Takeaways from the JP Morgan Healthcare Conference

Marc Lichtenfeld
by Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Takeaways from the JP Morgan Healthcare Conference

by Marc Lichtenfeld, Investment U's Senior Analyst

Wednesday, January 5, 2011: Issue #1421

Once again, I've secured my golden ticket to the most important healthcare event of the year.

In the past, I've described the JP Morgan Healthcare Conference as the Super Bowl of the healthcare investing world. That's no exaggeration either, as industry executives and investors jet in from all over the world to attend. And with hotels, restaurants and even the 37 Starbucks in Union Square packed with people looking for and providing information, even those without an invitation still hit San Francisco just to be near the action.

It's the place to get the latest news on drug development, research funding, and the companies that could be on the cusp of greatness. And for the past few years, I've come away from the event with great new ideas rare insider knowledge that I share with readers. For example...

~ In 2008, I met with the CEO of SIGA Technologies (Nasdaq: SIGA) and then recommended the stock to readers in October 2008. In a little over a year, we closed out the position for a 97% gain.

~ In 2009, I met with the management of Nektar Therapeutics (Nasdaq: NKTR) and followed up with a recommendation in March 2009. In seven months, we pocketed a 103% gain.

~ In January 2010, I got together with Delcath Systems (Nasdaq: DCTH) and BioTime (AMEX: BTX). I was glad I did. My subsequent recommendations produced gains of 103% and 88%, respectively (and BioTime is still an open position.)

In my conference preview this time last year, I predicted an outstanding year for the biotech sector. Sure enough, biotech stocks jumped 36% higher last year, which trounced the 12% and 17% returns for the S&P 500 and Nasdaq Composite, respectively.

So what's in store for this year?

A Huge Healthcare Shift is Coming

My agenda next week will be a little different.

In the past, I've searched for hidden healthcare gems – the tiny, little-known companies with compelling stories. That part won't change, with a meeting set up with Compugen (Nasdaq: CGEN), among others. Compugen is an Israeli company whose incredible technology saves pharmaceutical and biotech companies millions of dollars in the early drug discovery phase.

But my main focus will be the shifting mega trends in the healthcare sector over the next few years. Specifically, two huge changes...

  • Compliance with healthcare reform.

  • Patent cliffs (i.e. the patent expiration of several major drugs).

The companies that can successfully navigate these new developments stand to make a lot of money, as will their investors.

The Future's Bright... The Future's Generic

I'm particularly interested to see what companies like Pfizer (NYSE: PFE), Eli Lilly (NYSE: LLY) and Merck (NYSE: MRK) have to say with regard to the upcoming patent expirations of cholesterol fighter Lipitor, schizophrenia drug Zyprexa and asthma treatment Singulair, respectively.

As a result, I expect generic drugmakers like Teva Pharmaceuticals (Nasdaq: TEVA) to have especially strong presentations. At last year's conference, the company boasted a 22% market share in the United States and its management team said it was aiming for a 35% share within a few years. I'm looking forward to an update.

Conference Buzz Will Surround These Insurance Reformers

On the healthcare reform front, insurers like WellPoint (NYSE: WLP) and Molina Healthcare (NYSE: MOH) will likely have crowded presentations, as investors strive to learn more about the enormous windfall that is about to hit health insurers. And the ones that will benefit most from reform will be the ones who can cut costs from the healthcare system.

On this front, Wellpoint is testing several initiatives aimed at reducing costs, including a prescription management program designed to ensure that patients take their medications as prescribed.

Along the same lines, Pharmacy Benefits Management companies like Express Scripts (Nasdaq: ESRX) and MedcoHealth Solutions (NYSE: MHS), which lower drug costs for insurers, should also do well in the new environment.

Another group that should outperform in the current and future environment is healthcare technology companies that lower costs for providers. I'm eager to hear how firms like McKesson (NYSE: MCK) and athenahealth (Nasdaq: ATHN) are approaching reform.

Get the Inside Track on Healthcare...

And I'll be bringing that vibe directly to you, too. Next Thursday, I'll report direct from the healthcare conference on the important developments. I'll fill you in on emerging healthcare trends and my impressions of specific companies and their management teams. I'll also share details of some of my meetings with CEOs and hedge fund managers.

It's going to be a hectic week, darting into all the presentations and meetings – and I can't wait to get started. I'll talk to you from San Francisco next week.

Hoping your longs go up and your shorts go down,

Marc Lichtenfeld

comments powered by Disqus