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Biotech Roundup: American Society of Hematology, Pfizer's Analyst Day, Merck's Acquisition Causes Pause

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This week in biotech...

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American Society of Hematology

The American Society of Hematology (ASH) meeting kicks off next week in Orlando. While the conference spans the entire study of blood and blood-targeted drugs, most people attend for the blood cancer presentations. Everyone wants to see which company has the next Rituxan or Velcade.

While this conference is not as well attended as ASCO, it can be as influential in the small company space. Blood cancers seem to attract the attention of small biotechs even though competition is fierce and enrolling patients challenging. For whatever reason, the bar for approval at the normally overly-restrictive FDA Office of Oncologic Drugs seems to be much lower for blood cancers.

They've actually handed out a few Special Protocol Assessments (SPAs) this year contemplating approval for drugs based upon non-randomized data. Still, as Genta's (GNTA) recent experience in front of the ODAC panel demonstrates, OOD's leniency is selective so investors still need to be careful.

Pfizer's Analyst day

My firm is still digesting Pfizer's (PFE) analyst day comments, but we really saw nothing that jumped out at us – including the torcetrapib data presented. I find it interesting the investigators will be presenting the data in March without even the company knowing it first. A gimmick, to be sure, but I suspect torcetrapib will need all the gimmicks it can get to fly through the FDA anytime this decade.

The sales force reductions are an interesting item, however. If the Democrats have their way and ban several forms of direct-to-consumer advertising, the ability to launch new drugs into the primary care physician segment of the market (where most blockbuster drugs live now) will be hampered.

Is this yet one more signpost on the road to the Death of the Blockbuster Drug? The blogs are full of ex-pharma sales reps saying their former companies will follow suit. I think it cannot hurt the progression towards targeted medicines, but there were too many duplicative sales reps to begin with. This may simply be a housecleaning and not anything more.

Merck's Acquisition Causes Pause

As expected, Merck's (MRK) acquisition of Sirna (RNAI) caused a pause in the acquisition spree we saw start in 3Q and extend to 4Q. Bidders and askers alike had to take a bit of extra time to work that new watershed in valuation into their cost/benefit models. My firm is hearing the push to clear deals by Christmas is intense among the BD people at pharma and biopharma. I would be surprised, therefore, to see December as quiet as the last couple of weeks of November.

One problem is many of the acquisitions are awaiting data releases or FDA action to cement the requested valuations. Slippage of data release timelines into 1Q may slip the purchases, too.

I still believe a focus on smaller companies is the right way to go for healthcare investing. This is especially true in an uncertain regulatory environment. If the politicians come down particularly hard on pricing and onerous post-approval "safety" monitoring, then the risk of post-approval investments goes up measurably. That causes some leveling of risk between pre-approval (development-stage) and post-approval biopharma/pharma. If the resulting action by investors is to re-evaluate the relative risks between these two sides of the healthcare coin and they shift money into development-stage biotechs instead of out of the sector entirely – and I can make an argument that will be the case – post‑approval regulations could be, counterintuitively, good for the biotech space.
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Position in GNTA

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