Betting on Biotech - Interview with Adam Feuerstein, Senior Columnist and Biotech Analyst of TheStreet.com

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Hello and welcome to Zing Talk, where Benzinga brings you the biggest names and brightest minds from Silicon Valley to New York City.

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Today our guest is Adam Feuerstein, Senior Columnist and Biotech analyst for TheStreet.com. How ya doing today Adam?

Good Andy, thanks for having me on.

Great, glad to hear it. Could you start off by telling us a little bit about yourself and what you do at TheStreet.com TSCM?

I am the biotech stock columnist for TheStreet.com. I have been working for TheStreet covering bio tech for just a little bit under ten years.

What got you started in the biotech sector?

I've been a business journalist for more than twenty years, and covering biotech was just a natural outgrowth of some stuff I had previously covered in the technology sector - internet technologies, business software. When I came to TheStreet.com they asked me if I could cover biotech. I'd always had an interest in the field, so I took it on. It's amazing that it's been ten years since I've been covering the sector.

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Now you say your earlier technology writings prepared you for biotech?

The way I tell people - as a business journalist you are expected to cover a lot of different pieces. I've covered everything from real estate to banking to technology, healthcare in general, and now biotech. You learn the beat, you learn what's going on. When I started in biotech I tried to find the smartest people in the sector - and I learned. I tell people I don't have an academic background in science. I don't have an M.D. or a Ph. D. But I cover biotech investing - that's not the same thing as covering the actual science behind it. When it comes to investing, I have a lot of experience. So the things I did covering technology and internet stocks - it certainly transfers over.

The biotech sector is rapidly changing - are there any upcoming game changing break-throughs that you think might shift the market in any meaningful way?

The way I think about biotech - I try to break it down, that's a very broad question, and a lot of things are happening in a lot of different areas. There are a lot of places where medicines are coming and are going to benefit patients. I try to look at things from a company by company perspective. What I've noticed in recent years is that biotech has become much more of a catalyst driven sector. People tend to look at biotech with a shorter term focus - they look at events. FDA approvals, clinical trials, those are the things that drive stock value. Whether you're a fundamental investor, or a day trader, these are the things you look for.

Is this because biotech is a new or quickly changing sector or do you just think that's the nature of the sector itself?

I think you're partially right. But I think it's a sector that has a lot of risk and a lot of volatility. Statistics tell you that most drugs that companies develop fail. It's a risky business. But there's a possibility of a very high return. You think about banking or finance or technology - it's very hard to find stocks that will do that sort of thing. Now on the other hand, a drug fails - a stock could fall 50-60%. I think that's why people are attracted to this sort of thing and because of that it is a little short term oriented - and then they may get out of the stock.

Any companies in particular you think will really shine over the next few years?

I tend to look at companies - I think if you look at some of the larger cap companies - I think people overlook them because they're more “boring” than the small caps but I think a company like Celgene CELG is a company I've always admired. They've just done an acquisition where they're getting into solid tumors - I think that's a great growth company. A company I've liked for a long time is Gilead Sciences, Inc GILD they're the market leader in HIV. They've had a lot of stock problems in the last two years dealing with some growth issues, but it's a company I like from a fundamental basis. In terms of smaller caps? I think a company like BioMarin BMRN which is in the rare disease space - I think it's a very well managed company. In the news there's a lot of news about Sanofi-Aventis buying Genzyme GENZ. BioMarin is kind of like a mini Genzyme. It's a company I really like. In the Hepatitis C space, there's a company I like called Pharmasset VRUS. They've got a stable of really interesting Hep C drugs - and a partnership with Roche RHHBY. What company do you think could eventually be taken over? I always hestitate on this - but I think Pharmsset is going to be bought by a large company like Rouche.

What do you make of some of the controversies in biotech? Swings in public opinion on stem cells, cloning, etc. can have a profound effect on the financial situations of many biotech companies. Are you seeing any interesting trends?

I tend to look at things, even the public policy issues through an investor lens. When you do that, I think you have to be cautious about a lot of the stem cell stocks. It's a very early field. There's some very interesting research being done, both embryonic and non-embryonic stem cell research. A lot of small companies that are doing things. A lot of things are done outside of the publicly traded companies in academia and government research. I think it's going to be a long time before any of these drugs or technologies play out. I tend to have a very conservative mind on these things. I would like to see a bit more evidence that these things work. So when people ask me about a stem cell stock - for example Geron GERN - pretty popular among retail investors - I appreciate what they're doing. They've been around for a long time, they burn a lot of money. They raise a lot of money. They dilute shareholders all the time. They have to pay for research they're doing. And that research is slow. You have to take that in mind when you think about these stocks.

Now I know you're not a scientist, but is there a certain time frame in which you think those technologies will hit the market?

It's really hard to say - a lot of this work takes a long time. Is it 10 years? Is it 15 years? Is it 20 years? Is it 5 years? Some of these companies are beginning to move into trials for humans, but these are early days. The clinical hurdle and the regulatory hurdle is very high. You have to remember that every time you get a brand new technology that works its way through the labs, there's going to be a lot of scrutiny. Drug safety is a huge issue right now, from a regulatory standpoint. You're going to have to see a lot of data on these drugs before they say “they're approved and ready to be used on patients”

Do you think that maybe the FDA should be a little less regulatory on these drugs?

Personally, I don't. The FDA is in a no-win situation. If they go out and are aggressive and approve a drug, and that drug has safety issues and has to be pulled, you get people screaming at the FDA for approving it - they say you should have never done that. Now if they want to wait and be more cautious, then you get people saying “You're keeping life saving drugs from people” - I sympathize with the FDA. Right now the pendulum has swung to more of the side of safety first. I have to say the FDA is a little more conservative than its been. There are obesity drugs coming through the FDA right now. There are drugs that have been on the market, and they have sometimes been found to possibly cause more harm than good. I generally like how the FDA handles this - I like the speed. No real complaints. If the data is good, the FDA will approve the drug, if it isn't, then they won't.

Are there any places you feel that biotech should simply not go, for ethical reasons? Do you feel we've crossed any lines so far?

You know, I'm a stem cell research proponent. I would like to see the government fund that sort of research. I don't think we should be cloning human beings. There's probably an ethical line we shouldn't cross. I don't see anything that biotech is doing today that crosses some sort of ethical boundary.

Where do you get your news or investment information from? Are there any particular sources you frequent?

You know, I work online - so I cull news and information from all the sources that people do. All the wire services. Twitter is a great tool. I am a late convert to Twitter, I started tweeting just this year. It's an essential tool for traders. Maybe not for more casual investors. If you're dealing with stocks in real time, it's a great tool.

Alright, now that we've got the tough ones out of the way, here are a few less hard-hitting questions. What was your first, and what was your worst job?

My first and worst job? Probably, I would say, I worked in a car dealership washing cars in high school, which was not a great job. It was during the summer and it was a hot summer so it wasn't so bad having a hose in my hand all the time, but that was the job was probably not the greatest I've ever had.

What do you like to do outside of your work with TheStreet.com?

I coach soccer, I bike, I run. I like to go out to eat - the typical types of things.

What is your favorite restaurant you've ever been to?

Oh God! I lived in San Francisco for almost four years, and San Francisco is a great restaurant town. Probably a restaurant called the Slanted Door - a Vietnamese restaurant.

Do you have any heroes or people that helped you get to where you are today?

Definitely Jim Cramer. I know he's a bit of a controversial figure, but I feel he's just so smart, and he's taught me so much.

Okay, this last one is Benzinga's trademark question: What was the best, and what was the worst investment decision youíve ever made?

This is an easy one for me. I'm not allowed to make investments. TheStreet.com has a strict conflict of interest policy, and I am not allowed to own any stocks, except stock in TheStreet.com as well as mutual funds. I'm not even allowed to own say, technology stocks even though that's not my sector. It's a sacrifice.

Do you think it's worth it?

I agree with the policy. I can see where ethical things come up, with what you write and someone could question you based on what you own. No one goes into journalism for the money. If I had wanted to make a lot of money, I would have taken my mother's advice and gone to law school after college. I didn't do that. I went into journalism. I actually spent a few years out of journalism, but I came back because it is something I really do love. Could I be materially better off if I managed stocks on my own? Yes, but I love journalism too much.

Thanks Adam. That'll do it for this episode of Zing Talk. Remember to check out the latest market-moving information, commentary and trading ideas on www.benzinga.com.

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Posted In: Movers & ShakersGeneralAdam FeuersteinBenzinga PodcastBiotechnologyHealth CareInformation TechnologyInternet Software & ServicesTheStreet.com
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