Source: Tracy Salcedo-Chourré of The Life Sciences Report (12/30/14)
http://www.thelifesciencesreport.com/pub/na/will-biotech-fire-on-all-cylinders-in-2015
Making predictions for a New Year might feel as inclusive as peering into a clear ball. But in a life sciences, tough scholarship and prolonged knowledge behind prognostication. The biotech marketplace enjoyed a stellar 2013 and withstood a plain check in early 2014 before rebounding, radically following a ceiling trend that many experts forecast. What is in store for 2015? The Life Sciences Report incited to newsletter author John McCamant and WBB Securities’ Steve Brozak for insight.
Consider a statistics. In 2013, many vital biotech indices, such as a NASDAQ Biotechnology Index (NBI) and a NYSE ARCA Biotech Index (BTK), posted healthy double-digit gains. It appears 2014 will finish on a same ceiling trajectory: Year-to-date, a NBI is adult about 34%, and a BTK is adult about 48%. As 2015 approaches, a doubt on any investor’s mind is: Can a marketplace continue a bonanza-style growth? And that companies or sectors will be a many appealing and lucrative?
Steve Brozak of WBB Securities and John McCamant, editor of a Medical Technology Stock Letter, have some ideas.
A Brief Glance Back
Reflecting on a prior integrate of years, McCamant believes that expansive 2013 was an “outlier. . .a make-up year” in that financing finally held adult with a flourishing sector. He doesn’t consider that kind of enlargement will be seen again. He describes 2014, with a market’s brief shelter early in a year, as “rational.”
“Biotech dominated a collateral markets in 2014,” Brozak observed. He points to a array and peculiarity of initial open offerings (IPOs) as an denote of a sector’s power. “The IPO marketplace has been strong, with 100 deals finished year-to-date and roughly $8.7 billion ($8.7B) lifted so far. As a group, a normal lapse from these IPOs alone is approximately 28%.”
When IPOs slacked off a bit early in 2014, “we saw partnership and partnership (MA) activity boost with a fibre of supposed taxation inversions,” Brozak said. “These deals usually reignited a IPO and delegate markets. Since then, MA has also been on fire, with a array of vast transactions. Even unsuccessful mergers assistance to expostulate a rest of a marketplace in 2014. For instance Pfizer Inc.’s (PFE:NYSE) unsuccessful office of AstraZeneca Plc (AZN:NYSE) progressing in a year—a partnership that would’ve been historically immense—opened a doorway to incomparable sell after in a year, like Medtronic Inc. (MDT:NYSE) and Covidien Ltd.’s (COV:NYSE) $43B merger.
McCamant believes biotech will continue to build on fundamentals that have been, and will continue to be, excellent. “The scholarship is initial class, a companies govern most better, and a regulatory sourroundings is a best it has ever been,” he said, indicating to a enlargement of companies like Gilead Sciences Inc. (GILD:NASDAQ) and Celgene Corp. (CELG:NASDAQ) as “validators” of a sector’s underlying elemental strength.
Follow a Money
Asked where record is headed in 2015, Brozak said, “We usually need to demeanour during what a IPO marketplace is funding. It’s perverse, though Wall Street fundamentally dictates what scholarship receives support by a appropriation process. In a analysis, we see that fundraising in a immuno-oncology and immunotherapy space has been prolific, and 2015 seems to be a year of PD-1 (programmed dungeon death-1), T-cell therapy and cancer vaccines. Many of a new companies operative in these spaces now need to perform in a hospital as good as in a market.”
McCamant agrees with Brozak on a prospects for immuno-oncology—enabling a physique to quarrel cancer regulating a healthy defenses. This will continue to be “a impassioned space” in 2015, he predicts. Vaccines, antisense and gene therapies also tip McCamant’s list. With courtesy to gene therapy in particular, a newsletter author observed: “Twenty years ago was too soon. Now, it’s primetime.”
Immunotherapy Takes Center Stage
“In a immunotherapy space we follow Celldex Therapeutics Inc. (CLDX:NASDAQ),” Brozak said. “The association usually announced it has finished enrollment for a Phase 3 cancer vaccine module in glioblastoma multiforme (GBM). To date, Celldex’s lead module in GBM has shown some really good information in halt Phase 2 trials in patients with modernized disease. The product, rindopepimut, is now being complicated in an general Phase 3 conference called ACT IV for newly diagnosed patients, and a Phase 2 conference called ReACT for patients who have a regularity of GBM.”
Celldex also has a monoclonal antibody module being complicated in a METRIC conference in triple disastrous breast cancer; this showed pledge in an progressing study, according to a analyst. “There are few options for oncologists to spin to in treating [this disease], and this could be a really critical drug claimant for cancer caring physicians and their patients. Both of Celldex’s primary products manipulate a patient’s defence complement to quarrel cancer,” Brozak said.
Big Pharma dominates a expansion of PD-1 pathway inhibitors, according to McCamant, though he likes a prospects of smaller companies targeting other pathways. Five Prime Therapeutics (NASDAQ:FPRX) has “a library” of proteins, that form a substructure of a height and can be used to arise new cancer therapies. The association has entered into collaborations with Bristol-Myers Squibb Co. (BMY:NYSE), that is assisting to account Five Prime’s investigate and development. He also likes Incyte Corp. (INCY:NASDAQ), that has an orally accessible devalue targeting a IDO pathway and “strong egghead property.” Isis Pharmaceuticals Inc. (ISIS:NASDAQ) is also operative in a immuno-oncology field, and has entered into a partnership with AstraZeneca.
Vaccination Proclamation
Vaccines are done to forestall disease, rather than yield it, McCamant said. The ongoing Ebola conflict in West Africa has generated poignant seductiveness in vaccine development, and a thought of prevention, as opposite to treatment, is a best approach to stop a disease, he explained. He expects that anyone who goes to an area where Ebola is a hazard will accept a vaccine, a “traveler’s market” that will be value $500 million to $1 billion.
Novavax Inc. (NVAX:NASDAQ) is relocating brazen with a vaccine for Ebola, that “is a giveaway furious card,” McCamant said. The association has a array of arrows in a quiver, including vaccines that aim anniversary and pestilence influenza and respiratory pathogen syndrome, that can be harmful for infants and a elderly. The company’s VLP record puts it brazen of a competition, enabling a association to arise a “functional vaccine” within 30 days of receipt of a virus’ sequence.
With courtesy to a Ebola vaccine, McCamant remarkable that Novavax’s product, now in Phase 1, is a “best for mixed protection” from both a stream aria and prior strain. The advantages of a Novavax vaccine are multiple, given that, with a height technology, a association can potentially furnish “millions of doses in a matter of months,” and that those vaccines won’t need to be frozen, like stream vaccines, though need usually refrigeration, most easier to accommodate in Africa.
Playing a Field
“While there are a array of other good companies building technologies in a immuno-oncology and immunotherapy spaces, we tend to concentration on other names that could assistance change out altogether investment strategies,” Brozak said. “We feel that there’s a good bargain of value to be unbarred in other niches of a biotech courtesy not being followed by a masses.”
He went on to note that, “While a good bargain of courtesy has been paid to Ebola this year, we need to keep in mind that, according to a Centers for Disease Control, 53,826 people died of complications of influenza, that might embody bacterial coinfection and pneumonia, in 2013. Coupled with a arise of bacterial ‘superbugs’ resistant to stream antibiotics, we are saying increasing seductiveness in biotechs building new antibiotics.” For those reasons, WBB Securities continues “to be bullish in a antibiotic space, and Cempra Inc. (CEMP:NASDAQ), formed in North Carolina, continues to be a tip pick.”
The association “has several near-term catalysts, including information from a lead product in a Phase 3 clinical conference expected someday in a initial entertain of 2015,” Brozak said. “The Phase 3 uses Cempra’s absolute antibiotic candidate, solithromycin, opposite community-acquired bacterial pneumonia (CABP). [The verbal form of a antibiotic] has demonstrated implausible intensity opposite an array of pathogens that means CABP. If a prior information reason adult in a expected release, it should be a good day for patients and investors.”
Brozak also likes Seattle-based Omeros Corp. (OMER:NASDAQ) “Omeros usually perceived CMS (Centers for Medicare and Medicaid Services) payment capitulation for Omidria, a initial U.S. Food and Drug Administration (FDA)-approved drug. Omeros indeed perceived improved pricing than a Street had anticipated,” he said. “Management teams that underpromise and overdeliver are ones to watch.”
The drug, used during visible medicine to distend pupils and forestall pain, replaces what eye surgeons now contingency sequence from drug compounders, a resolution that isn’t reimbursable. “This is a rarely emasculate and unsure approach to yield your patients. We usually saw 14 people who worked during a Framingham, Massachusetts, compounding trickery that supposing medicine drugs sinister with meningitis germ criminally charged. Contaminated products were used in thousands of patients, caused illness in some-more than 750 people, and killed 64 people. The same forms of comforts now yield visible surgeons with essential drugs used during eye surgery. With Omeros’ product, surgeons will accept a improved product from a single-source, FDA-regulated company.
Brozak pronounced investors might be astounded with NeoStem Inc. (NBS:NASDAQ), a biotech intent in regenerative medicine. “We also demeanour for companies with good elemental scholarship whose stories were misinterpreted by Wall Street,” Brozak said. “NeoStem expelled formula from a Phase 2 cardiac conference final month that were earnest and demonstrative of a Phase 3, though Wall Street might have misunderstood and ignored a intensity in this case. We consider 2015 binds a good bargain of pledge for a domain of regenerative medicine, with companies like NeoStem during a forefront.”
“Even a forms of swell we’re saying in immuno-oncology, and all a financier violence for chimeric antigen receptor (CAR) and T-cell therapy, is usually probable since of what early pioneers have been doing in a regenerative medicine and branch dungeon space,” Brozak continued. “Our bargain of cancer and defence cells is subsequent from a work that scientists during labs and companies like NeoStem have been conducting in regenerative medicine. These newer platforms we are conference about—CART, T-cell and PD-1—are subsequent from decades of watching and training from tellurian branch cells, since cancer cells are really similar.”
But, according to Brozak, investors do not comprehend how related a systematic sermon is. “Investors tend to compartmentalize, and are not tuned to a finer frequencies. In NeoStem, we have a association that understands branch dungeon science, with possibilities in both a regenerative medicine and immunotherapy space. In 2015, we design that a FDA will concede a Phase 3 conference in cardiac formed on a Phase 2 information that was perceived wrongly by Wall Street. We also design a launch of NeoStem’s Phase 3 immunotherapy conference in melanoma, that utilizes a patient’s possess expansion cells to quarrel modernized disease. This therapy could potentially be total with other immunotherapy regimens to raise a defence system’s response to find out and destroy cancer cells via a body.”
Brozak also advises investors to “Keep in mind that NeoStem has some of a best minds in immunotherapy operative for a auxiliary during Progenitor Cell Therapy, a agreement production classification that has far-reaching imagination in production and clinical conference government for other immunotherapy companies.”
Onward and Upward
Given that biotech courtesy indices in 2014 “more than tripled a opening of both a Dow Jones Industrial Average (DJIA) and a Standard Poor’s 500,” Brozak is bullish on prospects for 2015.
“Year to date, a SP Biotech Select Industry Index has grown 34.31%, while a DJIA and a SP 500 have usually appreciated 2.97% and 6.7% respectively, definition that in 2014, biotech has outperformed a marketplace by an even incomparable domain than in 2013. This conveys a strength of a medical zone and shows that a fast horizon is in place for serve expansion,” Brozak said. “Currently, medical is in a midst of liquidity levels that are forlorn in new times, so a initial half of 2015 is expected to be characterized by a duration of stream trends in biotech.”
While Brozak doesn’t know accurately when, he does knows a biotech bang will delayed down and come to an end. “Right now we’re also really endangered with what is function geopolitically, generally in Russia with a destabilization of a ruble, a collapsing appetite marketplace and misunderstanding in a Middle East. These are events that might profoundly impact collateral marketplace activity and a ability for companies to perform.”
When asked about a sector’s long-term prospects, Brozak went on to say, “Sometime early in a second half of 2015, investors should design a improvement in a biotech space. There will be a setback. Maybe one of a newly IPO’ed companies will news bad clinical conference formula or, some-more likely, something won’t work a approach a marketplace wanted it to, and we’ll see an industry-wide correction. There were a few times this roughly happened in 2014, though there was always another catalyst—the proclamation of a megamerger or glorious formula reported in a tiny immunotherapy trial—which helped a zone recover. When a marketplace hits 20,000, investors should design it to cold off. . .and even that miracle could be a matter for a correction. No matter a cause, a improvement will be a good time to deposit in biotechs, with glorious systematic prospects during a retrenching.”
Looking forward, McCamant also offers some cautions. He advises investors to “watch for a frothy IPO market” and agrees that biotech won’t be defence to a downturn in a altogether market, should that happen. He also doesn’t like a bent to “finance til we puke,” another intensity interruption to a sector’s altogether robustness.
But on a upside, McCamant likes a prospects for smaller biotech companies, observant that large pharmas are looking to acquire “strings of pearls,” smaller, nimbler companies with compounds and platforms that will accelerate their pipelines. “Competition is heating up,” he said, adding that “bidding wars” might be in a offing.
Demographics also indicate to continued enlargement in a sector, with aging baby boomers primed to accelerate marketplace growth. “Health will always come before wealth,” McCamant observed. “The zone is attack on all cylinders.”
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Steve Brozak is a handling partner and boss of WBB Securities, an investment bank and financial methodical organisation intent in a biotechnology, curative and medical device sectors. Before cofounding WBB Securities, he worked for several Wall Street firms, including Salomon Brothers, Dean Witter, Cowen Company, and Alex. Brown Sons. As WBB Security’s Senior Equity Analyst, Brozak has been concurred for his investment astuteness and equity investigate opening by a vital researcher ranking systems. In 2013, he was comparison as a #2 ranked researcher in a pharmaceuticals zone by a StarMine/Financial Times Industry Analyst Awards system. The Wall Street Journal renowned Brozak as a Best on a Street Medical Equipment and Supplies financial researcher in a 19th Annual Best on a Street Survey in 2011. In 2010, Brozak perceived StarMine Thompson Reuters/Financial Times Best Brokerage Analyst endowment for his preference of top-performing companies in a biotechnology space. With a 25-year lane record in banking and investigate in a life sciences space, Brozak also works as media commentator on a life sciences zone on a web, on television, and in imitation media. Brozak served in a United States Marine Corps and now serves on a Secretary of a Navy’s Navy and Marine Corps Retiree Council, where he focuses on healthcare, advantages and other maestro issues. He perceived a bachelor’s grade and a master’s grade in business administration from Columbia University, and also binds FINRA licenses 3, 7, 8, 24, 63, 65, 79, 86, 87 and 99.
John McCamant is a editor of a Medical Technology Stock Letter, a heading investment newsletter. McCamant has spent 25 years on a frontlines of biotechnology investing. He has dynamic an endless network that includes contacts via a investment banking and try collateral communities. His imagination in biotechnology investments is a thesis of media interest. He is frequently consulted and quoted by The Washington Post, Reuters, Bloomberg, CBS and Marketwatch.
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3) Steve Brozak: we own, or my family owns, shares of a following companies mentioned in this interview: None. we privately am, or my family is, paid by a following companies mentioned in this interview: None. My association has a financial attribute with a following companies mentioned in this interview: WBB Securities recently acted as a financial confidant to NeoStem Inc.’s debt financing. we was not paid by Streetwise Reports for participating in this interview. Comments and opinions voiced are my possess comments and opinions. we dynamic and had final contend over that companies would be enclosed in a talk formed on my research, bargain of a zone and talk theme. we had a event to examination a talk for correctness as of a date of a talk and am obliged for a calm of a interview.
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