Philanthropy: A Huge Driver Of Speculative Bio-Pharma

 |  Includes: ARIA, BMY, DNDN, GS, GSK, JPM, MS, VRTX
by: StockMatusow

Have you been wondering lately why some smaller bio-pharma companies, many with poor balance sheets but potential blockbuster drugs, seem to attract so much institutional investment?


Philanthropy etymologically means "the love of humanity" - love in the sense of caring for, nourishing, developing, or enhancing; humanity in the sense of "what it is to be human," or "human potential." In modern practical terms, it is "private initiatives for public good, focusing on quality of life" - balancing the social-scientific aspect emphasized in the 21st century, with the long-traditional and original humanist core of the word's ancient coinage. This formulation distinguishes it from business.

Many philanthropists have a ton of money, and many multimillionaires and billionaires seek to do a lot of good for humanity with it. This is where bio-pharma companies with potential blockbuster drugs enter the picture.

These Companies offer hope for many who suffer from various forms of cancer and other serious diseases and ailments. As society further progresses in technological advancement, the hope to find treatments and cures increases.

Big money philanthropists tend to invest through big institutions like Morgan Stanley (NYSE:MS), JP Morgan Chase (NYSE:JPM), and Goldman Sachs (NYSE:GS), to name a few.

Ever notice a lot of these speculative companies with these potential blockbuster drugs often present at large conferences held by the above firms? In part, it is because there are many mega rich philanthropists in attendance at these meetings who look for such companies to put their money into. They sincerely want to help society advance and ease suffering. Many of these super rich people are truly very decent human beings just trying to do good with their money.

Understanding this can help you make money from these companies, and even feel good about doing it. The more institutional investment you see in these companies often translates into a much higher current and future pps. Let's take a look at the institutional investment percentage in some of these companies and their key potential blockbuster drugs;

Dendreon (NASDAQ:DNDN), % Held by Institutions: 66.30%

Potential blockbuster drugs

  • Provenge (sipuleucel-T), an active cellular immunotherapy for the treatment of metastatic, castrate-resistant prostate cancer;
  • DN24-02, an investigational active immunotherapy for the treatment of patients with bladder, breast, ovarian, and other solid tumors expressing HER2/neu;
  • TRPM8, a small molecule agonist to transient receptor potential ion channel, for multiple cancers.

The company also has a range of products in preclinical studies, which include Carcinoembryonic antigen for the treatment of lung, colon, and breast cancer; and Carbonic AnhydraseIX for the treatment of kidney cancer.

Ariad Pharma (NASDAQ:ARIA), % Held by Institutions :59.80%

Potential blockbuster drugs

  • Ridaforolimus, treatment of metastatic sarcomas, breast cancer, endometrial cancer, prostate cancer, and non-small cell lung cancer;
  • Ponatinib, a pan BCR-ABL inhibitor in phase 2 clinical trial for applications in various hematological cancers and solid tumors;
  • AP26113, an anaplastic lymphoma kinase inhibitor in preclinical studies for the treatment of various cancers, including non-small cell lung cancer, lymphoma, and neuroblastoma.

Human Genome Sciences (HGSI), Held by Institutions :82.50%

Potential blockbuster drugs

  • BENLYSTA, treatment for systemic lupus erythematosus;
  • raxibacumab. treatment for inhalation anthrax.
  • Mapatumumab, treatment of non-small cell lung cancer, multiple myeloma, and hepatocellular cancer.
  • CCR5 mAb, a human monoclonal antibody to the CCR5 receptor for the treatment of ulcerative colitis.

Vertex Pharma (NASDAQ:VRTX) % Held by Institutions :93.90%

Potential blockbuster drugs

  • Telaprevir (VX-950), treatment of hepatitis C virus (HCV) infection.
  • VX-222, targeting HCV infection.
  • VX-770, treatment of cystic fibrosis.
  • VX-809, targeting cystic fibrosis.
  • VX-509, treatment of rheumatoid arthritis.
  • VX-765, targeting epilepsy.
  • VX-759, treatment of HCV infection.

VRTX has a real nice pipeline going for it. It is also one of many rumored buy-out targets, as huge pharma companies such as Bristol-Myers (NYSE:BMY) have been gobbling up these smaller bio-pharmas lately. However, the market cap on VRTX is rather high at over 7.5 billion dollars, a hefty price tag for any company looking to buy it. Regardless, this company looks impressive at first glance.

As I mentioned in my last article about Dendreon, these stocks can fall just as fast as they can rise. Those who invest in these companies need to keep a sharp eye on every possible development that can seriously effect these stocks. All it takes is one negative setback in a clinical trial, and the stock prices can get cut in half overnight.

Philanthropists are not as concerned with the stock prices as they are about these potential blockbusters having success. However, they will run for the hills if they think any of these companies are failing to deliver on the potential treatments and cures.

You can certainly benefit from these philanthropists' generosity and sincere desire to help these companies better society, but be sure to be completely aware of the risks.

Disclosure: I am long ARIA.