Leerink’s Geoffrey Porges is taking a bullish view on large cap biopharma companies’ chances for the rest of the year.
After watching stocks suffer through the doldrums over the last two years, he cites a series of factors that could make the coming months more of a treat than a terror for biopharma investors. Financial forecasts have moderated to more achievable levels and there appears to be a better chance of some appealing, though fairly limited, beats to Wall Street consensus numbers.
Another big factor: All that brouhaha earlier this year about drug prices may have been little more than hot air. And the forces that have been marshaled in favor of new regulations or price-cutting purchasing strategies? They may have to be satisfied with relatively modest changes unlikely to leave a mark on the branded R&D side of the industry. In his words:
After two years of political anxiety and uncertainty about healthcare reform, drug pricing restrictions and major federal interventions, we believe the probability of material negative changes is receding. Specifically, while we expect something to be done about the most egregious examples of drug pricing (e.g., daraprim), we believe it is very unlikely that any of industry’s biggest fears, such as formal cost effectiveness regulation, centralized federal purchasing for Medicare, unrestricted importation, or federal government patent “march-in” rights come to fruition. Something will happen on drug pricing, and more importantly on out of pocket costs for consumers, but we believe it is unlikely to be materially negative for the branded research based industry.
Just weeks ago President Donald Trump was able to summon up some dramatic headlines about his plans for drug prices in the US. But as they say, a week is a long time in politics, and no one is discussing drug prices this week.
We’ll see soon enough if Porges is right. We’ve already witnessed a boomlet of biotech IPOs over the past few weeks. More are likely on their way if conditions remain favorable and the storm clouds continue to recede.
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