Director Of Equity Research At RBC Capital Markets Covers Phase III Data For Multiple New Drugs; Find Out The Stocks That Investors Should Look At
December 17, 2010 - The Wall Street Transcript has just published 2010 Health Care Review From The Wall Street Transcript offering a timely review of the Health Care Plans sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Michael Yee brings more than nine years of sell-side equity research experience to RBC Capital Markets' biotechnology research platform. He won the 2010 Institutional Investor biotechnology "Best Up-and-Comer" analyst award. He joined RBC Capital Markets in 2005, after working at WR Hambrecht + Co, where he also covered biotechnology. Mr. Yee has previously worked at Deutsche Bank Securities and Thomas Weisel Partners LLC, covering life science tools companies from 2001 to 2004.
TWST: You are the Director of Equity Research for RBC. What is your coverage?
Mr. Yee: I cover small-, mid- and large-cap therapeutic biotechnology, which are the drug companies. I cover Acorda Therapeutics (ACOR), Auxilium (AUXL), Amgen (AMGN), Cypress (CYPB), Dendreon (DNDN), Elan (ELN), Genzyme (GENZ), Human Genome Sciences (HGSI), Myriad Genetics (MYGN), Regeneron (REGN), United Therapeutics (UTHR) and XenoPort (XNPT). For the most part, those are all therapeutic biotechs with some sort of science or technology platform developing drugs for unmet medical needs.
TWST: What are the major themes in the sector?
Mr. Yee: I'll speak to the broad biotech themes. I think there are three things that are weighing on people's minds. Number one, M And A is something that is always going on in the sector and that is certainly not going to stop anytime soon, and we have seen certain precedent transactions.
Number two, I think that what we saw this year was a testament to what biotech is all about. And what I mean by that is we will have over the 12 to 18 months a wave of new blockbuster drugs that could really change the paradigm or standard of care for a number of diseases, and I think that's what the heart of biotech is really all about. Three examples that I'd point out to you that constitute as real game changing therapies, either from Phase III data or because they were proved, would be Dendreon's Provenge for prostate cancer, which is the first therapeutic cancer vaccine approved for prostate cancer this summer; Phase III data from Human Genome's Benlysta, which would be - if approved by the end of this year - the first lupus treatment in 50 years; and Telaprevir from Vertex (VRTX), which will be a game-changing drug for hepatitis C that not only significantly improves chances of a cure but also significantly shortens the duration of treatment. So those are three multibillion-dollar blockbuster treatments that all happened this year, which I think goes to the heart of what biotech is all about. And although the market as a whole and the biotech sector sort of went through some ups and downs this year, I think the root of it is that novel discovery of blockbuster drugs are still going on right here in biotech.
The third theme I would tell you is for the back end of that, which is, while the first two are great, the third theme that I think people have in the back of their minds for biotech and health care is certainly the consequence of health care reform, which is ongoing. And because of this uncertainty, we don't know how the industry may look over the next one, three and five years. So I think that is weighing on the back of people's minds as we think about valuations.
TWST: Should we expect to see more M And A now than in the past?
Mr. Yee: This is no surprise, and I think that the pharma industry is facing well-known, blockbuster patent cliffs in the near term, and I would point to Pfizer's (PFE) Lipitor, Sanofi's (SNY) Plavix, Forest's (FRX) Lexapro and Lilly's (LLY) Zyprexa all going generic over the next three years as areas where big pharma has to replace their revenue stream. The only way to do that is to either have new drugs in your pipeline or go out and buy something with the war chest of cash and cheap capital that is out there. Everyone has their own proprietary pipelines, but that's risky, so you have to support it with more deals. I think if you look over the next three years, multibillions of dollars' worth of generics are going to be coming on and, as a consequence, that's lost revenue that pharma has to replace. And one way to do that is through novel discoveries. But because it's risky, you've got to go and buy stuff too, and so that's positive for the biotech sector.
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