Barclays | U.S. Biopharmaceuticals
3 January 2019 2
CONTENTS
2018 – A Quick Review ......... 3
2018 Healthcare Performance Drivers ........... 7
Drug Pricing remained key topic in 2018; therapeutic area leaders retained significant
pricing power ..... 11
2018 IPO and M&A Environment ..... 16
2018 U.S. Regulatory Trends . 18
Strengthening U.S. Dollar ........ 20
Looking Forward to 2019 .. 21
Policy Issues: Potential Implications from Trump’s Blueprint ......... 24
Medicare/Medicaid Drug Spend....... 25
Hot Topic 1: Therapeutic Themes .......... 27
Hot Topic 2: Biosimilars ..... 40
Hot Topic 3: Gene / Cell Therapy44
Top 25 Catalysts to Watch in 2019 ........ 48
The View from Europe ....... 53
Favorite Names: Meacham ........... 54
Alexion (ALXN) .. 54
Celgene (CELG) .. 55
Eli Lilly (LLY) ........ 56
Seattle Genetics (SGEN) .......... 57
Favorite Names: Wang ....... 58
Regenxbio Inc (RNGX) . 58
Sarepta Therapeutics (SRPT) . 59
Bluebird Bio (BLUE) ....... 60
Favorite Names: Papadakis and Field ..... 61
Key Overweight recommendations .. 61
Key Underweight recommendations ........... 61
Catalyst Calendar ..... 63
Medical Conference Calendar ...... 65
Barclays | U.S. Biopharmaceuticals
3 January 2019 3
2018 – A Quick Review
Following a strong 2017—in which the NASDAQ Biotechnology Index (NBI) and the NYSE
Pharmaceutical Index (DRG) both outperformed the broader market (with each
experiencing double-digit growth)—2018 was more challenging (Figure 1) and reminiscent
of 2008 and 2016. Although throughout most of the year both indexes generally tracked
the overall market, the DRG ending the year above the S&P 500 (+4% vs. S&P 500 -6%),
while the NBI ended below (-9%)—a reversal of the their respective positions at the start of
2H18 and an indication of a rotation away from perceptively higher risk equities to lower
risk in the space (Figure 2; see U.S. Biopharmaceuticals: 2H18 'Back to School' Outlook,
09/07/18).
FIGURE 1
Historical Biotech and Pharma Performance vs. the S&P 500
Source: Barclays Research; Refinitiv
Overall we thought the summer’s positive sentiment in biotech was driven by the clinical
and/or regulatory validation (including clinical progression) of a number of innovative
platforms, including RNAi/silencers, cell-based therapies (e.g., CAR-T), and gene therapy/
editing approaches, which while re-engaging healthcare specialists, did little to entice
generalists back into the space. At the same time, increasing political rhetoric over key
pharma drivers like drug-pricing (see below for an in-depth discussion) likely limited returns
throughout the year in the sub-sector.
Further limiting pharma stock performance, data presented at major conferences like ASCO
and ASH was largely incremental—and not generally paradigm shifting—and there was
little in the way of stock moving events (see U.S. Biopharmaceuticals: ASH 2018: Meeting
Wrap-up, 12/05/18 and US Biopharmaceuticals - ASCO 2018: That's a Wrap, 06/05/18).
And while there were some notable exceptions, including AACR, outcomes rarely lead to the
development of new market opportunities but instead established market position (i.e.,
Merck’s dominance in 1L NSCLC; see MRK/BMY - Final Perspectives from AACR: Investor/
Oncologist Feedback, 04/17/18).
Returns20082009201020112012201320142015201620172018
NBI(13%)+16%+15%+12%+32%+66%+34%+11%(22%)+21%(9%)
DRG(19%)+13%(1%)+9%+11%+27%+14%+2%(11%)+13%+4%
S&P500(38%)+23%+13%(0%)+13%+30%+11%(1%)+10%+19%(6%)
Relative Performance
NBI+26%(8%)+2%+12%+19%+36%+23%+12%(31%)+2%(3%)
DRG+19%(10%)(14%)+9%(2%)(3%)+2%+2%(21%)(6%)+11%
Barclays | U.S. Biopharmaceuticals
3 January 2019 4
FIGURE 2
NBI and DRG Indices vs. S&P 500 in 2018
Source: Barclays Research; Refinitiv
Consistent with this outlook, Small Cap Biotech was well above other sub-segments of the
drug market through October—especially with the Large Cap Biotech and Pharma
composites well below (the S&P 500) for most of the first three quarters of the year, but this
quickly eroded with a diminishing appetite for risk as the fall season began (Figure 3).
FIGURE 3
2018 Price Performance within Biopharma
Source: Barclays Research, Refinitiv
Overall performance trends were largely captured by fund flows. After an initial increase in
sentiment in January, substantial capital left Biotech throughout much of 1H18. Despite
rebounding in June, the net flow did not become positive until August, which followed the
composite’s performance. After a substantial correction starting November, however, the
overall net flow finished the year slightly negative (-$43M; Figure 2 and Figure 4).
-20%
-10%
0%
10%
20%
1/22/23/24/25/26/27/28/29/210/211/212/2
% Change YTD
S&P500NBIDRG
Trump
drug-pricing
blueprint
CELGacq Impact
GILD launches
Biktarvy
BMY Nektar
collaboration
AMGN Aimovig
approved
BIIB BAN2401
top-line data
INCY
ECHO-301
miss
Trump Part B
proposals
ALXN +ve
NMO data
CELGacq Juno
CELG
ozanimod RTF
ALXN'1210
PNH data
ALXN acq Wilson
AACR I/O
NSCLC
data
LLY/INCY
baricitinib approved
CELG/
XLRN
+ve
MEDALIST
LLY/PFEtanezumab
OA data
ABBV/NBIX
elagolix
approval
UTHR
FREEDOM-EV
PFE tafamidis
presentation
PFE CEO plan
ABBV EU Humira guidance
Midterm elections
VRTX '659
triple
data
GILD
new CEO
MRNAIPO
-6.9% Large Cap Biotech
-9.6%; Small Cap Biotech
-6.2%; S&P 500
+4.4%; Pharma
-9.3%; Biotech
-20%
-10%
0%
10%
20%
30%
Large Cap Biotech Composite ($10B)Small Cap Biotech Composite (<$2B)S&P 500DRGNBI。