New York, NY, United States (4E) – Many biotech firms are now biding their time, waiting for their research projects to result in a breakthrough drug that will not only cure a once untreatable disease but could also make the company more profitable.
The biotech industry has not been the poster boy of stable growth. Investors even fear there is a “bubble” caused by many of them pinning their hopes on windfall profits in case their company of choice succeeds in developing a lucrative new product.
But others see the industry’s growth rate as within normal bounds attributable to the higher number of drugs approved by the U.S. Food and Drug Administration (FDA), as well as increased mergers. In 2012, new drug approvals by the FDA hit a 16-year high with 39 “new molecular entities” (NME) approved. While the number declined to 27 in 2013, it is still higher than any of the NME results since 2004, except 2011′s 30 NME approvals.
Meanwhile, the recent decline in bio-tech stocks is expected to be short-lived, offering a buying opportunity for investors on the lookout for lower prices. Blue chips to look out for include the three biggest U.S.-based biotech companies–Amgen, Gilead Sciences and Celgene–which are focused on developing medicine to address catastrophic illnesses such as cancer and human immunodeficiency virus (HIV)/AIDS.
The industry leader Amgen (AMGN) has a market cap of $86.32 billion as of April 2014, 18,000 employees and sales at $17.27 billion. Ranked 192 in Forbes’ Global 2000 list, the company markets products for the treatment of cancer, hepatitis C, rheumatoid arthritis and bone-related illnesses. It has at least 10 approved drugs by the FDA and around 30 undergoing clinical trials.
Established in Thousand Oaks, California in 1980, Amgen’s largest selling drugs are Neulasta and Neupogen, which are used to prevent infections acquired while the patient is undergoing chemotherapy. Another bestseller is Enbrel, which treats rheumatoid arthritis and other autoimmune diseases. Enbrel was included in the Amgen drug roster after its developer Immunex was acquired by the company in 2002.
Earlier this year, Goldman Sach’s included AMG 785/CDP 7851, which Amgen is developing in collaboration with UCB, in its latest list of “10 drugs that could transform the industry.” AMG 785/CDP 7851, a sclerostin antibody, has just started its Phase 3 clinical trial program to check its safety and efficacy in treating postmenopausal osteoporosis. The humanized monoclonal antibody binds to and inhibits sclerostin, a protein that restrains bone formation. It will be tested within the next two years through an international, randomized, double-blind, placebo-controlled study among 5,000 women with postmenopausal osteoporosis. Initial results are expected to be released by the end of 2015.
Amgen closed at $111.94 on Friday, nearer its 52-week high of $128.96 but down by $2.17 the day before.
Coming in at second is Gilead Sciences Inc. (GILD), based in Foster City, California, with a market cap of P68.45 billion and a company size of 5,000 employees. With sales at $9.7 billion, it was ranked 103rd in Market Value by Forbes.
Gilead Sciences’ primary focus is developing drugs for HIV/AIDS, liver diseases and cardiovascular, metabolic and respiratory illnesses. In 2012, the FDA approved Stribild, a single tablet regimen developed by the company for “treatment-naïve” adults with HIV-1 infection. It was also during that year that Truvada, the controversial drug that reduces the risk of sexually acquired HIV-1, was approved.
Truvada is making headlines lately because of the raging debate in the gay community. Critics believe that sex without the use of condom is a reckless habit that will expose them to other sexually transmitted infections. Doctors and supporters of Truvada, however, claim that it reduces the risk of acquiring HIV by more than 90 percent, if taken diligently. Although the treatment cost around $13,000 a year, many insurance plans, including the government-funded Medicaid, cover prescriptions for Truvada.
It has at least eight products undergoing Phase III clinical trials and 20 others in the pipeline. Among them is Idelalisib, an existing drug, being tested as a treatment for indolent non-Hodgkin lymphoma and chronic lymphocytic leukemia.
With two new drugs approved, It is not surprising that Gilead stocks spiked starting 2012, reaching its peak this year. Gilead closed at $66.03 on Friday, up by 55 cents from the previous day.
New Jersey-based Celgene Corporation (CELG), on the other hand, focuses on developing therapies for cancer and inflammatory diseases. With a market cap of $47.07 billion, 4,700 employees and $5.51 billion worth of sales, it is the third largest independent biotech firm in the U.S.
Among Celgene’s major products are Thalomid for erythema nodosum leprosum and multiple myoma (when in combination with dexamethasone) and Revlimid for multiple myeloma patients with at least one prior therapy (also in combination with dexamethasone). It has at least six approved drugs by the FDA and more than a dozen others in the pipeline, including ones that address anemia, lymphoma, leukemia and solid tumors.
Celgene is among the research companies vying to commercialize chimeric antigen receptor-modified T-cell-based therapies that makes it possible to genetically modify a patient’s immune cells to fight cancer or destroy tumors. The company believes it will revolutionize treatment of hematological and solid malignancies.
On Friday, Celgene stocks closed at $136.90, down by $3.08 from the day before and nearer the low end of its 52-week range.
Catalyst and CytoDyn
In addition to the usual blue chip picks, investors should also consider dipping their hands in small caps such as Catalyst Pharmaceutical Partners (CPRX) and CytoDyn Inc. (OTC: CYDY).
Catalyst is working on drugs that will treat rare neuromuscular and neurological diseases such as the Lambert-Eaton Myasthenic Syndrome and Tourette’s disorder. Its closing price on Friday was $2.06, down by 16 cents.
Meanwhile, CytoDyn is nearing FDA approval of its humanized monoclonal antibody PRO 140, which is supposed to inhibit HIV infection. Unlike antiretroviral drugs, clinical trials of PRO 140 showed no toxicity and resistance with only mild side effects. It is being studied as a replacement for highly active antiretroviral therapy (HAART) since it only needs to be injected weekly or bi-monthly. CytoDyn believes that it can replace HAART or serve as a new tool in HIV treatment that will allow temporary discontinuation of HAART for the replacement or assessment of drugs being taken. The FDA recently allowed the company to test the antibodies on 40 screened patients as part of its Phase 2b clinical trial protocol.
CytoDyn closed at $0.74 on Friday, a cent down from the previous trading day.
When it comes to biotech stocks, patience is the key. Investors need to hold on for the long-term while learning more about how such stocks will become more valuable in the future.