Wednesday, March 12, 2014

Three Favorites from a Biotech Expert

Biotechnology analyst Jay Silverman shares his outlook for the sector and the growing trend for large drug firms to acquire successful biotech firms. The editor of The Medical Technology Stock Letter also highlights a trio of current favorites in the sector.

Steve Halpern: Joining us today is Jay Silverman, biotechnology sector expert and co-editor of The Medical Technology Stock Letter. How are you doing today, Jay?

Jay Silverman: Very well, Steve, thank you.

Steve Halpern: We've had a strong year-to-date performance for the biotech sector, but many investors got scared-out by a sharp pullback at the end of February and going into early March. Should this volatility be expected and what do you see looking ahead?

Jay Silverman: Excellent, we've had a very healthy two step forward and one step back pattern in the Biotech stocks, so, while the end of February pullback was somewhat disappointing and somewhat sharp, in the scheme of things, it actually is following the same healthy pattern as we've seen in the last several months, so again, the fundamentals remain very strong. We've had, again, a ton of good news and we are just in the midst of a typical volatile biotech market.

Steve Halpern: Now, there were some important investor conferences occurring and, as you've noted in the past, these events can have a big impact on the sector, could you expand on that?

Jay Silverman: Well, there are a couple of major investor conferences during the course of the year. Of course, you are familiar with the JP Morgan conference in San Francisco in early January.

The next bigger investor conference is Cowen Conference up in Boston, which is finishing up as we speak, and Cowen also attracts every major big drug, and pharmaceutical, and biotech company, but also brings a lot of experts to the table, that's their differentiating factor versus JP Morgan. So, again, it's well attended up in Boston.

All the companies get to present and there's a wonderful turnout, again, this one more east coast-based, and JP Morgan is based in San Francisco.

Steve Halpern: Now is it typical that companies will wait until these conferences to make announcements?

Jay Silverman: If they have announcements that they can control, yes, they would like to do that. Again, the time difference between JP Morgan and Cowen is not very long. It's only about—it's less than two months—so sometimes, a lot of people like to open the year at JP Morgan with a major announcement.

This one, again, is, sort of, how the year has started off for the companies who are selling drugs, and registering sales and earnings, and then updates on the clinical developments and, as I mentioned, Cowen has a number of scientific experts so there's a lot of focus on new classes and what are the key clinical trials that are going on right now.

Steve Halpern: Now one thing that people have been talking about in this sector are acquisitions, as the global drug companies look to expand their pipelines, could you share your thoughts on this.

Jay Silverman: Sure, well, many of the big pharmaceutical companies, even today, are a combination of multiple smaller companies, as in the past. There are too many names to talk about, but even Pfizer (PFE) has made an untold number of acquisitions to get to the size they are.

But, more importantly, is that the innovation has really come from the small companies, so when you get the next big blockbuster drug, it's usually coming from the small company that is either innovative, has some of the smartest people out there who are willing to take risks in developing new compounds.

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