As the year draws to a close, analysts at Leerink Swan have been making some predictions about what 2013 holds for the pharmaceutical and biotechnology sectors, and they seem fairly positive.
They have published a 112-page report on healthcare, saying that "we're confident that healthcare stocks can outperform". The broker's favourite sectors "are areas where intellectual property is creating improving healthcare products, compelling health economics and valuable competitive moats".
Top of the list are emerging biotechs which are creating "powerful and defensible IP for shareholders [and] valuable intellectual property". Leerink Swan also notes "the improving regulatory pathway that they enjoy, and the well-funded potential suitors available to them".
The report states that "in a world where many large therapeutics companies have sought to shrink their discovery efforts", and funding for academic and government basic research is pressured, biotechs "possess the expertise to discover and develop valuable molecules". It adds while payors are pressuring reimbursement, "the differentiated and proprietary nature of biotechnology drugs can defend pricing well [and] the Affordable Care Act assures innovators 12 years of protection from biosimilars."
FDA understands biotech better
Staying with the FDA, the analysts said "we don’t want to overstate it, but it’s clear to us that the agency has made it a priority to be more open and responsive in its guidance to emerging drug developers like emerging biotech companies". They believe that, "that with several years of experience, the agency is better understanding the genomic data it often receives as part of biotech drug candidate New Drug Application packages".
The report also notes that with clinical progress comes the possibility of acquisition. "Large therapeutics companies have cash and cash flow, what they need are products".
Leerink Swann says "don’t expect heroics from pharma in 2013, but improved capital markets and a lapsed patent cliff "sow the seeds for future improvement". They expect that pharma/biotech research growth will remain muted in 2013 as certain companies companies look to contain costs.
Still, "the worst year of the pharma patent cliff is behind us", the analysts state, noting that in 2012, some $25 billion of branded drugs lost protection". They conclude by saying "we believe pharma and biotech will eventually begin to increase R&D spend again, or at least stop the decrease".