Biotech Values

[Biopharm investor]

Last one (for me) on BSR

Since there’s been some discussion about David Miller and the criticisms of some of his comments, I thought I’d elaborate a bit on my opinion as to why I found his comments quoted by Dew to be inane for a professional analyst and investment advisor in the health case sector.

The comments in question were:

”Biosimilar Producers: With the 12-year exclusivity written into the proposed PDUFA legislation, don’t bother. If you do bother, realize you are investing in a pack driven by perception and not fundamentals. Be nimble and don’t get greedy”.

I can’t speak for Dew but I have problems with this comment on several levels.

First, the 12-year exclusivity is “proposed” legislation. I think GPhA will weigh in on this, and I sincerely doubt they’ll find the 12-year exclusivity proposal acceptable. And while GPhA doesn’t have the lobbying clout that pharma does, it does have very powerful lobbying allies. For example, the largest employers in the country, each with their own lobbying resources and efforts, share GPhA’s interest in this regard since increased generics substitution translates to lower health care costs for their employees. So the proposed 12-year exclusivity period is by no means final.

Second, as I understood the bill, the proposed 12-year exclusivity clock starts ticking when the referenced biologic product wins FDA approval. There are many biologics that have been on the market for more than the 12-year period anyway. To name just a few since Amgen was recently mentioned on this board, consider that Epogen was approved by FDA and launched in 1989, a full 18 years ago. Similarly, Neupogen was FDA approved and launched in 1991, 16 years ago. Enbrel was approved and launched in 1998, so its 12 years of exclusivity would lapse in 2010. As of a couple of years ago, over 30% of drugs in Phase III clinical trials were biologics. So while biologics is an area requiring great innovation, it also involves extraordinary cost in the healthcare eco-system, and something will have to be done to help make the costs of these great medicines more manageable within the overall system.

Third, contrary to Miller’s comments, there is - and will be - no “pack” of producers that, even if the legislation is enacted, will be able to capitalize on this opportunity. Biologic products are not like small molecules. The competition for generic biologics will be very limited, probably to no more than a select handful of companies. It will not be like the situation with small molecules, where the barrier to entry is small and competition is fierce within a fragmented industry of literally dozens of small players. Miller’s comments suggest he doesn’t understand this difference.

Finally, the companies that will be poised to capitalize on the biogenerics opportunity are already well capitalized, profitable companies generating significant cash flows and earnings. And contrary to Miller’s assertion, these companies do not trade on “perception” as Miller stated like the development-stage biotechs he likes to cover in his rag, but rather on fundamentals, something the companies in Miller’s universe of coverage wouldn’t know anything about. These companies are not sitting by waiting for, and trading on, the possible enactment of the “Biologic Price Competition and Innovation ct of 2007”. They already have significant operations.

I could go on but will spare you. The point being is, Miller throws out these comments like the one quoted above, and his followers generally assume his comments to be his opinion based on a grasp of the underlying facts. In reality, he sometimes shows a lack of a grasp of the underlying facts, and as a result, makes ridiculous statements. But that’s okay with most of his subscribers, because to many of them, he’s a celebrity, regardless how well his investment advise pans out for them.

Lastly, a word about hypocrisy, which I think most of us are all prone to from time to time – David Miller being no exception. How many times and in how many places has he bemoaned the outcome of Genta’s ODAC panel meeting in May 2004, whining about Pazdur, the ODAC panel members, Genta’s statistician, etc. But when he correctly called the outcome of the DNDN advisory committee and then had to read comments fromt hose that were forecasting an unfavorable outcome of that panel meeting, he penned this:

“I also find this difference is lost on most people judging by the desire to keep arguing about what happened, should have happened, and/or might have happened if thus-and-such in terms of the panel meeting.”

http://investorshub.advfn.com/boards/read_msg.asp?message_id=18838670

So when David Miller is on the wrong side of an FDA advisory panel meeting outcome as was the case with Genasense, it’s okay to argue post hoc about the outcome. But when he correctly predicts the outcome as he did in the case of Provenge, he has little tolerance for others “arguing about what happened, should have happened, and/or might have happened if thus-and-such in terms of the panel meeting.”

Anyway, that’s all I have to say on the subject. I probably should have remained quiet, and I’ll let David’s supporters have the last word.

Regards,
BI