The rain has slowed down in San Francisco and biotech stocks have recovered somewhat from earlier in the week, but as day three of the J.P. Morgan Healthcare Conference wraps up, it's become clear that this year isn't going to shake up the industry.
A handful of small deals trickled out at the beginning of the week, but M&A news has largely petered out as the conference begins to come to a close.
Many execs around San Francisco have been heard saying this week that they no longer register for the bellwether conference and simply come to the city for outside meetings — J.P. Morgan has in large part become about the ecosystem surrounding the show.
Heard 'round the halls
Cantor Fitzgerald analyst Mara Goldstein expressed a somewhat negative view about the immuno-oncology space to a largely empty room at the Biotech Showcase during a panel discussion.
"Immuno-oncology has really been a continuum, starting well back with the early days with the idea of oncology vaccine and that is an area that has really struggled for a variety of reasons. But I think we are finally at a point where the biological understanding is catching up with the clinical trial science and that really is a huge opportunity," she said, noting that there are currently more than 1,500 clinical trials ongoing in the space.
"In our due diligence when we talk to KOLs and physicians, the one thing that we routinely hear from them is that they believe that there has been a lot of careless behavior when it comes to clinical trials in IO because of the idea of taking things and throwing it against the wall and seeing if it will stick," Goldstein added.
The strategy for many companies in the space has been to conduct basket studies to test their compounds in a variety of tumor types and see which ones show any response, allowing the company to bring the drug forward in only those potentially promising indications. Companies have also been inking a variety of discovery and research deals that combine various compounds in the clinic from two companies to see if they have any potential together.
"In immuno-oncology, to some extent, the big breakthrough has already happened with checkpoint inhibitors," she added.
Acorda plans, God laughs
Saying 2017 was a challenging year for Acorda Therapeutics might be putting it mildly, but CEO Ron Cohen isn't letting the optimism fade.
The company is facing loss of exclusivity for its key product (which makes up nearly 95% of its revenues) and is banking on an approval that is far from a sure thing.
In a presentation at the conference, he told investors that the company is actively planning for commercialization of Inbrija, its levodopa inhalation powder for off episodes of patients with Parkinson's disease.
The company received a nasty surprise in August when the Food and Drug Administration issued a refusal-to-file letter for its Inbrija application (which it resubmitted back in December).
Cohen told investors that the refusal-to-file was somewhat a blessing in disguise, allowing the company to get a better idea of the FDA thinking on the product.
"In the event that we should lose exclusivity [on Ampyra], it would be an almost seamless transition. It's exactly right-sized for the launch of Inbrija," said Cohen about the current Acorda salesforce. "If there is a lag of a few months between the loss of exclusivity and the launch of Inbrija, they will be out there doing our very best to maintain as robust a tail on Ampyra sales. All of that cash flow is going to be important to us going down and they are going to defend the erosion curve," he added.
In the event that Acorda wins the appeal of the patent decision for Ampyra, it will have the coveted problem of having to hire another 30-35 sales reps in order to cover the coverage gaps between the two products.
"The turnaround opportunity of a lifetime"
That's what Joseph Papa, CEO of beleaguered Valeant Pharmaceuticals Inc., pitched Wednesday about his company's prospects in 2018 and beyond.
After coming in to lead Valeant two years ago, the ex-Perrigo chief pitched the 2017-2018 as the company's "turnaround" years — aimed at improving the balance sheet and focusing resources on key specialty markets.
Some progress has been made. Since 2016, Valeant has reduced its total debt — inflated by an abandoned strategy of serial acquisitions — by $6.5 billion and extended debt maturities to give itself some breathing room.
The specialty pharma has launched some new drugs, too, such as the psoriasis medicine Siliq (brodalumab) and eye drug Vyzulta (latanoprostene bunod).
But the road back to Wall Street's good graces still looks long. Siliq and Vyzulta will face competition and dermatology may be tougher sledding than Valeant's higher-growth businesses of Bausch & Lomb and Salix.
"Dermatology has been a challenge for us," Papa admitted in his presentation, although he noted the company would increase the number of sales reps behind the business segment by 25%.
Pushing debt maturities out gives Valeant breathing room, but that may not be enough to allow a free hand for investment in R&D and business development.
Papa says growth will come from what he dubs the "significant seven" — a lineup of products that Valeant predicts could cumulatively bring in $1 billion in peak annual sales over the next five years.
Well and good, but maybe not quite a shot in the arm for market confidence.
most companies stress a product that could become a 1B blockbuster$VRX highlights 7 products, which when combined, could become 1B over the next 5yrs— zach (@zbiotech) January 10, 2018
M&A's coming — just wait!
Tax reform has biopharma executives feeling bullish. Although few deals besides Celgene Corp.'s buy of Impact Biomedicines were announced at biotech's biggest bash, many are predicting unleashed offshore cash will fuel an uptick in M&A this year.
Moody's Investors Services agrees and this week put out a report indicating which companies it sees as the most likely to be active acquirers.
Most-likely U.S. acquirers
|U.S. company||Total cash & investments, billions as of Sept. 30|
Source: Moody's Investors Service
Celgene has already dipped its toe in the M&A waters, but could strike again. Same for Gilead, which bought Kite Pharma last year for $12 billion. (Moody's estimates the impact of this deal will take Gilead's cash holdings down to about $37 billion due to the company's use of a term loan.)
Even if the deal flow at J.P. Morgan has disappointed some, Moody's senior vice president Michael Levesque believes "considerable" cash will be deployed over the next six to 12 months.
"Targeted deals for pipeline assets and recently launched drugs are more likely, with sizes that could reach the $10 billion range," wrote Levesque, in response to an emailed question. "However, given the size of cash holdings and ample debt capacity, we would not rule out mega mergers."
Of course, many also predicted 2017 would see more M&A, too.