The Opening Lunch Plenary at this year’s BIO CEO & Investor Conference was a lively discussion between portfolio managers and senior buy-side analysts looking to forecast the year ahead in biotech. BIO’s own, Celia Economides, Director, Investor Relations & Programs, reminded us all where we were 15 years ago at the inception of this event. At the 1999 event, there were 18 presenting companies, zero 1X1 meetings scheduled and 271 attendees. As of day one, this year’s event had 152 presenting companies, 1,400+ 1X1 meetings scheduled and close to 1,200 attendees. Likewise, the industry has seen growth with nearly double the R&D spending since 1999, while the number of FDA approvals has remained relatively the same (39 new drugs approved in 2012).
All three panelists, Geoffrey Hsu, General Partner, OrbiMed, Oleg Nodelman, Founder & Managing Director, EcoR1 Capital and Nathan Sadeghi-Nejad, Partner, Palkon Capital Management, seemed to agree that we are now facing a somewhat favorable regulatory environment, so the positive uptick in the BTK should only continue to trend up.
Quick to follow on this positive sentiment was the moderator, Mark Schoenebaum, MD, Senior Managing Director and Head, Healthcare Research, ISI Group, when he posed the question, “Is the FDA becoming easier to work with or has the quality increased?” On this, the panel was not so decisive. Nodelman believes we are not where we could be with the FDA; it is the predictability of a drug that is more important. Seconding that sentiment, Sadeghi-Nejad believes it is still a case by case scenario with the FDA whether a drug should be approved. Geoff on the other hand believes the FDA climate is friendlier, evidenced by last year’s approvals and helped by the breakthrough therapy program.
When evaluating a stock and its market value, the need for access to the best and most current information is crucial. While Sadeghi-Nejad cautioned, “human biology is unpredictable, know your spot.” Further, he believes there are lots of difficult unknown variables with Phase 1 investing, so he likes to get in when a company is hot and there are no unknowns. Nodelman on the other hand favors those companies that no one has heard of or has a consensus on. The investor sentiment is not always the key indicator as to a company’s stock value.
Schoenebaum next raised the subject of pricing as he often receives pushback on investment from generalists who believe that the biotech and pharma market is declining, the prices not sustainable. Hsu believes when speaking to these generalists, the focus must be on innovative drugs and novel approaches. “The state of innovation is strong,” said Hsu. Sadeghi-Nejad too believes that people will pay for orphan drugs as there is typically no push backs for value add drugs.
At the conclusion of the panel, before the floor was open to Q&A, the question of R&D productivity and spending was raised, specifically in relation to where we are now compared to the last 10 years. Nodelman believes the budgets have increased dramatically compared to 10 years ago. He is of the opinion that companies should not be focused on the “17th XYZ drug” but rather on the next novelty drug.