With a market capitalization of 160 billion dollars, Pfizer (PFE) is one of the largest pharmaceutical companies in the world. In 2009, Pfizer had fourteen blockbuster compounds, with total sales of Lipitor exceeding 11 billion dollars. In 2010, Pfizer generated over 67 billion dollars in revenue - a figure that exceeds the gross domestic product of some states. However, over the years, with patents on blockbusters including Lipitor expiring and revenue growth slowing, Pfizer, along with many other big pharma companies such as Bristol-Myers Squibb (BMY), have partnered with smaller, more nimble biotechnology/pharmaceutical companies to make up for these shortcomings. With vast resources (capital, scientific and financial) Pfizer is able to perform analyses of a potential partnering company and its science that most cannot. With this realization, investments in partnered compounds/companies can generate great de-risked returns, as one can be confident that a Pfizer-partnered company has passed the "Pfizer test"--a thorough vetting of the management, science and company. Tracking the investing activities of Pfizer allows an investor a margin of safety, as some of the required diligence and initial screening have been performed.
Emergent Biosolutions (EBS) and Lpath (LPTN.OB) with market capitalizations of $575 million and $56 million respectively, are two companies that have undergone the vetting process at Pfizer and have current collaboration(s) with Pfizer.
It's not too often that one will find a small biotech company that has a solid developmental pipeline and is profitable. Emergent Biosolutions, based out of Rockville, MD, is a small company that is making money, has a number of promising candidates in the pipeline, and partnerships with big pharma. Emergent has a strong presence in the biodefense arena and primarily focuses in the areas of infectious diseases, cancers and autoimmune disorders with their compound SBI-087 partnered with Pfizer.
SBI-087, an anti-CD20 Small Modular Immuno Pharmaceutical Therapeutic molecule, is currently being studied for the treatment of rheumatoid arthritis, systemic lupus erythematosus and other autoimmune and inflammatory diseases. In rheumatoid arthritis, SBI-087 is currently in phase I studies evaluating a single dose of this drug in patients and phase II to study the efficacy and safety in seropositive subjects with active rheumatoid arthritis. Furthermore, this compound is being evaluated in phase I studies in systemic lupus erythematosus.
The main driver of revenue at Emergent is from their biodefense business and product, Biothrax. While there are other companies such as Human Genome Sciences (HGSI) working on an Anthrax vaccine, Biothrax is the only FDA approved vaccine to offer protection from infections with Anthrax. The company has shipped over 55 million doses of Biothrax, with over 10 million doses administered to over 2.6 million military personnel. In October 3, 2011, Emergent received an award to supply the United States government with 44.75 million doses of Biothrax with deliveries extending through September 2016. This five-year deal is valued at $1.25 billion dollars. This deal is quite significant when one considers a market capitalization of $575 million and 2010 revenues of $286 million and the full year 2011 revenue guidance of $270 to $290 million dollars.
With a pipeline of drug candidates exhibiting great therapeutic activity and over 50 issued or pending patents, Lpath is the leader in the space of bioactive-lipid research and drug development. As written here, Lpath has two compounds, iSONEP and Asonep, that have demonstrated great activity in clinical trials. iSONEP is partnered with Pfizer and has the right of first refusal for ASONEP. The iSONEP deal with Pfizer is estimated to be worth up to $500 million in milestone payments, with royalties that can exceed $800 million per year. If approved, peak annual sales of iSONEP can exceed $5 billion dollars.
The phase I iSONEP trial demonstrated significant efficacy in treating wet age-related macular degeneration or wet AMD. In the trial, iSONEP demonstrated the ability to reverse choroidal neovascularization or CNV--the driving force behind wet AMD. In Phase I, with a single dose of iSONEP, four out of 7 patients experienced a decrease in lesion size greater than 5 mm2, and the remaining three had a decrease in lesion size greater than 75 percent. Furthermore, a single dose of iSONEP completely or near-completely resolved the symptoms of two patients that were determined to have pigment epithelial detachment. A single dose of iSONEP elicited a "strong" positive response from the 5 patients with occult CNV 30-45 days post dose. If this trial is predictive of future, larger trials, iSONEP will supplant Lucentis - the current standard-of-care treatment for wet AMD with $2.9 billion dollar in sales in 2010.
Data from completed phase I studies of ASONEP in advanced solid tumors are encouraging. The drug was well tolerated up to 24 mg/kg and some patients had "long-term" stable disease. In the trial, patients had the following types of cancers: ovarian (5 patients), renal (4), colorectal (4), breast (2), prostate (2), melanoma (2), head and neck (2), and other (7). Eight patients had stable disease for greater than 2 months including one with carcinoid (15+ months) and one with adenoid cystic (8+ months), treated with 3 and 17 mg/kg, respectively. ASONEP is currently in phase II studies for renal cell carcinoma. In 2009, Drs. James Mier and Rupal Bhatt from Harvard demonstrated that ASONEP, as a single agent, slowed progression of renal cell carcinoma by 60 percent when compared to current standard-of-care treatments such as Sutent.
In December 2011, Lpath announced a stock offering, with most of the proceeds to be used to develop and start clinical trials for Lpathomab. Lpath plans to file one or more INDs with the FDA by late 2013. A molecule directed at Lysophosphatidic acid, Lpathomab has demonstrated promise in treating central nervous system disorders, pain and fibrosis. It is important to note that AM152, the lead compound from Amira that targets Lysophosphatidic acid receptors, was purchased by Bristol-Myers Squibb for $325 million in cash and $150 million in milestone payments.
Shares in Lpath have weakened recently after announcing the temporary suspension of the PEDigree and Nexus trials due to noncompliance of their fill/finish contractor. This delay, estimated to be approximately 6 months, presents an opportunity to initiate a position or add to a current one as the safety, efficacy, and potential of the iSONEP have not changed.
Disclaimer: All information is provided for informational purposes only and does not serve as investment advice or an offer of management services. There is no guarantee that the information is accurate. All information is subject to change, amendment, and correction without any notice. Any mention of current and past results does not indicate any future expectations or results. All investments are associated with risks and loss of money. Consult with a professional tax, accounting, legal, and/or investment advisor before making any investment decision.
Disclosure: I am long (LPTN.OB).