The biotech field is a horn of plenty for those keen on understanding the nearly limitless scope of human ingenuity. From new drugs to new platforms and tools for treatment, to new genetic research that has cracked open entirely new vistas of research and development, the field is virtually ablaze with energy and activity.
And off in one corner of that vast laboratorial expanse lies a group of companies whose niche is circumscribed exclusively by the development of unique delivery systems for a variety of medications.
While it used to be that oral delivery, injection or IV were the principal methods of drug delivery, today transdermal patches, inhalation systems, creams and ointments vie with extended release capsules, continuous delivery systems and biodegradable polymeric-based delivery for the most efficient - and least disruptive - options for patients.
Below I've surveyed four companies working the drug delivery ward, each of whose stock has been on the move of late.
Recent Merger Adds Heft; Builds Investor Confidence
Alkermes Plc (ALKS) is a $2.8 billion company by market cap whose stock has risen over 230% since the market bottomed in the winter of 2008/2009. The company, based in Dublin, Ireland, has a 25 year history in the pharmaceutical and biotechnology field that has found favor with both retail and professional investors alike, the latter to the tune of over 90% ownership in the company's float.
This is a company that doesn't seek to discover or develop new drugs, or license old ones. Alkermes' business is built exclusively on improving existing drugs, mainly by conceiving and developing new methods of administering them.
The company currently earns royalties and/or manufacturing revenues for 20 approved drugs from a variety of therapeutic classes and independently markets two of its own products, Vivitrol, an extended release injectable for the treatment of alcohol and opioid dependence, and Risperdal Consta, a similar application for the treatment of schizophrenia and bipolar disorder.
Alkermes' strength lies precisely here: in developing both slow release injectable and oral delivery drugs. And its best hopes appear to lie with the following treatments.
Risperdal Consta, mentioned above, is a Johnson & Johnson (JNJ) property, from which Alkermes receives both manufacturing revenues and a 2.5% royalty on global sales. The drug has annual revenues of close to $1.5 billion and should continue to increase market share. It also has a full decade of operating health before the patent runs dry.
Bydureon is a once-a-week, anti-diabetic treatment developed by Amylin (AMLN) that's on its way toward $1 billion in annual sales. Alkermes stands to earn an 8% royalty from its partnership with that company.
Invega Sustenna is another J&J treatment for which Alkermes has negotiated royalties. This long-acting injectable antipsychotic is a next generation treatment that could take time to garner meaningful revenues, with much depending upon the U.S. market and how fast longer acting treatments for this class of disease become the preferred remedy.
Finally, the company's merger with of Elan's (ELN) Drug Technology unit a year ago should add a potentially strong source of revenue. That deal was worth just under $1 billion and elevates the company's annual base sales to roughly $600 million. When all the synergies and efficiencies are worked through, I believe the market will reward Alkermes with a higher multiple than it has traditionally received and advance the stock toward a fairer value at $30 per share.
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Sweeter than Wine
The succulently named Nektar Therapeutics (NKTR) has also seen its share price appreciate over the last half year, but it hasn't come without some wild swings in the interim.
All told, the stock has gained 10.4% over that period - for those who managed to weather the roller coaster ride.
Look here:
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Nektar's business lies in developing drug delivery mechanisms that employ molecule and particle engineering. In short, that means they take an existing drug, and, using its own proprietary platform, re-engineer the drug molecule using polymer chemistry to create a new entity that's either more readily absorbed or that self-disperses at a slower rate, or that produces a novel therapeutic effect altogether.
Nektar has a market capitalization of just over $1 billion, has been a publicly-traded company for 19 years and is 93% institutionally owned.
Part of what makes the company so appealing to institutions is that, like Alkermes, it already has a strong and growing list of approved drugs marketed in tandem with major pharmaceutical companies, including (among the all-stars) Roche (RHHBY.PK), Bristol Myers Squibb (BMY), Amgen (AMGN), Pfizer (PFE) and Schering Plough.
In addition, the company has 18 more products in the pipeline, eight of which are currently in phase three or have passed phase three and are awaiting European approval or an FDA 'new drug application' signature. Ten major megapharma players have already teamed with the company on these 18 treatments, including German giant Bayer (BAYRYPK) for two of them, AstraZeneca (AZN) for two, Baxter (BAX) for two and UCB Pharma (UCBJY.PK) for another two.
Fourth Quarter results will be released on February 28th, kicking off what should be a very exciting year for Nektar.
Canadian Players
Intellipharmaceutics International Inc. (IPCI) is a NASDAQ-listed, Canadian-based company with a fifteen year history, and ten treatments currently in its R&D pipeline.
Its current lead drug candidate is a generic knock-off of Novartis' (NVS) Focalin XR, a treatment for children aged six and older with attention deficit hyperactivity disorder (ADHD) with annual sales of over $650 million in the United States alone.
IPCI's Hypermatrix technology allows the company to reformulate existing oral delivery drugs into extended release applications and also permits them to apply for an FDA 505(2)(B) shortcut to approval, thereby saving significantly on the time and resources that weigh on full scale clinical trials.
The company has six such abbreviated New Drug Applications (ANDAs) in the pipeline that could bring swift commercialization for its treatments, should the FDA signs off.
In the meantime, operating cash is ever the problem for microcaps, and IPCI is no exception. With the company's most recent financing, a $1.5 million convertible debenture offering, now complete, the company appears to have cash enough to take it through completion of at least two of its abbreviated FDA trials, due in 2013.
For stockholders, however, those trials can't be completed soon enough. The stock has been on a serious slide for the last six months.
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Pint Size and Fits Under the Tongue
Finally, Generex Biotechnology (GNBT.OB), a pink sheet traded company with a miniscule market cap but seemingly great potential, has developed a new delivery system for a host of drugs, but is currently focused on its diabetes treatment, Oral-lyn.
What is it? A spray that's sprayed in the mouth and is absorbed beneath the tongue (and the rest of the mouth's manifold absorbent lining), saving the patient the dread and discomfort of needles as well as inhalation systems that patients seem also to fear. To digress a moment, both Novo Nordisk (NVO) and Pfizer dropped their lung aerosol diabetes treatments after spending a collective $3 billion on the research required to get FDA approval. Patients simply didn t want to use them.
Generex's spray is more humane and it appears to work. It's quite possible that Novo Nordisk, the world's largest maker of insulin, would be a natural partner for the company. But until Generex secures financing to complete its current round of clinicals, don't bet on any deals. Until then, the company's shares are floating lower.
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The best thing to say about this company may be that the last two times volume spiked this high - once in early 2006, the next in mid-2009 - the stock's price doubled.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
