May 22, 2017
By Alex Keown, BioSpace.com Breaking News Staff
NEW YORK – Leerink biotechnology analyst Geoffrey Porges is anticipating a boom in biotech stocks, despite a two-year slowdown. But, Porges said it won’t be the blue chip companies such as Amgen , Biogen and Gilead leading the way.
Rather, Porges said in a note published May 19, growth companies such as Vertex Pharmaceuticals , Regeneron Pharmaceuticals and Alexion Pharmaceuticals are likely to be the driving forces in the next biotech wave. Porges said the large cap companies “drag down the performance of the indexes,” while the growth stocks are already catching the interest of savvy investors, Porges said, according to a report in Investors Business Daily.
Regeneron and its partner Sanofi are looking for approval of a new RA drug. In April, Regeneron and Sanofi said the FDA accepted the resubmission of its Biologics License Application for its rheumatoid arthritis drug Kevzara (sarilumab). In October, the FDA rejected the application due to certain deficiencies identified during a routine good manufacturing practice inspection of the Sanofi Le Trait facility in France where sarilumab is filled and finished.
Earlier this month, Vertex announced the FDA expanded the use the use for its cystic fibrosis drug Kalydeco to a small subset of patients–about 900 in the United States.
“Our advice to investors remains to identify and scrutinize evidence of competitive advantage and to look to management to maximize profitability of existing businesses first and foremost,” Porges said.
Taking a look at the past two years for the biotech market, Porges said sales and profits have declined 14 to 23 percent and 7 to 12 percent, respectively during that time frame. Overall biotech share prices are approximately 40 percent below their long-term median relative multiples.
Despite that underperformance, Porges pointed to some signs that indicate there is going to be a turnaround in the sector that investors should pay attention to. For the first quarter of the year, Porges said estimates have been “remarkably stable” despite “a mixture of positive and negative results vs. (the) consensus…” Additionally, Porges pointed to the political landscape and calls from the White House, as well as some leaders in Congress, for a new system that could cut down on high process of prescription drugs. As an example, Investors pointed to the recently approved Spinraza, Biogen’s treatment for spinal muscular atrophy that comes with a price tag of approximately $750,000 for the first year, with a reduction in price to about $375,000 for the second year of treatment. While the price for that orphan drug is high, Porges said other companies are taking more measured approaches to pricing. He pointed to other new drugs that have more reasonable price tags, including eczema drug Dupixent, developed by Regeneron and Sanofi and Roche’s multiple sclerosis drug, Ocrevus. With respective prices of $37,000 and $65,000, Porges said those are more reasonable.
“Furthermore, manufacturers of established brands are taking more modest price increases and fewer of them, and are adopting voluntary price-increase limits (which remain too high but are a step in the right direction),” Porges said.
Another factor that could lead to a biotech boom is the increasing number of drug approvals from the U.S. Food and Drug Administration. Investors said that this year along there have already been 20 new drugs approved, which matched the total for all of last year. The newly approved drugs also had broader labels, which means a larger market for them. Over the next 18 months, Porges said there could be an increase in new drug sales, which could outdo consensus views. Those new drugs could include gene therapies, treatments for end-stage cancers and RNA-based treatments.
“This process finally validates all the capital that was invested in these remarkable technologies during the ‘boom years’ and had seeming headed for disappointment at many points during the bust of the last 24 months,” Porges said, as cited by Investors.
