My Report Card for JP Morgan Healthcare Conference Picks

Xconomy National — 

Forecasting trends in an industry that you cover every day, if you take time to think about it, is not that hard. Checking back a year later to see how right you were? That can be a little uncomfortable.

Rather than add to the pile of predictions people have already made about biotech in 2013, and will continue to make this week at the JP Morgan Healthcare Conference, I looked back instead at the five predictions I put down here 12 months ago. The exercise, I figured, ought to provide some humility for the year ahead, which is never a bad thing.

So here are last year’s predictions, and a quick summary of what actually happened in 2012. I’ve given myself a letter grade on whether the prediction was right, half-right, or wrong.

—“The biotech IPO market won’t pick up.” Prediction grade: B-. This prediction was a little more than half-right. The biotech IPO market has been so anemic for so long, it’s hard to remember when public investors were excited about new companies at all. There was so little enthusiasm in 2011 for biotech IPOs that Groupon (NASDAQ: GRPN)—remember Groupon?—raised more money in its IPO that year than the previous 10 biotech companies combined. In 2012, there were 12 biotech/biomedical companies that went public by my count. That’s roughly on par with the tepid performance of past years. None captured the public imagination, or even made mainstream business news headlines.

The surprise is in what happened next. Biotech’s IPO class of 2012 performed extremely well, compared to the debacles everyone saw with tech glamour boys like Facebook (NASDAQ: FB) and Zynga (NASDAQ: ZNGA). Nine of the 12 newly minted public biotech companies are worth more today than they were on IPO debut day, and the three decliners are only down modestly. Two members of the 2012 biotech IPO class—Kythera Biopharmaceuticals (NASDAQ: KYTH) and Intercept Pharmaceuticals (NASDAQ: ICPT)—saw their valuations roughly double in the just a couple of months. That just might encourage a few more companies to take the IPO leap in 2013, and provide a lifeline to a few VC firms in need.

—“Amgen will not make a mondo acquisition.” Prediction Grade: A. Here’s what I said last year as rumors were circulating about Amgen prepping for a monster deal. At the time, the company had named a new CEO, had more than $17 billion of cash in the bank to play with, and a need to fill up its pipeline.

“It may sound logical, but this all feels like wishful thinking to me on the part of bankers with vested interests. Amgen will think long and hard before it attempts to do any monster acquisition, especially after seeing the organizational indigestion mega-mergers have caused in Big Pharmaland (see Pfizer/Wyeth, Merck/Schering-Plough, and Roche/Genentech). My hunch is that Amgen may buy a company in the $1 billion ballpark, but it will not pull the trigger on a really audacious mega-merger in 2012.”

I got this one right. Just a couple weeks after last year’s JP Morgan conference, Amgen shelled out $1.2 billion to acquire Rockville, MD-based Micromet. In April, it acquired South San Francisco-based KAI Pharmaceuticals for $315 million, and got ahold of Turkey-based Mustafa Nevzat Pharmaceuticals for $700 million. The biotech giant (NASDAQ: AMGN) ended the year by swallowing up Iceland-based deCode Genetics for $415 million. The pattern here is clear. No mega-mergers, just small tuck-in acquisitions that bring either technological or geographic diversity to the world’s biggest biotech company. I’d expect more of the same in the year ahead.

—“FDA won’t be more supportive of innovation.” Prediction Grade: F. This is the stinker in the bunch. At this time last year, I had reported on the FDA’s new initiative to encourage innovation, but took a skeptical position, predicting that the number of new FDA drug approvals would drop in 2012. Wrong, wrong, wrong. The agency approved 39 new drugs in the past year, the highest number in 15 years. Everyday interactions between companies and the FDA appeared to improve in the past year. There was a 17 percent decline in projects being delayed by regulatory requests last year, according to one survey of 157 biotech CEOs in California conducted by BayBio, the California Healthcare Institute, and PwC.

Margaret Hamburg, FDA commissioner

To be fair, I did write a column in September which tallied up the year’s activity and concluded the FDA turned “friendly toward pharma” in 2012. While it’s possible this past year could be a fluke, I doubt it. FDA commissioner Margaret Hamburg is the longest-tenured boss in more than 15 years at this agency at this agency that so many people love to hate. She showed backbone and scientific integrity when she stood up to her boss, Health and Human Services Secretary Kathleen Sebelius, in a political decision about the availability of Plan B emergency contraceptives. Hamburg was a central player in the extension of the Prescription Drug User Fee Act that became law last fall. She deserves credit for a job well done, and with President Obama’s re-election, there’s no reason she can’t stay and solve a few more problems at the FDA in the years ahead.

—“The mood will be upbeat.” Prediction Grade: B. This prediction was on target, but it was essentially a statement of the obvious. Still, some people seem to think they can take the temperature of investor sentiment for the year ahead at this conference. This whole line of inquiry about “how’s the mood?” strikes me as odd. It shouldn’t be a surprise that people enjoy hanging out with friends, talking about their work, running up expense accounts, and sipping fancy drinks at fancy hotels late into the night. They enjoy the warmth and sun in one of the world’s greatest cities in the middle of winter. How do you think that would affect your mood? Other than one year from the Great Recession, the mood I’ve seen has always been upbeat, and always will be.

—“Biotech VC funds will fail to raise new funds in 2012.” Prediction Grade: A. The biotech venture capital world is living in crisis, and little happened in 2012 to reverse this trend. There were very few VC firms that raised new money to invest in startups, because very few have delivered returns to justify their risks. Kleiner Perkins Caufield & Byers raised a new $525 million healthcare fund in May, but that’s Kleiner—it can probably fall out of bed for five years straight and still raise more money. The fact remains that most venture capital firms have little gas in the tank, and desperately need a few IPOs or big-ticket acquisitions if they are ever going to refill.

Meantime, entrepreneurs are going to have to be clever in finding money from foundations, government agencies, and Big Pharma partners if they want to develop new biotech products. We saw very few “big idea/big money” companies get started in 2012, even at an amazing time of opportunity in science. The lack of investment in new ideas is so severe, it’s enough to suffocate the careers of a generation of scientists and young businesspeople. Not to be too much of a party pooper, but that’s something all the bright and hard-working JP Morgan delegates ought to be thinking about and working in some way to solve in the year ahead.

One last note: I’m going to be on the ground this week at the conference with the usual days full of one-on-one interviews, and evenings full of receptions. In between, I will send out a few Tweets from various hotel elevators—always a good way to pass the time and test my cell phone service. For those of you relatively new to the social media world, and the JP Morgan conference hullabaloo, the Appeering website does a nice job of filtering the chatter into conversations that are easier to follow. I look forward to seeing lots of readers there in the City by the Bay.