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Video Transcript
JULIE HYMAN: Moving on, we are also watching for some pharmaceutical earnings in today's session. One of the companies we're watching is Biogen, which cut its 2020 profit forecast because of extended competition from generic rivals to its blockbuster drug to treat multiple sclerosis. We're joined now by Michael Yee, he is the analyst at Jefferies, to talk more about this and more about the pharmaceutical industry more broadly. So Michael, let's start with Biogen, and I was interested to talk to you in particular about some of the drug makers that don't necessarily have a COVID play right now, because there are quite a few big drug makers that are not directly involved in that industry. Biogen, I believe, is one of them. It looks like the next promising drug on the horizon could be its Alzheimer's drug, but what are the prospects for that when you weigh it against the generic competition for Tecfidera?
MICHAEL YEE: Well, that's a great segue, and thanks for having me. I think you're spot on. Biogen has not benefited at all, and that's fine from any sort of COVID play. But I think the audience and certainly biotech investors know that Biogen has perhaps one of the biggest drugs in the biopharmaceutical industry up for potential FDA approval in its Alzheimer's drug with a decision by March of next year and an FDA panel on November 6 where they're going to vote on this.
Those prospects could make the drug $5, $10 billion, one of the bigger drugs in all the industry, versus their generic near term disappointment with one of their multiple sclerosis drugs. So the stock is down modestly on some weak earnings, and like you said, lower guidance. People are willing to look beyond that because of this decision coming up from an FDA panel, and we will see what those prospects are. This could have a significant upside versus downside if it does play in their favor.
ADAM SHAPIRO: Well, that's always the question though, if it plays in their favor, and is there any kind of track record as to once you get to this stage, that November 6 meeting before the FDA, what usually happens at that point? Because for an investor, looking at this as maybe a potential opportunity, there's still a great deal of risk, is there not?
MICHAEL YEE: Yeah, well, what is, I guess, difficult for investors and even for sell side analysts in this situation is that it is mostly unprecedented, and that is because most of the time, the data are very clear cut, very good, and the panel is just going to discuss some nuance to it or something that could impact sales or something related to some aspect of the program. Or the data are very bad, and it is widely understood that the drug will get rejected, but you know, maybe it would just, that's already expected. Here, the situation is more interesting, because we understand that the data are not very good, but there was one study that was positive, but it stopped early, and so without getting into all the nuances of it, you had one very bad study, one good study, but overall, the program did not reach statistical significance. And so the FDA is going to review it, and everyone is surprised why are they reviewing this.
The data did not meet any statistical merits. And so because of the huge unmet need in Alzheimer's, everybody understands this was one of the most problematic health care headwinds of old people in society, we could see how the FDA could approve the drug based on mixed data. And if that's the case because of political pressures and unmet need. A good history at Biogen, just to be clear, they have gotten approval of more than five or six different drugs. It's very possible that this could get approved despite mixed data.
JULIE HYMAN: So Michael, that seems like that would be quite an outcome. I do want to ask you more broadly though, at this point in time when the world is grappling with the pandemic, does it make sense as an investor to sort of chase those opportunities, whether we're talking about vaccines or treatments, or are they even going to be moneymakers for the companies that make them if they end up being successful, or should people focus on some of the long term health issues like Alzheimer's, like cancer, for example?
MICHAEL YEE: Yeah, so you know, ultimately, we believe that quote unquote, "chasing a lot of the COVID plays" I think will be problematic mostly because there's already a high expectation and a lot of market exuberance for some of those, particularly if it's trading solely due on COVID. We do, on one hand however, like Regeneron, it's a buy rated stock here. And although they have a treatment for COVID which, you know, the president did take and could lead to big sales, they also have a lot of other pipeline stuff going on at Regeneron too. So we like that stock, but a lot of these other COVID players that had a lot of big runs on this show, that's going to be very tricky and risky for investors.
We do like bigger picture, the more broader cancer plays, a small and mid-cap biotechs, mostly because there's a lot of innovation going on in oncology. There's M&A opportunities. They are all these big companies we're talking about like Biogen, but Amgen and Gilead and Bristol, et cetera continue to look at doing more acquisitions, and so we think that's a positive tailwind for that. So both from an innovation standpoint, what's going on in some of these earlier companies as well from an M&A perspective, we do like that. If you want to be more risk averse, the XBI and the IBB are the biotech indices as well that a lot of people like to play as well.
JULIE HYMAN: Yes, that way you get a little bit of diversification in your biotech. Thank you so much. Appreciate it, Michael. Michael Yee of Jefferies.
