The curious mind embraces science; the gifted and sensitive, the arts; the practical, business; the leftover becomes an economist" - Nassim Nicolaus Taleb
It looks like the biotech sector is on its way to posting another down week. The main biotech indices are back down to their levels of late August before a significant rally in September as third quarter earnings reports from the large industry concerns were largely devoid of organic revenue growth.
The biotech and pharma giants are certainly watching the progress of the tax reform bill that just got out of congressional committee. If passed, this could free up the hundreds of billions of dollars these companies have 'stashed' in their overseas operations. This could trigger a wave of M&A activity the industry so desperately needs to acquire new growth engines and replenish pipelines.
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While the current tax reform bill might be good for M&A, it could also impact firms focused on rare diseases in a negative way. Included in the package is a rollback of tax credits as part of the Orphan Drug Act of 1983 intended to incent research into diseases that affect less than 200,000 individuals. This credit allows drug developers to claim half of the qualified clinical research costs for a designated orphan product. The credit only should cost the government some $2.3 billion in FY2017. However, those costs are expected to balloon to some $15 billion a decade from now.
It has been a good week for Adamas Pharmaceuticals (ADMS). On Monday, Evercore ISI issued a Buy rating with a whopping $85 price target triggering a 20% rally in the
