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JPMorgan Confab Kicks Off Biotech 2012


A look at some of the companies that are presenting at the JPMorgan Healthcare Investment Conference next week.

Biotech investing runs in fairly predictable cycles each year. Starting in the fall, investors try to get in ahead of what they think will be newsmakers at the giant JPMorgan (JPM) Healthcare Investment Conference in early January. A few weeks following the JPMorgan conference, we usually get a little hangover happening. Things are wonky until the run into the June American Society of Clinical Oncology conference. Then things usually get ugly until the late summer or early fall when the pattern restarts itself.

The JPMorgan conference starts on Monday and runs until Thursday. Everyone who is anyone in biotech (or wants to be) will be in San Francisco for this four-day extravaganza of nearly around-the-clock meetings. The conference is only part of the show. Most of what happens in San Francisco actually happens in one-on-one meetings scattered in hotel rooms across central San Francisco.

This will be my seventh JPMorgan conference. You can follow along with the formal presentations on the JPMorgan site, though you really have to be in San Francisco to catch the vibe. Twitter allows additional color. Search on the hashtag #JPM12 and you'll get bombarded with insights and other things from conference attendees.

I expect biotech to have a decent first half of 2012 and then run into trouble in the second half as uncertainty about the presidential election and June's United States Supreme Court decision on the constitutionality of the individual mandate in the Patient Protection and Affordable Care Act (PPACA) is due.

As a reminder, the individual mandate is good for insurers and drugmakers because it creates more customers for both. Wall Street momentum traders traditionally have this backward when reacting to news about the individual mandate. If the mandate is tossed out, the fundamental trade is against insurers and drugmakers. Care must be taken, however. Traders paying more attention to entertainment news channel sound bites instead of fundamentals can be (and are likely to be) wrong longer than you can remain solvent.

I expect this to all be background themes for discussion at the JPMorgan conference next week. What most biotech investors will be focusing on, however, is in the company presentations and especially the Q&A breakout sessions afterward. Here's my take on the companies my firm covers (and a couple more) that are presenting at the conference next week. All times are San Francisco times (Pacific Standard).

Incyte Corp (INCY) Monday, 8:30 a.m.
My firm doesn't cover Incyte, but we follow them for Jakafi – a drug for the treatment of myelofibrosis. A company we do cover, YM Biosciences (YMI) has CYT387, a competitive drug currently in Phase II trials. Incyte investors, many of whom are very loyal because they made a ton of money in this company, will be agitating to know how sales are going on the recently-approved Jakafi. I'd expect the Q&A breakout conversation to focus on market size and what Incyte management thinks of the potential competitive threat from CYT387.

Seattle Genetics (SGEN) Monday, 10:30 a.m.
Seattle Genetics beat estimates for the initial launch of their new blood cancer drug Adcetris, but the stock still went down as bears think the initial results had more to do with a big waiting list than sustainable demand. At the American Society of Hematology conference last month, doctors talked about retreatment and much longer than expected time on drug – both of which are added revenue sources not currently in most Wall Street estimates. Nevertheless, this company is one of the most heavily shorted on Wall Street. Attendees will want to hear color from management about how Q4 sales went. If management is going to share, expect them to issue a press release on this Friday or Monday morning before their presentation with top-line details.

BioMarin Pharmaceuticals (BMRN) Monday, 11:30 a.m.
Every year for several years now, BioMarin has been on the short list of companies likely to be acquired by pharma. With BioMarin's focus on ultra-high margin orphan drugs that are likely to be the last casualties of any price controls, they are certainly attractive. I'd expect the Q&A to focus on recent news of immune reactions to their PEG-PAL drug to treat Phenylketonuria.

Dendreon (DNDN) Monday, 3:30 p.m.
My firm has written extensively about Dendreon for over a decade now so I know this biotech probably better than anyone else. Dendreon's 2012 is all about whether the company can secure Provenge as the Foundation of Care (Dendreon's term). This means Provenge would be used ahead of, or simultaneous with, the horde of other drugs converging on the pre-chemotherapy castrate resistant prostate cancer space. One sign of progress toward Foundation of Care is sales. I would expect Dendreon to report at least some information on their Q4 sales – which it already guided to be only slightly above Q3 sales due to seasonality. Dendreon should already have some idea of January bookings for Provenge, so Wall Street will be focusing on that number as well. Look for Dendreon to issue a press release with some of this information this Friday or Monday.

Algeta ASA (ALGETA.OL) Tuesday, 1:30 p.m.
This Norwegian company seems to be a darling of Wall Street after it reported positive data for a targeted radioactive drug used for prostate cancer. I disagree this drug will be a major player, though I understand where the buzz comes from. Key prostate cancer opinion leaders who commonly sell their services to Wall Street are really talking this one up. Questions about regulatory process will be common for this management team, who will likely defer to partner Bayer (BAY) for answers.

ImmunoGen (IMGN) Tuesday, 2:00 p.m.
ImmunoGen's market cap simply keeps going up despite the fact several analysts (notably myself and JPMorgan's Cory Kasimov) are pretty public with our arguments about why their mere 5% (ish) share of Roche's (RHBBY) T-DM1 future revenue doesn't justify their valuation. I would expect the Q&A to be almost exclusively about T-DM1. Since ImmunoGen's management won't say much more about this subject than what Roche says, those interested in ImmunoGen should really catch Roche's presentation at 8:30 a.m. on Tuesday. You'll probably see ImmunoGen's management team there taking notes.

Medivation (MDVN) Tuesday, 3:00 p.m.
Medivation was my firm's biggest equity position gainer in 2011, up over 230% from where we initiated coverage after last year's JPMorgan conference. Their MDV3100 drug showed positive Phase III pivotal trial results in the post-chemo castrate-resistant prostate cancer setting. The company released only top line data, however, preferring to release full results at a scientific conference. Since that conference is in early February, people expecting Medivation to say much about MDV3100 data are likely to be disappointed.

Exelixis (EXEL) Wednesday, 3:30 p.m.
Exelixis had a rough year in 2011, much of it self-inflicted. Management spent too much time listening to the wrong key opinion leaders and chose a clinical pathway for their lead drug cabozantinib that doesn't make much sense. This pathway was made all the more difficult when the company couldn't come to agreement with the FDA on clinical trial design for their first pivotal prostate cancer trial, but told Wall Street they were going ahead with their design anyway. Fortunately, Exelixis is more likely to get bought than not. At the very least, I expect a major pharma partner for cabozantinib to develop in 2012. This drug is the real deal in prostate cancer and, unlike most of its competitors, has efficacy in other cancer types as well. Management will certainly provide additional color on medullary thyroid carcinoma (MTC) in their JPMorgan presentation. Cabozantinib successfully completed a Phase III pivotal trial in this disease and a new drug application is expected to be filed with the FDA in 2012.

Raptor Pharma (RPTP) Thursday, 12:00 p.m.
Management will provide updates on their DR Cysteamine program, particularly in kidney patients and on how all their different trials will converge on a FDA application for approval. Investors will have questions about funding, partnerships, and launch strategy. Raptor, which my firm has covered since 2008, was quietly up 72% in 2011.

Dynavax (DVAX) Thursday, 12:30 p.m.
This company focuses on toll-like receptors as adjuvants in vaccines and for the treatment of immune-related diseases. Their lead product, Heplisav, is a vaccination against contracting Hepatitis B. It has some significant advantages, particularly in certain hard-to-vaccinate patient populations, over the currently-available vaccine (Engerix). The company announced in October they had settled on a regulatory path in both the US and the EU. In November, the company completed a financing to allow for commercialization. Investors will want to hear about progress on the regulatory side and what the company's plans are for label expansion for Heplisav.

Twitter: @BiotechStockRsr

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