The pharmaceutical industry, rich with innovative players and shaken by impending regulatory changes, is a well-worn topic on Wall Street. Adam Feuerstein joined Benzinga’s Pre-Market Prep radio show to comment on the status of the market and recent activity in the sphere.
Will Novogen-GBT Happen?
Rumors suggest that Novo Nordisk A/S (ADR) (NYSE: NVO) is eyeing Global Blood Therapeutics Inc (NASDAQ: GBT) as a potential acquisition target, and while Feuerstein said he has no particular insight into the matter, he looks favorably on GBT based on the company’s sickle cell drug data.
GBT is developing products targeting sickle cell disease and idiopathic pulmonary fibrosis, and Feuerstein said “it sort of fits in with the strategic focus that Novo is looking for.”
While Novo CEO confirmed the company's M&A aspirations, though not necessarily their interest in GBT, Feuerstein said a merger between the two aligns with a greater industry trend of big pharma companies buying smaller biotechs for growth.
Don't Get Caught Up In Sarepta Volatility
“The volatility that you see to me is noise, and at the end of the day, it doesn’t really mean anything,” he said, suggesting that the stock moves merely on analyst notes and company statements.
The factors that actually matter and will have sustained impact, he said, are the company's drug pipeline and sales of Exondys. These alone will have the greatest effect on both the Sarepta and its stock price.
The Parable Of Gilead
In February, Gilead Sciences, Inc. (NASDAQ: GILD) reported very bad guidance in their earnings report, leading to a massive sell off in the stock. Shortly after on Twitter, Feuerstein observed a cold truth about the industry: Sometimes, curing disease is bad for business.
“The idea is that, if you think about it conceptually, sort of the best business model is in a chronic disease where you’re developing a drug and selling a drug that patients need all the time, so you're not curing the disease but basically treating the symptoms of the disease, so the patient takes it chronically,” he said.
HIV, for example, used to be a fatal disease, but pharmaceutical companies have rendered it a chronic, treatable disease by repressing symptoms. Gilead has made billions on this model because once it hooks a patient, the patient remains for life.
“As long as the patient is alive, you can have that patient,” Feuerstein said.
However, its Hepatitis C line is less profitable. The curable disease requires a brief treatment before altogether disappearing and removing the patient from the customer pool. The number of clients requiring Hepatitis C drugs has thus diminished over time.
“It sort of points to why Gilead is having so much trouble right now because the number of patients that are taking their Hepatitis C drugs is falling, and so is their stock price,” Feuerstein said.
You can listen to the full discussion with Adam Feuerstein at 56:05 in the clip below.
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