Tuesday, January 12, 2010

Notes From JP Morgan: Sliding Toward Innovation?

The 2010 JP Morgan conference kicked off yesterday with Celgene and Roche taking honors as one and two at the podium in the Westin's Grand Ballroom. It was standing room only--after all Celgene is the stock to watch for certain analysts and EVERYONE wants to know how the privatization of Genentech has succeeded. But the squeeze was more a function of half the room's chairs being spirited away than a whopping attendance.

What did this blogger learn?

Celgene put up some pretty astonishing numbers: 20% revenue growth ; 30% earnings growth; $1 billion in operational cash flow. And it was all, unsurprisingly, thanks to its multiple myeloma drug Revlimid.

Roche, meanwhile, has been preparing for the "rough seas" for some time. With Erich Hunziker as CFO, cash flow continues to be a focus. Of course taking your little sibling private requires a lot of cash. But playing to his base, Hunsiker emphasized that the company has already paid down 13% of the money owed, and expects to settle up another 12% in the coming months.

Nor will liquidity be a strong challenge for Roche.Thanks to strong sales of Tamiflu--which isn't tagged with the same buyer's remorse as H1N1 vaccines--Roche is in a stronger cash position than ever.

And you know what that means. It's time to focus on Innovation with a capital "I". Indeed, both Celgene and Roche execs made a point of talking up their R&D focus. "It's about the culture," says Sol Barer, CEO of Celgene. "No company is better than its pipeline for the future."

And Hunsiker clearly agreed. The biggest pharm---er, sorry, we meant to say the biggest biotech ('cuz we aren't allowed to call Roche a pharma any more)--"needs to invest in innovation now. You are only successful if you can refill your pipeline," stated Hunziker.

Without naming names, he threw icy water on the diversifiers, accusing pretty much everyone in the industry except Bristol-Myers Squibb of "cold feet", for inking deals in the consumer/generic space. "We are interested in pure pharma" development, Hunziker maintained during his opening spiel. "This may be higher risk but if successful will generate higher returns."

Now there's innovation--and then there's Innovation. We've been hearing for months now that healthcare reform, plus regulatory and reimbursement hurdles, are driving companies to emphasize unmet medical need no matter what a drug's market size. Is innovation with a capital "I" the theme of this year's JPM?

Just like belief in the markets, hope springs eternal.

Tune in post conference for our assesment and potential responses from the Pfizer and GSK types.
image from flickr user wallyg used under a creative commons license

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