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Pharma's Market
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Time to pen our predictions for our beats in the new year. With each passing year, though, this assignment is becoming more of a challenge. Seven predictions for 2007...doable. Eight for '08...alright, I guess I can handle that. Nine for '09...we're starting to push it. But here goes.
1. Big Pharma M & A
Okay, I know it's the same old song, but no one pulled the trigger this year like I thought they would. Analyst Barbara Ryan at Deutsche Bank says enough is enough, that these times call for "aggressive M & A." In a huge research note to clients Ryan writes, "we conclude that acquisitions (in big pharma)—and eventually mergers of equals—are inevitable."
2. Big Pharma-Big Biotech M & A
The proposed Roche acquisition of Genentech is still marinating. BHP Billiton is walking away from its hostile offer to buy Rio Tinto because of the economy. Even though Roche has said repeatedly that it remains committed to seeing this through, investors are skeptical. DNA is trading well below Roche's $89-a-share bid, which Genentech said is too low. I'm not willing to even guess how this one plays out.
3. Big Pharma-Little Biotech M & A
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Johnson & Johnson is buying Omrix Biopharmaceuticals for less than half-a-billion dollars. Roche is scooping up Memory Pharmaceuticals for chump change of $50 million. Schering-Plough Chairman and CEO Fred Hassan told me in a recent interview that biotech is cheap and compelling. Look for big pharma to continue to take advantage of bargains through straight-out acquisitions and drug development partnerships.
4. On The Macro, Bigger Picture Side
There's the prospect of government price controls on prescription drugs. While the economy is front and center for the Democratic-controlled Washington, eventually they're gonna get around to healthcare. Analysts expect Medicare to negotiate lower prices on pills. That will squeeze profit margins. But some say the industry might be able to make up for it with increased sales to more patients at the discounted price.
5. Generic Drug Competition to Increase
More brand-name pills will continue to lose their patents, which means that cheaper, generic versions can come to market. Deutsche Bank's Ryan recently said on CNBC that 67 percent of prescriptions are being filled with money-saving generics. It used to be closer to one-half.
6. On The Individual Drug Front
Diabetes continues to loom large. 2009 could see important test results and regulatory decisions made on a new type of one-a-day drug from Novo Nordisk and a once-a-week drug from Eli Lilly, Amylin Pharmaceuticals and Alkermes.
7. A Growing, Competitive Market For Vaccines
GlaxoSmithKline could finally win FDA approval next year of its shot, Cervarix, for sexually transmitted disease and cervical cancer. And Merck would expand the approved use of its similar vaccine, Gardasil, to an older age group of females and to young males.
8. Amgen
Amgen could get FDA approval of its twice-a-year osteoprosis drug known as D-mab. It's an important new product for the biotech giant which continues to grapple with safety and reimbursement issues for its blockbuster anemia drugs.
9. A Big Year For Dendreon
Around the middle of the year, the most dynamic stock story in biotech will reach what's called a "binary event." That means if the news is good, the stock will soar. If it's bad, the shares will tank. Dendreon is expected to announce the long-anticipated test results on its highly controversial treatment for prostate cancer. If the drug Provenge helps patients live significantly longer, the FDA should approve it in relatively short order.
DNDN has said it's looking for a corporate partner to help sell the drug outside the U.S., but that it plans to keep Provenge to itself here at home. Until the clinical trial reports out, I don't think any interested parties will touch this with a 10-foot pole. But if the results are robust and the FDA okays the drug, I don't think DNDN gets an ex-U.S. partner. It gets an acquirer.
(These are just observations and predictions. Invest at your own risk.)
Questions? Comments?
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