| | | |   | Hello, everyone! Damian here. Don't forget to join STAT next Wednesday for a virtual discussion on how the latest discoveries in cancer biomarkers are reshaping the standard of care. Our own Matthew Herper will host a panel of oncologists from around the country. You can sign up here. | | | Can Vertex turn the tide for biotech? Amid all those red numbers in the world of biotech, Vertex Pharmaceuticals is among vanishingly few green shoots. And the company’s fourth-quarter earnings, to be disclosed after market close today, could bolster sentiment with a reminder that biotech companies do sometimes make actual money.
Wall Street’s consensus estimate is that Vertex will have made $2 billion in revenue in the fourth quarter and that management will forecast another $8.2 billion for 2022. If Vertex can exceed those numbers, biotech might swing positive for only the second day so far in 2022.
Conversely, an underperformance would resonate. Analysts have been almost universally confident that Vertex can deliver a strong 2022, both in terms of revenue from its franchise of cystic fibrosis drugs and in positive data from pipeline treatments. If those projections start to look unfounded, the sector’s sorry state might only worsen. | For pharma, ‘cheap’ doesn’t mean ‘on sale’ With biotech down double digits in the early days of 2022, investors are crossing their fingers for a bailout. Deals are likely afoot, the thinking goes, because major pharma companies have massive cash reserves, and biotech valuations are depressed. But the reality, according to drug company executives, is not so simple.
The latest articulation comes from Johnson & Johnson, which reported its 2021 earnings yesterday. Speaking to analysts, Chief Financial Officer Joseph Wolk pointed out that just because biotech companies are cheaper than they were last year, it’s “hard to say whether there's been a capitulation or a recognition that values have come down,” adding that “I don't think things are out there necessarily on sale.”
His comments echo the words of Bristol Myers Squibb CEO Giovanni Caforio, who told STAT this month “there typically is a lapse between the time the market resets and the time in which boards and management teams reset their expectations.” Said another way: Biotech will have to suffer a few more months of red tape before small companies adjust to their new valuations and come to the negotiating table. | The #1 cloud financial management for biotech and life sciences companies Sage Intacct cloud accounting is ideal for the needs of Biotech, Pharmaceutical, and Life Sciences companies at every stage of growth: from two scientists and a molecule to large, public companies. Get rid of spreadsheets, automate your processes, handle complex consolidations, and get real-time analytics, so you are always on top of your research. Sage Intacct is the only accounting solution endorsed by the AICPA. | Enter the activists One way to transform “cheap” into “on sale” in biotech is to galvanize a shareholder revolt against management teams unwilling to put a given company on the market. And for Amarin, a drugmaker that has lost 60% of its value over the past 12 months, that process might already be afoot.
This week, activist investor Sarissa Capital disclosed that it has amassed a roughly 6% stake in the company, which markets a fish oil-derived pill for patients with high triglycerides. Sarissa hasn’t said anything about its intentions, but the firm has a history of taking activist positions in underperforming companies and then agitating for change.
The news sent Amarin’s share price up about 9% yesterday. Analysts have urged the company to stop spending money in the U.S., where its sole product faces generic competition, and instead focus its attention overseas. Sarissa, depending on its intentions, might force management’s hand. | In 2022, best biotech trade is shorting SPACs If your entire investing strategy were simply to bet against companies that went public via SPAC mergers, you’d have made $1.2 billion in 2022.
That’s according to Bloomberg, which reports that freshly SPAC’d companies have lost about 30% so far this year, following a 2021 in which they fell roughly 50%. In biotech, where SPACs have been virtually innumerable since 2020, the losses have been dramatic. Ginkgo Bioworks is down more than 50%, while 23andMe has fallen 56%, and EQRx is trading at just $4.15 per share after de-SPAC’ing at $10 in mid-December.
Some of the losses are attributable to a broader downturn in biotech and tech, where blank-check mergers have been especially popular. But the problems might also be SPAC-specific. Among the purported virtues of skipping the standard IPO process is that companies can cut out the investment banks that underwrite traditional offerings. But that means SPAC stocks tend to miss out on sell-side analyst coverage, resulting in less attention and, perhaps, languishing stock prices. | More reads - A former FDA official on making the jump to health tech startups. STAT+
- Moderna rout continues as haven plays replace vaccine names. Bloomberg
- What risks? FDA scolds Lilly for misleading Instagram post about a best-selling diabetes drug. STAT+
| Thanks for reading! Until tomorrow,  | | | |
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