Biopharma Analyst Musical Chairs


In the world of nearly 400 publicly-traded biotechs, analyst coverage is especially important. Many of the firms are micro caps and when an analyst initiates coverage it can help put a baby biotech on investor and reporter radar screens.

Not to mention the significance of an upgrade or a downgrade. But as equity research departments are being downsized or eliminated, it looks like a lot of biopharma coverage might be falling by the wayside.

The folks on Team Biopharma at Thomson Reuters keep track of analyst comings and goings. This week alone at least three firms have "dropped" coverage of the sector. Biotech analyst Jim Reddoch has left FBR and the firm suspended coverage of all but one of the companies he covered. Then this morning, in their daily sector pulse note to clients, TR says George Farmer is leaving Wachovia which is suspending coverage of the 18 biotech companies he looked after.

And also according to TR, Broadpoint Capital is "dropping coverage of the Biotechnology sector due to the departure of the covering analysts." That reportedly includes 17 ticker symbols. "Suspending", of course, is a key word, though. Certainly it's possible the firms will replace the analysts who will resume coverage. But lately, generally speaking, it seems less likely.

And that's just the tip of the iceberg. From big Wall Street firms to boutique houses, from big pharma to baby biotechs, from medical devices to healthcare services, TR points out that over the past several months there's been a flurry of analyst departures, layoffs and suspensions, drops, transitions and reviews of analyst coverage. Way too many, frankly, to list here. But not everyone's ending up on the unemployment line. TR says several former Bear Stearns analysts, for example, are popping up all over the Street.

Mark Schoenebaum, who used to be at BS, is now at Deutsche Bank. Yesterday, I listened into a pre-earnings season conference call he did for clients during which he discussed, among other things, what Amgen might be worth in a takeout. He estimates that if an acquirer could cut out 25 percent of costs in synergies that AMGN might be worth as much as $62 a share. "Who might buy Amgen?" Schoenebaum asked. "Give Barbara Ryan (DB's pharma analyst) a call," he said. Ryan's been saying for months that Pfizershould buy Amgen.

DB makes a market in PFE & AMGN and owns at least one percent of the shares. It would also like to do investment banking for PFE. Pfizer Chairman and CEO Jeff Kindler and his senior management have consistently said they're not interested in doing a big deal. Meantime, PFE's market cap has fallen to number three in big pharma behind Novartis and GlaxoSmithKline. Johnson & Johnson'smarket cap dwarfs them all, but it's not really a drug pure-play.

Questions? Comments?