Biotech 2012 Kickoff Party: Investor Preview

SAN FRANCISCO ( TheStreet) --The City by the Bay earns its reputation as the birthplace and epicenter of the biotech industry next week as executives, investors, consultants (and hangers on) convene for meetings, networking, deal making and parties all centered around the 30th annual J.P. Morgan Healthcare Conference.

People complain about how crowded and over-hyped the J.P. Morgan conference has become, but yet the biotech tribe still gathers faithfully every January because this conference (and all the ancillary meetings that piggyback off it) is still the best forum to set agendas, trade gossip and think about new investment ideas for the coming 12 months.

2011, like the year before, wasn't so great for biotech investors. Biotech stocks outperformed the broader indices although the second half of the year was largely a nightmare thanks to disappointing new drug launches (Hello, Dendreon ( DNDN)!), European economic turmoil and a general loss of investor confidence and interest in the sector. Biotech will always have its small, obsessed investor fan base, but it can't really prosper without participation from generalist investors.

What's in store for 2012? I'll let J.P. Morgan senior biotech analyst Geoff Meacham set the table since he's co-hosting next week's big investor shindig:

"Broadly speaking, we think that 2012 brings more challenges than opportunities in the biotech space. Our concerns include: 1) European economic uncertainty, which instills a fear of additional austerity measures or reimbursement hurdles or lower utilization, 2) a more clear path forward for biosimilars in the US, which is not a surprise but it impacts industry bellwethers, and 3) slightly lower revenue growth expectations for the overall sector of 9%, which doesn't look as beatable as in prior years. There are some positives in 2012, namely the US Presidential election, where NBI performance has beaten the S&P by an average of 21% over the past four elections. In 2012, however, the impact of the election on healthcare policy is less clear with HCR already well in place. Other positives for the sector include the M&A backdrop (uptick in 2011), where large cap companies seem to be looking to do more with cash than just buybacks / dividend increases."

No disrespect intended, but prior to last year's conference, Meacham was way more ebullient about biotech prospects for 2011. So, perhaps his curmudgeonly outlook for 2012 is a harbinger of brighter days ahead?

I'll be in San Francisco next week to cover and analyze all the breaking biotech news, rumors and goings-on at the J.P. Morgan Healthcare conference. Check the site for my ongoing stories and updates from the conference's presentation rooms and hallways.

New and different this year, I also plan to hold a series of live chats each night after the conference winds down for the day. The live chats -- similar to my regular monthly Biotech Stock Live Chats -- will give me a chance to answer your questions and provide additional analysis of what's happening on the ground in San Francisco. I hope you'll participate. The first J.P. Morgan Biotech Live Chat will be held on Monday, Jan. 9 at 7:30 pm ET.

To help you prep for next week, the following are capsule looks at some (certainly not all) of the major story lines and questions for biotech and drug companies presenting at the J.P. Morgan conference.

Monday, Jan. 9

Celgene: ( CELG) As it does every year (as far back as I can remember) this big-cap biotech lands the first presentation slot of the conference and uses the time to provide financial guidance. At present, the Street has Celgene earning $4.51 a share on total revenue of $5.395 billion in 2012. Sales of the multiple myeloma drug Revlimid are expected to reach $3.9 billion.

Street expectations include the assumption that European regulators approve Revlimid for front-line meyloma use -- a big catalyst for the stock this year. Celgene tends to play the forward guidance game on the conservative side (allowing it to raise its financial forecast throughout the year) so it will be interesting to see how the company's executives guide Revlimid revenue next week given the looming European approval decision.

Apart from Revlimid, expect Celgene to discuss and get a bunch of questions about the the pipeline drug apremilast and pending phase III results in psoriasis and psoriatic arthritis.

Gilead Sciences: ( GILD) Perhaps for the first time at J.P, Morgan, investor focus will turn away from the company's HIV drugs and toward the nascent hepatitis C program, anchored of course by the experimental PSI-7977 and the rest of the pipeline acquired through the $11 billion purchase of Pharmasset ( VRUS). The deal is expected to close in January, perhaps during the week of the conference.

Expect Gilead executives to discuss how its newly acquired Hep C drugs will boost the company's growth. Towards that end, the big catalyst for the stock will be the next slug of '7977 data expected in April. Gilead's HIV franchise won't be ignored, of course, so look for discussions about expectations for the Quad launch.

Incyte: ( INCY) A key drug launch stock for 2012. Investors will be looking to see if Incyte's myelofibrosis drug Jakafi can break the 2011 trend of under-performing product launches. The Street is currently forecasting fourth quarter 2011 and 2012 Jakafi sales of $2.1 million and $202 million (U.S. and rest of world), respectively. I suspect YM Biosciences ( YMI) and its competing myelofibrosis drug may sneak into the conversation as well.

Vivus: ( VVUS) All eyes are on the Feb. 22 FDA advisory panel convened to review the weight-loss drug Qnexa. Vivus didn't hold a conference call in December after reporting the latest birth-defect data tied to one of Qnexa's component drugs, so I'm expecting a standing-room only crowd at the company's breakout session.

Onyx Pharmaceuticals: ( ONXX) Two questions for 2012: Will FDA approve the multiple myeloma drug carfilzomib based on the submitted phase II data alone? And how is Onyx's "for sale" process progressing?

Seattle Genetics: ( SGEN) How big is the commercial market really for the Hodgkin's lymphoma drug Adcetris? This is a spirited bull-bear tug-of-war that shows no signs of letting up.

Vertex Pharmaceuticals: ( VRTX) Cystic fibrosis drugs and the newly appointed CEO Jeff Leiden grab the spotlight from the launch of the hepatitis C drug Incivek (although don't for a second believe Incivek -- 2012 consensus sales estimate $2.2 billion even with flattening script growth -- isn't still a meaningful factor in Vertex's market valuation.) This may mean something or it doesn't: Vertex isn't presenting in the Grand Ballroom, the center stage at the J.P. Morgan confab, this year.

Amarin: ( AMRN) Will U.S. regulators assign New Chemical Entitty (NCE) status to AMR101, or not? And what about those patents?

Biomarin Pharma: ( BMRN) Is this the year -- finally -- when Big Pharma finally decides to buy Biomarin for its high-priced orphan drugs?

Biogen Idec: ( BIIB) Like 2011, this year is heavy on clinical catalysts for Biogen Idec. Results from two phase III studies of its hemophilia drug and a single phase III study in ALS (Lou Gehrig's disease) are expected in the second half of the year. Biogen will also be filing its multiple sclerosis pill BG-12 for approval this year.

Dendreon: A lot of investors single out the Provenge launch debacle in August for knocking the entire biotech sector off its rails in the second half of 2011. CEO Mitch Gold has a tough task next week trying to convince investors that Provenge sales can recover and grow in 2012 as competition strengthens from other prostate cancer drugs like Johnson & Johnson's ( JNJ) Zytiga, Medivation's ( MDVN) MDV3100 and Algeta's Alpharadin.

Regeneron Pharmaceuticals: ( REGN) Wall Street will be watching the launch of the eye drug Eylea to see how new, more convenient therapy performs against two entrenched competitors from Roche -- Lucentis and Avastin. The consensus U.S. sales estimate for Eylea in 2012 is approximately $100 million.

Merck KGaA: The German drug giant isn’t normally a presentation I'd spend time on at J.P. Morgan, but this year I'm curious to hear how much is said about the looming result from the Stimuvax phase III study in non-small cell lung cancer. Stimuvax, as most small-cap focused investors know, is the cancer "vaccine" originally developed and owned by Oncoythyreon ( ONTY).

Human Genome Sciences: ( HGSI) Next to Provenge, no drug launch under-performed as badly in 2011 as Human Genome's lupus drug Benlysta. Recent prescription sales data trends haven't inspired much confidence in Benlysta's growth prospects for 2012. In fact, many investors believe that analyst sales forecasts for the year are still too high.

Tuesday, Jan. 10:

Roche ( RHHBY) and Immunogen ( IMGN): Results from the phase III "EMILIA" study of T-DM1 in second-line metastatic breast cancer patients should be released in the middle of the year. If positive (and that's the expectation) Roche should seek approval by year's end.

Ariad Pharmaceuticals: ( ARIA) The FDA approval decision date for sarcoma drug ridaforolimus is June 5, but most investors are more interested in the leukemia drug ponatinib. Full data from the pivotal phase II PACE study are expected at ASCO this year, which could allow the company to squeeze in an approval filing before year's end. At J.P. Morgan, expect a lot of investor questions about Ariad's commercial plans for ponatinib, which now seem to be leaning towards a go-it-alone strategy i.e no European partner.

Algeta: Drug companies that trade on the Norwegian stock exchange don't typically garner much attention, but Algeta deserves to be the exception. Its prostate cancer therapy Alpharadin, which zaps tumors that invade bone with small doses of radiation, was heralded at a significant medical breakthrough at a European cancer conference this past fall.

Clovis Oncology: ( CLVS) Investors love Pat Mahaffy for the job he did while helming Pharmion (sold to Celgene for $2.9 billion in 2007.) Now, Mahaffy's back with a new cancer drug startup, Clovis Oncology. The company's lead drug is a reformulation of the chemotherapy gemcitabine in a pivotal phase IIb study for pancreatic cancer with results expected in the second half of the year. Can Mahaffy work his magic a second time?

Medivation: Investors will probe management about the prostate cancer drug MDV3100 in front of what is expected to be a full presentation of the phase III data at the ASCO Genitourinary Cancers Symposium, Feb. 2-4.

Wednesday, Jan. 11:

Geron: ( GERN) The embryonic stem-cell program has been jettisoned, leaving a tattered stock and a mish-mash of cancer vaccines and therapies in mid-stage studies. And what about those year-end executive bonuses?

InterMune: ( ITMN) Management is holding a conference call Thursday to pre-announce Esbriet sales for the fourth-quarter (current consensus is approximately $3 million) and to update investors on the drug's early launch in Germany. All these topics will be rehashed during InterMune's J.P. Morgan presentation.

Idenix Pharmaceuticals: ( IDIX) If we're lucky, data from the phase IIb study of hepatitis C drug candidate IDX-184 will be announced during the conference. This is the most critical near-term catalyst for the company.

Amag Pharmaceuticals: ( AMAG) The company may pre-announce fourth-quarter Feraheme sales (consensus $14 millon) as it's done in the past. More importantly, investors want to hear about continued plans for the restructuring and possible sale of the company in 2012.

Mesoblast: ( MSB AU) Certain biotech hedge funds talk about this Australian stem-cell drug company as their juiciest short.

Thursday, Jan. 12:

Arena Pharmaceuticals: ( ARNA) suspect the same hedge funds who love to hate Mesoblast are hoping for a run in Arena's stock price this year so they can short going into the expected June approval decision for the company's weight-loss drug lorcaserin.

Sequenom: ( SQNM) The non-invasive fetal DNA test for Down's Syndrome has been launched but Sequenom's stock is trading at its lows? Why?

Mannkind: ( MNKD) Last year, hedge fund manager Martin Shkreli and Mannkind CEO Al Mann got into a shouting match during the company's breakout session. I'm not sure any investor cares enough about Mannkind this year for there to be the same level of drama, but you never know. Regardless, Mann is always entertaining.

Keryx Pharmaceuticals: ( KERX) Perifosine phase III results for colon cancer coming soon.

Spectrum Pharmaceuticals: ( SPPI) Retail investors love Spectrum. Institutional investors, generally speaking, either hate the company or pay it very little attention, mainly because few really trust CEO Raj Shrotriya. But 2011 was a great year for Spectrum so it will be interesting to see if Wall Street is changing its opinion of the company and its chief executive.

--Written by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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