The massive pharmaceutical company Novartis (NVS) is trading at a 52-week high as investors grow their confidence in the company's financial position and pipeline. Looking at the actual sales figures of the company's major therapeutic products, you can see that much of the company's recent success is being fueled by its cancer drug portfolio.
The most prominent is Gleevec (imatinib), which is primarily intended to treat particular classifications of leukemia but had its indication expanded to treat myelodysplastic syndrome ((MDS)), gastrointenstinal stromal tumors (GIST), and other malignancies. Gleevec brought Novartis a whopping $1.46 billion in annual sales for fiscal year 2011 within the United States alone, which represented a 14% increase in sales relative to 2010. This was largely fueled by expansion of Gleevec's indication for treatment, which is an example of cancer drugs' ability to generate surprisingly high revenue over time through the treatment of new types of cancer through sNDA applications. This can compensate investors for the extremely long and costly clinical development of cancer drugs, but not always.
Novartis has other oncology drugs that have seen significant growth in the last few years too. Other notable drugs with forward momentum include Tasigna (nilotinib) for leukemia, Afinitor (everolimus) for kidney cancer, and Sandostatin (octreotide) as a supplemental treatment of cancer. Although its overall prospects in oncology remain strong, Novartis suffers from patent expirations like any other pharmaceutical company. Note that revenues of their oncology division continue to be dragged down by the patent expiration of their breast cancer drug Femara (letrozole), which lost exclusivity in 2011.
Understanding this, Novartis has been quite aggressive with the expansion of its oncology pipeline. For instance, the company intends to expand Afinitor's indication to treat lymphoma and non-functional carcinoid tumors by 2015. Then there are partnerships that Novartis has developed with a number of smaller companies developing more unconventional therapies. One example that I found interesting is Novartis' partnership with Ablynx (GM:ABLYF), a pharmaceutical company from Belgium that is best known for the development of nanobodies through their platform.
Many recent cancer therapies are being developed with the use of antibodies due to their high affinity for target cells (an extremely useful trait for targeting cancer cells), but Ablynx believes that nanobodies possess a few advantages over traditional antibodies due to their smaller size. The two main advantages offered by the small size of nanobodies include their ability to inhibit enzymes, and their ability to access receptor clefts. What is particularly exciting is that none of the advantages of conventional antibodies are left behind with the switch to nanobodies.
Novartis clearly saw potential in Ablynx's nanobody platform back in 2010, and partnered with the company to develop and commercialize two nanobody therapies for two separate, highly specific, and complex targets. TAS266, one of these nanobody therapies, received IND approval last year and triggered a milestone payment for Ablynx.
TAS266 targets DR5, which is a key receptor for the treatment of multiple types of cancer. Novartis seems to be considering this nanobody therapy for solid tumors, although there seems to be big potential for indication expansion.
Although the stock is highly illiquid and obscure in the United States, Ablynx is an interesting play that should be receiving a lot more attention due to its potential impact on the future development of cancer drugs. Unmentioned before is the fact that Merck (MRK) has also expressed interest in Ablynx's nanobody platform, which demonstrates just how exciting the new technology could be.
Novartis is also interesting. Even after moving to $65/share, it has a 3.8% dividend yield and has impressive revenue growth despite patent expirations. NVS is not cheap, but I think it has one of the better pipelines out of the major pharmaceutical companies.