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Letter from the Editors – Oct 12, 2009
October 12, 2009 by mdbeckerpartners · Leave a Comment
Our prior e-newsletter coincided with Independence Day and it’s hard to believe that Halloween is now just around the corner. Soon it will be time for popular Halloween activities, such as trick-or-treating, wearing disguises, playing pranks, and telling scary tales. Of course, all of this may sound more like an average day in Washington, DC.
On that note, and against the current backdrop of political debate regarding the high costs of health care, we read with great interest one of the scariest aspects of Halloween this year: the amount consumers plan to spend on their holiday celebrations.
According to the National Retail Federation’s 2009 Halloween Consumer Intentions and Actions Survey [1], consumers are expected to spend an average of $56.31 on Halloween this year. To be fair, this figure is down more than 15% from last year’s $66.54, likely due to the effects of the Great Recession. Nonetheless, total spending on Halloween is expected to reach $4.75 billion in 2009.
The question naturally arises: Why is it that Americans have no compunction about spending billions of dollars on costumes, candy, decorations and greeting cards, but take umbrage at the cost of innovative new medicines developed by life science companies that provide better patient outcomes, improved quality of care, increased life expectancy, and economic gains? In search of an answer, we explored the links between health care reform, the life sciences industry, and economic growth in our new opinion editorial available by clicking here.
While clearly in the minority, at the start of the year we provided a positive outlook for the biotechnology industry in 2009, citing the sector’s defensive characteristics, favorable technical aspects, and improving fundamentals, such as the number of new product approvals, products in clinical trials and the brisk pace of industry consolidation and licensing transactions.
We reiterated our bullish stance even as the major market indices recorded losses for the month of January and noted that while a gain in the S&P 500 during the month of January has led to a positive overall year for stocks 85 percent of the time, the so-called January barometer is no better than the proverbial toss of a coin when the month’s return is negative.
In view of the spate of high profile clinical setbacks and regulatory delays during the month of February, we noted that investors would be closely monitoring near-term events, such as results from the first Phase 3 trial of Human Genome Sciences’ (HGSI) product candidate Benlysta™ [known as LymphoStat-B® at the time] for the treatment of lupus in mid-2009, AMAG Pharmaceuticals (AMAG) obtaining marketing clearance for Feraheme™ to treat anemia, and final results from Dendreon’s (DNDN) Phase 3 trial of Provenge® for prostate cancer. Fortunately, each of those stories had a happy ending and the NASDAQ Biotech Index (NBI), which started the year at 729.54, ended the third quarter of 2009 up 15% year-to-date to close at 839.61.
As is customary during this holiday period, there will of course be some ghosts and goblins lurking in the shadows. For example, as the Bilski case moves its way through the courts, companies and investors will consider the implications of the machine or transformation test on claims directed to medical diagnostics or methods of medical treatment. The significance for this case is vital to investors as it could potentially alter the way life science companies disclose scientific information.
However, many of the biotechnology industry’s fundamental and technical characteristics remain intact, as does our firm’s bullish thesis for the sector in 2009. In keeping with the holiday theme, we hope that the biotechnology sector provide investors with more “treats” than “tricks” this season and extend our wishes for a safe and happy Halloween.
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