Banking on Biotech
Research Director, Mad Money
From: James Cramer
Sent: Tuesday, January 08, 2013 6:50 PM
To: Nicole Urken
The cholesterol drugs could be huge – these names continue to have so much potential to be big winners.
From: Nicole Urken
Sent: Tuesday, January 08, 2013 6:52 PM
To: James Cramer
Subject: RE: REGN
Some immunity from economy – positive or negative.
All week, J.P. Morgan has been hosting its healthcare conference in San Francisco, highlighting a host of names and their respective pipeline opportunities. The conference comes at interesting time for investors, for while the market remains robust, macro-economic concerns persist along with continued uncertainty domestically on the debt ceiling and beyond.
Pessimism has abounded this week from the analyst community, with worries about an overextended consumer discretionary index, continued questions about Apple and tech, and questions over limited upside potential for the financials.
Want a respite from all of this negativity? Biotech stocks.
Just take a look at Regeneron (REGN) as case in point. The stock happened to be the best performer in the Nasdaq in 2012 and has been a long-time Mad Money favorite. The company has managed to launch a blockbuster drug in Eylea, which treats age-related macular degeneration (an eye disease that an ultimately cause blindness) and continues to defy expectations. But this isn't just a one-drug wonder. It also has a strong pipeline which includes a promising cholesterol drug which could be a hidden gem driving the stock higher.
Biogen (BIIB) CEO George Scangos joined Mad Money this week to talk about the company's franchise in multiple sclerosis, a chronic, often disabling disease that attacks the central nervous system. We've known that Biogen has a strong core MS franchise—comprised of its Avonex and Tysabri drugs—but the big driver going forward is likely its BG-12 drug candidate—an oral MS treatment with an expected approval decision coming in March. The only thing to keep an eye out for? Sanofi-Aventis (SNY) which stands to give Biogen a run for its money in the MS space, particularly given its Genzyme acquisition.
As a side note,another derivative MS play is Acorda Therapeutics (ACOR) which helps people with MS regain some of their ability to walk.
Of course, Celgene (CELG)—a name we have continued to be behind even amidst FDA concerns—was one of the big winners of the JP Morgan conference. This is a name we have continued to stick behind on Mad money. The large-cap biotech posted strong financial guidance for, solid outlook for its core Revlimid (blood cancer drug) franchise, and positive psoriasis results.
What else? Orphan drug companies, or companies whose drugs target a very small population of individuals, remain strong trends—we have highlighted Alexion (ALXN)and Biomarin (BMRN) on the show. A more off the radar name to keep on your radar, NPS Pharmaceuticals (NPSP).
Healthcare IT? We have continued to get behind the theme of companies that make costs go down, highlighting the likes of Cerner (CERN). Athena Health (ATHN), whose CEO joined Mad Money this week, provides a software platform for electronic medical records but does it all from the cloud—it is a new age company with new age growth.
Don't forget diagnostics. For that we looked at Exact Sciences (EXAS), a colon cancer diagnostics company that offers a non-invasive stool test which should help to fill the gap (40 percent) of Americans over the age of 50 that don't go for colonoscopies.
It is true that drugs move drug stocks. And this is particularly true for biotechs. But it is even true for big pharma names that are hitting trough EPS this year and now can move past patent cliff worries to focus on pipeline growth potential. This is a theme we highlighted last year and should continue this year. Some of the best positioned? Pfizer (PFE), which we highlighted in our "Off the Charts" segment this week along with Bristol Myers (BMY). Eliquis (a blood thinner that helps prevent stroke and blood clots in people with abnormal heart rhythm) is a big driver for both of these names following the recent US approval. After all, the end market, of which Eliquis should capture large share, is $10bn. Not to mention that big pharma is known for its smart capital allocation. We've seen this even with Eli Lilly (LLY), the quintessential patent-cliff worry stock, that continues to sport a solid 4 percent dividend yield and invest in its pipeline.
The bottom line: the JP Morgan conference is a reminder of investing opportunities separate from the questions of the US debt ceiling, European stabilization, housing rebound, and China soft landing. Ultimately the biotech companies (and the big pharma names too) are about pipelines. And for that reason, the Mad Money visitors from the JP Morgan conference this week are some solid names to keep up your sleeve as we kick off 2013.