Analyst Bets On Extraordinary Science And Clinical Data

Analyst Bets on Extraordinary Science and Clinical Data: Greg Wade

Managing Director Greg Wade of Wedbush Securities doesn't use a cookie-cutter approach to picking biotechnology stocks. He directs investors to companies with strong science, well-executed clinical studies and data that points toward future success. In this exclusive interview with The Life Sciences Report , Wade shares his favorite names and the compelling stories behind each company.

The Life Sciences Report: The Wedbush Management Conference was held in New York City in mid-August. What was the mood of institutional life sciences investors?

Greg Wade: The investors I talked to were upbeat. Most were looking for new ideas. They were optimistic that the marketplace would be stable enough in the latter half of 2012 for folks to make money in equities with good fundamentals. It was a very positive outlook.

TLSR: You also had some private companies presenting at the conference. What kind of exit strategies are they looking for? Do most of them want to do an initial public offering (IPO)?

GW: Yes. The valuations that can be achieved with public offerings are sufficiently positive that some private companies are considering them as viable financing options. The investing community, too, is more broadly considering IPO candidates, which is heartening for companies looking to meet with investors.

TLSR: Are companies expected to have clinical assets before they think about going public?

GW: That almost always depends on the indication and whether the data at hand predicts ultimate clinical success. Certainly, more advanced companies are going to have a broader audience of potential investors, but we've also seen promising, unique technology platforms. Companies with these platforms could attract the type of capital that would propel them to the clinical stage.

TLSR: We have had a wonderful rally in biotech since the end of last year. In talking with investors, especially institutional investors, do they feel the rally is going to continue?

GW: One reason for the strong rally that must be recognized is a real decline in volatility. That decline has created a very healthy financing environment for development-stage companies, and is very supportive of a strong overall index. Most of the investors I talk to are not trading the market; they are looking for specific investment ideas that might be well financed and have immediate attractive valuation.

TLSR: Could we talk about some companies that you like?

GW: There are two companies on the Wedbush Securities Best Ideas List, currently in my coverage, that I'd like to discuss. The first is Pharmacyclics Inc. (PCYC:NASDAQ), which we added when the stock was priced in the low-teens. It has since blown through our price target-up well over 350% since it was added and continuing to move up. The stock is trading at about $63 per share presently.

Investors clearly appreciate the safety and efficacy of the company's lead drug ibrutinib (PCI-32765), and the global development partnership that the company has struck with Janssen Biotech Inc., a subsidiary of Johnson & Johnson (JNJ:NYSE). The expected results from phase 3 studies and the absence of a requirement to finance the company's participation in global development of the drug make this a must-own hematology/oncology company.

We continue to recommend the stock to investors, believing that there's some further work required on our model to properly value the biggest opportunity for the drug, which we think is as a chronic treatment for chronic lymphocytic leukemia (CLL).

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