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Biotech Roundup: ASCO, Pfizer, IMS Health


No script data!?! Grr! Arg! This is a big deal for Wall Street.


ASCO Books

In the next couple of weeks, ASCO will send out their abstract books to select members. These books will be delivered, sometimes for a fee, into the hands of hedge funds who will start trading on the data before the presentations are made. Keep an eye on oncology stocks in two weeks and we'll see what effect the ASCO books have this year.

Retail tends to get very whippy around this time as normal declines in an oncology stock are magnified by Yahooligans (a nickname for Yahoo! message board denizens) who fret and freak that "someone" knows something.

I honestly haven't done any work on ASCO beyond our coverage universe, but I am hearing that ASCO is a snore this year from my contacts in the hedge fund world. I expect that is due, in part, to the widespread practice of paying docs for information. ASCO used to be the only time you could get contact with most oncology docs. Now they are one check away so the thrill of ASCO is gone.

That said, one presentation I'd pay attention to is Pfizer's (PFE) Sutent melanoma survival data. I've heard conflicting views that they will present full survival data from their Phase III at this meeting. Some people say it is too early for full data, some people say it isn't. In any case, a failure from that Phase III would endanger the accelerated approved Sutent got in both Europe and the US. Mostly, though, nobody expects failure. What they will all be looking at is how the survival data compare to Nexavar from Onyx Pharma (ONXX) and Bayer (BAY). That battle is shaping up to be epic in the industry. If Pfizer's Sutent data are really good, then Onyx is in tough straights.

Script data

Proposals surfaced last week to prevent drug companies from learning what scripts doctors are writing. This is a big deal for Wall Street for four reasons:

  • Marketing costs will soar at big pharma as targeted sales efforts will be replaced by more expensive scorch-the-earth policies to maximize revenue.

  • Biotech companies will have a harder time going it alone. A small firm can manage to sell even a blockbuster drug if it can tell who exactly are the highest prescribers of the drug. Knowing that information, they can develop small sales forces to get the job done. Absent that information, they have to sell everyone – that's far more expensive.

  • IMS Health (RX) is trading not far from its 52-week high. Every biotech company and nearly all hedge funds I know use IMS script data. 75% of doctors in a poll don't like the fact companies see their script data. The American Medical Association (AMA) is preparing an opt-out program. If 75% of docs opt out of script reporting, IMS has a real problem.

  • Earnings estimates from the sell-side will go wonky. They depend heavily on script data to make predictions. Most sell-side healthcare desks feature script data as a regular feature of their morning calls. Most put out weekly updates, particularly around the time of new drug launches. Reductions in the availability or reliability of script data will increase earnings volatility.

Other quick thoughts

  • I have mixed feelings returning to high altitudes to pitch in the MIM-3 softball game. Last time I pitched in the mountains, the longest home run ever hit off me was stroked by Minyan James. That said, I'm really looking forward to the mountain biking trails…

  • The biotech sector has been in a real funk. I had a long conversation with a client earlier in the week and we both thought it felt like 2002 when Fidelity blew out of biotech close to the 2002 lows. Then Toddo hits the Buzz with the rumor a big fund was liquidating their healthcare holdings. That would explain the vibes we were getting.

  • There is no situation more frustration that watching a good drug lag because management can't seem to execute properly. We have a couple of these in our coverage universe at the moment and it's maddening to the point of distraction. If you have something similar in your portfolio, consider punting the position completely and never looking back. What you bank in losses will probably be regained via a clearer head.

  • I met two new entrepreneurs last night at our weekly confab at the Ale House. People ask me sometimes why I donate so much time to helping entrepreneurs. Their enthusiasm is contagious and that makes me a better businessman. Besides, I was given a big break in my 20s and I'm a firm believer in returning the favor.

  • If we hold the breadth in the NBI today, that will be three days in a row. That will be the first time since 3/29-31 when the NBI was at 840. It closed yesterday at 783.

  • You are paid to take risk. You must realize the difference between understanding the risks and deferring to the risks else you might not get paid.
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