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 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 transform the world of medicine by becoming 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 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 $2 billion in sales after being bought over by Johnson & Johnson (NYSE:JNJ); 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 (NYSE: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. (NASDAQ: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.
As prescriptions for the more popular biologics on the market find their way into patients’ hands daily, new biotechs continue to sprout out of the cracks in Wall Street, all of them hoping to develop the next big drug. But which of the young biotech companies have the legs for the kind of growth and sustainability that can make them the next Janssen?
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.
A fresher company which trades at .18 and has made a lot of moves lately, is Amarantus Biosciences (AMBS.OB). Amarantus is a biotech whose proprietary focus is also Parkinson’s treatment by way of MANF, a disease-modifying protein which fights apoptosis, or the “programmed cell death” responsible for Parkinson’s and other neurodegenerative diseases. Amarantus has appeared frequently in recent headlines, as the company has made strides by obtaining a grant from the Michael J. Fox Foundation for Parkinson’s research and expanding its overall business strategy. 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 this growing market with a number of forward-thinking strategies.
Sangamo Biosciences (NASDAQ:SGMO) is yet another 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.
Because of the complexity of these companies’ goals and the exponentially increasing number of biotechs entering the market, this sector can be tricky for investors to navigate. Based on current trends, however, these three companies appear to be a safe bet in the development and production of biologic medicinal therapies, which is proving to be one of the fastest-growing industries in this unstable economic climate.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.