The 30th annual JP Morgan Chase health care conference has investors considering the direction of biotech companies for 2012. While the sector had a disappointing second half of 2011, some stocks may be poised for gains according to analysts. Two companies presenting at this week’s conference, Emergent BioSolutions, Inc. (NYSE:EBS) and Regeneron (NASDAQ:REGN), may have gains in 2012.
Will Emergent BioSolutions, Inc. truly emerge in 2012?
One such company presenting at the conference, Emergent BioSolutions, Inc., is a solid mid-cap to look at early in 2012. Current financials show a net income of $20-24 million in 2011. Emergent offers an interesting mix of possibility and production, between its BioDefense and BioSciences divisions. Emergent’s BioDefense division is currently to thank for its revenue stream. The company’s on-going contract with the CDC for production of its anthrax vaccine, BioThrax, provides a solid base line for its income. While the War on Terror may have done a lot to buoy interest in anthrax biotechs early on, Emergent’s relevance in anthrax-related development has withstood the hype. In 2012, company president Daniel J. Abdun-Nabi expects increased production and enhancement of BioThrax.
With support from its anthrax franchise Emergent has increased possibilities in product development and clinical trials in the BioSciences division. Autoimmune disorders, infectious disease and oncology are areas for expansion for 2012. As 2011 came to a close, Emergent has garnered sole rights to TRU-016, a leukemia and lymphoma drug in clinical stages, as Abbott Laboratories (NYSE:ABT) is terminating its partnership on the drug. Abbott will continue financial support during the transition until March 2012. While breaking a financial partnership with a big player like Abbott is not necessarily ideal, streamlined decision making and avoiding profit share may be a benefit. Completed data on this drug is expected in 2013.
A solid PE of 29.31, low relative debt and stable contracts make Emergent BioSolutions, Inc. a sound player in the 2012 biotech sector.
Regeneron to focus on more lucrative drugs
Regeneron has seen a steady uptick through 2011. The November 2011 FDA approval of Eylea, the company’s long awaited macular degeneration drug provides momentum going into the new year. Eylea offers some price and dosing benefits over market competitors, making it an instant player in the growing field of aging-related drugs. Comparative drugs such as Lucentis from Roche (OTCQX:RHHBY) had sales in near $1.5 billion last year.
The company looks to be moving away from its years of frustration with drugs which ate up cash and time and produced limited results. Moving the focus away from longer term big project goals such as nerve regeneration, it may see more substantial production in 2012 and beyond. In the pipeline for Regeneron are potentially lucrative PKSC9 inhibitors, a new class of cholesterol lowering drugs as well as Zaltrap, a colorectal cancer drug and Arcalyst, a gout treatment.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.