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Best of the Blogs, Biotechnology: What Can AstraZeneca Learn From Soriot?


Plus, an interim report on where we are in biotech stocks so far this year.

This column highlights the most interesting and useful business and financial commentary on biotechnology from around the Web.

In Vivo Blog
Link: What Will Soriot's Genetech/Roche Experience Mean for AstraZeneca?
"Like Bristol-Myers Squibb (BMY), AstraZeneca (AZN) has maintained a 'pure-play' pharma approach to business in recent years as well as a preference for smaller, targeted 'bolt-on' acquisitions, rather than the large-scale M&A pursued in recent years by Pfizer (PFE), Merck (MRK) and Roche.

Some Wall Street analysts suggest that may be about to change, as the UK multinational announced Aug. 28 that Pascal Soriot, a chief architect of Roche's successful absorption of Genentech, will take over as its new CEO on Oct. 1, replacing acting CEO Simon Lowth and succeeding David Brennan, who stepped down in April."

The Street
Link: 2012 Biotech Stock Predictions: An Interim Report Card
"Amgen (AMGN) announced the acquisition of Micromet on Jan. 26, which made me feel really good about the accuracy of my biotechs buying other biotechs prediction. Since then, however, the healthcare M&A trend has reverted to the old, boring script. Big Pharma remains the biggest buyer of biotechs in 2012: Witness Bristol-Myers Squibb's purchase of Inhibitex and Amylin Pharmaceuticals (the former a disaster already); and AstraZeneca's acquisition of Ardea Pharmaceuticals.

Still, I take solace in smaller deals that support my view: Spectrum Pharmaceuticals (SPPI) seeking to acquire Allos Pharmaceuticals (ALTH), Amgen buying Turkish drug firm Nevzet Pharma, and Celgene (CELG) and Biogen Idec (BIIB) both making acquisitions of small, privately held biotech companies. I'm just ahead of the curve with my prediction. I'll be right, eventually."

Seeking Alpha
Link: Mega-Cap Shows Investors the Way
"If you are going to play the biotech investor game, you will first and foremost need to recognize that any investment in the small cap biotech universe is speculative, and any process should include ample due diligence as well as an exit strategy. There is a place for long-term investing in biotech, but it exists with mid to large cap companies with a proven track record of managing a diversified portfolio of treatments through the approval process and distribution in the market place. Any reasonable candidate would have a formidable stable of revenue-generating products with ample generic protection for its portfolio. Amgen, Gilead Sciences (GILD), and Biogen Idec would be the best examples of diversified biotech powerhouses. Smoother revenue and earnings trajectories have afforded terrific returns to shareholders over long stretches of time. This has endeared them to institutional investors and fund managers (who don't have the mandate to shoot for the moon with more speculative picks)."

Pharma Times
Link: Spain: Govt Drug Spending Falls 24%
"The massive drop in drug spending by the centre is to due to the series of severe austerity measures which have been rolling out since 2010. Among these, particularly effective have been the mandatory patient co-payments, ranging from 10% for retirees to 60% for working adults, which were introduced on July 1 on all prescription drugs, and the revision of drug prices which has imposed increases of as much as 56% on around 4,000 drugs used in the treatment of chronic diseases. Both of these were introduced under the Royal Decree 16/2012 health care austerity package, which was approved in April, and is forecast to produce savings totalling more than 7 billion euros."

Link: Biotech's Capital Intensity Challenge
"Raising lots of money is not indicative at all of successfully generating a return for shareholders, but as a sector we tend to celebrate it. I've vented on this subject before, highlighting our tendency to cheer for trophy financings (here); the first company I highlighted as potentially challenged in that post was Pacific Biosciences (PACB). About 1.5 years later, its the poster child of 'Go Big, Go Bust' stories, having raised ~$600M over the past five years and now has an enterprise value of -33M."

"The amount of capital raised by a venture-backed private biotech has no clear correlation with its exit value. The scatter plot of Figure 6 from this Kevin Lalande analysis is an excellent visualization of this point. The odds of a $300M exit are seemingly just as likely for a company that has raised $40M as it is for those that have raised $150M. Obviously capital starvation doesn't give a new company a chance, but above a reasonable threshold this observation appears to hold true."
No positions in stocks mentioned.
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