CitiGroup Conference -- Healthcare Losers :: Michael Shulman's Biotech Blitz

CitiGroup Conference -- Healthcare Losers

Please accept my regrets about being "dark" for a time, there was a death in the family and I had to clear up a backlog at work. But here I am, so let's start with my current work.

I'm attending an excruciatingly boring healthcare conference in New York. I normally don't go to these fests -- I prefer more specialized biotech confabs -- but I'm actually looking for short opportunities for my Shorts newsletter: ChangeWave Shorts.

I am also checking the mood of the analysts in the meetings, and how they feel about some of my large cap biotech positions. These meetings are boring because the analysts and investors are, for the most part, generalists into financials not breakthroughs.

What have I learned?

• On the short side, dental companies are not talking about their U.S. business. Dentsply International (XRAY) had the temerity to devote much of its opening to emerging markets, and I fell asleep during the American Dental Partners (ADPI) presentation.

Feedback from the breakout sessions was clear -- business is slow and still slowing in the United States due to the recession, and I believe the same could happen in Europe.

• Traditional big pharma analysts -- the ones with million-dollar salaries, a third grade knowledge of anything that matters (except for the stocks they tout), no sell recommendations -- are much more concerned about the change in administration than the upcoming patent expirations.

They were told -- wrongly -- by two political analysts, who may or may not have many big pharma clients, that even though Obama and McCain want the Feds to directly negotiate Medicare prices, it will not happen.

It will happen. It could be the first thing Congress passes -- even if it is in the form of just saying Medicare will be entitled to "best price" for any drugs it buys. Many states already insist on this for their Medicaid formularies.

• At the conference there is a big-time ostrich mentality about the upcoming patent expirations -- $65 billion to $100 billion through 2012 -- and I remember the quote from a Bank of America (BAC) analyst I spoke with a few weeks before Schering Plough (SGP) lost patent protection for Claritin. ChangeWave surveys showed sales would fall off a cliff.

When I asked about Schering Plough's ability to respond, he said "they will figure it out." They did. They figured they could lose 85% share in a heartbeat and did.

That is the attitude now. If you model Pfizer (PFE) three years out -- through Q2 2011 -- you will see a $5 billion to $7 billion drop off in Lipitor sales. This somehow has escaped the attention of earnings estimates from analysts. At least they have reasonable table manners.

Any winners?

When I tell people I follow biotech they hand me their business cards -- first time it's ever happened in seven years of going to these things. When these guys wake up to the reality of big pharma, money will flow to big and emerging, revenue, but not yet profit-producing, biotech.

Stocks:

Comments

Please accept my regrets about being "dark" for a time, there was a death in the family and I had to clear up a backlog at work. But here I am, so let's start with my current work. I'm attending an excruciatingly boring healthcare conference in New York. I normally don't go to these fests -- I prefer more specialized biotech confabs -- but I'm actually looking for short opportunities for my Shorts newsletter: ChangeWave Shorts. I am also checking the mood of the analysts in the meetings, and how they feel about some of my large cap biotech positions. These meetings are boring because the analysts and investors are, for the most part, generalists into financials not breakthroughs. What have I learned? • On the short side, dental companies are not talking about their U.S. business. Dentsply International (XRAY) had the temerity to devote much of its opening to emerging markets, and I fell asleep during the American Dental Partners (ADPI) presentation. Feedback from the breakout sessions was clear -- business is slow and still slowing in the United States due to the recession, and I believe the same could happen in Europe. • Traditional big pharma analysts -- the ones with million-dollar salaries, a third grade knowledge of anything that matters (except for the stocks they tout), no sell recommendations -- are much more concerned about the change in administration than the upcoming patent expirations. They were told -- wrongly -- by two political analysts, who may or may not have many big pharma clients, that even though Obama and McCain want the Feds to directly negotiate Medicare prices, it will not happen. It will happen. It could be the first thing Congress passes -- even if it is in the form of just saying Medicare will be entitled to "best price" for any drugs it buys. Many states already insist on this for their Medicaid formularies. • At the conference there is a big-time ostrich mentality about the upcoming patent expirations -- $65 billion to $100 billion through 2012 -- and I remember the quote from a Bank of America (BAC) analyst I spoke with a few weeks before Schering Plough (SGP) lost patent protection for Claritin. ChangeWave surveys showed sales would fall off a cliff. When I asked about Schering Plough's ability to respond, he said "they will figure it out." They did. They figured they could lose 85% share in a heartbeat and did. That is the attitude now. If you model Pfizer (PFE) three years out -- through Q2 2011 -- you will see a $5 billion to $7 billion drop off in Lipitor sales. This somehow has escaped the attention of earnings estimates from analysts. At least they have reasonable table manners. Any winners? When I tell people I follow biotech they hand me their business cards -- first time it's ever happened in seven years of going to these things. When these guys wake up to the reality of big pharma, money will flow to big and emerging, revenue, but not yet profit-producing, biotech.