The J.P. Morgan Healthcare Conference kicks off Monday in San Francisco amid troubled times for the biotech sector. The longest-running biotech conference (now in its 27th year) always draws big crowds of investors, but this year's edition comes on the heels of a bum year for the markets and for biotech, specifically. While large-cap biotech stocks were a relatively safe haven in 2008, early-stage companies were mostly walloped. And the biotech outlook for 2009 remains uncertain because many of these smaller companies need cash to keep the lights on, but where will that money come from? With that framework in mind, the biotech universe will revolve around San Francisco's Westin St. Francis hotel for four days next week, as more than 250 companies (not just biotech, but drug and device makers and healthcare service companies, too) offer their plans and outlooks for the next 12 months to a crowd of invited institutional investors. And in the many hotels within blocks of the J.P. Morgan conference, scores of other biotech and drug companies without a ticket to the confab, competing investment banks and venture capital firms will hold their own meetings with investors. It promises to be a busy week.
Here are some of the early story lines on my radar screen: Hedge funds: More specifically, how healthy are the health-care hedge funds after the annus horribilis of 2008? Hedge fund managers don't get a lot of sympathy these days, but their health and well being does have a direct bearing on the outlook for the biotech sector because these funds tend to do a lot of the heavy lifting when it comes to financing small and early-stage biotech companies.
One of the reasons many of these small biotechs were down 50% or 60% in 2008 was that hedge funds weren't there to buy the stocks. For returns to improve in 2009, health-care hedge funds need to get back to investing in these stocks. Celgene ( CELG - Get Report): Per tradition, Celgene will announce preliminary 2008 results and give 2009 financial guidance on Monday. Two analyst downgrades this week have pressured the stock, which was already feeling the ill effects of the market's fall swoon. Investors are mainly worried about Revlimid, the company's blood cancer drug and chief revenue growth driver. Competition in the multiple myeloma treatment market from Takeda's rival drug Velcade is intensifying, and Revlimid pricing in Europe is coming under pressure. For the record, consensus expectations for Celgene's 2009 earnings currently stand at $2.29 a share, on revenue of $2.95 billion. The consensus earnings numbers have been dropping, which is lowering expectations and working in Celgene's favor. Biogen Idec ( BIIB - Get Report): There's been speculation that Biogen Idec CEO Jim Mullen will use the J.P. Morgan platform to officially step back from a previous growth forecast promising 100,000 patients using the company's multiple sclerosis drug Tysabri by 2010. Whether Mullen does that or not remains to be seen, although note that he spoke earlier this week at a Goldman Sachs conference and did no such thing. And the effect of such a retreat is probably mitigated by the fact that most analysts and investors who follow Biogen Idec closely have already assumed lower Tysabri utilization numbers.
Biogen Idec is also expected to use the J.P. Morgan conference as the venue to release new phase II study data on BIIB014, an experimental drug for Parkinson's disease. Biogen Idec could benefit from positive data on BIIB014, if for no other reason than it would give investors something else to talk about besides Tysabri. Elan ( ELN): As the co-marketer of Tysabri with Biogen Idec, Elan will also be affected by what Mullen says or doesn't say about the drug. But Elan CEO Kelly Martin has his own problems to deal with from ticked off shareholders who have questioned his leadership. Some of these shareholders have called publicly for his resignation. This should make for an interesting breakout session between Kelly and investors on Tuesday. Orexigen Therapeutics ( OREX): The company announced Thursday night the first data available from a phase III study of its obesity drug Contrave. The weight-loss results for Contrave fell below investors expectations, although the company insists the drug met its study goals. This is likely to be debated heavily when the company presents at the conference Monday morning. Genentech ( DNA) and Roche: How much, if at all, will the companies discuss the latest developments in Roche's attempt to acquire Genentech? Pfizer ( PFE - Get Report): Speaking of mergers and acquisitions, now that Pfizer CEO Jeff Kindler has said he's amenable to all types of deal making, his proxy at the conference will certainly be grilled about more specific plans. Gilead Sciences ( GILD - Get Report): Investors could get the first glance at data from the company's "Quad pill" for HIV. This new pill is a combination of Truvada (Viread plus Emtriva) and two experimental drugs, elvitegravir and GS9350. The so-called Quad pill is a big part of the longer-term HIV growth story for Gilead.
InterMune ( ITMN): A phase III study of pirfenidone in idiopathic pulmonary fibrosis is due in February, which should spark a lot of investor questions when the company presents Thursday.