four large players in the sector, Johnson & Johnson, Abbott, Biogen Idec and Baxter International, report third quarter earnings this week.

Johnson & Johnson (NYSE: JNJ), after a series of setbacks to its pipeline from the FDA, is riding on some positive news going into its earnings report Tuesday. JNJ recently got approval from the FDA for Stelara, the antibody used for psoriasis, which will give its pharma business a boost and improve the company’s overall outlook. It is also part of the latest wave of players to venture into the vaccine market. JNJ announced at the end of September that it will acquire an 18% equity stake in CRXL and has entered into an agreement with CRXL to develop and commercialize a universal monoclonal antibody for influenza, as well as three additional vaccines over the next 3-5 years. If successful, the collaboration could bring significant revenue. Although the promising news could be compromised by continued generic competition to some existing products such as Risperdal and Topamax, long term prospects still appear favorable. Analysts are projecting earnings per share of about $1.13. JNJ has beaten Wall Street estimates in the last four quarters.

Biogen Idec (Nasdaq: BIIB) will report third quarter earnings Tuesday, with consensus earnings estimate of $1.04 per share. BIIB’s cash balance of $3 billion remains one of the strongest of its peers, both a sign of overall financial health and potential for returning value to shareholders through dividends. However, revenue from Rituxan is expected to take a hit as Roche’s ex-U.S. royalty revenue is expiring. EPS is also lowered by a $20 million milestone fee to partner Cardiokine. This is partially offset by the 9.5% price increase to Avonex, which should lead to higher revenues despite decreasing volumes.

Abbott (NYSE: ABT), scheduled to release earnings Wednesday, has been actively expanding through acquisitions. In September alone, ABT acquired the pharmaceutical business of Solvay ($6.6 billion), $400 million for Visiogen, and $410 million for Evalve. Its Solvay deal has been well received by Wall Street analysts, who believe Solvay will add about $3 billion more in annual revenue and complements Abbott’s business by diversifying its pharmaceutical portfolio and providing access to needed R&D resources. J.P. Morgan raised its price target for Abbott from $53 a share to $59 a share following the acquisition. Visiogen and Evalve are expected to make progress in the medical device area. Analysts are projecting average earnings per share of $0.90 for Q3, citing continued high growth rates for Humira and limited exposure to patent expirations. 

Baxter International (NYSE: BAX), scheduled to report earnings next Thursday, recently held its Investor Day conference in Chicago. Baxter stated that it would continue to invest in R&D, and expects to have 14 pipeline projects in Phase III clinical trials and over 100 new product development projects in 2009. Wall Street analysts agreed that the projected 8% annual growth based on these new developments is very reasonable, and its high operating margins (over 55%) will keep its financials healthy. They are projecting average EPS of $0.90 a share. In addition, Baxter is optimistic about the European Medicines Agency’s (EMEA) opinion for its H1N1 vaccine (expected soon), which would have a positive effect on EPS.  

Judging by these four companies, it looks like the larger healthcare companies are coming out of the recession and expanding through acquisitions or new markets. Is it too late to jump on the investor wagon? Quite a few companies still have depressed stock values due to pending patents, and a lot of the acquisitions, agreements, or developments have not yet realized their potential value, so this could be a prime time to invest.