3Q Financial Markets Preview: Punctuated equilibrium

Money managers see a quiet 3Q13 punctuated by some big events

Buysiders are viewing 3Q13 as a relatively quiet quarter punctuated by some important clinical and commercial milestones for a few of biotech's bigger names, notably Celgene Corp. and Biogen Idec Inc.

The under $200 million market cap companies did not perform as well last quarter as their bigger brethren and the environment is unlikely to become any less challenging as some investors may look to lock in recent gains rather than taking on increased risk in search of returns.

Nonetheless, money managers still see some small- and mid-cap companies as poised to outperform, with the Orphan and oncology spaces remaining investors' darlings.

Big news

Perhaps the most anticipated clinical milestone expected this quarter is a readout from Celgene's Phase III MM-020 study, which is designed to expand use of Revlimid lenalidomide into front-line multiple myeloma (MM) (see "2H13 Milestones," A10).

"We are waiting to see if Revlimid can beat out a commonly used regimen, particularly in Europe, that uses thalidomide as its base," noted Janus' Andrew Acker.

Several more buysiders, including OrbiMed's Sven Borho and ClearBridge's Marshall Gordon, agree the data will be an important catalyst for Celgene.

Revlimid, a thalidomide analog, is approved in the U.S. and EU for relapsed or refractory MM, and in the U.S. for myelodysplastic syndromes (MDS).

Another big-cap catalyst on the minds of many buysiders is Biogen Idec's earnings announcement in July, when the company will report 2Q sales of Tecfidera dimethyl fumarate (BG-12).

"The Tecfidera launch appears to be going much better than anybody had hoped," said Borho, citing scrips data from IMS Health. However, some analysts have questioned whether the data exaggerate the drug's uptake.

Biogen has declined to give guidance on sales. Jefferies analyst Thomas Wei expects $256 million in 2013 sales, while Canaccord analyst Ritu Baral said she is looking for $335 million.

Acker noted investors also are expecting a decision this half on whether Biogen Idec will receive a 10-year exclusivity period for Tecfidera in Europe.

In March, EMA's CHMP backed approval of Tecfidera, but the recommendation does not mention new active substance (NAS) designation, which entitles a sponsor to eight years of data exclusivity plus two years of market exclusivity starting on the date of marketing approval. In May, the company said it would push out the launch into 2H13 in order to "clarify our regulatory data protection in the

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