In my opinion, this past month or so marks somewhat of a turning point for the Pharmaceutical and Biotechnology Industries. Both macroeconomic and market conditions contributed to the optimism. Since there is much to say, I'll initially focus on some of the move by Big Pharma in Europe. In the next few days, we'll discuss the US based companies and then Biotechnology.
A headline grabbing contributor to the optimism from the Big Pharmaceutical players in Europe are the numerous reports about revenue enhancement resulting from Swine Flu Medicines (mostly Vaccines) resulting in billions of incremental revenue.
This trend was especially helpful to GlaxoSmithKline who are quoted in FT.com (July 23 by Andrew Jack) as “GlaxoSmithKline moved yesterday to become the pharmaceuticals company with the broadest range of products to tackle swine flu. The group unveiled plans to add masks and diagnostics to its vaccines and antiviral medicines business.” Interestingly enough, Andrew Witty, CEO of GSK had to make a public pronouncement about the company's ability to meet demand-certainly a different issue than the company had to deal with in the past. The UK company signaled a strong upsurge in demand from governments for its swine flu vaccine and Relenza, its antiviral drug, as the infection spreads, with plans to expand manufacturing capacity sharply.
Roche of Switzerland was also quite positive with JP Morgan indicating that additional sales of $4.3 billion for 600 million doses are being booked for its antiviral, Tamiflu and its pandemic vaccine. Reportedly, a further 340 million+ doses worth $2.6 billion are anticipated-quite a windfall. Roche threw the US Pharmaceutical Trade Group, The Pharmaceutical Research and Manufactures Association (PhRMA) into quite a tizzy as well by announcing it will drop out of that organization and aligning itself to another trade group, the Biotech Industry Organization (BIO). This was attributed to Roche's acquisition of Genentech and the acknowledgment that most of Roche's Pipeline was coming out of Genentech.
Sanofi-Aventis (SNY) was making good on CEO Chris Viehbacher's announced strategies. In rapid succession, he announced that preclinical research may be dropped in half and use the money to partner with smaller companies in early stage development. He was quoted earlier in the WSJ.com Health Blog as saying: “Part of the reason the Pharma model didn’t work is we just kept throwing money at things and hoping the next blockbuster would come along.” SNY also announced a major restructuring (closing down and consolidation) of its R&D operations. Sanofi continues to be the leader in Flu Vaccine accounting for between 25-33% of worldwide supply and certainly stands to have significant revenue and profit increases from Swine Flu Pandemic Vaccine sales. Additionally, this week Sanofi made a major acquisition to buy out the other 50% of Merial the animal health business that it jointly owns with Merck. It also acquired a $9.25 billion call option to combine Merck's new animal health business when it acquires Schering Plough in the 4th quarter. But wait, it doesn't stop there, as previously stated by Viehbacher, Sanofi wants to go further into vaccines and emerging markets, well the company started that in a big way by buying a 78% share of Indian Vaccine maker Shantha Biotechics for $615 million. What is particularly noteworthy is that unlike other big pharmaceutical companies, Sanofi chose to buy rather than partner- a strategy we believe that will pay large dividends.
TO BE CONTINUED
Showing posts with label Pharmaceuticals. Show all posts
Showing posts with label Pharmaceuticals. Show all posts
Friday, July 31, 2009
Wednesday, February 4, 2009
If Pfizer-Wyeth is Absurd, What do you think about BMS-Sanofi or BMS-Biogen-Idec or even BMS-Amgen or Sanofi.....?
It's no secret that Guy de Lastin and I feel very strongly that the Pfizer-Wyeth merger is a train wreck about to happen.
However, as long time members of the Life Sciences Industry, we know better than to think that this merger will be the only one to occur this year despite our earlier views (see our multiple blog articles on this subject over the last few months) that
there is no rational and compelling reason for these companies to consolidate.
So, let us speculate about what could happen next. Many Wall Street analysts and august financial papers suggest that BristolMyers Squibb (NYSE:BMY) is a maiden in distress and is being dressed up by its "savvy" management team to be taken to the alter.
If BMY is acquired, the leading contender may very well be Sanofi-Aventis (NYSE: SNY) of Paris. There was an extensive article in yesterday's Financial Times on this subject http://www.ft.com/cms/s/0/27be6860-09a-1dd972c0000779fd2ac,_i_email=y.html) and the truth be told, there is some merit in their thinking. SNY has lots of cash, a new CEO Chris Viehbacher, ex-Glaxo and runner up to Andrew Witty for that CEO job who is anxious to make a mark for himself by "expanding and diversifying" their business. And, oh lest we forget they share rights to PLAVIX, both companies' largest blockbuster and one that is beset by potential generic competition.
Let's suppose BMY want to be the acquirer, not the "acquiree". BUT, wait a minute, didn't BMY very recently get outfoxed by Eli Lilly (NYSE:LLY) in a very expensive acquisition of Imclone Systems and its blockbuster oncology pipeline known as Erbitux? It seems to us that BMY's strategy was a combination of expanding its oncology franchise, diversifying into large molecule (e.g. Biotechnology) science and hanging onto some potentially massive blockbuster extensions? If you believe that and BMY's management has learned a lesson,why not think that BMY looks at Biogen-Idec (NASDQ: BIIB) as an alternative or parallel version of its Imclone thinking. With a market cap of $14 billion or so, it could be affordable-NOT cheap, but very attractive with marketed and developing drugs in the areas of oncology, neurology, immunology, and cardiology in the United States and internationally. Its product set includes AVONEX for the treatment of relapsing forms of multiple sclerosis (MS); RITUXAN for the treatment of relapsed or refractory low-grade or follicular, CD20-positive, B-cell non-Hodgkins lymphomas, or B-cell NHLs; TYSABRI for the treatment of relapsing forms of MS; and FUMADERM, an immunomodulator for the treatment of severe psoriasis (http://finance.yahoo.com/q/pr?s=BIIB). This would be a very interesting fit with BMY's marketed products and pipelines. However, THE SAME COULD BE ALSO SAID FOR SNY!! Think of the fun, merriment and mirth that the bidding war could become!
Now, just for the pure joy of it, let's suppose that Amgen (NASDQ:AMGN) were thrown into this mix. What a powerhouse of a company despite some near term challenges. An attractive mix of marketed therapeutic products in supportive cancer care, nephrology, inflammation, and oncology. The company's principal products include Aranesp and EPOGEN that stimulate the production of red blood cells to treat anemia; Neulasta and NEUPOGEN, which selectively stimulate the production of neutrophils, a type of white blood cell that helps the body fight infections; and ENBREL that blocks the biologic activity of tumor necrosis factor by inhibiting TNF, a substance induced in response to inflammatory and immunological (http://finance.yahoo.com/q/pr?s=AMGN) and a potentially "golden" pipeline in each of these areas. One small challenge, AMGN's market cap at almost $60 billion dwarfs BMY at about $45 billion which at best suggests a merger of "near-equals" albeit some potentially very reluctant management and shareholders who may very well question the "synergies" and "value creation". Again substitute SNY (market cap over $75 billion) and does it make any more sense-we don't think so-do you?
As always, we are interested in your comments, please send them to larryrothmansblog@gmail.com
Contributed by Larry Rothman
However, as long time members of the Life Sciences Industry, we know better than to think that this merger will be the only one to occur this year despite our earlier views (see our multiple blog articles on this subject over the last few months) that
there is no rational and compelling reason for these companies to consolidate.
So, let us speculate about what could happen next. Many Wall Street analysts and august financial papers suggest that BristolMyers Squibb (NYSE:BMY) is a maiden in distress and is being dressed up by its "savvy" management team to be taken to the alter.
If BMY is acquired, the leading contender may very well be Sanofi-Aventis (NYSE: SNY) of Paris. There was an extensive article in yesterday's Financial Times on this subject http://www.ft.com/cms/s/0/27be6860-09a-1dd972c0000779fd2ac,_i_email=y.html) and the truth be told, there is some merit in their thinking. SNY has lots of cash, a new CEO Chris Viehbacher, ex-Glaxo and runner up to Andrew Witty for that CEO job who is anxious to make a mark for himself by "expanding and diversifying" their business. And, oh lest we forget they share rights to PLAVIX, both companies' largest blockbuster and one that is beset by potential generic competition.
Let's suppose BMY want to be the acquirer, not the "acquiree". BUT, wait a minute, didn't BMY very recently get outfoxed by Eli Lilly (NYSE:LLY) in a very expensive acquisition of Imclone Systems and its blockbuster oncology pipeline known as Erbitux? It seems to us that BMY's strategy was a combination of expanding its oncology franchise, diversifying into large molecule (e.g. Biotechnology) science and hanging onto some potentially massive blockbuster extensions? If you believe that and BMY's management has learned a lesson,why not think that BMY looks at Biogen-Idec (NASDQ: BIIB) as an alternative or parallel version of its Imclone thinking. With a market cap of $14 billion or so, it could be affordable-NOT cheap, but very attractive with marketed and developing drugs in the areas of oncology, neurology, immunology, and cardiology in the United States and internationally. Its product set includes AVONEX for the treatment of relapsing forms of multiple sclerosis (MS); RITUXAN for the treatment of relapsed or refractory low-grade or follicular, CD20-positive, B-cell non-Hodgkins lymphomas, or B-cell NHLs; TYSABRI for the treatment of relapsing forms of MS; and FUMADERM, an immunomodulator for the treatment of severe psoriasis (http://finance.yahoo.com/q/pr?s=BIIB). This would be a very interesting fit with BMY's marketed products and pipelines. However, THE SAME COULD BE ALSO SAID FOR SNY!! Think of the fun, merriment and mirth that the bidding war could become!
Now, just for the pure joy of it, let's suppose that Amgen (NASDQ:AMGN) were thrown into this mix. What a powerhouse of a company despite some near term challenges. An attractive mix of marketed therapeutic products in supportive cancer care, nephrology, inflammation, and oncology. The company's principal products include Aranesp and EPOGEN that stimulate the production of red blood cells to treat anemia; Neulasta and NEUPOGEN, which selectively stimulate the production of neutrophils, a type of white blood cell that helps the body fight infections; and ENBREL that blocks the biologic activity of tumor necrosis factor by inhibiting TNF, a substance induced in response to inflammatory and immunological (http://finance.yahoo.com/q/pr?s=AMGN) and a potentially "golden" pipeline in each of these areas. One small challenge, AMGN's market cap at almost $60 billion dwarfs BMY at about $45 billion which at best suggests a merger of "near-equals" albeit some potentially very reluctant management and shareholders who may very well question the "synergies" and "value creation". Again substitute SNY (market cap over $75 billion) and does it make any more sense-we don't think so-do you?
As always, we are interested in your comments, please send them to larryrothmansblog@gmail.com
Contributed by Larry Rothman
Friday, January 9, 2009
Contrarianism Lives!
There seems to have been a lot of writing recently about the lack of merger activity and what may be possible. Amgen seems to be getting a bit of ink too, but, then that one always seems to. First, Julie MacIntosh of the Financial Times published an interesting piece (http://www.ft.com/cms/s/0/57ccbec6-db91-11dd-be53-000077b07658.html ) concerning this subject on their website this January 6th. Her take was that the mergers and acquisitions market would be slow in coming back as companies assess risks and investment advisors want to appear cautious in recommending deals. Earlier in the week, Andrew Jack, also of the Financial Times speculated (http://www.ft.com/cms/s/0/20d8f19e-da8a-11dd-8c28-000077b07658.html ) about Pfizer entering into a large acquisition of a rival and what it might lead to in a pharmaceutical industry shying away from the large deals that spawned many of today’s Big Pharma companies. His musings were based on comments by Jeff Kindler, Pfizer’s CEO. He noted debates in the investment community about Pfizer acquiring Amgen. (CNBC had also reported this story.) As I wrote earlier, that’s an old story heard many times before.
What I find interesting here is how from very substance, a lot of speculation is going on. As I blogged earlier, I don’t think there is much of a market for large deals in the pharmaceutical industry right now. I find myself more in agreement with Julie MacIntosh about deal prospects in the industry. That is, the length and breadth of this recession will determine people’s willingness to return to the deal markets. Like I wrote earlier, she quotes Mark Shafir, the global mergers and acquisitions head at Citibank, who believes that bankrupt or near bankrupt companies will provide the first wave of opportunities. He goes further saying that cash rich companies may then begin to prowl for values. But, all this will take time. While these activities may start this year, I don’t think that they will culminate in any significant deal activity until 2010 at the earliest.
I know that some people have been writing about 2009 being the big year for drug company acquisitions. I’m just not buying into it. Let’s see what comes of these vaunted pipelines. Let’s see what happens when a President Obama instructs Medicare to negotiate drug prices with the drug companies. (I’ve always found it interesting that when corporations squeeze their vendors for lower costs, it’s capitalism; when the government does it, it’s Marxism.) As this blog has repeatedly said over the last year, there is too much capacity in the drug industry. Whatever deals happen this year will be restructurings designed to handle this fundamental problem.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
What I find interesting here is how from very substance, a lot of speculation is going on. As I blogged earlier, I don’t think there is much of a market for large deals in the pharmaceutical industry right now. I find myself more in agreement with Julie MacIntosh about deal prospects in the industry. That is, the length and breadth of this recession will determine people’s willingness to return to the deal markets. Like I wrote earlier, she quotes Mark Shafir, the global mergers and acquisitions head at Citibank, who believes that bankrupt or near bankrupt companies will provide the first wave of opportunities. He goes further saying that cash rich companies may then begin to prowl for values. But, all this will take time. While these activities may start this year, I don’t think that they will culminate in any significant deal activity until 2010 at the earliest.
I know that some people have been writing about 2009 being the big year for drug company acquisitions. I’m just not buying into it. Let’s see what comes of these vaunted pipelines. Let’s see what happens when a President Obama instructs Medicare to negotiate drug prices with the drug companies. (I’ve always found it interesting that when corporations squeeze their vendors for lower costs, it’s capitalism; when the government does it, it’s Marxism.) As this blog has repeatedly said over the last year, there is too much capacity in the drug industry. Whatever deals happen this year will be restructurings designed to handle this fundamental problem.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Monday, November 3, 2008
Obama’s Won, Now What?
OK, I’m getting ahead of myself, but only by a little. I understand that I have to wait for the votes to be cast and then counted for the rest of the world to know what I do today – Barack Obama will be the next President of the United States.
I’m going to leave the significance of this momentous event to the historians and the pundits. I want to talk about what this means to the people who read this blog. What happens to the Life Sciences/Pharmaceutical Industry now that we have a new Democratic President? Actually, a lot depends on what happens in the Congress and the Senate. If the Democrats can achieve a filibuster proof majority in both Houses then President-elect Obama is sitting in the catbird seat. Without these, a lot’s possible but it won’t be as easy.
Let’s start with Big Pharma. In my last blog, I forecast tough times ahead, if not an actual overhaul of the business model:
We may see a very significant decrease in private funding of major new drugs.
Mergers or acquisitions? Especially with target companies valuations falling? Not likely, unfortunately, given the state of the markets, mergers and acquisitions, except in the financial services industry, are practically nonexistent.
New drug pipelines that are already running dry. The FDA has not exactly been setting records for new drug approvals despite record R&D spending by Big Pharma. Are we to believe that the promised "new regulations" will help or hinder FDA cycles--we would strongly suggest that things will get worse for a while and approvals will be even more difficult and slower.
We think that 2009 will probably show declining revenues for the major drug companies, dramatically so if the ambitious plans for universal health insurance and concentration of buying power occurs--in fact Obama may be a breath of fresh air here compared with the McCain campaign promises (more like threats) toward big Pharma. Profits will depend on how well they manage their cost cutting programs. I won’t even go into what the foreign exchange markets’ impact could be.
Next, let’s talk about outsourcing companies. Here the damage may be even bigger than just the pharmaceutical industry. With a new President talking about giving preferential tax rates to companies that bring jobs back to America, folks might not be so quick to outsource/offshore jobs as they once were. (Remember that filibuster-proof Congress?). The other side of that equation is the possibility that R&D done offshore certainly will be more cost attractive and therefore may still be compelling.
Now, let’s talk about consulting firms. These guys are normally pretty good at playing it whichever way it lays. There is a unique problem this time, two things are working against them:
First, I don’t think the drug companies have figured out what to do next. They won’t spend until they do.
Second, with cost cutting (efficiency) programs being put in place as a response to declining revenues, there is another good reason not to spend money on consultants without laser4 focused projects. So, there is another industry segment could be in for a hard time.
This will be my final blog entry before Election Day. Assuming I’m right about the outcome, we’ll have a lot to talk about in the next few months. If I’m wrong, I’ll get over it and figure out what could happen next.
As always, we welcome your feedback. Please contact us at
Contributed by Guy de Lastin
Friday, October 31, 2008
What’s Going to Happen after Election Day?
Less than a week to Election Day. I’m going to stick my neck out, Larry loves it when I do, and predict that it’s going to be Obama. Not exactly good for McCain, but, he only has himself to blame. He neglected to notice that the Cold War was over. But, there will be bad news for others, such as Big Pharma. (OK, there probably would have been bad news even if McCain won.)
Earlier, I had written about how neither of the two candidates would be good for the drug industry. I wasn’t the only who thought so. In fact, I recently came across an opinion article in the online edition of The Wall Street Journal , WSJ.com - Opinion: How Obama Would Stifle Drug Innovation, by a Dr. Scott Gottlieb outlining how Obama’s policies could curtail drug research.
Dr. Gottlieb presents the proposition that in order to pay for affordable medical care for younger people, Obama would have to introduce controls over newer, more effective drugs for diseases such as cancer. While I agree with him that the next administration will attempt to rein in drug prices, I’m a little skeptical about a new front opening up in the ongoing generational conflict.
I do subscribe to the argument that preventative healthcare can lead to reductions in the incidence of diseases such as diabetes. We’ve been told for years that not smoking reduces the likelihood of lung cancer and emphysema. Reduce or eliminate the illness and you eliminate the need for expensive treatments. Funding improved healthcare for younger people can avoid more expensive solutions later on. Not to mention the improved quality of life for those concerned. To say nothing of the improvements to the American landscape afforded by a major reduction in obesity.
I also have reservations about the idea that drug companies should charge whatever the market will bear for their drugs. If tomorrow someone discovers a cure for AIDS, does anyone really think that they would be permitted to charge whatever they wanted? Third world countries have already been breaking drug patents when they felt that public need outweighed the profit motive. Precedent exists for this. Defense contractors have been limited to “fair” profits for their products in time of war.
The success rates for new drugs mentioned by Dr. Gottlieb seem to suggest that the current model of private funding may have outlived its usefulness. Great risks require great rewards. I think that I’ve already shown that great rewards are going the way of the dodo bird. If government funding can split the atom, send a man to the moon, and, maybe, just maybe, avert another Great Depression, then finding a cure for cancer may not be beyond the realm of possibility.
Whatever happens after Obama wins next week, Big Pharma’s days of unchallenged domination of drug development are numbered. In fact, they may devolve into generic manufacturers of products developed by government research programs.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Earlier, I had written about how neither of the two candidates would be good for the drug industry. I wasn’t the only who thought so. In fact, I recently came across an opinion article in the online edition of The Wall Street Journal , WSJ.com - Opinion: How Obama Would Stifle Drug Innovation, by a Dr. Scott Gottlieb outlining how Obama’s policies could curtail drug research.
Dr. Gottlieb presents the proposition that in order to pay for affordable medical care for younger people, Obama would have to introduce controls over newer, more effective drugs for diseases such as cancer. While I agree with him that the next administration will attempt to rein in drug prices, I’m a little skeptical about a new front opening up in the ongoing generational conflict.
I do subscribe to the argument that preventative healthcare can lead to reductions in the incidence of diseases such as diabetes. We’ve been told for years that not smoking reduces the likelihood of lung cancer and emphysema. Reduce or eliminate the illness and you eliminate the need for expensive treatments. Funding improved healthcare for younger people can avoid more expensive solutions later on. Not to mention the improved quality of life for those concerned. To say nothing of the improvements to the American landscape afforded by a major reduction in obesity.
I also have reservations about the idea that drug companies should charge whatever the market will bear for their drugs. If tomorrow someone discovers a cure for AIDS, does anyone really think that they would be permitted to charge whatever they wanted? Third world countries have already been breaking drug patents when they felt that public need outweighed the profit motive. Precedent exists for this. Defense contractors have been limited to “fair” profits for their products in time of war.
The success rates for new drugs mentioned by Dr. Gottlieb seem to suggest that the current model of private funding may have outlived its usefulness. Great risks require great rewards. I think that I’ve already shown that great rewards are going the way of the dodo bird. If government funding can split the atom, send a man to the moon, and, maybe, just maybe, avert another Great Depression, then finding a cure for cancer may not be beyond the realm of possibility.
Whatever happens after Obama wins next week, Big Pharma’s days of unchallenged domination of drug development are numbered. In fact, they may devolve into generic manufacturers of products developed by government research programs.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Friday, July 18, 2008
Insights from a Top Five Star Fund Manager on Drug Pipelines (Part III)
Recently, Larry and I met with an interesting person, Ken Kam. Ken manages the Masters 100 Fund (MOFQX) and is a Morningstar Five Star fund manager. He has been regularly beating the S&P 500 Composite Stock Price index. Ken believes that his approach to investments using virtual portfolios to derive real investment decisions will be the wave of the future. Ken’s approach can be checked out at www.marketocracy.com. Earlier in his career, he had managed a technology and healthcare fund and had also run a medical devices company. During our meeting, we learned about his current holdings and what he thinks about the future of the pharmaceutical industry. This is the third and final of three blogs based on that interview.
This is my third and final blog based on a meeting that Larry and I had with Ken Kam, the fund manager of the Marketocracy’s Masters 100 Fund (MOFQX). In my two earlier blogs, I reviewed Ken’s thinking on the current and future prospects for Elan Corporation PLC. When Ken began talking about the future of Elan, he was touching on some of the current issues in the drug industry. That’s when Larry and I started to ask him questions about the industry in general and its future prospects.
Ken said that the industry will respond as in the past but that it can’t shortcut research. The old hit or miss approach to drug research is dead. More specifics will be required. Ken says that Genomics will drive much change and that new drugs will have a Genomics element. Large drug companies will have to find early stage drug research and then purchase it.
When looking to make future investment decisions, Ken says that he considers two stages. First, the beginning when the drug is unknown and it’s not known yet whether it will work. It’s tough to invest until the clinical trials are done. Next, once the trials are successful, it’s the basic blocking and tackling to run the business that counts. He cites Amgen as an example of a company that had been here with its drug Epogen but had to bring in a partner that had a sales force with preexisting relationships with doctors. Ken says that it’s hard to get into doctors’ offices with only one product. But, it can be done as Amgen and Genentech have demonstrated.
Ken thinks that Elan may get there. Also, Ken notes that manufacturing drugs is tough, there aren’t that many people who know how to do it, and even the big players get it wrong once in a while. Start-up’s only have scientists and this second stage is equally as important as the first. Hot IPO markets sometimes let start up’s fund these activities. Other times, it’s the big companies that provide the funding. Ken thinks that we’re in these later times right now. Also, what the business model looks like becomes a factor in making an investment decision. Outsourcing services and support to gain a cost advantage become important considerations.
Both Larry and I enjoyed our meeting with Ken Kam and we would like to take this opportunity to thank him and his team for arranging this opportunity for us.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
This is my third and final blog based on a meeting that Larry and I had with Ken Kam, the fund manager of the Marketocracy’s Masters 100 Fund (MOFQX). In my two earlier blogs, I reviewed Ken’s thinking on the current and future prospects for Elan Corporation PLC. When Ken began talking about the future of Elan, he was touching on some of the current issues in the drug industry. That’s when Larry and I started to ask him questions about the industry in general and its future prospects.
Ken said that the industry will respond as in the past but that it can’t shortcut research. The old hit or miss approach to drug research is dead. More specifics will be required. Ken says that Genomics will drive much change and that new drugs will have a Genomics element. Large drug companies will have to find early stage drug research and then purchase it.
When looking to make future investment decisions, Ken says that he considers two stages. First, the beginning when the drug is unknown and it’s not known yet whether it will work. It’s tough to invest until the clinical trials are done. Next, once the trials are successful, it’s the basic blocking and tackling to run the business that counts. He cites Amgen as an example of a company that had been here with its drug Epogen but had to bring in a partner that had a sales force with preexisting relationships with doctors. Ken says that it’s hard to get into doctors’ offices with only one product. But, it can be done as Amgen and Genentech have demonstrated.
Ken thinks that Elan may get there. Also, Ken notes that manufacturing drugs is tough, there aren’t that many people who know how to do it, and even the big players get it wrong once in a while. Start-up’s only have scientists and this second stage is equally as important as the first. Hot IPO markets sometimes let start up’s fund these activities. Other times, it’s the big companies that provide the funding. Ken thinks that we’re in these later times right now. Also, what the business model looks like becomes a factor in making an investment decision. Outsourcing services and support to gain a cost advantage become important considerations.
Both Larry and I enjoyed our meeting with Ken Kam and we would like to take this opportunity to thank him and his team for arranging this opportunity for us.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Wednesday, July 16, 2008
Insights from a Top Five Star Fund Manager on Drug Pipelines (Part II)
Recently, Larry and I met with an interesting person, Ken Kam. Ken manages the Masters 100 Fund (MOFQX) and is a Morningstar Five Star fund manager. He has been regularly beating the S&P 500 Composite Stock Price index. Ken believes that his approach to investments using virtual portfolios to derive real investment decisions will be the wave of the future. Ken’s approach can be checked out at www.marketocracy.com. Earlier in his career, he had managed a technology and healthcare fund and had also run a medical devices company. During our meeting, we learned about his current holdings and what he thinks about the future of the pharmaceutical industry. This is the second of three blogs based on that interview.
In my last blog, I introduced Ken Kam, the fund manager of the Marketocracy’s Masters 100 Fund (MOFQX) and reviewed his position in Elan Corporation PLC, his thoughts on its drug, Tysabri,(Bapinuezumab) and its current prospects. In this entry, I will go over Ken’s future prospects for Elan and Tysabri.
Since taking his first in Elan in June 2005, the stock has doubled several times. Ken thinks that it could double again. Larry and I queried him about this and he gave us his reasons. First, Elan is conducting trials for Tysabri for use with Alzheimer’s disease. Unlike the multiple sclerosis space where Tysabri has three other competitive drugs to go against there are no others in the Alzheimer’s space to contend with. For this reason alone, Ken thinks Elan could double. He likes the Alzheimer’s story and thinks that it could make Elan another Amgen.
Next, Ken is taking a longer view on Elan. It possesses nanocrystal technology which allows the manufacture of nano-sized versions of existing drugs. This increases the surface area of the drug permitting a more effective dosage with reduced side effects. This is fundamental technology that can be applied to many other drugs, that are coming off patent. Other companies would have to do the research to see of their drugs were effective. Elan could either acquire other drugs coming off patent and make nano-sized versions or license the technology to the other drug manufacturers. Manufacturers with drugs coming off patent are looking at ways to make their drugs more effective. Nanocrystal technology offers the chance to extend a patent for another ten years Ken explained to us. This is what Ken sees as the future pipeline for Elan and explains his optimistic future for the company.
In my next and final blog based on Larry’s and my meeting with Ken Kam, I’ll write about Ken’s thoughts on the drug industry and its future.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
In my last blog, I introduced Ken Kam, the fund manager of the Marketocracy’s Masters 100 Fund (MOFQX) and reviewed his position in Elan Corporation PLC, his thoughts on its drug, Tysabri,(Bapinuezumab) and its current prospects. In this entry, I will go over Ken’s future prospects for Elan and Tysabri.
Since taking his first in Elan in June 2005, the stock has doubled several times. Ken thinks that it could double again. Larry and I queried him about this and he gave us his reasons. First, Elan is conducting trials for Tysabri for use with Alzheimer’s disease. Unlike the multiple sclerosis space where Tysabri has three other competitive drugs to go against there are no others in the Alzheimer’s space to contend with. For this reason alone, Ken thinks Elan could double. He likes the Alzheimer’s story and thinks that it could make Elan another Amgen.
Next, Ken is taking a longer view on Elan. It possesses nanocrystal technology which allows the manufacture of nano-sized versions of existing drugs. This increases the surface area of the drug permitting a more effective dosage with reduced side effects. This is fundamental technology that can be applied to many other drugs, that are coming off patent. Other companies would have to do the research to see of their drugs were effective. Elan could either acquire other drugs coming off patent and make nano-sized versions or license the technology to the other drug manufacturers. Manufacturers with drugs coming off patent are looking at ways to make their drugs more effective. Nanocrystal technology offers the chance to extend a patent for another ten years Ken explained to us. This is what Ken sees as the future pipeline for Elan and explains his optimistic future for the company.
In my next and final blog based on Larry’s and my meeting with Ken Kam, I’ll write about Ken’s thoughts on the drug industry and its future.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Monday, July 14, 2008
Insights from a Top Five Star Fund Manager on Drug Pipelines (Part I)
Recently, Larry and I met with an interesting person, Ken Kam. Ken manages the Masters 100 Fund (MOFQX) and is a Morningstar Five Star fund manager. He has been regularly beating the S&P 500 Composite Stock Price index. Ken believes that his approach to investments using virtual portfolios to derive real investment decisions will be the wave of the future. Ken’s approach can be checked out at www.marketocracy.com. Earlier in his career, he had managed a technology and healthcare fund and had also run a medical devices company. During our meeting, we learned about his current holdings and what he thinks about the future of the pharmaceutical industry. This is the first of three blogs based on that interview.
Ken Kam manages the Marketocracy Masters 100 Fund (MOFQX) that has a Morningstar Five Star for three year returns. The fund’s objective is to seek capital appreciation in common stocks of domestic and foreign companies of any size, seeking to outperform the S&P 500 Composite Stock Price index. What brought Larry and I to meet with Ken was his position in Elan Corporation PLC. Elan has been conducting clinical trials on a drug, bapineuzumab, for Alzheimers patients, and they currently market Tysabri, to treat multiple sclerosis. Elan represents the largest holding of MOFQX at about 9½ % of its entire portfolio. What had brought Elan to Ken’s attention was two of the virtual portfolio managers who use his website (www.marketocracy.com). In March 2005, these two virtual fund managers made Elan 25% of their test portfolios. They were betting their long term track records on this stock. (One had been running cash at 22% of his portfolio, a fairly conservative position.) In addition, 1,500 of 80,000 virtual investors at www.marketocracy.com had Elan in their portfolios. Elan’s clinical trials on their drug, Tysabri, for use with multiple sclerosis had been proving successful. However, because of a one in one thousand chance of a fatality, the FDA had ordered the drug withdrawn.
Ken decided to do more research on the drug. What separates Ken from other stock researchers is his use of the Internet. He e-mailed 1,500 people on the Internet to solicit their feedback. Approximately five hundred responded of whom, one hundred were MS patients and some had been participants in Tysabri’s clinical trials. All were waiting for their insurance companies to approve the drug for use despite the risk of fatality. Ken’s research approach took him in a different direction from other Wall Street analysts who normally talk with the neurologists. Being doctors, they reply that there isn’t information yet to give an opinion.
With this research behind him, Ken took his initial position two months after Elan first came to his attention. Since then the stock has doubled several times after the FDA ban was lifted and Ken is hopeful for the future.
Several things caught my attention during our meeting. First, the use of the Internet to bring together virtual investors to develop stock picks. Next, Ken’s use of the Internet to take advantage of his in depth understanding of clinical trials to conduct original patient research on Tysabri’s effectiveness. In the next several blogs, I will write about what Ken thinks about Elan’s future pipeline and the drug industry in general.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
Ken Kam manages the Marketocracy Masters 100 Fund (MOFQX) that has a Morningstar Five Star for three year returns. The fund’s objective is to seek capital appreciation in common stocks of domestic and foreign companies of any size, seeking to outperform the S&P 500 Composite Stock Price index. What brought Larry and I to meet with Ken was his position in Elan Corporation PLC. Elan has been conducting clinical trials on a drug, bapineuzumab, for Alzheimers patients, and they currently market Tysabri, to treat multiple sclerosis. Elan represents the largest holding of MOFQX at about 9½ % of its entire portfolio. What had brought Elan to Ken’s attention was two of the virtual portfolio managers who use his website (www.marketocracy.com). In March 2005, these two virtual fund managers made Elan 25% of their test portfolios. They were betting their long term track records on this stock. (One had been running cash at 22% of his portfolio, a fairly conservative position.) In addition, 1,500 of 80,000 virtual investors at www.marketocracy.com had Elan in their portfolios. Elan’s clinical trials on their drug, Tysabri, for use with multiple sclerosis had been proving successful. However, because of a one in one thousand chance of a fatality, the FDA had ordered the drug withdrawn.
Ken decided to do more research on the drug. What separates Ken from other stock researchers is his use of the Internet. He e-mailed 1,500 people on the Internet to solicit their feedback. Approximately five hundred responded of whom, one hundred were MS patients and some had been participants in Tysabri’s clinical trials. All were waiting for their insurance companies to approve the drug for use despite the risk of fatality. Ken’s research approach took him in a different direction from other Wall Street analysts who normally talk with the neurologists. Being doctors, they reply that there isn’t information yet to give an opinion.
With this research behind him, Ken took his initial position two months after Elan first came to his attention. Since then the stock has doubled several times after the FDA ban was lifted and Ken is hopeful for the future.
Several things caught my attention during our meeting. First, the use of the Internet to bring together virtual investors to develop stock picks. Next, Ken’s use of the Internet to take advantage of his in depth understanding of clinical trials to conduct original patient research on Tysabri’s effectiveness. In the next several blogs, I will write about what Ken thinks about Elan’s future pipeline and the drug industry in general.
As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.
Contributed by Guy de Lastin
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