Biotech Winners of 2008 and Early 2009 Outlook

Biotech proved to be a defensive investment with the Dow Jones Biotech Index up 4% in 2008 while the overall DJ Market Index was down 39%. The NASDAQ Biotech Index resisted better at -16% than the overall NASDAQ Market Index which fell 42%. No less than four Biotech companies figured among the top 10 Gainers of 2008 on Wall Street.

Vertex (NASDAQ:VRTX) was the top performer on the NASDAQ 100, up 27 % at $30.15, on the promise of its $ 75,000 a year treatment for Hepatitis C and a robust and well partnered portfolio.

Genentech (NYSE:DNA), boosted by revenue growth of its blockbuster portfolio and Roche’s offer to acquire 100% of the company, was up 24% at $ 89 a share.

Amgen (NASDAQ:AMGN) was up 24% on the promise of denosumab, an osteoporosis drug awaiting FDA approval, which reduces spinal fractures in post-menopausal women and is expected to reach peak sales of $ 2 billion.

Celgene (NASDAQ:CELG), now a fully integrated global bio-pharmaceutical company, was up 20% at $ 55.28, on continued growth of Revlimid and the integration of the Pharmion acquisition.

Gilead (NASDAQ:GILD) was up 11% at $ 51.14, on strong sales of its robust HIV portfolio.

Among the Mid caps, a special mention goes to ViroPharma (NASDAQ:VPHM), up 63.7% at $13.02.

ViroPharma continues to maintain strong sales of Vancomycin, still without generic competition, is moving forward with phase III trials for Camvia, its promising treatment for CMV infections and completed the $688 million acquistion of Lev Pharmaceuticals, giving it access to Cinryze, a treatment for hereditary angioedema, approved by the FDA in 2008.

Clearly, Big-Cap Biotech is a winner, replacing Big Pharma as a defensive investment. It is still growing fast. It is also much less vulnerable to generics, even if bio-similar legislation, increases competition for the more mature Biotech products.

Mid-Cap Biotech, with a combination of revenues and pipeline, is also well positioned for 2009, both as an acquisition target for pipeline-hungry Pharma and as a selective acquirer of smaller public and private biotech companies looking for a safer heaven in a challenging capital raising market.

Just like every year, Investors and Executives will convene at the JP Morgan Healthcare Conference to be held January 12-15, 2009 at the Westin St Francis in San Francisco, CA.

More insights to come soon!

Biotech beats the Stock Market in 2nd Quarter

Biotech companies defied the gravitational pull of the global capital markets during the second quarter, as some of the major biotech indices finished in positive territory while other financial benchmarks declined.
The BioCentury 100 Index ended the quarter up 3.7%. The NASDAQ Biotechnology and AMEX Biotechnology indices also were up on the quarter, posting gains of 1.6% and 0.1%, respectively. The NASDAQ Composite Index was up 0.6%, while the AMEX Pharmaceutical Index was down 1.5%, the S&P 500 was down 3.2% and the Dow Jones Industrial Average lost 7.4% in the quarter.

source: BioCentury

Myriad Genetics to Refocus on Molecular Diagnostics and Personalized Medicine

Myriad Genetics (NASDAQ:MYGN) is ending its venture into drug development. Its Alzheimer’s drug, Flurizan, did not show benefits in phase III, barely a surprise following unconvincing Phase II trials. Fortunately for Myriad Genetics, it has already recouped the $ 68 million invested in phase III thanks to an agreement selaed last May where Lundbeck paid $ 100 million for Flurizan European rights.
Myriad’s lead compound is now Azixa (MPC-6827). The apoptosis-inducing compound is in Phase II testing to treat glioblastoma multiforme (GBM), melanoma with brain metastases and non-small cell lung cancer (NSCLC) with brain metastases. Myriad received exclusive rights to Azixa from EpiCept (NASDAQ:EPCT),
Discontinuation of Flurizan will allow Myriad Genetics to show a profit of $ 0.35 per share on 2009 sales of $ 315 million according to analyst consensus. On June 30, MYGN was down 5% at $45.52 a share and market cap was $ 2.03 billion.
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However, as “personalized medicine” becomes increasingly prevalent, companies like Myriad Genetics are likely to be winners, enjoying rapid growth and high profitability.

Is it time to buy Schering Plough stock?

Shares of Schering Plough (NYSE:SGP) and Merck & Company (NYSE:MRK) have dropped 40% and 25% respectively since January 2008 when first news of negative results were made public. The downward spiral accelerated in the past week since ENHANCE was presented at the meeting of the American College of Cardiology. Full publication and comments have published in the New England Journal of Medicine.

Schering Plough CEO Fred Hassan did not wait more than a few days to announce a major restructuring, including 5 500 lay-offs of 10% of worldwide staff, for total annual savings of $ 1.5 billion. mostly in the US.  That gave an immediate boost to Schering Plough stock which jumped 11% on Thursday to $15.32 having hit a record low of $ 13.83 the previous day.

Yet, Wall Street worries that that may not be enough and that Vytorin and Zetia will never recover the $ 5.2 billion in sales reached in 2007. However some analysts are bullish at the prompt reaction of Fred Hassan to cut costs, accelerate Organon’s integration and improve productivity. Credit Suisse C.Arnold reaffirmed an “outperform” rating and a target price of $ 32. Others like Mad Money’s Jim Cramer also sticking with Schering Plough stressing that SGP trades at less than 10 times earnings, that the company is valued at the price of Organon plus Remicade sales, while it has another $ 15 billion in sales and the second best short term pipeline in the industry based on potential launches in the 2008-2012 period.

Genentech Upside Confirmed after FDA Avastin decision

As anticipated by Biobusinessblog.com on January 1 (Genentech: Biotech Stock of 2008) and February 10 ( will the FDA approve Avastin for Breast Cancer), the FDA has put Genentech and Roche’s Avastin on accelerated approval track pending the results of breast cancer study RIBBON 1 later this year confirming the favorable data of AVADO already shared with the agency. It is anticipated that the FDA will focus on Progression Free Survival with a positive trend for Overall Survival.

The Breast Cancer labelling has the potential to add $2-3 billion to the yearly sales of Avastin. Genentech (NYSE:DNA) closed at $71.60 on Friday, gaining $ 5.80 in after hour trading to $ 77.40. We expect that DNA will move rapidly over       $ 80 a share supported the Breast Cancer indication for Avastin and future upside with Avastin in Colon Cancer and Rituxan in Lupus and Multiple Sclerosis.

Will Genentech’s Avastin be approved on February 23, 2008 by the FDA for Metastatic Breast Cancer ?

While the FDA Advisory Committee voted 5-4 last December, against approval of Avastin in Metastatic Breast Cancer, one of the committee members may have changed his vote, leading to a 5-4 in favor of approval, according to a recent Conference Call of Roche. Roche is the parent company of Genentech (NASDAQ:DNA) and the marketer of Avastin in Europe. The European Regulatory Agency, EMEA, has expressed a favorable opinion. The FDA Approval decision is expected on February 23. If there is any doubt, the AVADO study, to be released by mid-2008, should demonstrate progression-free survival and convince the skeptics. Breast Cancer labeling is worth $ 1 billion in Avastin sales.

Genentech’s stock is trading at below $ 70 a share, assuming the worst scenario. The good news on February 23 as weel as other developments such as  adjuvant treatment of Colon Cancer with Avastin and Lupus and Multiple Sclerosis with Rituxan, should support a ride upwards for DNA.

ViroPharma Up 20% in the Past Week

ViroPharma (NASDAQ:VPHM) has been up 20% last week to $9.96 a share and a market cap of $ 696 million, after the company announced a guidance for Vancocin of $ 202-208 for 2007 sales and $210-235 for 2008 sales. Nevertheless, the Street continues to assume generic competition for Vancocin if not this year soon after. Cash and equivalent account for $ 6 a share and phase III Cambia for $4-5 a share using a discounted cash flow model. ViroPharma remains attractive as an acquisition target. However, we would  not be surprised if  ViroPharma management leverages its strong cash position and stronger market valuation to acquire products or companies to consolidate its portfolio going forward.

JP Morgan Update: Vertex: Awaiting Telaprevir

At the JP Morgan Healthcare Conference, Joshua Boger, Founder, Chairman and CEO of Vertex (NASDAQ:VRTX) introduces Kurt Graves, formerly Chief Marketing Officer at Novartis AG and now Vertex’s new Executive Vice President, Chief Commercial Officer and Head of Strategic Development.

Kurt’s presentation focused on Vertex’s commercial strategy to build telaprevir, a breaktrough Hepatitis C (HCV) drug, into a blockbuster. Vertex’s vision continues to be on “transformational innovation”: innovation that redifines health and transforms lives with new medications. Hepatitis C remains a market with high medical unmet needs, large potential for growth and treatment provided by specialists. It is particularly appropriate for the new commercial model that Vertex embraces:emphasis on quality of live outcomes and health economics ( rather than just efficacy and safety), patient centric (rather than just physician centric), focus on Impact of Voice (rather than just Share of Voice), growth through market share and market expansion ( rather than just market share), multi-brand treatment solution ( rather single brand).

Telaprevir is progressing toward phase III. The EMEA has provides scientific guidance to JNJ’s Tibotec unit, Vertex commercial partner in Europe. The FDA’s opinion is being expected by the end of January 2008.

While several of its competitors did bite the dust last summer ( see story on biobusiness.tv) , telaprevir appears to have an exceptional product profile: rapid viral decline, strong efficacy (RVR rate 75-80%, SVR> 60%, relapse<10%), and most importantly shorter treatment duration (24 weeks vs. 48 weeks but current standard of care). This is particularly important when 58% of patients cite treatment duration as a reason to drop out.

Recent market research revealed that 98% of physicians intended to prescribe telaprevir within 12 months of availability. Vertex expects the Hepatitis C market to be $ 4 billion by 2010 and exceed $ 10 billion aftter 2012.

Beyond telaprevir, Vertex remains committed to category leadership through the development of second generation protease inhibitors and later of oral drug combinations, adressing the needs of every patient segment.

The promise is clearly there. However investors continue to be cautious with Vertex trading at $22.60, close to its 52 week-low of $ 20.71 and bearly more than 505 of his 52 week high of $ 41.42. Vertex is a strong buy for all those who believe in the telaprevir promise.

JP Morgan Update: ViroPharma back on the Upside

At the JP Morgan Healthcare Conference yesterday, Michel de Rosen, CEO of Viropharma (NASDAQ:VPHM) presented a very attractive update on the company:

1. ViroPharma is advancing his late stage asset, Canvia for the treatment of Cytomegalovirus (CMV) infections, toward a 2009 NDA. CMV infections are the most frequent illness in transplant patients. Other groups at risk include HIV/AIDS patients, certain oncology patients and neonates. Sales expectations for Canvia are in excess of $ 500 million.

2. ViroPharma has a strong Balance Sheet, with $552 million in cash, which supports an agressive Business Development strategy.

3. Vancomicin, which ViroPharma acquired from Eli Lilly in 2004 when sales were $54 million, continue to grow. The company gave guidance of  $ 202-208 million Vancocin net sales for 2007 and $210-235 million for 2008. The new guidelines from the Infectious Disease Society of America (IDSA) support the leadership position of Vancocin in the treatemnt of Clostridium dificile infections (CDI).

Viropharma was up 7.9% yesterday to $9.28 a share. We believe that the company has been unfairly punished by investors in the past year. With a Market Cap of under $650 million, ViroPharma has definitely a very strong upside potential.

JP Morgan Update: Are Wall Street Analysts underestimating GSK?

At the JP Morgan Healthcare Conference today, Dr JP Garnier, CEO of GlaxoSmithKline (NYSE:GSK) commented that Wall Street Analysts may be underestimating GSK stock for the following three reasons:

1. The revenue impact of Advair patent loss in 2011 may not be as dramatic as forecasted. Since Advair has a distinct patented device, generics will not be AB rated and pharmacists will not be able to substitute physician’s prescriptions.

2. GSK has 25 products ready for launch in the 2008-10 time period, a clear booster for revenue growth.

3. Merck and Co’s Gardisil- for which GSK receives royalties, was understimated. So is GSK’s own Cervarix, which has been approved in 45 countries, and should clear the FDA review once they have fully digested the 30,000 patient database. Additionally, the medical need for the prevention of cervical cancer should drive market expansion.

Alltogether, the post 2011 cliff may be exagerated driving a low P/E of 14 for GSK.

JP Morgan Update:Can Celgene become a “Niche Buster” Factory?

Sol Barer, PhD, CEO of Celgene (NASDAQ:CELG) announced at the JP Morgan Conference in San Francisco, exciting developments in in label expanding clinical trials for Revlimid including in the treatment of newly diagnosed multiple myeloma patients. Along with oral TNFalpha inhibitor for the treatment of psoriasis in the research pipeline, Celgene is demonstrating its ability to create and develop more drugs in the immunology/oncoloy sector. Dr Barer announced the goal for Celgene to become a major pharmaceutical company. Hopefully, Celgene will remain nimble, delivering multiple ”niche busters’ , just like Genentech has done, rather than grow into a Big Pharma with a mediocre R&D productivity.

In the mean time, Celgene is trading at around $ 50 a share, 33% below its peak level in 2007. 2008 will a transition year with the digestion of the $ 2.9 billion Pharmion acquisition and continued pressure to grow Revlimid sales over 30 % in face of competition from Millenium’s Velcade.

JP Morgan Update: Scandinavian company BioVitrum develops long lasting Hemophilia Treatment

At the JP Morgan Conference in San Francisco, former executive director of Astra Zeneca, newly appointed CEO of BioVitrum, Martin Nicklasson announces launching of clinical trials for a fusion Factor IX Fc molecule with extended product life time allowing a one a week drug administration, thus improving considerably patient quality of life. Phase I & II clinical trials are due to being launched in the US early 2008.

BioVitrum (BVT:SS) is a $536 million market cap biopharmaceutical company.

BioVitrum is currently awaiting results for two Phase II clinical trials for primary care products for the treatment of Glaucoma (retinal hypotension inducer) and for the treatment of Diabetic Neuropathic Pain, for which it claims to be the sole player involved. 

The outcome of these trials will determine the future development of the company and surely deserves undivided attention…

JP Morgan Update: Alnylam Pharm. (NASDAQ:ALNY) starts Phase II RSV study

At the JP Morgan Annual Healthcare Conference in San Francisco, Alnylam Pharmaeuticals’ CEO John Maraganore detailed the steady development of the clinical indications for their RNAi technology and announced Phase II clinical trials of ALN-RSV01 for human Respiratory Syncytial Virus (RSV) infection, based on the microRNA silencing technology.

Major developments include usage of the RNAi silencing into Hypercholesterolemia, Liver Cancer and Huntington’s Disease, the latter being developed in partnership with Medtronic.

Alnylam claims possession of the majority of exclusive patents on RNAi technology and continuing successes in partnership building. After a historical deal on a non-exclusive plateform alliance with Roche in July 2007, with an upfront cash payment of $ 331 millions, and a product alliance with Medtronic, Alnylam is looking at extending its RNAi technology and receiving its first POC in Q1 of this year.

Alnylam (NASDAQ:ALNY) was up 4.35% today in after hours trading, reaching a Market Cap of $1.25 billion. Alnylam breakthrough technology and strong product portfolio make it certainly a company to be kept on the radar screen in months and years to come.

Wall Street Analysts cheer Millenium Pharma

 

Millenium Pharmaceuticals (NASDAQ:MLNM) is a new favorite among Wall Street Analysts. The favorable clinical results for Velcade help MLNM rise 38% in 2007. Now a survey of 50 Oncologists treating Multiple Myeloma lead Analyst Howard Liang of Leerink Swann to conclude that Velcade and rival Revlimid from Celgene (NASDAQ:CELG) may split equally first line treatment. This is an important trend for Velcade, an injectable drug, generally considered an underdog to oral drug Revlimid. Lehman Brother analyst Jim Birchenough predicts 4th quarter 2007 sales of $ 81.2 million for Velcade, more optimistic than Millenium estimate of $ 73.9 million and previous Wall Street estimates at $ 66. 3 million.

Velcade sales are also strong in Europe, where it is marketed by Johnson & Johnson and its price is higer than in the US.

On January 2nd, 2008, Millenium Pharma was up 8.1% closing at $16.19. Millenium Pharma’s CEO, Deborah Dunsire, MD, will be presenting at the JP Morgan Conference in san Francisco on January 9, 2008 at 3.30 pm PST.

source: Forbes and Associated Press

Merck & Co in $ 700 million Schizophrenia Deal with Swiss Biotech Addex

According to Reuters, US Pharmaceutical Giant Merck & Co (NYSE:MRK) licensed ADX63365 for the treatment of schizophrenia from Geneva, Switzerland based Addex SA (Swiss:ADXN). Addex will receive $ 22 million upfront and up to $680 million in milestone payments. Piper Jaffray analysts suggests an additional 5-15% royalty on sales and co-promotion rights in certain European markets.

Theravance and Astellas close to FDA review for Telavancin

According to Reuters, Drug developer Theravance Inc (NASDAQ:THRX) said the FDA’s anti-infective drugs advisory committee may soon meet to review the marketing application for telavancin, an antibiotic for the treatment of Gram Positive infections. Telavancin is partnered with Astellas Pharma.

Forbes comments on the recent investor anxiety and Theravance stock slide as a result of delays in the FDA review.

Most analysts are skeptical but not  Rachel McMinn of Cowen : ”The FDA is now required to refer all new molecular entities for advisory review prior to approval or explain why not in an action letter,” said McMinn, who added that the telavancin review may be “nothing more than what will become routine for the industry.”

BIOTECH STOCKS: 2007 WINNERS AND LOSERS

 

New York, NY based Imclone (NASDAQ:IMCL) spiked 65% in 2007 on the promise of its only drug, Erbitux, which showed survival improvement in colon cancer patients when used as initial treatment, while rival drug Vectibix from Amgen, failed in a similar study. Earlier this year, raider Carl Icahn has raised its stake in Imclone and Johnson&Johnson veteran John Johnson joined as CEO.

As reported by Forbes,  the Biotech sector overall underperformed broader market indices in 2007. The NASDAQ Stock Market Biotech Index rose 5.6% while the NASDAQ composite was up 10.7% and the Dow Jones 7.2.

Along with Imclone, the big Biotech winners are Invitrogen (NASDAQ:IVGN), Gilead (NASDAQ:GILD), Millenium (NASDAQ:MLNM) and OSI (NASDAQ:OSIP). Invitrogen, based in Carlsbad, CA, is a leading supplier of Research products, including Kits for Gene Cloning. It stock went up 63% in 2007. Foster City, CA based Gilead Sciences, went up 43% on the strength of its HIV drug portfolio. Melville, NY based OSI Pharmaceuticals, went up 39% on growth of its Oncology division while still awaiting divestiture of its Ophtalmology business. Cambridge, MA based, Millenium Pharmaceuticals, rose 38% on favorable clinical results for its oncology drug Velcade.

The big Biotech losers are Amgen, Genentech, Nektar and Vertex. Thousand Oaks, CA based Amgen (NASDAQ:AMGN) went down 31% on weak sales of its flagship drug Aranesp, which experienced label restrictions from the FDA and tighter reimbursement guidelines. South San Francisco, CA based Genentech (NYSE:DNA) fell 17% after the FDA did not approve Avastin for Breast Cancer. San Carlos, CA based Nektar Therapeutics (NASDAQ:NKTR) fell 56% after Pfizer discontinued its partnership recognizing the marketing failure of  inhaled insulin drug Exubera. Cambridge, MA based Vertex Pharmaceuticals (NASDAQ:VRTX) fell 37% in 2007 as confidence in its current and future product porfolio eroded.

GENENTECH: BIOTECH STOCK OF 2008?

GENENTECH (NYSE:DNA): BIOTECH STOCK OF 2008?

This is what Fortune Magazine recommends in its 2008 Investors Guide, and we agree.
DNA has been unfairly punished on December 5, 2008, plunging 10% on news that the FDA Advisory Board had recommended against expanding the label of Avastin, Genentech’s “Niche Buster”, already approved for Colon and Lung Cancer, for Breast Cancer. The Panel criticized the methodology of the trials while recognizing that Avastin was effective. The European Drug Agency, EMEA, agrees and approved Avastin for Breast Cancer based on existing data. Most oncologists also agree, already use Avastin in some late stage cases and may expand their use to up to 40% of all their Breast Cancer patients upon FDA approval, according to a survey conducted by Sanford C. Bernstein & Co. As a result, Avastin sales, now $ 2.5 billion could reach $ 5 billion by 2011, says analyst Goeffrey Porges.

Wall Street Journal HealthBlog editor Jacob Goldstein has a more balanced view citing serious side effects, the high cost of the drug and uncertainties about the effects of Avastin (Bevacizumab) at different stages of the disease.

A comprehensive discussion of the pivotal phase III study – Paclitaxel plus Bevacizumab versus Paclitaxel Alone for Metastatic Breast Cancer – can be found in the December 27, 2007 issue of the New England Journal of Medicine Volume 357:2666-2676, Number 26.

In addition to Avastin, Genentech Product Portfolio’s strength also include Herceptin, a miracle drug for Breast Cancer, Lucentis for macular degeneration and cancer drug Rituxan, licensed from and co-promoted in the US with Biogen Idec (NASDAQ:BIIB), now with an expanded label for Rheumatoid Arthritis and potential for other Auto-Immune Diseases.

Genentech (NYSE:DNA) was trading at $ 67 a share (P/E 20) on December 31, 2007. Along with Tom Marsico, which firms owns 3,5% of DNA stock, we consider Genentech, not only the premier Biotech company but also the most innovative Pharma company in the world.

DNA is a Strong Buy for Biotech and Pharma Investors. It has the potential to reach the $100 a share mark.