JP Morgan preview: Celgene sets the tone for 2017

Last year’s JP Morgan Healthcare Conference marked the start of a sell-off from which the sector never fully recovered in 2016. This year, investors seem cautiously optimistic that things will improve – but any knock to the already fragile sentiment in biopharma could send shares crashing again.

The news flow at JP Morgan can be unpredictable, but one definite announcement will be Celgene’s financial guidance, with which it traditionally kicks off the meeting on Monday morning. There are already signs that the meeting could reclaim its role as a financing catalyst, though realistically a surge in deal making – including acquisitions of Actelion and by Gilead – is needed to give confidence about the upcoming year a major boost.

Analysts expect Celgene to forecast 2017 sales of $13.2bn – around $8bn of which will come from Revlimid – and earnings of $7.04 per share. The company itself is slightly less optimistic; its previous 2017 guidance, released in October, put sales and earnings per share “at the high end of the range” of $12.7-13.0bn and $6.75-7.00 respectively.

This might just be caution by Celgene, which tends to under-promise, but if its forecast falls short again the sector could be set for more January jitters.

Investors will also be watching closely for longer-term updates, as Celgene has pledged to achieve $21bn in revenue by 2020. Diversifying away from Revlimid will be a key to meeting this goal, and an early indicator of its success will come with results from two phase III studies of its S1P modulator ozanimod in relapsing multiple sclerosis, due in the first half of this year.

Moderna's message

Meanwhile, over 350 other companies will be presenting at JP Morgan, and attendees are already guessing about what some of them might reveal. News that Moderna has a slot on Monday afternoon has spurred more speculation that the mRNA specialist might be about to announce its eagerly awaited IPO.

The group has raised $1.9bn in private cash, including a $474m financing in September. But so far details about its projects remain scant – Moderna has two clinical trials under way, according to its website, but nothing is known about either.

More information could be available at JP Morgan, where the company says it plans to present its pipeline of 12 candidates.

Actelion off or on?

Anyone hoping for an update on the will-they-won’t-they saga between Actelion and Johnson & Johnson would have been disappointed by news that the Swiss company has pulled out of its appearance, which had been scheduled for Monday.

While optimists will no doubt hope that Actelion is close to reaching an agreement with J&J, the likeliest reason for the cancellation is that it does not want to risk market-sensitive information slipping out while it is in takeover talks. The two companies began exclusive discussions on December 21 after J&J previously walked away from negotiations amid rumoured interest from Sanofi.

J&J is said only to be keen on Actelion’s marketed pulmonary arterial hypertension products, rather than its pipeline, which includes the multiple sclerosis candidate ponesimod. If the investigational products are spun out into a new company, as rumoured, this might prove an attractive arrangement for Actelion's chief executive, Jean-Paul Clozel, who has previously insisted that he is against a takeover.

Actelion’s stock is up 58% since the beginning of November, when rumours of a potential deal first emerged. If an acquisition does not materialise it will surely slip back down again.

Funding frenzy

JP Morgan is traditionally a time to raise money, but news of follow-on financings cooled last year relative to the period around JP Morgan 2015. There are already signs of a rebound in 2017 with Clovis and Loxo Oncology announcing secondaries in the past few days.

Clovis has raised over $205m to help it launch its ovarian cancer therapy Rubraca, approved just before Christmas, while Loxo has reeled in at least $120m to support a filing for its oncology candidate larotrectinib. More financings could signal that 2017 will be an improvement over 2016.

Nevertheless, what investors really want to see is an increase in M&A activity: respondents to a buyside survey by the Evercore ISI analyst John Scotti rated this as the most significant tailwind for biopharma this year should deals emerge.

And, as well as keeping an eye on developments between J&J and Actelion, investors hope that 2017 will be the year that Gilead finally makes another meaningful acquisition. This is unlikely to happen next week – but any clues that M&A activity is on the up will be seized on.

To contact the writer of this story email Madeleine Armstrong in London at [email protected]. For live updates from the JP Morgan healthcare conference in San Francisco on January 9-12 follow @ByMadeleineA on Twitter.

EP Vantage has previously published a free preview of the year ahead, available for download.