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Synergy Pharmaceuticals, Inc. Message Board

  • hawk25702 hawk25702 Apr 4, 2014 8:40 PM Flag

    90% of the biotechs taking a beating

    what's up?

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    • Here is what JP Morgan said:


      After two years of dramatic outperformance, concerns about valuation and a “biotech bubble” have emerged. We believe that the sector remains broadly attractive from a valuation/pipeline/growth perspective, particularly in large cap. Notably, the average 3-year revenue and EPS CAGR for the top 10 biotechs (market cap) is 4.5X and 3X that of the S&P500, yet the P/E/G on 2015-2016 forecasts for biotech is ~0.7 versus the S&P at ~1.4. Regarding the industry pipeline, product cycles are very long in biotech ( 10 years) and dozens of major launches are occurring or are about to occur ([Gilead's] Sovaldi, [Biogen Idec's] Tecfidera, Imbruvica, Pomalyst, [Celgene's] Otezla, [Regeneron's] Eylea, Kalydeco, Xtandi, Linzess asfotase alfa, Vimizim, idelalisib, evolocumab, alirocumab, etc.). In addition, we estimate that at least 50+ compounds/label expansions that have some level of derisking are largely unaccounted for in Street models. Admittedly, companies with earlier-stage pipelines that haven’t been fully de-risked are being awarded a higher probability of clinical success, but drug development has become more efficient, particularly for orphan drugs. The recent concern on pricing for Gilead’s Sovaldi has caused much anxiety; at the end of the day, the benefit/risk and cost/benefit profile remains quite striking and we doubt that the recent Congressional inquiry would lead to an “innovation tax” (i.e., forced material discounts).

 
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