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Improving Economic Outlook Bodes Well for Biotech in 2013

By Marie Powers
Staff Writer

SAN FRANCISCO – Improving economic indicators portending a positive year for biotech was the early theme of the 31st annual J.P. Morgan Healthcare Conference.

Doug Braunstein, JPMorgan Chase & Co.'s vice chairman, noted in opening remarks that the size of the conference has grown from 21 presenting companies to 398 companies this year, with a combined market capitalization of more than $3 trillion. The 2013 conference also boasts 8,600 registered attendees and 7,700 one-on-one meetings.

"This has clearly become an industry-wide event," Braunstein said.

Indeed, attendees stood two and three deep at the back of the Grand Ballroom at the Westin St. Francis when Celgene Corp., the perennial kickstarter for J.P. Morgan, took the dais. The company did not disappoint, with CEO Robert J. Hugin predicting Celgene would report 2012 fourth-quarter sales exceeding $1 billion and earnings per share of about $4.90 – new high water marks for the big biotech.

Regarding its 2013 financial outlook, Hugin said net product sales are expected to reach some $6 billion – an 11.4 percent year-over-year increase. Net sales of Revlimid (lenalidomide), the company's multiple myeloma drug, are expected to exceed $4.1 billion even after a negative year-over-year foreign exchange impact of $90 million, for revenue growth of 11 percent to 14 percent.

Hugin also predicted adjusted diluted earnings per share in a range of $5.50 to $5.60, representing a year-over-year increase of 12 percent to 14 percent.

While the Summit, N.J.-based biotech continues to seek expanded indications for blockbusters Revlimid and Abraxane (nab-paclitaxel), the Phase III ESTEEM 1 and 2 trials of inflammatory disease candidate apremilast also showed "highly statistically significant and clinically meaningful improvements" in moderate to severe psoriasis, Hugin disclosed. The small-molecule phosphodiesterase 4 inhibitor hit primary and major secondary endpoints, with improved safety and tolerability over previous psoriasis studies.

Celgene will continue to invest in R&D, albeit at a modestly lower pace, through a combination of internal efforts and partnered projects. "It's imperative to have internal expertise at the highest level in areas where you believe you have a competitive advantage," Hugin said, adding the biotech "also is working with some of the finest emerging companies in the world."

With four compounds introduced into the clinic in 2012 and four more expected to begin human trials this year, "we believe the best days of Celgene are in front of us," Hugin added. With that in mind, he said Celgene expects to achieve a compounded annual growth rate of 19 percent over the next five years and to reach "an ambitious but achievable" target of $12 billion in annual revenues in 2017, based on its core franchises in hematology and oncology and the market opportunity for apremilast.

In a research note, Wells Fargo Securities LLC analyst Brian Abrahams said "notable in [Celgene's] presentation (compared to previous overviews) was a slightly lesser focus on Revlimid and a growing emphasis on the importance of Pomalyst (pomalidomide), Abraxane and apremilast in driving out-year growth."

With a PDUFA date of Feb. 10, Pomalyst has "positive body language," Abrahams added, and the apremilast Phase III findings add strong value to the company's pipeline.

"CELG remains our top large-cap pick," he wrote.

Also presenting in the Grand Ballroom Monday morning, Leonard Bell, CEO of Alexion Pharmaceuticals Inc., of Cheshire, Conn., provided an update on Soliris (eculizumab), its fully humanized monoclonal antibody targeted at complement protein C5, which continues to show strong sales in the orphan indications of paroxysmal nocturnal hemoglobinuria and atypical hemolytic uremic syndrome. Alexion expects to expand the drug into new indications and markets in 2013 and beyond, Bell said, including additional penetration outside the U.S., Western Europe and Asia.

Alexion, which purchased Montreal-based Enobia Pharma Corp. for $1 billion just prior to last year's J.P. Morgan conference, is reaping the fruit of its investments, reporting a 44 percent increase in third-quarter revenues, to $294 million. Bell predicted 2013 revenues would exceed $1.12 billion. (See BioWorld Today, Jan. 3, 2012.)

Jeff Leiden, CEO and chairman of Vertex Pharmaceuticals Inc., was the final presenter Monday morning on J.P. Morgan's main stage. He focused on the company's progress with cystic fibrosis drug Kalydeco (ivacaftor) and hepatitis C drug Incivek (telaprevir), observing that it was "unusual for a biotech to commercialize two products in quick succession."

Leiden said prioritization of the Cambridge, Mass.-based company's pipeline has created a robust late-stage pipeline, citing additional opportunities in cystic fibrosis and new indications in Huntington's disease, multiple sclerosis and autoimmune disease.

Leiden also disclosed that Kalydeco received the FDA's first two "breakthrough therapy" designations for monotherapy and the combination regimen with VX-809 in cystic fibrosis. Enacted as part of the 2012 Food and Drug Administration Safety and Innovation Act, the designation is designed to expedite the development and review of new medicines to treat life-threatening diseases.

The designation will allow Vertex to explore additional indications for Kalydeco beyond cystic fibrosis in individuals 6 and older who have the G551D mutation, helping to accelerate the company's personalized medicine strategy, Leiden said.

He also called the company's JAK3 inhibitor, VX-509, "a true pipeline in a drug." Vertex is investigating the compound in moderate to severe rheumatoid arthritis but expects to pursue global opportunities in a range of autoimmune diseases.

With $1.3 billion in cash and equivalents, Vertex will use 2013 to maintain its market leadership in Incivek and maximize and grow revenues from Kalydeco, Leiden added.

Of course, 2013 still could still go south for biotechs, cautioned JPMorgan Chase's Braunstein, particularly if Congress fails to curtail federal spending and to offer a long-term solution to the U.S. fiscal imbroglio. "You always worry about the black swans right in front of you," he said.

But low cost of capital and a robust industry cash position of $163 billion at the end of 2012 more likely set the stage "for what could be a very positive 2013," he predicted.