Not a great start to the week but we remain in a range and rangebound. We are back at the bottom of that range and I do not see anything in the sector that should break us out one way or another. If anything, I think we start to drift a little higher as we get closet to JPM as I think we traditionally move higher into the conference. The conference itself can trigger a move higher or lower but people tend to be positive heading into the conference.
- CHRS is lower on the delay of the PDUFA for toripalimab in NPC. I would not say that this was expected but given that the FDA required an inspection of the manufacturing site in China before approval and the COVID outbreak/lockdowns did not allow an inspection, the conclusion would be that they could not approve. To be clear, this was not a CRL, it was a non-decision, and the review process continues until the inspection occurs. It seems like the stock reaction is a little overdone. This is going to be approved. I guess the worry is that there is no clear timetable to resolve the inspection issue and the market generally does not like uncertainty.
- Mizuho put out a note on their 2023 outlook and it had some interesting tidbits. The first is that the sector has never had three down years in a row and we are now at year three. Does it guarantee a green year for the sector? Absolutely not but the year ahead is setting up for some more positive movement. Two years of declines has an impact on valuations and so that is good going forward. Second, I still think the interest rate environment (the hikes) has been a massive drag in the second half of 2022 and this should be (with all the obvious caveats) fading into background. Of course, if that coincides with a hard landing for the economy then we remain at the mercy of macro but it should be good to see the end of the interest rate hike cycle.
- The big question that the report highlighted is whether or not 2023 will see the return of the generalist. I think it could very well see that if the two big launches go well. We are going to see the biggest launches since HCV (the last time we saw a big move of generalists into the sector): Alzheimer’s and obesity. The difference with these launches and HCV is that they are not cures and so the revenue stream will be a lot longer. If we see good launches in these areas then these are decade long revenue streams and bullish for the return of the generalist.
- We could also see a third boon to the sector with the approval of SRPT DMD gene therapy. I do not think it would be a 2023 launch story but it would represent a big approval in gene therapy. Gene therapy had its hype and then the decline and an approval in DMD and positive launch could re-light that excitement and be a boon for a whole new treatment modality. I have not been bullish on gene therapy commercial potential (as of yet) and I think that is probably a consensus view (waiting to see a series of positive launches before become more bullish on the treatment modality). If we can get excitement on the prospects of gene therapy as well as good launches in Alzheimer’s and obesity, it will certainly peak the generalist interests. Of course, these are a lot of ifs but this is the first time in years that we have the actual set of catalysts that could drive generality interest.
I will end it here and I hope that everyone is have a good end of the year.
Disclosure: Long CHRS