Baird Hosts 29th Annual Growth
Stock Conference
Senior Research Analyst Christopher Raymond Discusses Potential
Growth Opportunities for Biotechnology Sector
CHICAGO (Business Wire EON) May 12, 2008 --
Baird, an
employee-owned, international capital markets, private equity, wealth
and asset management firm, will host its 29th annual Growth Stock
Conference at the Four Seasons in Chicago, May 13-15. This year’s
conference will feature executives from more than 160 of the
fastest-growing companies across the following sectors: Business
Services, Communications, Consumer/Retail, Distribution, Education,
Financial Institutions, Health Care/Life Sciences, Specialty
Pharmaceuticals, Technology and Transportation/Logistics. Several
hundred institutional and private equity investors will attend.
“This year’s
conference is particularly relevant as markets have turned increasingly
volatile. Investors are hungry to learn about firms and sectors that are
continuing to perform well despite the current environment,”
said Director of Research Robert
Venable. “Baird has, once again, attracted
a great group of companies that can demonstrate their continued success.”
Q&A with Senior Research Analyst
Christopher Raymond
In anticipation of the Growth Stock Conference, Baird took the
opportunity to talk with Senior Research Analyst Christopher
Raymond about some of the growth opportunities in the biotechnology
sector.
Q. Drug and therapeutic stocks are often viewed as counter
cyclical investments. Why is that?
Companies in this group, for the most part, produce products that
patients will demand regardless of the economy. So while individuals may
curtail their spending in one area in an economic slowdown, the
underlying demand for drugs is generally quite resistant to forces that
might impact the broader economy.
Q. But Biotech stocks have not exactly had a great start to
the year, have they?
No they haven’t. While as a sector, biotech
has outperformed the broader NASDAQ Composite, the group is still down
about 4-5% from the start of the year. I think this performance has been
largely driven by some fairly important macro head-winds.
First, the election presents the biggest unknown as rhetoric from some
of the candidates has focused on changes to the health care system which
could equate to more restrictive Medicare policies and increased pricing
pressure. Second, coincident with the election cycle, the pendulum at
the Food & Drug Administration (FDA) has also swung to a more
conservative position on drug approvals. For biotech companies –
which are rich in pipeline opportunities but dependent on an efficient
approval process – this poses a problem.
Despite the fact that commercial biotech companies have, for the most
part, continued to put up impressive numbers, it seems as though
concerns about the impact of these two issues on the space in 2009 and
beyond has kept some investors on the sidelines.
Q. Are these uncertainties temporary or more fundamental in
nature?
I think they are temporary. While reimbursement policies may indeed
evolve, and FDA may continue to struggle, over the long run, we believe
the fundamentals of this sector are very good. These are the
quintessential defensive growth stocks. After all, collectively, their
products do nothing less than improve the human condition. For drugs
that can significantly extend or improve lives, demand will be fairly
inelastic for the foreseeable future.
Q. So could this year’s uncertainty
present a buying opportunity?
The headwinds I mentioned earlier are likely to continue for much of
2008, and I think the large-caps in our space are probably most
susceptible to these concerns. However, we do see significant
opportunities now in some of the newly or nearly-commercial mid-cap
names.
Q. What’s different about mid-cap
names?
A couple of things. First, in a mid-cap biotech, we look for commercial
stories that are fairly self-contained, at the beginning of their growth
trajectory and offer products that meet a significant unmet medical
need. Often times a very successful route has been to develop drugs
targeted at what are called orphan populations –
small, highly targeted populations with a high-value, disease altering
therapy. An example is BioMarin
Pharmaceutical (BMRN). BioMarin has three approved drug therapies –
all of which target diseases most people have never heard of, but which
are very serious. One example is a drug called Kuvan, which treats a
disease called phenylketonuria (PKU), a rare genetic metabolic disorder
primarily affecting children. This drug was just approved at the end of
2007, and targets an initial addressable US population of just about
7,000 people. However, given a very high price-point, we think it’s
on track to post 2008 revenue of $75M, and has the potential to be a
$500M drug.
Second, given that many large pharmaceutical and even some large
biotechs are facing slowing growth, acquisition of a nearly or newly
commercial, faster growing mid-cap can be a very effective way to
bolster top line performance. A recent example is Millennium
Pharmaceutical (MLNM), which has recently agreed to be acquired for
over $8B despite having posted 2007 revenue of just over $525M.
Q. Any other thoughts on the outlook for the biotech sector?
We think that the long-term prospects for this industry remain
compelling. These companies, for the most part, offer products with
seemingly insatiable demand and some of the highest margins of any U.S.
industry. Despite current election headwinds and other regulatory
issues, we continue to like select mid-cap biotechs as an attractive
investment opportunity.
About Chris Raymond and Baird’s Equity
Research Team
Chris is Baird’s senior analyst covering
Biotechnology. He was recognized by The Wall Street Journal in
its "Best on the Street" listing for his coverage of Biotechnology in
2003. Prior to joining Baird in 2002, he was a biotech analyst at
Prudential and Prudential Vector Healthcare Group. Previously, he spent
10 years with Baxter Healthcare and G.D. Searle, where he focused on
marketing oncology and cellular therapy products. Chris received a BA
from Michigan State University and an MBA from the University of Chicago.
Baird has been recognized for the
quality of its investment research. Integrity
Research rated Baird No. 1 in small cap research, and a Bespoke
Investment Group (B.I.G.) survey found that Baird analysts’
stock recommendations had the most impact on stock prices. In addition,
Baird has been repeatedly well-represented on The Wall Street Journal’s
“Best on the Street”
analyst survey rankings over the years. Seven Baird analysts also
received 12 awards from StarMine, ranking the firm third overall, based
on 2006 data. StarMine is the most recognized firm in the industry for
tracking earnings accuracy and stock picking results.
About Baird
Baird is an employee-owned, international wealth management, capital
markets, private equity and asset management firm with offices in the
United States, Europe and Asia. Established in 1919, Baird has more than
2,200 associates serving the needs of individual, corporate,
institutional and municipal clients. Baird oversees and manages client
assets of $73 billion. Committed to being a great place to work,
Baird is one of FORTUNE’s “100
Best Companies to Work For” in 2008 –
its fifth consecutive year on the list. Baird’s
principal operating subsidiaries are Robert W. Baird & Co. in the United
States and Robert W. Baird Group Ltd. in Europe. Baird also has an
operating subsidiary in Asia supporting Baird’s
private equity operations. For more information, please visit Baird’s
Web site at www.rwbaird.com.
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