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Fearless Football and Biotech Picks For Fall 2012

Xconomy National — 

Football season starts this week, which means a few things to me. Summer vacation season is over, people’s batteries should be recharged, and it’s time to start fresh at work and school. This is also the time of year I look for lessons and storylines from America’s most popular spectator sport for ways to liven up and explain what’s going on in this wild and nutty business called biotech.

Since I had so much fun this time a year ago writing about fantasy football/biotech awards and predictions, I figure this could become an annual tradition. For those unfamiliar with fantasy football, it’s a simple game. The object is to outwit your friends by selecting real-life NFL quarterbacks, running backs, receivers, kickers, and team defenses who you think are poised to have statistically outstanding seasons—while you try to avoid the overhyped/overrated players.

It’s a bit like picking stocks, where you want a balanced portfolio of safe, predictable veterans mixed in with a few promising newcomers that might add a little pop to your portfolio. To be really good, you’ve got to work hard, be consistent, and have some vision to see patterns that others don’t, a tolerance for risk, and some luck.

With that, here are my fantasy football-inspired biotech picks for the fall of 2012, along with a quick recap of how my biotech picks did in the fall of 2011.

The Reggie Bush Don’t Believe the Hype Award. This dubious honor, named after the former star running back at USC who never panned out in the NFL, went to Brisbane, CA-based Intermune (NASDAQ: ITMN) last year. The company’s stock has indeed fallen from the mid-$20s to $7.37 at the most recent close. This year I expect two highflying obesity drugmakers to disappoint their owners—San Diego-based Arena Pharmaceuticals (NASDAQ: ARNA) and Mountain View, CA-based Vivus (NASDAQ: VVUS). I didn’t think these companies could win FDA approval for their drugs a year ago, and they both proved me wrong. But I still don’t think either of these drugs is the answer for millions of Americans struggling to achieve healthy body weight.

The Adrian Peterson Fading Superstar Award. For a few years, the Minnesota Vikings running back was the best combination of speed and power in the game. Then the workhorse blew out the anterior cruciate ligament in his left knee in December. Like Peterson, Summit, NJ-based Celgene (NASDAQ: CELG) was once a shining star of biotech, but it did the biotech equivalent of tearing its ACL back on June 21. The company withdrew its application to market lenalidomide (Revlimid) in the European Union as a maintenance therapy for newly diagnosed multiple myeloma patients. Celgene said it intends to try again to get that approval when it has more long-term follow-up data. The stock tumbled on that disclosure, and has since bounced back, but that’s still the kind of regulatory misstep that you don’t expect from a traditional Pro Bowl-caliber performer like Celgene.

Packers-Bears best rivalry. Last year I predicted that Vertex Pharmaceuticals and Merck would have the best rivalry in biotech, as they faced off with new protease inhibitor drugs for treating hepatitis C infections. This has actually been a pretty lopsided matchup, just like how my Green Bay Packers have gained the upper hand over the Bears for a few years now (take that, Bears fans!). Vertex (NASDAQ: VRTX) generated $328 million in sales of telaprevir (Incivek) in the most recent quarter ended June 30, while Merck (NYSE: MRK) lagged behind with $126 million in sales of boceprevir (Victrelis). But the bigger story, which I didn’t see coming last September, was how all-oral nucleotide polymerase inhibitor regimens in development would upstage the protease inhibitors so quickly. It’s still too early to say who will end up winning this battle for the long term, but odds are that the rivalry will continue to intensify with multiple players, especially Gilead Sciences (NASDAQ: GILD) and Vertex.

Tom Brady Sleeper Pick of the Year. Brady will forever provide inspiration to underdogs, as a lowly 6th-round draft pick who went on to become a three-time Super Bowl champion. Last year I picked Richmond, CA-based Sangamo Biosciences (NASDAQ: SGMO), and it promptly disappointed everyone when its diabetic neuropathy clinical trial failed. But Sangamo has some strong science with its zinc-finger binding proteins, and it has recovered from last fall’s stumble because of encouraging results against HIV. This year’s sleeper pick is Bothell, WA-based Sarepta Therapeutics (NASDAQ: SRPT). This little company has shown some provocative interim results from a trial of a RNA-based therapy for Duchenne Muscular Dystrophy, and has lately attracted more than a few speculative investors. Critical information on this drug’s safety and effectiveness will come in October when Sarepta analyzes 48-week follow-up data from a clinical trial of 12 boys with the disease.

Peyton Manning Comeback Player of the Year. The NFL might as well give the future Hall of Fame quarterback this award in advance, because he sat out all last season with a neck injury, and now looks poised to return to form. Last year’s honor went to South San Francisco-based Exelixis (NASDAQ: EXEL), which made a legit comeback in 2011. It looks like Cambridge, MA-based Infinity Pharmaceuticals (NASDAQ: INFI) will be this year’s comeback story. Infinity has seen its share of adversity, as its stomach cancer drug flunked a final-stage clinical trial three years ago, and its pancreatic cancer drug candidate failed in a mid-stage clinical trial in January. But Infinity, led by CEO Adelene Perkins and R&D chief Julian Adams, has regrouped. It has amended its partnership with Purdue Pharma and Mundipharma to get back the worldwide rights to its PI3 kinase inhibitor program, made some R&D spending cuts to preserve its cash, raised another $88.4 million, and renewed some enthusiasm on Wall Street. Still, the PI3 kinase field is crowded and competitive, and it’s unclear yet what advantage Infinity might have. But Adams is known for his work developing bortezomib (Velcade) which is now a billion-dollar blockbuster for Millennium: Takeda, so it would be foolish to count him and his team out.

The Baltimore Ravens Defensive Team of the Year. Last year I gave this award to the FDA division that reviews obesity and diabetes drugs, for setting up what looked like impossibly high hurdles for drugmakers in this field. The Ravens remain tough, but the FDA softened up a bit last year, and allowed Arena and Vivus to reach their goals of getting cleared for sale in the U.S. The defensive award this year goes to Thousand Oaks, CA-based Amgen (NASDAQ: AMGN), for its uncanny ability to defend its existing franchise drugs. Last November, it was awarded a new patent on its blockbuster autoimmune drug etanercept (Enbrel) that allows the company to keep direct competitors off the market until 2028. The old patent would have allowed competitors to flood the market as soon as 2013. This past week, the FDA approved a “biosimilar” drug from Teva Pharmaceuticals that competes with Amgen’s pegfilgrastim (Neupogen) to help cancer chemotherapy patients fight off infections. But Amgen has a deal with Teva that keeps the biosimilar off the market until November 2013—plenty of time for Amgen to get even more patients taking a patent-protected longer-lasting version of the drug called Neulasta. And even though the EPO franchise is limping along on bad knees, those products still generated more than $2 billion in worldwide sales in the first half of 2012.

The Tony Romo Bust of the Year. The Dallas Cowboys’ quarterback is overrated, and tends to play his worst when it matters most. Last season, I picked Seattle-based Dendreon (NASDAQ: DNDN) as the bust of the year and it takes home the prize once again. The company had a golden window of opportunity to build a great cancer drug company in 18-month period following FDA approval of its trailblazing immunotherapy for prostate cancer. But it fumbled. Competitors have exploited that opening, and while Dendreon has overhauled its management, it could be too little too late. Dendreon’s market value now stands at about $680 million, a long way from the days of $5 billion-plus valuations it enjoyed in 2010 and 2011. Tough new competitors like Johnson & Johnson’s abiraterone (Zytiga) and Medivation’s enzalutadmide (Xtandi) are on the march. Dendreon’s dreams of going to the Super Bowl of drug marketing, just like Romo’s dreams of winning the big game, appear to have little chance of materializing.

Wes Welker Overachiever of the Year. This honor went to Berkeley, CA-based Plexxikon last year for its breakout performance with a new melanoma drug. This year, it goes to South San Francisco-based Onyx Pharmaceuticals (NASDAQ: ONXX). Onyx has long had ambitions of going from a one-drug company to a two-drug company—the traditionally necessary step for long-lasting success in biotech. Onyx surprised many analysts by reaching that goal faster than expected, winning FDA approval of its second drug, carfilzomib (Kyprolis) for multiple myeloma. But an even bigger surprise came when it settled a long-running dispute with its partner, Bayer, and agreed to take a $160 million payment and a 20 percent royalty on future sales of another cancer drug, regorafenib. Days after that settlement, Bayer reported that the drug extended lives of colon cancer patients (albeit modestly), and it later showed strong results for gastrointestinal stromal tumors. It all means that Onyx is likely to leapfrog from a one-drug company into a three-drug company in short order. Like Welker, who finds a way to get open downfield when others can’t, Onyx found a path to success that few others in biotech have ever been able to find.

Russell Wilson Rookie of the Year. As a lifelong Wisconsin Badger fan, I concluded last year that Russell Wilson was the best quarterback in school history and could be the best quarterback to come from the Big Ten since Drew Brees. When the Seahawks stole him in the third round of this year’s NFL draft, I told a sportswriter friend that Wilson has amazing poise under pressure, football IQ, leadership ability, a great arm, and athletic ability. The only thing he lacks is height, and I don’t believe that’s going to stop him from becoming a star. I see similar qualities in San Francisco-based Medivation (NASDAQ: MDVN). Like Wilson, this company is frequently overlooked in favor of companies with more flashy stories. But Medivation just quietly goes about its business, nailed its pivotal clinical trial, and won FDA approval for its first cancer drug about three months ahead of schedule. Given the faster-than-expected approval—which is almost unheard-of—you might expect some operational stumbling out of the gate. After all, sales reps need to be trained, manufacturing inventory needs to be built up, doctors need to be informed. But listening to Medivation CEO David Hung on a conference call with investors, I get the feel that while this guy lacks cover-boy charisma, he’s got his act together, and a winning team behind him.

Aaron Rodgers Most Valuable Player. The quarterback for the Green Bay Packers, my favorite team, had an amazing MVP season last year with 45 touchdown passes and just six interceptions. Last year, this honor went to Vertex Pharmaceuticals for its successful introduction of its hepatitis C drug, and for gearing up for the successful rollout of its truly groundbreaking cystic fibrosis drug. This year’s honor goes to Tarrytown, NY-based Regeneron Pharmaceuticals (NASDAQ: REGN). The company has had a breakout year, starting with its stock at about $56 a share, and closing Friday at $148.05. This antibody drug developer has grabbed a huge share of the market for macular degeneration drugs almost overnight with afilbercept (Eylea). Along with its partner, Sanofi, Regeneron has impressed scientists and physicians with its anti-PCSK9 antibody for lowering cholesterol. And it won an FDA approval this year for ziv-aflibercept (Zaltrap) as a cancer treatment. It threw one interception in late July when the FDA turned down its application for a gout drug, but with this many wins in a row, fans of Regeneron have nothing to complain about.

Tom Coughlin Coach of the Year. The New York Giants were not a popular pick to win the Super Bowl last season, but Coughlin coaxed his team played its best when it mattered most. Last year this went to Biogen Idec CEO George Scangos as he helped the venerable biotech company get its mojo back. This year, the honor goes to Illumina CEO Jay Flatley. Illumina (NASDAQ: ILMN) faced a mortal threat earlier this year when Roche made a hostile takeover bid for the market-leading maker of genome sequencing instruments. Flatley led the effort to reject the low-ball bid. He successfully argued to shareholders that Illumina could create more value as a focused independent company than it could as a division of a global healthcare colossus with scientific instruments, diagnostics, and drugs all competing for resources under one roof. Illumina hasn’t won the Super Bowl yet, and it has a problem with stagnant revenues, but it also shows huge potential as we head into the era of the $1,000 genome. Flatley’s resolve in facing down Roche is the kind of inspired move that I suspect will lead the company to much greater things.

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  • lebronz

    Guess that means you and your buddy Mr. Loncar are definitely buying DNDN shares now yes..? Cool! I’m in too!
    Good luck sir!