Biotech Sell Side Research: A Retrospective Analysis January 2013 Mark G. Edwards Managing Director
Biotech Sell Side Research: A Retrospective Analysis 250 Public Biotech Cos (2+ Reports per Co) 2,492 Sell Side Reports over 14 years - Initiation of Coverage (IOC) Reports only (10+ pages each report) - All reports between 1998 and 2011 Key Question: Which of These Biotech Initiation of Coverage Reports Reached Their Target Stock Price Within a Year?
Biotech Initiation of Coverage Reports by Year (N=2,492) 270 261 292 258 278 215 205 157 122 132 116 121 65 98-99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
# of Initiation of Coverage Reports for Each Biotech Company (N=250 biotech cos.) 82 64 46 19 18 6 8 7 2-5 6-9 10-13 14-17 18-21 22-25 26-29 30+
135 112 Top 12 Most Frequent Issuers of Biotech Initiation of Coverage Reports 104 102 101 98 91 81 79 78 78 72 Rodman UBS Wells Fargo Credit Suisse ThinkEquity Jefferies Citibank JP Morgan Cowen Royal Bank of Canada Morgan Stanley Piper
70 70 63 Other Frequent Issuers of Biotech Initiation of Coverage Reports 60 52 50 47 45 44 42 38 34 34 34 33 33 Roth Oppenheimer Brean Merriman Pacific Natexis Prudential Punk Hambrecht William Blair Merrill Lynch Wedbush Unterberg CIBC Deutsche Bank Canaccord
39 38 38 Most Prolific Authors of Biotech Initiation of Coverage Reports 33 33 32 27 26 25 25 24 24 24 23 23 23 23 Aschoff, Jonathan Kantor, Jason Farmer, George Yang, Eun Augustine, Mark McMinn,Rachel Harr, Steven Sonnier, John To, Alex Reames, Aaron Jellinek, Derek Chovav, Meirav Geller, Matt Werber, Yaron Pantginis, Joseph King, Michael Tenthoff, Edward
Distribution of Stock Ratings by Period of Biotech Coverage Initiation Pre-2005 (N=826) 2005 3Q08 (N=938) 4Q08-2012 (N=728)
Distribution of Stock Ratings by Top 12 Most Frequent Issuers of Biotech Initiation of Coverage Reports Buy Neutral Sell Morgan Stanley Rodman UBS Wells Fargo Credit Suisse ThinkEquity Jefferies Citibank JP Morgan Cowen Royal Bank of Canada Piper
Distribution of Stock Ratings by Most Prolific Authors of Biotech Initiation of Coverage Reports Buy Neutral Sell Pantginis, Joseph King, Michael Tenthoff, Edward Aschoff, Jonathan Kantor, Jason Farmer, George Yang, Eun Augustine, Mark McMinn,Rachel Harr, Steven Sonnier, John To, Alex Reames, Aaron Jellinek, Derek Chovav, Meirav Geller, Matt Werber, Yaron
Predicted % Change in $/Share Over 12 Month Period Buy Rating (N=1,835)* Neutral Rating (N=537)** Sell Rating (N=120)*** * 99 w/o Target Price ** 128 w/o Target Price *** 12 w/o Target Price
What Percentage of Biotech Initiation of Coverage Reports Reached Their Target Stock Price Within a Year? Analyst Buy Recommendations (N=1,645)
Key Question: Which of These Initiation of Coverage Reports Reached Their Target Stock Price Within a Year? Analysis of Buy Recommendations that met their Target Stock Price within a Year by Investment Bank by Research Analyst Analysis of Buy Recommendations with a Target Stock Price at Least 40% Higher within a Year by Investment Bank by Research Analyst
135 51 How Often Did the Most Frequent Issuers Of Biotech IOC Reports Reach Their Buy Target Price? 112 104 102 101 98 91 # of Reports Met Buy Target 81 79 78 78 72 29 31 35 23 28 28 28 22 18 22 9 Morgan Stanley Rodman UBS Wells Fargo Credit Suisse ThinkEquity Jefferies Citibank JP Morgan Cowen Royal Bank of Canada IOC = Initiation of Coverage Piper
How Often Did Other Frequent Issuers of Biotech IOC Reports Reach Their Buy Target Price? 70 70 25 28 63 60 18 19 52 9 50 16 47 45 44 14 15 42 38 13 14 12 34 34 34 33 33 15 # of Reports Met Buy Target 3 9 15 9 Deutsche Bank Canaccord CIBC Roth Oppenheimer Brean Merriman Pacific Natexis Prudential Punk Hambrecht William Blair Merrill Lynch Wedbush Unterberg IOC = Initiation of Coverage
How Often Did the Most Prolific Authors Of Biotech IOC Reports Reach Their Buy Target Price? 39 38 38 33 33 32 # of Reports Met Buy Target 27 26 25 25 24 24 24 23 23 23 23 16 15 13 11 11 12 10 9 9 7 7 7 7 7 7 3 1 Pantginis, Joseph King, Michael Tenthoff, Edward Aschoff, Jonathan Kantor, Jason Farmer, George Yang, Eun Augustine, Mark McMinn,Rachel Harr, Steven Sonnier, John To, Alex Reames, Aaron Jellinek, Derek Chovav, Meirav Geller, Matt Werber, Yaron IOC = Initiation of Coverage
The Best Sell Side Biotech Stock Pickers Over the Past Decade Are Among the Most Frequent Issuers of Coverage, Piper and ThinkEquity each met their Buy Target Price in 38% of their Biotech IOC Reports Among the Other Frequent Issuers of Coverage, Wedbush, Hambrecht and Canaccord met their Buy Target Price in at Least 40% of their Biotech IOC Reports Among the Most Prolific Authors of Coverage, Alex To (of Natexis, previously at Credit Suisse) met his Buy Target Price in 50% of his IOC Reports
What Percentage of Biotech Initiation of Coverage Reports Reached Their 40+% Gain Target Stock Price Within a Year? Analyst 40+% Gain Buy Recommendations (N=987)
How Often Did the Most Frequent Issuers Of Biotech IOC Reports Reach a Target Price of 40%+ Gain? 21 16 30 13 84 83 23 6 11 12 8 17 17 16 73 79 73 70 11 11 8 24 17 14 56 53 57 40%+ Gain <40% Gain Other Reports 3 6 69 6 12 60 9 13 50 Piper Morgan Stanley Rodman UBS Wells Fargo Credit Suisse ThinkEquity Jefferies Citibank JP Morgan Cowen Royal Bank of Canada IOC = Initiation of Coverage
How Often Did the Other Frequent Issuers Of Biotech IOC Reports Reach a Target Price of 40%+ Gain? 7 18 21 7 13 5 45 42 45 11 6 8 3 41 43 9 6 7 8 7 8 9 34 33 30 31 28 26 4 5 9 8 4 9 6 19 0 3 31 40%+ Gain <40% Gain Other Reports 2 7 25 13 2 18 2 7 24 Deutsche Bank Canaccord CIBC Roth Oppenheimer Brean Merriman Pacific Natexis Prudential Punk Hambrecht William Blair Merrill Lynch Wedbush Unterberg IOC = Initiation of Coverage
How Often Did the Most Frequent Authors Of Biotech IOC Reports Reach a Target Price of 40%+ Gain? 14 2 23 3 8 27 8 7 5 6 6 4 23 22 23 8 4 5 3 19 20 5 3 4 4 6 1 17 18 18 1 0 23 6 6 12 0 3 21 40%+ Gain < 40% Gain Other Reports 4 3 6 3 6 1 3 4 16 14 16 16 Pantginis, Joseph King, Michael Tenthoff, Edward Aschoff, Jonathan Kantor, Jason Farmer, George Yang, Eun Augustine, Mark McMinn,Rachel Harr, Steven Sonnier, John To, Alex Reames, Aaron Jellinek, Derek Chovav, Meirav Geller, Matt Werber, Yaron IOC = Initiation of Coverage
And When Swinging for the Fences, Best Sell Side Biotech Stock Pickers Over the Past Decade Are Among the Most Frequent Issuers of Coverage, Rodman Predicted and Got a 40+% Gain in 22% of their Biotech IOC Reports Among the Other Frequent Issuers of Coverage, Wedbush & Canaccord Predicted and Got a 40+% Gain in 39% and 30% of their Reports, Respectively Among the Most Prolific Authors of Coverage, Joseph Pantginis (of Roth, previously at Merriman and Canaccord) Predicted and Got a 40+% Gain in in 36% of his Biotech IOC Reports
Next Question: What is the Sweet Spot for Biotech Analysts to Meet their Target Stock Price Within a Year? Analysis of All Biotech IOC Recommendations by Biotech Stage of Development by Biotech Therapeutic Area Analysis of 40+% Buy Recommendations by Biotech Stage of Development by Biotech Therapeutic Area
Until a Biotech Product is on the Market, the Odds Are Against an Analyst Hitting their Stock Recommendation Phase II Phase III NDA Filed Market Target Price Reached Target Price Not Reached
Infection is the Therapeutic Area Where Analysts are Most Likely to Hit their Stock Recommendation Infection CNS Cardiovascular Oncology Target Price Reached Target Price Not Reached
For Buy Recommendations of 40+% Price Gain, Even Products on the Market Make for a One in Three Bet Phase II Phase III NDA Filed Market Target Price Reached Target Price Not Reached
For Buy Recommendations of 40+% Price Gain, Infection is Still the Best Therapeutic Area Bet Infection CNS Cardiovascular Oncology Target Price Reached Target Price Not Reached