Focus on Biotech stock
Interview: Franklin Templeton---McCulloch, Evan---Fund Manager
>> welcome back. our next guest is a biotech stock bottom up investor. he says because of the recent runup in biotech stocks he’s been invest nothing small-cap names. he manages $750 million in biotech stocks , and his name seven mccullough, portfolio manager of the franklyn biotechnology discovery fund coming to us live from san mateo california. thanks for being on the program.
>> thanks for having me much.
>> after a long, hard bare spell in biotech stocks , 2003 has produced a turnaround of inspiring proportions. as we’ve been mentioning your fund is up a significant amount. the amex biotech index up 35% year to date. what changed so much in biotechs that took this sector which was just a dog for several years, and made it a win?
>> a couple things changed. first, there was a confirmation of new f.d.a. commissioner last fall. that really set tone for a more accommodative f.d.a.. but really nothing changed t sector has been firmly strong all along. there was just a number of unfortunate events last year that caming the. fortunately a number of events caming the that were very positive. we had several drug approvals. some very positive clinical data and we think things are going well for the sector right now.
>> as we mentioned stocks that had such a run, how do you convince investors they didn’t miss the party and they should look to other more neglected sectors for places to invest their money now. how do you make that case?
>> we think this is the first sign for a very long run for this sector. the longer term we look the more encouraged we are about this sector. a number of drug approvals so far this year and we are expecting 18 over the next two years. if you look at a number of the products in the early stage pipeline close to 1,000, it bodes very well through this sector for the remainder of the decade.
>> a couple weeks ago we got news idec pharmaceuticals and biogen would be gettinging the to form a more perfect union to signal a coming waive of consolidation in the biotech field. are you in that camp?
>> we have already expected more consolidation.
>> it wasn’t those two companies we thought would coming the. we recently met with management and we are understanding the merger a little better. the synergies weren’t obvious right away. we think it’s better positions for both companies in the longer term. we expect smaller companies to get gobbled up by larger companies. particularly those like the am jens and genentechings that are sitting with billions of cash in their balance sheets.
>> those are the likely gobblers who are the gobbles.
>> we have a number in our portfolio. a number of the larger companies seeing what we see, i think they’ll get gobbled up.
>> can you give us names.
>> a number of the smaller ones, what we are looking for is unpartnered compounds. a company called atherojenics. they have an interesting drug that suggests that it might reverse atheroslerosis. that’s an interesting one.
>> back to the idec biotech deal. it was interesting how you described it. you said you didn’t see the synergies. you had meetings and you are starting to see synergies. does that mean you feel the merger is a good idea.
>> we did think it was a good idea.
>> first from idec’s standpoint they had a bit avenue pipeline gap.
>> biogen plugs that. biogen’s early stage pipeline was very week. biotech brings seven clinical programs that will bolster that.
>>ing the they have a much stronger growth profile going forward. in the mid term they’ll use cost saving synergies.
>> you like shares of amgen which some consider more pharmaceutical than biotech. i want to ask you about amgen and why you like it.
>> it’s not a pharmaceutical stock but it is growing earnings. we do like amgen right now because it has four recently approved products. they are driving very strong growth. we expect amgen to grow earnings in excess of 20% over the next three years. we like the management team and we think the stock is attractively valued.
>> you also have large position in gilead sciences. i want to ask you about a news release that came out last week regarding a new h.i.v. or aids drug they have called emtrina. what about gilead, was that an ornt announcement.
