Post by stcks on Jan 11, 2017 7:20:50 GMT
I could not find any mention of OPKO in the report but it should give you some background to the industry as a whole and JPM 2017 outlook. It's 90 pages long.
jpmorgan.metameetings.com/confbook/healthcare17/stash/misc/JPM_2017_US_Biotech_Outlook_2016-12-13_2206029.pdf
2017 US Biotech Outlook
What Will It Take To Make Biotech Great Again? Conference Call @ 10am TODAY
After a punishing 2016 that saw biotech significantly underperform (NBI -20% and BTK -17% vs. S&P +11%), we are cautiously optimistic about the group heading into 2017. Granted, it was inevitable that the prolonged bull run (NBI entered 2015 +218% since 2011 vs. S&P +66%) would come to an end sooner or later, and intense drug pricing scrutiny in an election year essentially turned into a perfect storm. More recently, President-elect Trump’s win spurred a sharp and rapid rally (NBI +16% and BTK +20% in the 5 trading days post-election vs. S&P +4%) based on the assumption that pricing risk was diminished (which appears premature) and tax reform could facilitate a significant increase in M&A. Either way, with the election finally in the rearview mirror, we do anticipate 1) a gradual shift back to company fundamentals, which remain strong overall, 2) greater appreciation of the innovation cycle, provided there are some clinical data wins, 3) a stable (potentially improving) regulatory environment, and 4) appreciation that large cap valuations look attractive and SMids are generally well capitalized to invest in growing and maturing pipelines. Bottom line, we are constructive on Biotech in 2017 as key fundamental drivers are intact, capital is starting to flow back into the group, and the prospect of M&A adds a sense of anticipation. However, we acknowledge sector sentiment does somewhat hinge on M&A materializing in the early innings of 2017. Please join us for a CC today at 10am ET to discuss our sector outlook and favorite names (US dial in: 888-989- 4421; OUS: 517-308-9052; Passcode: BIOTECH).
* Large caps look reasonably well positioned overall with relatively depressed multiples for the legacy 4 (12x 2017e cons EPS vs. 15x for pharma and 17x for the S&P). Ballooning cash positions should fuel potential M&A / pipeline investment, which could lead to re-ratings, removing outer year revenue concerns. A number of clinical catalysts and new product launches could also increase interest in the group.
* SMID caps remain largely clinical/regulatory catalyst driven, although we suspect budding anticipation for increased M&A could prove to be the key lever for overall performance in 2017. If M&A fails to materialize, selectivity will again be a key theme and there will likely be a focus on commercial SMIDS with valuation backstops.
* Key sector tailwinds: Innovation is still firmly entrenched as the main tailwind (some data wins would further validate), though M&A is increasingly expected to play a significant role in 2017 as big Biotech/Pharma look to address growth via M&A. We also believe that many were underweight healthcare in general and biotech in particular in 2016 and see the potential for funds to flow back into the sector post the valuation reset (JPM Equity Strategy is OW Healthcare/Biotech).
* Key sector headwinds: Pricing headlines, of course...while the risk of sweeping policy change is likely lower post a Republican sweep, the chance of negative headlines (that keep investors at bay) clearly remains. Beyond just pricing, we note that we still do not really know what is to come under Trump and that uncertainty could be an overhang. Finally, as mentioned above, given the broader expectation for a meaningful uptick in M&A, a lack thereof could be a drag on performance.
* Buyside survey takeaways: Our buyside survey (n=124) indicates 71% of respondents anticipate biotech to outperform the broader markets (10% underperform). Interestingly, 93% of respondents expect more M&A in 2017 versus 2016, highlighting the degree of investor anticipation.
* Favorite Names – Kasimov: CELG (large cap) and SAGE (SMID); Rama: AGIO and NBIX; Fye: JAZZ and RDUS.
This is where they get the "get out of jail free card". After they sell you the wrong stock. They can say. We told you "Macro uncertainty/ wild card factor 50%"
jpmorgan.metameetings.com/confbook/healthcare17/stash/misc/JPM_2017_US_Biotech_Outlook_2016-12-13_2206029.pdf
2017 US Biotech Outlook
What Will It Take To Make Biotech Great Again? Conference Call @ 10am TODAY
After a punishing 2016 that saw biotech significantly underperform (NBI -20% and BTK -17% vs. S&P +11%), we are cautiously optimistic about the group heading into 2017. Granted, it was inevitable that the prolonged bull run (NBI entered 2015 +218% since 2011 vs. S&P +66%) would come to an end sooner or later, and intense drug pricing scrutiny in an election year essentially turned into a perfect storm. More recently, President-elect Trump’s win spurred a sharp and rapid rally (NBI +16% and BTK +20% in the 5 trading days post-election vs. S&P +4%) based on the assumption that pricing risk was diminished (which appears premature) and tax reform could facilitate a significant increase in M&A. Either way, with the election finally in the rearview mirror, we do anticipate 1) a gradual shift back to company fundamentals, which remain strong overall, 2) greater appreciation of the innovation cycle, provided there are some clinical data wins, 3) a stable (potentially improving) regulatory environment, and 4) appreciation that large cap valuations look attractive and SMids are generally well capitalized to invest in growing and maturing pipelines. Bottom line, we are constructive on Biotech in 2017 as key fundamental drivers are intact, capital is starting to flow back into the group, and the prospect of M&A adds a sense of anticipation. However, we acknowledge sector sentiment does somewhat hinge on M&A materializing in the early innings of 2017. Please join us for a CC today at 10am ET to discuss our sector outlook and favorite names (US dial in: 888-989- 4421; OUS: 517-308-9052; Passcode: BIOTECH).
* Large caps look reasonably well positioned overall with relatively depressed multiples for the legacy 4 (12x 2017e cons EPS vs. 15x for pharma and 17x for the S&P). Ballooning cash positions should fuel potential M&A / pipeline investment, which could lead to re-ratings, removing outer year revenue concerns. A number of clinical catalysts and new product launches could also increase interest in the group.
* SMID caps remain largely clinical/regulatory catalyst driven, although we suspect budding anticipation for increased M&A could prove to be the key lever for overall performance in 2017. If M&A fails to materialize, selectivity will again be a key theme and there will likely be a focus on commercial SMIDS with valuation backstops.
* Key sector tailwinds: Innovation is still firmly entrenched as the main tailwind (some data wins would further validate), though M&A is increasingly expected to play a significant role in 2017 as big Biotech/Pharma look to address growth via M&A. We also believe that many were underweight healthcare in general and biotech in particular in 2016 and see the potential for funds to flow back into the sector post the valuation reset (JPM Equity Strategy is OW Healthcare/Biotech).
* Key sector headwinds: Pricing headlines, of course...while the risk of sweeping policy change is likely lower post a Republican sweep, the chance of negative headlines (that keep investors at bay) clearly remains. Beyond just pricing, we note that we still do not really know what is to come under Trump and that uncertainty could be an overhang. Finally, as mentioned above, given the broader expectation for a meaningful uptick in M&A, a lack thereof could be a drag on performance.
* Buyside survey takeaways: Our buyside survey (n=124) indicates 71% of respondents anticipate biotech to outperform the broader markets (10% underperform). Interestingly, 93% of respondents expect more M&A in 2017 versus 2016, highlighting the degree of investor anticipation.
* Favorite Names – Kasimov: CELG (large cap) and SAGE (SMID); Rama: AGIO and NBIX; Fye: JAZZ and RDUS.
This is where they get the "get out of jail free card". After they sell you the wrong stock. They can say. We told you "Macro uncertainty/ wild card factor 50%"