The J.P. Morgan Healthcare Conference usually sets the agenda for the industry for the upcoming 12 months, but this year the delegates left the meeting perhaps wanting more action. The meeting was decidedly low key with the absence of any major news flow from companies during the week.

Nevertheless, there was no negative sentiment pervading the crowded meeting hallways, perhaps reflecting the fact that the biopharmaceutical sector is not in bad shape overall with no upcoming headwinds to worry about. It appears to be business as usual going forward, and the stock price performance of blue chip biopharmaceutical companies has reflected that. The BioWorld Biopharmaceutical index is up 3 percent so far this year with companies benefiting from the record-setting broader markets, which has seen the Dow Jones Industrial Average jump 5.2 percent and the Nasdaq Composite index follow suit with a 5.6 percent increase in value. (See BioWorld Biopharmaceutical index, below.)

Analysts were of a similar mind about the conference and its aftermath. J.P. Morgan analyst Cory Kasimov, for example, wrote in a wrap-up report of the meeting, "The 36th Annual J.P. Morgan Healthcare Conference wasn't the most action-packed of meetings by historical standards, but we still walk away from the event with a sense that sentiment is pretty stable – if not on a slight upswing – in the early days of the year."

The issues that were top of mind during the conference clearly related to M&A and how major companies were going to deploy their large capital reserves.

Everyone felt that the M&A floodgates were about to open when Celgene Corp. announced on the first day of the meeting that it was pulling the trigger on a proposed acquisition of San Diego-based Impact Biomedicines Inc. built around Impact's lead candidate, the phase III JAK2 inhibitor fedratinib, a potential treatment for myelofibrosis, a rare disease of the bone marrow. Celgene is paying $1.1 billion up front and future milestone payments could reach $5.9 billion. (See BioWorld, Jan.9, 2018.)

The Street's reaction to the deal was lukewarm at best, with Leerink analyst Geoffrey Porges writing in a research note that it was not a game-changer by any means and the company needed to pull the trigger on other deals. "Investors have been anticipating a meaningful acquisition for Celgene in 2018 and this may be just the first of several external business development deals for the company this year," he explained.

Investors appeared to agree and the company's shares (NASDAQ:CELG) were trading down 2.5 percent at market close Thursday.

Jefferies analysts noted that "the whole theme of the week in large-cap biotech can be summed up primarily around M&A, balance sheets and capital deployment."

In many of the presentations and subsequent Q&A sessions that followed, investors were keen to learn the business development intentions of blue-chip companies. Frustratingly for many, not too much information was shared on that account.

There is no doubt that this activity "remains a key catalyst for many investors," according to Jefferies. M&A needs to pick up its pace before midterm elections arrive; otherwise, "the sector will see a pullback," he concluded.

Against that backdrop, the only company that has pulled the trigger on a blockbuster acquisition – Gilead Sciences Inc. – did see its shares (NASDAQ:GILD) buck the trend of its colleagues with a significant 13 percent hike in value. That was enough for it to gain entry into the exclusive $100 billion market cap club once again. Helping boost interest in the company was the view that its hepatitis C virus franchise sales were stabilizing and the general positive buzz around its immuno-oncology activities post approval of the chimeric antigen receptor (CAR) T-cell therapy Yescarta (axicabtagene ciloleucel).

The only other $100 billion market cap club member, Amgen Inc., has also seen its shares (NASDAQ:AMGN) perform well out of the 2018 gate; the stock is up almost 8 percent. Last week, it reported that the FDA had approved the supplemental NDA to add overall survival (OS) data from the phase III head-to-head ENDEAVOR trial to the prescribing information for Kyprolis (carfilzomib). Data demonstrated that the drug and dexamethasone reduced the risk of death by 21 percent and increased OS by 7.6 months vs. Velcade (bortezomib) and dexamethasone in patients with relapsed or refractory multiple myeloma.

Biogen Inc. has also seen its shares (NASDAQ:BIIB) increase by 8 percent since the beginning of the year. Overall, 76 percent of the BioWorld Biopharmaceutical index group members are recording gains so far this year.

Drug developers

After a stellar 55 percent annual increase in value of the BioWorld Drug Developers index, its performance so far has been in the other direction, dropping almost 1 percent. (See BioWorld Drug Developers index, below.)

That is probably a reflection of the fact that investors see that macroeconomic drivers such as tax reform as more likely to help the large-cap biopharma companies rather than the small- to mid-cap companies. However, we do expect some selected company share buying going forward as investors place their bets on the expected potential acquisition of some of them, particularly those involved in hot areas such as immuno-oncology and gene and cell therapy.

Among the leading gainers in the group so far this year is Agios Pharmaceuticals Inc., whose shares (NASDAQ:AGIO) closed Thursday up more than 19 percent despite any significant announcements to drive the value inflection. The company took advantage of the hike by pricing an underwritten public offering of 7 million shares of common stock at $67 per share for gross proceeds of approximately $475 million. The company has also granted the underwriters a 30-day option to purchase up to an additional 15 percent of the shares of common stock offered in the public offering on the same terms and conditions.