Here's an article I wrote about some biotech stocks and the industry in general. Hope some of you here find it useful:
The New Solution: Biotechs in the 21st Century
As Europe crumbles and the U.S. economy limps along, we fork over the down-payment on our increasingly globalized society. Modern technology has connected us in so many ways, but rendered industry after industry obsolete in the process. The financial system, as we know it, is deteriorating, and no one has a definitive solution. However, there are always exceptions to the rule, and broadly speaking, healthcare is that exception. Despite corporate cutbacks and bureaucratic hoops, the biotechnology sector should remain competitive and inelastic while other industries buckle under the pressure of time.
We are still mortal, and we still get sick. An authentic fountain of youth eludes the human race. We can transplant organs, perform laser surgery, and prescribe therapies of all forms, but the treatment of some diseases without major side effects has continually mystified the medical world. In the 21st Century, however, new medicines of all kinds, and biologic drugs in particular, have begun to revolutionize the healthcare industry.
For many long-suffering patients of serious conditions such as CNS disorders and auto-immune diseases, the days of popping chemically-synthesized, side-effect inducing pills like steroids and immunosuppressants are quickly coming to a close. The main catalyst for this paradigm shift in the world of medicine is the fast-growing sector of biotech companies which are developing the latest in biologic drugs - medicinal therapies that employ a unique formula of proteins, antibodies, or other “living” entities which exist in human (and sometimes non-human) blood on a cellular level. As these therapies quickly become the go-to drugs for a number of incurable diseases, the companies behind them compete for market attention in an ever-expanding field.
For a sure-fire way to gain a glimpse into the potential success of the fresh-faced young biotech companies cropping up recently, investors need only survey some of the leading drugs now populating the market. For over a decade, Remicade®, developed by once-floundering Centocor in the 90’s (now Janssen Biotech) has been revolutionizing the treatment of Crohn’s and RA by blocking tumor necrosis factor, a cytokine which causes the inflammation involved in these diseases. It is perhaps the most popular biologic in existence, now seeing $2billion in sales after being bought over by Johnson & Johnson: Remicade® is a benchmark for every other burgeoning biologic on the market.
But despite its reputation as a wonder drug, Remicade® is far from infallible. Because the medication was formulated using a mouse protein, long-term users are susceptible to developing antibodies to Remicade®. Thus, in recent years, the medical community has seen a dramatic spike in allergic reactions amongst these patients, which are often so severe that use of Remicade® must be discontinued.
Enter Humira®, manufactured by Abbott Laboratories (ABT), and Cimzia®, manufactured by UCB Group (UCB.BR) to capitalize on this market opportunity. Both of these drugs are different formulations of the TNF-blocking antibody, which use little (Humira®) or no (Cimzia®) mouse protein. That’s great news for former Remicade® patients in need of a powerful biologic alternative. It’s also great news for Abbott Labs and UCB Group, as their respective drugs gain market share in the treatment of diseases whose prevalence sees a stark increase each year, and for investors searching for companies which look to be long-term, steady investments. ABT, which has a recent history of unflinching growth, is trading at 52.81, with a market cap of over $82B and a high average volume of almost 9 million. UCB, which also retains drugs for epilepsy and Parkinson’s in its arsenal, trades at 29.71 EUR with a market cap of over 7 billion dollars.
Outside of the TNF-blocker debacle, another biotech company to watch is Biogen Idec Inc. (BIIB), which manufactures Tysabri®, an increasingly popular biologic for the treatment of Multiple Sclerosis. Already one of the big dogs of the biotech sector, trading at 110.75 with a P/E ratio of 23.07, word is that the company may acquire Human Genome Sciences (HGSI), a move bound to up the ante on its competitors.
Also, Sangamo Biosciences (SGMO) is an exciting biotech with a handful of highly experimental biologics in varying clinical phases. Fueled by its proprietary “SB” series of biologics which utilize “zinc finger DNA-binding proteins” in order to literally perform genetic editing to cells on the fly, Sangamo promises to treat everything from HIV to hemophilia to the genetic mutations that cause “Bubble Boy disease.” From a market perspective, Sangamo is one of the leading young biotechs, trading at 2.60 with a healthy average volume. With a comparatively large number of treatments in development, Sangamo also has plenty of room for growth, giving it an edge over many of its competitors.
And what about neurodegenerative disorders like Parkinson’s disease and Alzheimer’s?
Six million Americans suffer from these fatal ailments, and Parkinson’s disease alone represents a $3 billion global market. According to the Harvard NeuroDiscovery Center, “Because neurodegenerative diseases strike primarily in mid-to-late life, the incidence is expected to soar as the population ages. (By 2030, as many as 1 in 5 Americans will be over the age of 65.) If left unchecked 30 years from now, more than 12 million Americans will suffer from neurodegenerative diseases. Finding treatments and cures for neurodegenerative diseases is a goal of increasing urgency.”
Part of that challenge may be met, as several companies currently clamor for a breakthrough in Parkinson’s disease research and treatment. These biotechs aren’t only on the road to saving lives with phases of clinical trials for new pharmaceuticals. They’re also increasing shareholder value and helping to maintain an entire sector of publicly traded entities. Here are a few of the contenders:
Of course, big players like Novartis AG (NVS) and Sanofi-Aventis (SNY) are in the game. With Novartis’ Comtan (entacapone) medication, the Swiss juggernaut is sitting pretty with a P/E ratio of 10.90, a D/E ratio of less than 50 percent, a market cap of $132.13 billion and tangible dividends.
Sanofi-Aventis, one of the five largest pharmaceutical companies in existence, is working on treatment of Parkinson’s symptoms. With central nervous system disorders as one of their six major areas of focus, this Paris-based company is poised to capitalize on developed countries’ aging populations. With a P/E ratio of 7.64, a market cap of $90.38 billion and a dividend of 1.76, Sanofi-Aventis should retain its post.
Amarantus Biosciences Inc. (AMBS : OTC.BB) and Addex Pharmaceuticals (SIX-ADXN) are also companies to watch as they are both funded in part by grants from the Michael J. Fox Foundation for Parkinson Research. This research money not only provides these companies with a golden endorsement, but perhaps the tools to uncover the next revolutionary treatment.
Since the end of March, Allosteric modulation company Addex Pharmaceuticals has been knee-deep in Phase II clinical trials to evaluate dipraglurant in Parkinson’s patients and expect results next year. This is because the leading Parkinson’s therapeutic, levodopa, induces an even more debilitating movement disorder known as levodopa-induced dyskinesia (PD-LID). Addex trades on the SIX Swiss Exchange main board, has a market cap of $43.1 million CHF and 7.8 million shares outstanding.
Amarantus Biosciences, Inc., a four-year-old biotech out of California, is perhaps even more exciting as it is the rising underdog. The company currently trades on the U.S. Stock Exchange at 12 cents per share with a market cap of $9.72 million, but those numbers should soar as Amarantus’ new potent protein treatment undergoes clinical development. The treatment is called MANF and it’s directed at the cell death (apoptosis) responsible for Parkinson’s disease.
The real beauty of the patented MANF is that it could address a host of other major apoptosis-related diseases including Alzheimer’s disease, epilepsy, macular degeneration and traumatic brain injury. CEO Gerald Commissiong PhD has stated in previous news that AMBS aims to continue filing patents and building a strong intellectual property portfolio from their inventory of 88 cell lines referred to as “PhenoGuard Cell Lines.”
Amarantus has appeared frequently in recent headlines, as the company has expanded and diversified its corporate strategy with the intention of identifying complementary assets and unmet medical needs within its core areas of neuroscience research. In fact, Amarantus has just announced a new collaboration with Banyan Biomarkers to evaluate the efficacy of MANF in treating Traumatic Brain Injury, and the company has consistently attacked the growing biotech market with a number of forward-thinking strategies.
Valeant Pharmaceuticals International (VRX) is also in the mix as the company standing behind Zelapar -- a supplemental once-daily oral therapy for Parkinson’s patients being treated with levodopa/carbidopa. It has a forward P/E of 16.6, a PEG of 0.8 and a market cap of $13.08 billion.
Impax Laboratories (IPXL), trading at 17.85 with a P/E of 21.28 and over a billion market cap, may have a fine new biologic on its hands with IPX066, an extended release drug which improves motor symptoms in Parkinson’s. The drug has reportedly achieved top-line results in a recent Phase 3 clinical study and become a main focus for Impax. In addition, CEO Larry Hsu recently made an insider buy of 5,000 shares in his own company, a move which typically only spells one direction for that particular stock to take.
Despite the alarming state of the macro economy and other sectors, all of the companies mentioned above have clear goals and purposes. Aided by their surefooted ventures into the experimental realm of biologic drugs, they remain relevant and necessary in the postmodern technological age. The risk is sufficiently asymmetrical and the potential for long-term sustainability is high. As far as this financial journalist can tell, healthcare investors should seriously consider hopping on the biotech bandwagon.
