Will Novel Treatment Innovations Continue to Drive Biotech Sector Success Stories? A Wall Street Transcript Interview with Brian Skorney, Senior Analyst with Robert W. Baird & Co.

Wall Street Transcript

67 WALL STREET, New York - May 2, 2014 - The Wall Street Transcript has just published its Biotechnology and Pharmaceuticals Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Health Care - Biotechnology and Pharmaceuticals - Orphan Drug and Biologics Manufacturing - Oncology Drug Development - Orphan Drugs - FDA Approval Process - Biotechnology and Pharmaceutical Companies Valuation - Genetic and Cell Therapies

Companies include: Gilead Sciences Inc. (GILD), Vertex Pharmaceuticals Incorpo (VRTX), Pharmacyclics Inc. (PCYC), Cubist Pharmaceuticals Inc. (CBST), Theravance Inc. (THRX), InterMune Inc. (ITMN), Idenix Pharmaceuticals Inc. (IDIX), Achillion Pharmaceuticals, Inc (ACHN), Curis Inc. (CRIS), Alnylam Pharmaceuticals, Inc. (ALNY), Isis Pharmaceuticals, Inc. (ISIS), Bristol-Myers Squibb Co. (BMY), Merck & Co. Inc. (MRK), Alexion Pharmaceuticals, Inc. (ALXN) and many others.

In the following excerpt from the Biotechnology and Pharmaceuticals Report, an expert analyst discusses the outlook for the sector for investors:

TWST: When we spoke a year or so ago, you were still in the process of ramping up your coverage for Baird. Bring us up to speed on your universe now. Do you still focus on hepatitis C?

Mr. Skorney: Right now I have 12 names, including a number of names in the hep C space. But I like to think of my coverage universe as fairly broad. It's always being built out, and in 10 years I'll still be building out new coverage. Right now I cover Gilead (GILD), Vertex (VRTX), Pharmacyclics (PCYC), Cubist (CBST), Theravance (THRX), InterMune (ITMN), Sarepta (SRPT), Idenix (IDIX), Enanta (ENTA), Cempra (CEMP), Achillion (ACHN) and Curis (CRIS). I think the range of names I will look at is pretty broad and encompassing anything in the therapeutic space, with a focus on areas where there is an intersection of novelty and unmet medical need.

TWST: These stocks have had a great run. What are some of the keys to their performance, particularly over the last year or so?

Mr. Skorney: Well, 2013 was a great year, keeping in context that it was also great for the S&P, which was up about 32%. The subindex of health care stocks outperformed the S&P, running up about 48%. Biotech names were up about 76%, and that type of performance was not solely limited to the S&P-listed biotech stocks: IBB was up 68%, and BTK was up 54%. I think there were a number of factors, and I think it was more or less a continuation of the great performance the year before. 2012 was great year, too.

I think the first thing to keep in mind from a macro perspective is that we have been emerging from a financial crisis, and we've seen strong performance across the whole S&P. The bottom of the financial crisis resulted in a risk-off mentality in the latter part of the last decade, and the perception of biotech and drug development is one of very high risk, so the sector was really at an all-time low. This was exacerbated by decades of failure, prolonged and costly research efforts in the therapeutic space, combined with more stringent regulation and significantly increasing costs associated with moving a program through to commercialization. At the end of the decade, the sector was emerging from this really difficult period, where investor confidence was really at an all-time low, development costs were accelerating, and approval and commercial success was getting harder and harder.

In the context of all that, we've emerged. I do think those hardships wound up doing a lot to improve the efficiency of the sector. Managements who were careless in clinical trial design and/or the use of capital learned to be more efficient, became more diligent in the design of clinical studies, and started to focus their efforts to bring drugs to the market that really improved upon prior therapies, rather than fighting for market share with the next-in-class agent of something that was already on the market.

I think that culminated in a number of very, very successful and exciting programs over the last few years. I'd point to Imbruvica for chronic lymphocytic leukemia from Pharmacyclics, SOVALDI for hepatitis C from Gilead, and Ivacaftor or KALYDECO from Vertex for cystic fibrosis as great examples of groundbreaking treatments for patients. This success has been a key factor driving the stocks...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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