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A Health Care Fortnight for the Record Books

Stocks in this article: PFE VRTX GILD HGSI ELN

NEW YORK ( TheStreet) -- I've been a professional investor for 15 years, and over that time I've listened to generalist investors gripe about the health care sector with mind-numbing cyclicality. Predictably, interest in health care investing often hits a nadir at the time of greatest opportunity. The complaints, which typically arise after major biotech blowups or government policy-fueled anxiety, range from absurdly broad-based assertions of disinterest (health care is "un-investable" is a common refrain) to specific anxiety about the sector's dependence on government as a payor.

Investors who dismiss the health care stocks often do so because they lack the expertise required to understand the sector. They're missing a lot. For those who think -- or have ever thought -- health care isn't a great sector for alpha generation, I present the first half of May in the year 2012, one of the busiest and most exciting two weeks for health care in recent memory. This week's column reviews -- in the first of two parts -- key events and the implications for relevant companies.

The Bapi Time Bomb Approaches

On Pfizer's (PFE) Q2'12 call, management revealed that the first of four massive Phase III trials of bapineuzumab -- the infamous amyloid beta-targeted monoclonal antibody initially developed by Elan (ELN) for Alzheimer's disease -- has been completed. This study, led by syndicate partner Johnson & Johnson (JNJ), enrolled 1,121 mild-to-moderate Alzheimer's patients with an unfavorable genetic mutation, called ApoE4, to receive either "bapi" or placebo.

Importantly, Pfizer said it plans to wait until the third quarter to disclose top line results from this trial alongside those from a second Phase III trial, which includes patients without the ApoE4 mutation. The non-carrier trial should be completed in August. As a reminder, the whole ApoE4 carrier versus non-carrier split was born from the post-hoc data mining of Elan's flagrantly equivocal Phase II trial.

Bulls insist the non-carrier study is more likely to succeed, because ApoE4 carriers with Alzheimer's are "too far gone" despite having clinically identical mild-to-moderate disease as the non-carriers. I still don't get why carriers, who have a worse prognosis, wouldn't respond better to a drug targeting amyloid beta, the alleged bad actor. Faulty logic.

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