Some Tongue-in-Cheek Fantasy Baseball (and Biotech) Picks
Baseball season starts this week, which means it’s time for me to spend too much time and energy on fantasy baseball. This is a strange little hobby in which millions of people use a combination of real-time data, news, and intuition to pick an imaginary team of baseball players that they hope will beat the tar out of the imaginary teams picked by their friends.
You need talent, work ethic, and luck in baseball (both real and fantasy). The game is full of all kinds of fascinating human characters, like overpriced free agents, eager rookies, cheaters, superstars, crafty veterans, and all kinds of bad and good managers. Possibly because I am a sucker for baseball/life analogies, I couldn’t resist applying some tongue-in-cheek baseball-inspired awards, predictions, and observations to the biotech beat.
The Hanley Ramirez Comeback Player of the Year Award: Vivus (NASDAQ: VVUS). The shortstop-turned-third baseman for the Miami Marlins is formerly one of the game’s elite players, and reports are that he’s been hammering the ball again in spring training after an injury-plagued 2011. Vivus, the Mountain View, CA-based drug developer, is also coming off a bad year, when few people thought it had much of a chance to win FDA approval of its obesity drug phentermine and topiramate (Qnexa). But the company recently won a surprisingly lopsided 20-2 recommendation for its drug from an FDA advisory committee, and most analysts expect it will get the FDA’s green light by the agency’s April 17 deadline. Even if Vivus fails to live up to some of the lofty multibillion-dollar sales forecasts out there, it’s still an impressive turnaround. I personally think its sales potential is being overhyped at the moment—Vivus’s drug offered modest weight-loss benefit in clinical trials—but since obesity represents such a vast market opportunity, I wouldn’t be surprised to see this company acquired this year for a big premium above its $1.9 billion valuation.
The Brett Lawrie Don’t-Believe-The-Hype Award: Social media in healthcare. Just like the 22-year-old third baseman for the Toronto Blue Jays, social media in healthcare is a youngster with seemingly unlimited potential. But Lawrie hasn’t proven he can perform over the course of a full major league season, has developed a groin injury this spring, and yet he’s getting drafted in fantasy leagues ahead of proven All-Stars. While social media holds a lot of potential for biotech and pharma marketers—there are a lot of highly engaged patients there to communicate with—the FDA hasn’t shown a willingness to lay down marketing rules of the road like with other communications platforms such as print, online media, and television. I’m a fan of what social networking can do in a lot of ways, and there are some promising things already happening in this space (PatientsLikeMe), but the burden is on its boosters to show that patients will truly engage in large numbers. My belief is that as more people become concerned about privacy on social media platforms, the first thing they will clam up about is their health status. Do you really want to share your experience on the latest drug for enlarged prostate, or the new hemorrhoid cream?
The Yu Darvish Wild Card of the Year: Biogen Idec’s dexpramipexole. The right-handed ace pitcher from Japan was signed for this year by the Texas Rangers, and all projections are that he’s ready to mow down major league hitters. But you just never know until you play the games. I’m similarly unsure what to make of Biogen’s compound for amyotrophic lateral sclerosis (ALS), the neurodegenerative disease that famously caused the death of Yankees legend Lou Gehrig. The underlying biology of this disease is poorly understood, and no one has ever come up with a good drug for ALS. But Biogen, the leading multiple sclerosis drugmaker, has placed a big bet on this other neurodegenerative disease with “Dex” in a Phase III clinical trial. Analyst Michael Yee of RBC Capital Markets says that based on interviews with leading physicians, he thinks this drug has about a 35 percent chance of success at reaching its goal of helping improve patients’ functional ability and/or helping them live longer. If Biogen can hit its endpoint, this would be huge news for ALS patients, and a $1 billion market opportunity, Yee says.
The Clayton Kershaw Keeper League Pick: Vertex Pharmaceuticals’ ivacaftor (Kalydeco) for cystic fibrosis. In a fantasy baseball “keeper league” you get to retain a few players from one year to the next, so there’s incentive to bid for young players with potential to have long career arcs with sustained greatness. Clayton Kershaw, the 24-year-old Dodger lefty, looks to have a long, great career in front of him after winning the Cy Young Award last year as the best pitcher in the National League. Vertex’s ivacaftor (Kalydeco) is one of those rare drugs that is truly life-altering for patients with cystic fibrosis. It’s the first drug that affects the underlying protein abnormality, rather than just treats the symptoms. It works extremely well, and costs a fortune at $294,000 a year. Vertex will make a lot of money from this drug for many years to come, even though it’s only for less than 5 percent of cystic fibrosis patients. And this could be just the beginning of this story, as Kalydeco is designed to be combined with another Vertex drug, VX-809, which could become a combo that helps many more CF patients.
The Howie Kendrick Sleeper Pick of the Year: Affymax (NASDAQ: AFFY). If you really want to win in fantasy baseball, you’ve got to find “sleepers”—players who are undervalued and can be picked up late after superstars are all taken. Howie Kendrick, the second baseman of the LA Angels, has underachieved much of his career, but he can hit, and should see much better pitches now that he’ll be hitting in front of superstar free agent Albert Pujols. Like Kendrick, Affymax hasn’t lived up to its full potential yet, and has disappointed owners along the way. But this year, Affymax is poised to step up. The Palo Alto, CA-based drug developer (NASDAQ: AFFY) won an endorsement from an FDA advisory committee in December for its anemia treatment, which should be the first product to challenge Amgen’s 23-year-old monopoly in the U.S. for kidney dialysis patients. Just like having Pujols in the lineup provides a lift for Kendrick, Affymax will be buoyed this year because it is bringing forward a lower-priced alternative to Amgen’s drug, just at the time insurers are clamoring for more cost-effective treatments. The FDA’s deadline to complete its review of the Affymax drug is tomorrow.
The Barry Zito “Can We Renegotiate That Contract Now?” award: Gilead Sciences (NASDAQ: GILD). Zito, the left-handed pitcher, signed a seven-year, $126 million contract with the San Francisco Giants before the 2007 season. He’s been mediocre at his best, and downright stinky at his worst. Gilead paid the shocking sum of $11 billion last November to acquire Princeton, NJ-based Pharmasset and its portfolio of hepatitis C drugs even though none of its programs had completed Phase III clinical trials. Wall Street mostly cheered at the time, but then turned skeptical when Gilead released data that essentially said Pharmasset’s lead drug wouldn’t be a solo magic bullet for every patient with hepatitis C. This drug, GS-7977, may still be a market leader, but you can bet that just like the Giants wish they hadn’t guaranteed Zito so much money, Gilead probably wishes it had structured “earn-out” provisions into its deal, in which Pharmasset had gotten some money up front, and the rest of the $11 billion when it truly delivered.
The George Steinbrenner Impatience Award: This one should go to most everybody in the biotech venture capital community. Steinbrenner, the famously demanding owner of the New York Yankees who died a couple of years ago, was known for firing managers and trading players after getting irritated over just a few bad games in a 162-game season. Venture capitalists are known for taking the long view, betting on companies that are supposed to grow and pay off over the life of a fund, which is typically seven to 10 years. But as we’re now almost four years removed from the financial crisis, and biotech VCs have struggled to generate returns that enable them to raise new funds, there are a lot of antsy biotech VCs who want to make money THIS YEAR, and they can’t afford to wait. Last week, I reported on how Kirkland, WA-based OVP Venture Partners sold much of its stake in Complete Genomics (NASDAQ: GNOM) for peanuts. I think this is just one sign of the times, and I suspect we’ll see a few more companies get pushed through the IPO process, and many more acquisitions (good and bad) will get done as VCs run out of time and patience. Whether the itchy trigger fingers will help them turn around their portfolios, or just mess things up, will be one of the stories to watch this year.