2013: A look ahead

2012 was a roller-coaster year.  The S&P Index for the year to date has gained almost 15% (as of Dec. 19th).  Some stocks have hit all time highs, notably AAPL, AMZN, IBM, and GOOG.  While some tech IPOs, such as GRPN and ZNGA, have tanked.  And of course there’s the botched FB IPO.  Now, with the austerity crisis looming, it’s tough to say where the market is heading for 2013.  It might be safe to say much of the uncertainty is already priced into equities as there has been a substantial pullback from these yearly highs, so fiscal deal permitting, we may see a decent bounce.

S&P 500 Daily Chart courtesy of Freestockcharts.com

We saw a Fibonacci retracement from the highs at $1474 on September 14th to the low at $1443 November 16th.  We’re also seeing a short-term top from the descending trendline resulting from the triple-top highs of 9/14, 10/5, and 10/17.  If we do, in fact, see a deal come out of Washington, we’ll most likely see a breakout, however, I give an agreement between Obama and Boehner a 20% chance of occurring this week before the holidays.  The more likely scenario is no deal is made and we hit resistance and start the trek back down to find support at a very major ascending trendline as well as support at $1350.

For 2013, the upside for the markets is certainly there.  Clearly, the markets want to breakout.  We just need to see the macroeconomic environment become more favorable.

Looking ahead, I’d like to offer some predictions for some publicly-traded companies.  I see great things coming out of Alnylam (ALNY).  Their 5×15 program, in which they’re aiming for 5 products on the market by 2015, looks to be on track.  RNA interference is an extremely promising approach for treating diseases and Alnylam’s GalNac-siRNA delivery platform is unmatched.  The RNAi Therapeutics Blog has some great insights about their GalNac-siRNA conjugates on knocking gene expression down.

Next up is Achillion Pharmaceuticals.  The race for an HCV treatment is extremely crowded and also incredibly risky.  Bristol-Myers Squibb effectively dropped out of the race after the failure of BMS-986094, which happened to be a $2.5 billion purchase of Inhibitex’s INX-189.  That’s one heck of an expensive bet that landed on red and not black.  But that just exemplifies how hot the competition is for an HCV treatment.  It is estimated by the US Centers for Disease Control that HCV affects some 3.2 million people in the US.  By the end of the decade, it is estimated that the market for HCV drugs could reach $20 billion (!!).  Companies are willing to pay a hefty premium (see: Pharmasett) for a slice of that and therein lies why I’m bullish on Achillion.  The profile for ACH-1625, now Sovaprevir, looks really good, and, in my view, it’s only a matter of time for major pharma to come knocking. Of course, Gilead’s GS-7977 is the furthest along currently with multiple Phase III studies underway, however, I can’t see all that much upside to the stock as it’s up almost 100% since the beginning of 2012.  I think most of the good news is already priced in.  If I were to get into GILD, I’d wait for a healthy pullback for a reasonable entry point.

Also having a large market are obesity drugs.  According to the CDC, 35.7% of adults are considered obese.  Obesity has been linked to a number of other diseases, notably heart disease and type II Diabetes.  Because of this, weight loss drugs have been gaining a lot of attention both on the long and short side.  Vivus (VVUS) and Arena Pharmaceuticals (ARNA) currently have two of the most promising drugs on the market, Qsymia and Belviq, respectively.  Both drugs were approved this year and both companies saw their respective stock prices ride a roller coaster around the news.  I think the market is undervaluing both stocks and I think now is a great time to ride the increase in sales for either drug once they gain traction.

I’d  also like to highlight a few privately held companies from which I think you’ll hear great things in 2013.

Warp Drive Bio, based in Cambridge, MA, focuses on natural products for discovering therapeutics.  It was founded by world-renowned scientists, including Dr. Gregory Verdine, Dr. George Church and Dr. James Wells.  With backing from funding powerhouses such as Third Rock and Greylock Partners, and a key strategic partnership with Sanofi, Warp Drive Bio’s impact will be difficult to ignore in the near future.

Global Blood Therapeutics, also backed by Third Rock, leverages their team’s blood-based disease expertise to revolutionize treatments for chronic blood disease.  Their approach combines the hot areas of computational biology and ligand modeling with traditional medicinal chemistry to treat certain blood diseases for which there are currently very limited options.

Epigenetics is an emerging field and Constellation Pharmaceuticals looks to be on the forefront of the technology.  Adding another dimension to typical gene expression control, Constellation seeks to develop therapeutics that alter the function of proteins that recognize chemical modifications on DNA and chromasomal proteins.

In August of 2012, Quanterix obtained a key patent for their Small Molecule Array technology (Simoa).  As small molecule microarrays are near and dear to my heart, I am particularly interested in Quanterix’s microarray platform and their ultra-sensitive detection (sub-femtomolar – !) of biomarkers for blood-screening, diagnostics, and biothreat detection.

23andme is an extremely fascinating company out of Mountain View, CA.  23andme gives you access to your own genetic information at an absurdly reasonable price.  They also claim they will update you with information relevant to you based on your genetic makeup.  With access to such a large amount of genetic data, they are also very well-positioned to leverage their platform for personalized medicine, a topic rapidly gaining speed among the scientific community.  One of the major bottlenecks for achieving success with personalized medicine is obtaining and interpreting such large data sets of individual genotypes.  23andme looks to be in a unique position to take advantage of this push for individualized treaments.  You may hear more from this company in the next year.

Last but certainly not least, one company that you will hear more about in 2013 is Cambridge-based, Living Proof.  From the lab of prolific scientist/engineer/serial entrepreneurs Dr. Robert Langer and Dr Daniel Anderson, Living Proof is turning the cosmetics and beauty industry on its head by actually basing their products on real science (!) and not folklore/myths/wives’ tales as is typical with common cosmetic products.  After an endorsement by Jennifer Aniston herself, Living Proof will continue to grow exponentially, and I would not be surprised to see them get some real traction in 2013.

A few other notable mentions I bet you’ll hear partnerships, funding rounds, and overall good news from in 2013 (my version of the Fierce 15):

Kala Pharmaceuticals, InVivo Therapeutics, Bind Biosciences, Selecta Biosciences, Seventh Sense, T2 Biosystems, Zafgen, BlueBirdBio, Hydra Biosciences, and Epizyme.

Also, I’d like to take this time to promise you, my readers, that, in 2013, I will provide updates more often than I have.  Since beginning a new position in June, things have been busy on my end.  But consider this my new years resolution to update Pi-Shaped much more often in the coming year.  So expect great things!

That is all for now.  Wishing you the best this holiday season and looking forward to a bullish and prosperous 2013!