Mr. Kaplan: I cover therapeutic companies in the small- and mid-cap range, with a focus on cardiovascular companies, women's health, and a mix of drug delivery and emerging specialty pharma companies as well.
TWST: Define "therapeutics." Where does that fall?
Mr. Kaplan: When I say "therapeutics," I cut out device companies or medtech companies and also nutraceutical companies. I focus on companies that are working on drugs which have to go through the FDA regulatory process, rather than companies that are looking at the next hip replacement or new catheter, or a company that's developing a new vitamin D supplement or something like that.
TWST: What are your thoughts on the FDA process?
Mr. Kaplan: When I take a look at companies, drug development companies, there are number of risks that each company has to manage. Obviously, there is clinical risk, there is financing risk, there is marketing risk, market risk in terms of the overall competitive environment, regulatory risk and there is manufacturing risk as well. Regulatory risk is something that I think you can manage. But there is always the uncertainty in terms of what the final outcome will be at the FDA, and this especially applies to drugs that are, let's call it, not life saving, but are more lifestyle drugs, for example. There is greater uncertainty there just because the FDA is dealing with a risk/benefit analysis, and they are looking at the price you pay for taking a drug for a specific indication. Unfortunately, over the last several years, the overall public perception has become that there should be zero risk whenever you are taking a pharmaceutical, which unfortunately is not realistic. And you can see that happening with some of the drugs which were taken off the market in the last several years. So there is that unrealistic expectation, and now the FDA is caught in a bind where they have to adopt an even more conservative position. Consequently, frequently it's difficult to predict what the ultimate outcome is going to be from the regulatory process. However, I believe you can, as you analyze the clinical data and speak to experts in specific indications, understand what's needed, where there is an unmet need, a clear unmet need, and to a certain extent start to be able to predict with a relative high level of probability what the outcome is going to be at FDA. To the extent that anyone can say that there is 100% probability that something is going to be approved, it's unrealistic because you never know what you don't know. Specifically, as an investor you generally are not privy to all of the information a sponsor or company has, or all the information the FDA has when they are analyzing a drug. Some data, whether it is the FDA's inspection of a manufacturing facility, for example, or the complete data set on the drug's adverse event profile, can be deemed proprietary information that's not shared with the public. In other words, we are at a disadvantage because we are trying to predict the FDA's risk-benefit analysis with an incomplete data set.
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