Biotech and Fantasy Football Picks for Fall 2013
There’s an old saying about surgeons. They are “sometimes wrong; never in doubt.” If only the same could be said for biotech writers.
I’ve been sometimes right, sometimes wrong, and sometimes embarrassingly wrong the past couple years I’ve made predictions about biotech and fantasy football. Last year, I doubted both Adrian Peterson, the Minnesota Vikings running back, and Celgene (NASDAQ: CELG).
Right after banging those predictions out on my keyboard, Peterson, coming off knee surgery, produced one of the greatest full-season performances of any running back in NFL history. Celgene recovered from a regulatory stumble, and its stock doubled.
When you make calls like that, let’s just say doubt tends to creep into the picture. All you can do is own up to the mistake and try to do better next time. So here’s my third annual series of forward-looking statements about fantasy football and biotech.
The Reggie Bush Don’t Believe the Hype Award. It’s a little harsh to name this award after the former Heisman Trophy winner, who was a disaster in New Orleans, but grew to become a mediocre running back the past two years with Miami. Last year, this dubious distinction went to San Diego-based Arena Pharmaceuticals (NASDAQ: ARNA) and Mountain View, CA-based Vivus (NASDAQ: VVUS). As predicted, both obesity drugmakers have been overhyped duds, like Bush in New Orleans.
This year, the award goes to Wilmington, DE-based Incyte (NASDAQ: INCY). Incyte recently released encouraging results from a mid-stage clinical trial of patients with pancreatic cancer. The drug didn’t work for everybody, but did appear to help extend survival times for half of the patients—ones who were considered most likely to respond to its JAK1/JAK2 inhibitor. That’s good news, but investors got carried away. Incyte shares gained 32 percent the day of the announcement, increasing the company valuation by $2 billion. That’s awfully rich for a drug that still has to prove it can extend lives in a Phase III clinical trial against one of the toughest-to-treat cancers on the planet. Incyte also will have to compete with Celgene’s paclitaxel protein-bound particles (Abraxane), which has increased survival time for pancreatic cancer patients in a Phase III study, and is currently under review by the FDA.
The Charles Woodson Fading Superstar. This dishonor was named last year for Peterson, the Vikings running back. Since Peterson proved all his doubters wrong last year, it only seems right to stop calling him a fading superstar. This year, the dishonor goes to the great defensive back who helped lead my Green Bay Packers to the 2011 Super Bowl title (even when he broke his collarbone). Sadly, Woodson has lost a step, and now plays for the pathetic Oakland Raiders.
Last year, this award went to Celgene (NASDAQ: CELG), after it goofed up a regulatory submission in Europe. That turned out to be a momentary setback, as Celgene continued to execute well with its marketed products, nailed the pancreatic cancer study mentioned above, has been on fire in business development, and benefitted from an overall surge in biotech valuations. This year’s fading superstar is the Millennium Pharmaceuticals unit of Takeda. Five years have passed since Takeda bought Millennium, and it hasn’t yet introduced a follow-up to its hit bortezomib (Velcade) for multiple myeloma. Former CEO Deborah Dunsire is gone. The competition in this field keeps getting tougher, especially now that Amgen has acquired a rival myeloma drug from Onyx Pharmaceuticals. Millennium needs to do something, and soon, if it wants to remain a player.
49ers-Seahawks best rivalry. This used to be known as the Packers-Bears best rivalry, but the rivalry has lost some juice as the Packers have had the upper hand for so long. The Seattle Seahawks and San Francisco 49ers now have the league’s best rivalry, as they are both Super Bowl contenders, both play hard-hitting defense, and both have exciting young quarterbacks. To top it off, the coaches don’t like each other.
There are plenty of interesting biotech battles, but I’m intrigued by the one shaping up between Cambridge, MA-based Sarepta Therapeutics (NASDAQ: SRPT) and Netherlands-based Prosensa. Both of these companies have interesting RNA-based therapies in development for Duchenne Muscular Dystrophy, a disease with no decent treatments today that cripples young boys. These companies are competing hard to win the hearts and minds of patients, grab the most investment dollars, and scoop up scientific talent. This drive will push both teams to play their best. It’s a great developing story. Patients will be big winners.
Tom Brady Sleeper Pick of the Year. Tom Brady of the New England Patriots was taken in the sixth round of the NFL draft. Sometimes the guy who nobody wants really does go on to achieve greatness. Last year in this space, I picked Sarepta Therapeutics as the biotech sleeper to watch. The company had released intriguing results from a study of Duchenne Muscular Dystrophy patients after 36 weeks of follow-up, and its stock was at $14.92. Its body of evidence has gotten stronger since then, and the company has broken out in the past year, closing Friday at $34.13.
The current boomlet in biotech IPOs has created a surge in interest in obscure private biotech companies. The one to watch in the pipeline now is Cambridge, MA-based Foundation Medicine. This company uses the tools of fast/cheap gene sequencing to find the particular genetic abnormalities driving an individual patient’s cancer. Knowing this information, doctors can prescribe a targeted drug they might never have thought to give before. This push for “clinical genomics” or “genomic medicine” has been building for a while, and Foundation is poised to seize the opportunity. Its challenge will be to persuade insurers to pay for a test that has a list price of $5,800.
The JaMarcus Russell Bust of the Year. It’s a bit unfair to have previously named this award after Tony Romo, because the Dallas Cowboys quarterback had been a solid pro for many years, even if he tends to choke in big games. JaMarcus Russell, the former No. 1 overall pick who flopped as a quarterback for the Oakland Raiders, deserves to be in the conversation with the biggest NFL busts ever, along with Ryan Leaf and Tony Mandarich. Last year’s bust was Dendreon, which I think fairly belongs in any conversation with chuckleheads like Leaf, Mandarich, and Russell.
This year the dubious distinction goes to Cambridge, MA-based Aveo Oncology (NASDAQ: AVEO). This company once appeared to have great promise, as it hit the primary endpoint of a pivotal clinical trial for kidney cancer patients with a product that has a clean profile on safety and convenience. But the company used a flawed clinical trial design that suggested it was a dud on overall survival, and an FDA advisory panel hammered Aveo for this misstep. A predictable series of events ensued, including a partner desertion, executive departures, and mass layoffs. It’s hard to see how Aveo can ever get back on its feet.
The Russell Wilson Rookie of the Year. This was my best football pick last year, hands down. Before Wilson started his first NFL game, I wrote he was destined to become a star. He went on to lead his team to the playoffs, and tie Peyton Manning’s rookie record with 26 touchdown passes. The biotech rookie of the year went to San Francisco-based Medivation (NASDAQ: MDVN), and it didn’t disappoint, either.
There are quite a few promising rookies to choose from in the new biotech class of 2013. I’m going to go with Cambridge, MA-based Epizyme (NASDAQ: EPZM). This is still an early and risky call, and Epizyme will surely endure some hard knocks after an overheated IPO debut. But it has a strong scientific underpinning, good management, solid finances, and a clear development strategy in treating rare forms of cancer.
The Aaron Rodgers MVP Award. The Green Bay Packers quarterback is at the top of his game, and even though I’m biased in his favor, most of the stats say he’s playing quarterback as well as anybody has ever played the position. Last year’s MVP was Tarrytown, NY-based Regeneron Pharmaceuticals (NASDAQ: REGN), which continues to roll. This year, the most valuable player award in biotech is going to the partners at Boston-based Third Rock Ventures.
Third Rock has started to reap the rewards of its early-stage investing strategy, six years after its founding. It raised a new $516 million venture fund to keep starting and aggressively building innovative life sciences companies, at a time when few other biotech VC firms are willing or able to play that game. Early in the year, Third Rock secured a solid return on the sale of Lotus Tissue Repair. This summer, it saw a couple portfolio companies go public—Bluebird Bio (NASDAQ: BLUE) and Agios Pharmaceuticals (NASDAQ: AGIO). Now Foundation Medicine is in the IPO queue for the fall. Surely the firm will have some failures in its portfolio because that’s the nature of early-stage investing. It still needs to prove that its West Coast startups can deliver like those on the East Coast. But Third Rock looks like it’s in position to throw a lot more touchdowns, with not too many interceptions.
Jim Harbaugh Coach of the Year. Harbaugh strikes a lot of people as obnoxious, but it’s hard to argue that he is one heck of a coach. He was a winner at Stanford University, and then turned around a 49ers franchise that bumbled for years before he got there. Harbaugh stuck his neck out last year when he benched a steady veteran quarterback in Alex Smith, in favor of an unheralded young player in Colin Kaepernick. The young guy took the team to the Super Bowl.
John Martin of Gilead Sciences takes home the hardware this year. Actually, he should probably share it with his whole management team, which includes long-tenured operators in John Milligan, Norbert Bischofberger, and Gregg Alton. Martin and Co. deserve credit for sticking their necks out to buy Pharmasset, even though it cost a breathtaking $11 billion. This was a bold strategic move to extend the company’s HIV leadership into another big opportunity in hepatitis C. What fewer people have noticed is that Gilead is finally becoming more than an antiviral company. It has also made a series of shrewd acquisitions to become a serious cancer drugmaker.