Are biotech valuations sustainable?

The biotech sector is currently in the most successful period in its history based on valuation metrics, amount of money raised and number of IPOs. The perception around the current situation ranges from very bearish (it’s a bubble) to very bullish (there’s enough innovation to fuel future growth).

Before providing my take (which is very subjective and is as good as anybody else’s for that matter), there are two things most investors agree on:

1 – The biopharma industry enjoyed a massive wave of innovation in the form of revolutionary drugs that truly make a difference for patients. These include PD-1 antibodies, curative HCV drugs and PCSK9 antibodies just to name a few. Fundamentally, our understanding around diseases and our abilities to modulate them has never been better, which should dramatically increase success rates in the long run.

2 – The biotech sector has had a huge run in the past ~3 years. Since the beginning of 2012, the primary biotech indices on NASDAQ and NYSE are up 250%-260%. This means that in 3.5 years, the biotech industry (which was already quite established at the time) saw its valuation more than triple.  Continue reading

Esperion and Aerie – Countdown to M&A

At first glance Esperion (ESPR) and Aerie (AERI) have very little in common. Although each company is focused on a clinically validated drug that employs a novel mode of action, the two products are very different: Esperion’s ETC-1002 is an oral cholesterol-lowering drug while Aerie is developing eye drops for glaucoma.

Yet from a market position perspective their situation is strikingly similar. To begin with, both companies address traditional indications characterized by heavily genericized markets and few innovative programs. Both indications require a huge global marketing infrastructure to reach meaningful penetration. In Esperion’s case, even getting regulatory approval necessitates initiating clinical trials in tens of thousands of patients. In other words, both companies must secure a partner or an acquirer by year end in order to extract maximum value from their drugs. Continue reading

Biotech portfolio update – 2014 summary and 2015 preview

Below is my traditional end of the year summary and a recap of catalysts for 2015. As always, I did my best to cover the most important events, let me know if I missed anything… I would like to use this opportunity and wish the readers of this blog a happy and prosperous new year.

Ohad Continue reading