Analysis: Investors likely to wait out 2012 drug launches

Fri Jan 13, 2012 1:10pm EST
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By Deena Beasley

SAN FRANCISCO (Reuters) - Burned by disappointing early sales for new, high-profile biotech medicines in 2011, healthcare investors are cautious ahead of this year's expected crop of drug launches.

Not so long ago, biotech makers could practically bank on seeing their company values jump once they obtained regulatory approval to market a drug. Now, investors are more likely to wait on the sidelines, or short a stock, ahead of proof the new treatments will be a commercial success, a process that could take months.

"People are all freaked out about product launches," said ISI Group analyst Mark Schoenebaum.

Well aware of that angst, drug developers are spending far more time laying the groundwork to get paid by insurance plans and to convince doctors and patient groups of their medicines' value as they prepare for regulatory approval.

"There was a time when products got full value prior to launch. I think we have now swung back in the other direction," said John Orwin, chief executive officer at Affymax Inc AFFX.O, which expects U.S. regulators to decide by late March whether to approve its experimental anemia drug.

Shares of Dendreon Corp DNDN.O, maker of the novel therapeutic prostate cancer vaccine Provenge, ended last year down 83 percent from their peak in May, while Human Genome Sciences HGSI.O finished with a drop of 75 percent after launching Benlysta, the first new drug for lupus in more than 50 years.

Initial sales of Provenge and Benlysta failed to live up to lofty expectations, and investors are cautious ahead of early sales results for drugs launched in 2011 by companies including Incyte Corp (INCY.O: Quote), Seattle Genetics (SGEN.O: Quote) and Savient Pharmaceuticals SVNT.O.

Even shares of Vertex Pharmaceuticals (VRTX.O: Quote), which launched hepatitis C drug Incivek last year with record-breaking sales of $420 million for its first full quarter on the market, ended the year 44 percent below their 52-week high.   Continued...