Recently named by Institutional Investor as the top analyst for specialty pharma, Umer Raffat ranks among the pharma world’s most distinguished commentators. He’s also one of its most prolific, filling inboxes with succinct bursts of verbiage and video. Here, Raffat assesses the highs and lows of 2016 and makes a few predictions for the year ahead.

Larry Dobrow, MM&M: Give us your year-end assessment for the pharma companies in your coverage universe. What were the big-picture trends you saw?

Umer Raffat, Evercore ISI: Pricing [of pharmaceuticals] was clearly number one. Some of the M&A activity you saw in the mid-caps was number two. And the election was number three.

Dobrow: What were the big successes in 2016?

Raffat: You see the stock prices just like I do. Big pharma was more resilient. In the mid-caps, you saw companies like Tesaro that did really well. Medivation was another one.

Dobrow: What did those com­panies do right?

Raffat: Tesaro had a trial go really well for it [niraparib, for the treatment of recurrent ovarian cancer].

Dobrow: What are the hottest, for lack of a more elegant way to put it, therapeutic categories? What are the areas in which you see the most promise?

Raffat: Immuno-oncology is hot, all the PD-1s. In general, some of the autoimmune diseases are hot. Which ones? Just the general diseases around psoriasis and psoriatic arthritis, atopic dermatitis, that sort of thing. Those are the two big areas.

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Dobrow: Why now? At least in autoimmune, it seems like we had a kind of dead period.

Raffat: It’s that there are more products being aimed at [those conditions]. We’re starting to see more data. There weren’t a lot of drugs approved, but now we’re starting to see more and more approvals.

Dobrow: How about the flip side of that: What were disappointments, whether categories or companies that might not have lived up to your expectations?

Raffat: Neurology saw some disappointment. Alkermes had a depression trial blow up. [Note: A few days after this interview was conducted, results from the second Phase III study for the same drug, ALKS-5461, showed positive results — and Al­kermes’ stock surged on the news.] ITCI [Intra-Cellular Therapies] had a schizophrenia trial blow up [for ITI-007]. Generic pricing deflation was another big surprise in that it hurt the generic companies a lot.

Dobrow: What kind of volume of M&A activity can we expect in the year ahead? It seems as though there are a lot of companies with cash just waiting to jump in.

Raffat: Volume [of activity] seems as if it will be high. All the big companies have bought some [smaller companies], but they still haven’t bought dramatic amounts yet. M&A will continue to be a theme. Companies with money will snap up targets as they see fit.

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Dobrow: Companies have slashed the SG&A and commercial sides in recent years. Are there any SG&A sacred cows, such as detailing?

Raffat: In terms of their own cost cuts? It’s not clear to me if there are more cost cuts in the works like that, unless it’s a company that is facing big, significant revenue pressure such as Novo Nordisk. Or there could be some big M&A announcement between two big companies and then cost cuts that follow — for the redundancies.

Dobrow: Within the payer world, how much more emboldened do you think they’ll attempt to be? Will pushback against costly products continue to intensify?

Raffat: Yeah, absolutely. But it’s starting to weigh on them as well. You’re starting to hear more about how they should cut back on the rebates they extract. [Payers and PBMs] don’t pass them along. This is definitely a new trend. They used to be able to just blame pharma and move on. They’re starting to come under scrutiny.

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Dobrow: “Blame pharma and move on.” Is that ever going to stop being an effective tactic for pretty much everybody?

Raffat: It’s already stopping. One of the members of Congress who was a former pharmacist [Rep. Buddy Carter, R-GA] wrote a letter about this. It’s starting now.

Dobrow: Who was your company of the year for 2016, in terms of successes or dominating the conversation or anything else?

Raffat: Valeant Pharmaceuticals and Mylan have been in the crosshairs, without a doubt. Valeant more than Mylan.

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Dobrow: How about companies in the spotlight for the right reason?

Raffat: This year, it’s actually been very humbling [for the industry]. Tesaro is the biggest bright spot. That trial is going really well [at press time].

Dobrow: As we’re chatting in mid-October, with the caveat this could change in two minutes based on any number of factors, who are your companies to watch for 2017?

Raffat: Investors are very focused on Biogen and Bristol-Myers Squibb. I’m interested to see how Biogen’s work for Alzheimer’s disease plays out and whether it gets bought. Bristol is the same sort of thing — how everything in its oncology [portfolio] develops and even whether it could get bought as well.