Thoughts and observations after Thursday's conclusion of the J.P. Morgan Healthcare Conference:
Attendance was down to about 6,600 registered attendees this year from 7,500 people last year, according to a J.P. Morgan spokeswoman. Despite fewer people, the conference was still crowded, at least on Monday and Tuesday. Moreover, San Francisco was filled with biotech people from just about everywhere. The Union Square hotels surrounding the Westin St. Francis hotel, home base for the J.P. Morgan conference, were taken over by other sell-side investment banks, venture capital firms, biotech companies and various industry hangers-on, all holding their own meetings. If J.P. Morgan were to give out commemorative T-shirts, this year's model would say "Survive in '09" in big black letters. From conversations in the hallways, to comments made by presenters, to questions asked by investors during breakout sessions, worries about the financial health of the industry amidst the backdrop of an overall economic recession dominated this conference.This is a typical hallway conversation from the week:"Hey, how are you?""Oh man, what a brutal year.""Terrible.""But dude, the weather out here this week is unbelievable!""I know, I just want to be outside." Yes, the San Francicso weather was amazing: sunny with temperatures in the 70s every day. Stunning. One quick fix for all these money worries would be a rush of mergers and acquisition activity. Who is Pfizer (PFE - Get Report) going to buy and when? What about Merck (MRK) or Bristol-Myers Squibb (BMY - Get Report)? Will Roche get the Genentech (DNA) deal done soon? Could Biogen Idec (BIIB - Get Report) be on the sale block again? Questions about M&A activity -- when, how much, who -- came up at almost every breakout session I attended. It's as if institutional investors are waiting, hoping, praying for some huge mega-merger/acquisition to be announced in the belief that such a deal will ignite a ferocious rally in all biotech stocks, which in turn will boost the value of their moribund portfolios, which naturally will help them get paid in 2009. (Something that happened for very few in 2008.) Alas, no such deals were announced during J.P. Morgan week. The best we got was the announcement from Elan ( ELN) that it was hiring bankers to help the company find a way to perhaps sell some assets and pay off the $1 billion in debt coming due in 2011. Speaking of Elan, I had an early morning meeting Wednesday with CEO Kelly Martin and President Carlos Playa. Martin bought me a Starbuck's latte, and it wasn't even spiked! He also wanted to know when he was going to get his Nance Trophy for being named Worst Biotech CEO of 2008. Seriously, we had a very good meeting, and I give Martin a lot of credit for that. I've certainly had my share of things to say about Martin and about the company's experimental Alzheimer's drug this year, so what I wanted to do Wednesday was shut the heck up and hear about Elan from his perspective. Here are a few tidbits: Elan will remain an Ireland-based company, in part, because of the country's low corporate tax rate. Martin and Playa are big believers in the multiple sclerosis drug Tysabri, and there are no plans to sell the drug to Biogen or anyone else.
The future of the company is being bet big on developing drugs for Alzheimer's disease and not just bapineuzumab. Elan wants to focus on the science and is not interested in creating a huge commercial infrastructure, which is one reason why the company is seeking partnerships or other strategic business arrangements at this time. The looming debt coming due soon is clearly on Martin's mind, but the company as a whole is not for sale.
I had a one-on-one meeting with the management team of Optimer Pharmaceuticals (OPTR) that reinforced for me the reasons I added the stock last year to the Biotech Select model portfolio. It's a keeper. There are two near-term events to watch with Optimer, both in the second half of 2009. First are the data from the second phase III study of OPT-80 in patients with Clostridium difficile (C. diff) infection. (Remember, the first phase III study was wildly positive, which is what got the stock running higher.) Second, look for Optimer to sign a lucrative ex-U.S. marketing partnership for OPT-80 that includes a hefty upfront payment and double-digit royalties on sales. If there's one concern (and there has to be at least one for every stock), it's that Optimer will need to raise money to fund the commercial launch of OPT-80 -- even with cash expected from a marketing partner. CV Therapeutics (CVTX) was one of the best stories I heard at the conference. The company received FDA approval last year for an expanded label for its chronic angina drug Ranexa, which has the potential to significantly accelerate sales growth. The decision by Medicines Co. (MDCO) to acquire Targanta Therapeutics (TARG) and its well-worn (and not yet approved) antibiotic oritavancin was -- and still is -- a head-scratcher. Will Vertex Pharmaceuticals (VRTX) buy Anadys Pharmaceuticals (ANDS) to add another hepatitis C drug to its pipeline? Merck CEO Richard Clarke said during a Tuesday breakout session that the company want to expand its presence in the HIV treatment market, building upon the successful launch of the company's integrase inhibitor Isentress. Does this mean it will partner with, or acquire, experimental HIV drugs from Ardea BioSciences and/or Idenix Pharmaceuticals? During a presentation Tuesday, Genentech CEO Art Levinson spoke highly of cancer drugs in the company's pipeline that are partnered with Curis (CRIS) and ImmunoGen (IMGN - Get Report). Poniard Pharmaceuticals (PARD) and Synta Pharmaceuticals (SNTA) both have hugely important data releases from phase III cancer studies expected around mid-year. Last, J.P. Morgan cancelled the conference's traditional opening-night gala, held at San Francisco's City Hall. A lavish shindig thrown by a TARP-receiving investment bank wasn't going to look good, so no party, just business.