There are continuing concerns being heard that the biotech bubble could be coming to an end, but last year’s results appeared strong.
As far as a possible bubble, on March 21 there was a drop in the SPDR S&P Biotech ETF. On four straight trading days, the SPDR S&P Biotech ETF was down 9.3 percent, according to the Motley Fool.
“We’ve been given plenty of warning signs for months that a sizable correction could be in the offing in the biotech sector, but investors have largely ignored those warnings,” the Motley Fool added. “Now it appears a biotech correction could be rearing its head.”
Last year, there were 38 biotech IPOs. In total, the group increased an average 43 percent in 2013. Some are justified, some are not, the report said. In addition, some of the acquisition valuations may be too high.
“Big pharma has been reaching more and more to find growth opportunities both domestically and overseas,” the report said. “Knowing this all too well, small- and mid-cap biotechs are demanding hefty premiums from big pharma, and getting them.”
On the other hand, Zacks.com reports the NYSE ARCA Pharmaceutical Index increased 21.4 percemt over the last year. The index increased 6.9 percent so far this year. “New products should start contributing significantly to results,” Zacks added. When it comes to generics, products which are no longer exclusive include Eli Lilly’s Cymbalta and Evista. AstraZeneca’s Nexium may see generics as of May 2014.
Zacks also reported that several pharma companies “are focusing on in-licensing mid-to-late stage pipeline candidates that look promising, instead of developing a product from scratch, which involves a lot of funds and time.” Similarly, small biotech firms will consider in-licensing and forms of collaboration. “It makes sense for them to seek deals with pharma companies that are sitting on huge piles of cash,” Zacks said.
Those sectors which could see significant in-licensing include immuno-oncology, oncology, central nervous system disorders, diabetes and immunology/inflammation, as well as the hepatitis C virus (HCV) market, Zacks reported.
In another recent report, the MoFo BioMeter, from the Morrison & Foerster law firm, it was shown that for 2013 there were “cross-the-board increases” in BioMeter value. The average was $33.9 million for all transactions, compared to $21.2 million in 2012.
Also, there was “strength” for sellers and licensors in “all stages of the drug development spectrum,” the report said. The BioMeter for preclinical/discovery transactions averaged
$21.8 million in 2013, compared to $10 million in 2012; the BioMeter value for Phase 1 products averaged $40 million in 2013 compared to $10 million in 2012; the BioMeter value for Phase 2 products was $47.4 million in 2013, compared to $37.1 million in 2012; the BioMeter value for Phase 3 products was $46.2 million in 2013, compared to $24.6 million in 2012; and the BioMeter value for approved products was $50.6 million in 2013, compared to $27 million in 2012.
Among the companies highlighted in the report was the OncoMed/Celgene transaction relating to anti-cancer stem cell therapies. Another highlighted transaction involved Forest Laboratories and Merck for the antipsychotic drug Saphris.
As far as U.S. regional differences, based on the location of the licensor for each BioMeter transaction, the region with the largest single number of transactions was the San Francisco Bay area. The mid-Atlantic region was second, and the New York/New Jersey and San Diego regions tied for third. Boston and Seattle were next. Among other nations, Germany was tops, followed by the United Kingdom, Belgium, Switzerland and Denmark.
Among the global issues which could impact the sector is the need to protect genetic resources, according to Inside Counsel.