Schaff­hau­sen (CH) — Record numbers of product appr­ovals, clini­cal breakth­roughs in new thera­pies and further acqui­si­ti­ons — at its most important inves­tor confe­rence at the begin­ning of the year, the biotech indus­try pres­ents itself in strong shape. For a number of BB Biotech port­fo­lio compa­nies, 2019 will be an exci­ting year.

The who’s who of the health­care indus­try met at J.P. Morgan ’s annual inves­tor confe­rence in San Fran­cisco, Cali­for­nia. Scien­tists, mana­gers and inves­tors watched presen­ta­ti­ons and panel discus­sions between Janu­ary 7 and 10 and exch­an­ged ideas at count­less meetings. For BB Biotech’s invest­ment team, the event provi­ded an oppor­tu­nity to meet with the manage­ment of its port­fo­lio compa­nies and also to hold discus­sions with a number of poten­tial new companies.

Acqui­si­ti­ons and licen­sing deals
The number one topic of conver­sa­tion at the start of the confe­rence was the two acqui­si­ti­ons announ­ced at the begin­ning of Janu­ary. In both cases, US phar­maceu­ti­cal compa­nies acted as buyers. Eli Lilly is acqui­ring cancer specia­list Loxo Onco­logy, which recei­ved appr­oval for its first product in Novem­ber 2018, for USD 8 billion. Even more spec­ta­cu­lar is Bris­­tol-Myers Squibb ’s acqui­si­tion of BB Biotech ’s long-stan­­ding core holding Celgene. The acqui­si­tion price of USD 74 billion repres­ents the largest tran­sac­tion in the history of biotech­no­logy to date and crea­tes one of the world’s largest provi­ders of cancer thera­pies on the sales side.

Even though other phar­maceu­ti­cal compa­nies have indi­ca­ted that they are looking for take­over targets, BB Biotech belie­ves that deals of this magni­tude will remain the excep­tion. The team considers so-called bolt-on acqui­si­ti­ons to be far more likely, with which compa­nies streng­then their port­fo­lio in indi­vi­dual indi­ca­ti­ons via smal­ler acqui­si­ti­ons in the single-digit billion range. “Take­over targets among the biotech heavy­weights include Gilead Scien­ces in onco­logy and gene therapy and Biogen in neuro­logy, in addi­tion to Amgen. The valua­tions of many biotech compa­nies, which remain low despite the recent share price reco­very, will have a support­ive effect on the conclu­sion of such tran­sac­tions,” says Dr. Daniel Koller, Head Invest­ment Team BB Biotech.

The discus­sion about the acqui­si­ti­ons was parti­ally overs­ha­dowed by the nume­rous licen­sing agree­ments announ­ced at the confe­rence. For exam­ple, the subsi­diary Espe­rion Thera­peu­tics signed an agree­ment with Daii­chi Sankyo Europe. Under the terms of the agree­ment, the Japa­nese phar­maceu­ti­cal company will pay USD 300 million in upfront payments and a further USD 900 million in success-based mile­stone payments in return for secu­ring the marke­ting rights to a blood lipid-lowe­ring drug.

Posi­tive newsflow
In terms of price-driving news, Sage Thera­peu­tics provi­ded a high­light of the confe­rence. Its share price shot up 40% after the company announ­ced very good clini­cal data for a product to treat severe post­par­tum depres­sion. This nerve dise­ase is the result of hormo­nal chan­ges after child­birth and affects 400,000 women each year in the U.S. alone. The advan­tage of the subs­tance called SAGE-127 is that it is taken as a tablet over a period of two weeks. In this deli­very form, the drug could also be used for other forms of depres­sion in which Sage is test­ing the drug. If SAGE-127 recei­ves appr­oval, the U.S. biotech company could secure a lucra­tive market niche, as the U.S. FDA is alre­ady deci­ding on March 19 whether to approve Zupressa for the same indi­ca­tion. The disad­van­tage of Zupressa is that this medi­cine must be admi­nis­te­red by infu­sion over a 60-hour period. In any case, the chan­ces are good that Sage will be able to gene­rate annual sales in the billi­ons with these products.

Invest­ment Stra­tegy BB Biotech: Bet on tomorrow’s winners
The latest deve­lo­p­ments in the indus­try confirm BB Biotech’s invest­ment stra­tegy of incre­asingly focu­sing on smal­ler and mid-cap compa­nies that are on the verge of a breakth­rough with new thera­peu­tic approa­ches. Cancer thera­pies remain the largest topic area here, follo­wed by mono­ge­netic rare dise­a­ses and neuro­lo­gi­cal dise­a­ses. The team is very confi­dent that some of the port­fo­lio compa­nies will deli­ver posi­tive price-driving news this year. These include Alexion Pharma with a follow-on product for Soli­ris, a billion-dollar product for the treat­ment of a rare gene­tic disor­der in hema­to­poie­sis. At the same time, manage­ment is working to increase the sales poten­tial of Soli­ris through expan­ded appli­ca­ti­ons in other niche indi­ca­ti­ons. Halo­zyme will submit pivo­tal data for its pancrea­tic cancer treat­ment towards the end of the year. From Vertex Pharma, BB Biotech expects further data from combi­na­tion studies in cystic fibrosis.

Inter­cept and Gilead Scien­ces will present pivo­tal clini­cal data from their candi­da­tes for the treat­ment of non-alco­ho­­lic fatty liver (NASH) in H1 2019. These medi­ca­ti­ons could be used to treat the early and late forms of the dise­ase. In the USA alone, up to 2 million people are affec­ted by liver cirrho­sis as a result of fatty liver and at least the same number by liver fibro­sis, which in most cases can only be trea­ted by liver trans­plan­ta­tion. The actual sales poten­tial for this dise­ase, which until now has been virtually untreata­ble, will only become appa­rent once the first products have been appro­ved. The main issue here is to deter­mine how long and inten­sive the medi­ca­tion of NASH in its early forms will be in redu­cing the fat content in the liver and impro­ving the blood count, and to what extent the new thera­pies will have a cura­tive effect in the late stages of the disease.

As in other dise­ase areas, BB Biotech posi­tio­ned itself here at an early stage, as soon as the medi­cal and commer­cial success of the new thera­peu­tic approa­ches was convin­cing. The above-average perfor­mance of BB Biotech’s shares compared to the indus­try under­pins this invest­ment approach. www.bbbiotech.com