Wall Street Transcript
Sector Review in Wall Street Transcript Annual Biotechnology Issue
Wednesday October 3, 11:35 am ET
67 WALL STREET, New York - October 3, 2007 - The Wall Street Transcript has just published its Biotechnology issue, a report offering a timely review of the sector to serious investors and industry executives. This 70-page feature contains industry commentary through in-depth interviews with 2 analysts and top management from 20 firms. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Targeted Therapies in Oncology, Pharmaceutical and Biotech partnerships, The FDA Clamp-Down, Phase III Trials, Antisense Technology, The changing Pharmaceutical Business Model, Oncology and Acute care, Supplying unmet medical needs, New uses for stalled drugs, Stem cell preservation, Growing new blood vessels, Intracellular Signaling Pathways, Stock picks and Stocks to avoid.
Companies include: Bradley Pharmaceuticals (BDY), Spectrum Pharmaceuticals (SPPI), GPC Biotech (GPCB), Dendreon (DNDN), Palatin (PTN), Seattle Genetics (SGEN), Genentech (DNA), Human Genome Sciences (HGSI), GlaxoSmithKline (GSK), Procter & Gamble (PG), VIVUS (VVUS), Cerus (CERS), Idenix Pharmaceuticals (IDIX), InterMune (ITMN), Vertex Pharmaceuticals (VRTX), ViroPharma (VPHM), CombinatoRx (CRXX), Renovis (RNVS), Alnylam Pharmaceuticals (ALNY), AVI BioPharma (AVII), Sirna Therapeutics (RNAI), Merck (MRK), Arena Pharmaceuticals (ARNA), Epix Pharmaceuticals (EPIX), and Wyeth (WYE). Analysts Include: Liisa Bayko, Next Generation Equity Research, LLC.; Ding Ding, Maxim Group, LLC.
In the following brief excerpt from the 70-page report, Liisa Bayko of Next Generation Equity Research, LLC discuss the outlook for the sector and for investors.
TWST: Is venture money continuing to filter into this space?
Ms. Bayko: Absolutely. I think there is always money for companies with good technology. Again, I think investors have gotten wiser. There are so many companies with new technologies that are trying to get money, and so investors are being able to be choosier in terms of where they put their money. Probably having being burned in the past, which happens in this area, they're becoming more scrutinous. For early stage companies, public funding is becoming harder to obtain. Again, I think people with good management teams, with really a novel technology, not a me-too but rather a distinct technology that has a chance of changing the way a particular indication is treated or making some progress in terms of survival time if it's cancer I think those types of companies will always find that there'll be money for them.
TWST: Is management becoming more important in this space?
Ms. Bayko: Absolutely. I think when biotechs started off in the 1980s, they were primarily comprised of scientists at universities. As such, there was sort of a business naivete in terms of the management teams. Then, as the pharmaceutical industry started to consolidate, there was an exodus of a fair degree of seasoned management teams. The available talent pool for biotechs then became larger. When you pair a talented group of academic scientists with pharma management that has actually brought a product to the market, perhaps sold a company, raised money, etc., the combination can result in a very effective team overall.
TWST: What's your read on the FDA at this point?
Ms. Bayko: That's a timely question. In my opinion, I believe the FDA became stricter. In the early part of this decade, there were a variety of safety issues with drugs like Vioxx and Celebrex, so the FDA overall has risen the bar with respect to safety. Recently, two companies in my space one I don't cover, Spectrum Pharmaceuticals (SPPI), which partnered with GPC Biotech (GPCB), and another one, Dendreon (DNDN) both suffered negative FDA action. These are both companies with drugs that had some pretty interesting clinical trial outcomes in prostate cancer, an area where there is a huge unmet medical need for which there are very few therapies. The only real approved therapy there is Taxotere, which a lot of men choose not to take because of its side effects. We've seen two drugs come through the FDA with a lot of volatility around the stocks during the review time with the FDA going back and forth and ultimately deciding they want additional data. These are two examples of the FDA clamping down, becoming a lot stricter and really putting a huge focus on safety. Recently, one of my companies, Palatin (PTN), which has a new agent in development to treat erectile dysfunction, was advised by the FDA not to proceed to Phase III studies because of some hints of safety issues, which the FDA finds hard to digest, especially in the lifestyle drug space and in particular because there are already several approved agents there. In my view, the FDA has become a lot tighter with respect to allowing drugs to be approved.
TWST: Is this going to stretch things out for everybody and raise costs?
Ms. Bayko: Yes, I think it's going to require sponsors to re-evaluate which product candidates to invest in. It's just raising the bar. Of course it's going to raise costs, but at the same time it will force firms to design better studies.
TWST: Again, it puts a premium on managements that have gotten products through there before.
Ms. Bayko: Right. From my perspective, this really boils down to companies that have Phase III programs designed in a way that addresses the right questions and demonstrates reasonable safety. Investors need to take a second look at whether or not they think the FDA will approve a compound based on the clinical package. At the same time, I think companies that do have very well designed, robust clinical Phase III programs that offer a reasonable risk/reward to patients will get past the FDA hurdle to the market. Those companies will be favored and will trade at a premium.
TWST: What's the investors' interest level in this space?
Ms. Bayko: It's pretty high. I see investors starting more and more to want to look at companies with at least some Phase II data. A lot of people, if they haven't seen any sign of the drug being efficacious, which is what you get from Phase II data, may not be interested. Then, there is a whole other group of investors who say, "I want management teams that have been there. I want some revenue flow, even if it's not the main part of the business, just to protect against the downside if the drug blows up because there have been quite a few disappointments in this space in the last year. I want a company that has some revenue flowing, maybe some royalties, maybe a small product in the market already, so I can wait for that data from maybe the second or third product. If that doesn't work out, I'll still have the revenue flow to give me a buffer."
TWST: If you look at this space longer term, is this going to continue to be something where investors should pay attention?
(Continued)