SAN FRANCISCO -- There are a lot of biotech investment conferences each year, but there's only one JPMorgan Healthcare Conference.
This is the granddaddy of biotech conferences, the oldest and the one that kicks off the biotech investment year. Investors flock to the Westin St. Francis hotel downtown every January to hear biotech CEOs offer up visions for the coming 12 months. It doesn't seem to matter what kind of year investors had previously, JPMorgan offers a chance to start with a clean slate.
Yes, this conference, which begins Monday, is too crowded. Other conferences offer better amenities, nicer hotels, but the January weather in San Francisco is a lot better than the dreary winter cold gripping the Northeast. This year, though, is the exception with several winter storms slamming the Bay Area.
And while biotech investors might be able to hear the same stories or collect the same investable nuggets at conferences in the months before or after JPMorgan, there is just something about being here, in January right after the new year, that makes this confab the place to be for biotech investors.
That's why I flew 2,700 miles from Boston to attend. I used to live here, so this conference was always on home turf. This year, I'm staying in a San Francisco hotel. That's a weird feeling, but now I have more in common with all the other attendees.
The following are some of the biotech stock stories I'm going to be paying attention to over the next week:
: Shares fell 21% in 2007,
weighed down by a slower-than-expected launch of its multiple myeloma drug Revlimid in Europe and investor worries that
( MLNM) cancer drug Velcade is emerging as a strong competitive threat.
Celgene gets its first shot at rebuilding investor confidence on Monday, when the company issues 2008 guidance. I'd say investor expectations are pretty low at this point. The dismantling of Celgene's stock price in the past month -- it closed at $49.85 Thursday -- has largely priced in the possibility of disappointing near-term Revlimid growth.
So, 2008 guidance that meets or slightly exceeds expectations might just help Celgene shares stabilize or even start to move higher again.
Here are the numbers to look for: The consensus analyst estimate now calls for Celgene to earn $1.58 a share in 2008 on total revenue of $2.02 billion. That earnings figure is pro forma or non-GAAP, which in this case means it excludes any impact from the
( PHRM) acquisition, which should close in the second quarter.
It's not clear if Celgene will drill down to provide detailed sales guidance for Revlimid, but if it does, look for a 2008 sales forecast in the range of $1.2 billion to $1.3 billion to satisfy Wall Street.
For the fourth quarter, investor expectations for Revlimid sales are about $235 million. Celgene is expected to earn 31 cents a share on total revenue of $381.46 million.
Celgene's third-quarter earnings report was a disappointment, especially when it comes to Revlimid sales in Europe, so management will be quizzed hard about its commercial operations on the other side of the Atlantic during the company's conference breakout session Monday.
There will also be a lot of questions put to management about Celgene's plans for dealing with what appears to be a resurgent Millennium Pharmaceuticals. Can Revlimid fend off a competitive threat from Velcade in the multiple myeloma market?
: In years past, Vertex has used the bright spotlight of the JPMorgan conference to highlight new data on its hepatitis C drug telaprevir that almost always generated positive buzz from investors. On Monday, however, Vertex will likely find investors in a
less receptive mood unless it can provide a meaningful update on timing for the start of a pivotal phase III telaprevir trial.
Vertex and the FDA have been locked in negotiations over details of this all-important telaprevir study for months. Competing hepatitis C drugs are now nipping at telaprevir's heels, so reaching an agreement with the agency over the design of the phase III study and getting it started fast is extremely important. Vertex needs to dispense some positive news at JPMorgan if it hopes to stanch the slide in its stock price, which closed at $21.44, more than a two-year low.
: What a fantastic 2007, with the stock up over 400%. To maintain the momentum, Onyx must wow investors again with stellar data from its cancer drug Nexavar. This time, the focus moves from the liver to the lungs, with results from a phase III study expected mid year.
Onyx CEO Hollings Renton has already announced his retirement for later this year, so Monday's presentation will be his JPMorgan swan song. Given the stock's stellar performance in 2007, investors will give Hollings a standing ovation for a job well done. If he delivers positive Nexavar lung cancer data later this year (which could double the stock again from its current $57.98), investors might just name sons (and daughters) after him.
: Can Erbitux be a player in the lucrative lung cancer treatment market? That's the big question for the company in 2008, as investors wait anxiously for the details from the phase III study known as "Flex."
ImClone's European partner
, which conducted Flex, has already announced that the study was positive, but without details (expected mid year), it's hard to forecast the upside in terms of future Erbitux sales.
Dare I say it, but I miss former ImClone CEO (and current federal inmate) Sam Waksal whenever the JPMorgan conference comes around. Waksal surely had his faults, but he was also a showman who knew how to
work a room.
Sadly, the ImClone CEOs who have followed have not been very inspiring. With the Erbitux opportunity in lung cancer dangling in front of investors, let's hope current chief executive John Johnson (formerly of
Johnson & Johnson
, if you can believe it) will prove to be more in the Waksal mold, at least when it comes to drumming up some excitement.
( DNA): A disappointing 2007, with shares down 17%. This marked the second consecutive year of negative stock market returns for the company. Genentech didn't suffer any huge blowups in 2007; instead it was multiple smaller setbacks that did damage.
The last cut hurt the most: The negative vote from an FDA advisory panel in December opposing approval of Avastin as a treatment for metastatic breast cancer patients. Genentech (and investors) were counting on FDA approval of Avastin in breast cancer to reverse decelerating sales growth for the drug. Now, that approval seems likely to be delayed as Genentech waits for results from additional studies, some of which could come later this year.
How Genentech plans to manage through this Avastin detour and whether or not it will take a bite out of 2008 earnings growth will certainly be a focus for investors when Genentech management takes questions Wednesday.
Genentech will not give 2008 guidance at the conference, choosing instead to wait for its regular quarterly conference call on Jan. 14. As with Celgene, investors have already priced in lower expectations, with the consensus outlook for 2008 earnings dropping to $3.37 a share currently (15% growth year over year) from $3.47 a share prior to the December FDA panel on Avastin. Genentech does not give revenue guidance.
: A best-in-big-cap biotech stock performance in 2007 (up 43%) coupled with decelerating earnings growth expected for 2008 (around 12%) vs. 2007 (31%) might make it hard for Gilead Sciences to repeat the returns of the past year.
It's not as if Gilead is doing anything wrong. In fact, management did just about everything right in 2007, exceeding expectations at almost every turn and avoiding the blowups that hurt other big-cap biotech stocks. But the law of big numbers being what it is, a slowdown in growth is hard to avoid.
Still, it's hard to bet against Gilead and its core HIV drug franchise, which just keeps on growing, cementing its No. 1 position amongst HIV physicians. A push to test more people for HIV infection, and if infected, to treat them earlier, are long-term trends that work in Gilead's favor. The recent approval of Gilead's single-pill Atripla in Europe also represents a new growth opportunity for the company.
One of the lessons learned from the great
debacle of 2007 is that diversification is important. Gilead knows that all too well, which is why Letairis, the company's new drug for pulmonary arterial hypertension, will get a lot of attention from investors in 2008. Also coming: a new antibiotic for cystic fibrosis patients.
Some quick hits:
: What kind of guidance does the company offer for Vancocin sales in 2008, especially in light of the continued threat that a generic version of the antibiotic is coming?
: Is there life after the failure of inhaled insulin Exubera? Can the company find a new marketing partner post
( AMLN): Byetta LAR is a great growth opportunity in the diabetes treatment market but an FDA filing in 2009 is several investment lifetimes in the future. What makes investors pay attention until then?
: Is there life after Carl Icahn?
: Is bapineuzumab the Holy Grail of Alzheimer's drugs?
Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;
to send him an email.