Editors' pick: Originally published Jan. 7.
2016 will be a difficult year for biotech stocks.
I'm only making one big prediction this year: The five-year party which saw biotech stocks outperform the broader markets comes to an end in 2016. Good biotech science marches on, but negative fund flows, a continued flurry of negative headlines about drug prices and the presidential election all contribute to lousy stock performance overall.
On that cheery note, I present a report card on my 2015 biotech stock predictions. I also threw in a few bonus predictions for the coming year.
1. Gilead Sciences (GILD) will buy Bristol-Myers Squibb (BMY) . Or Juno Therapeutics (JUNO) . Maybe Kite Pharma (KITE) . OK, I'm not sure exactly which company Gilead will buy, but the acquisition focus will be oncology and it will be transformative, just as Pharmasset was for its hepatitis C business.
Nope, didn't happen. In December, Gilead bought an equity stake in Galapagos as part of a global partnership for an oral rheumatoid arthritis drug, but this deal doesn't move the "transformative" needle.
My prediction was wrong because Gilead executives were (and still are) smarter than me. You're not surprised, nor am I. The "Gilead should buy Bristol" idea is still intriguing theoretically, but it's also probably too messy, too impractical to ever get done. There are plenty of attractive acquisition targets in biotech but their price tags for most, if not all, of 2015 were also just too damn high.
I'm not doubling down on Gilead acquisition predictions for 2016. But I do believe Gilead is likely to trade at a multiple lower than its large-cap biotech peers (as it has for awhile now) until the company can assuage investor concerns about a post-hepatitis C earnings growth cliff. A kick-ass acquisition would do the trick, or Gilead could post revenue numbers showing the hepatitis C franchise is more durable and resistant to competition (Merck, ahem) than investors current believe it will be.
My prediction missed by five days. I'm such a loser. I never get anything about MannKind right.