JPMorgan Healthcare Conference
Monday briefing: Rod Raynovich

Webcast at:

Biotech Valuations at trough levels

About 4000 attendees consisting of mutual and hedge fund investors,VC’s, Company executives and their PR legions registered the first day of the conference that eventually is expected to see 5500 by Thursday. With many markets weak and suffering from the credit malaise, biotechnology and medtech investments offers hope for 2009 as ultimately trillions of dollars of government and corporate expenditures for healthcare find their way into new products and services.
In his keynote luncheon talk JPMorgan CEO Jamie Dimon offered realistic commentary and reason for optimism:
• With regard to national healthcare “everybody must be in” because ultimately everyone pays for the uninsured and the current system is fraught with bureaucracy, high admin costs, fraud and a tax subsidy that is inefficient.
• Dreary economic times were caused in part by bad underwriting, high leverage and an ignorance of risk. CDO’s and other exotic vehicles (CDS’s) as we “know” them are gone.
• Lifestyle changes can help cut healthcare costs as many diseases are self inflicted.

From many of the presenters a background story was repeated :dreary economic times caused by a shortage of credit and investment capital have slowed product development and is now being exacerbated by consumer and government spending. Hospitals are also cutting back as state budgets are constrained and elective surgery postponed. Jobs ultimately drive business.
One record being set Monday was a temperature of 74 deg in San Francisco due to the current LaNina weather pattern. Warm dry weather will continue all week.

Many interesting companies presented in a four track7 hour session but here are some notes. See the WEB site for more details.

Amgen (AMGN)
CEO Kevin Sharer felt he has come out of the dark times now that issues regarding ESA’s have been resolved and markets have been stabilized. Label changes may cut sales growth.
Legal issues with Roche have been resolved. Competition has begun with biosimilars (FOB’s) in Europe with GCSF and ESA’s but no major hits to revenue as of yet. Major opportunity going forward for Q4 ’09 approval is denosumab (Dmab) for Post-menopausal Osteoporosis(PMO).which affects up to 5.3 M women.

Gilead (GILD)
Another large cap favorite positioned well due to a strong anti-viral franchise with limited exposure to healthcare policy issues. Strong growth trends for HIV and HBV and a next generation polymerase inhibitor GS9190 for HCV in Phase II with data expected in late ’09.

Hologic (HOLX)
A beaten down Hologic stock recovered Monday up 17% from bottom of $10.40 as Company management set higher estimates at$0.31 EPS F Q’1 and potential transition from revenue uncertainties around FDA approvals and dire situation in hospital capital equipment spending. The broad based medical technology Company is focused in women’s health with products for breast, cervical, gynecological, pre-natal and osteoporosis procedures and diagnostics. A 3-D digital tomosynthesis product called Selenia Dimensions is expected in H1 2009 for FDA approval. The Company’s earnings have been under pressure due to debt costs incurred during acquisition of Cytyc in 2007.

Ilumina (ILMN)
The leader in array and seqencing systems forecast future growth in the molecular diagnostics market that is expected to grow from $3B to $5B over the next few years.
The current markets for ILMN are 80% government and 20% commercial and any NIH funding boosts should help the Company’s prospects.
New technology for rapid sequencing was presented which is expected to provide longer term growth. An $18M investment was made in Oxford Nanopore, a technology out of the UK which utilizes nanopores to measures current flow for rapid sequencing.

Isis (ISIS)
Isis has developed a second generation anti-sense platform over many years which has been partnered with a number of companies focused on treating cardiovascular and metabolic disease as well as cancer and diabetes. The business model is to license out the new drug upon proof of concept and cut deals for funding of development and clinical trials and obtain royalties or profit sharing. Partners include BMS, GSK, Alnylam, TEVA , Ortho and a blockbuster deal with Genzyme for $325M in funding with a 50/50 profit sharing for a cardiovascular drug-an APO B inhibitor. An NDA is expected by late 2010.


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