July 18, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Biotech stocks are risky all the time, it’s just part of the industry, and 2016 hasn’t been the best year for biotech so far. But there are undoubtedly some less-risky biotech companies for the more conservative investor, and The Motley Fool asked three of their analysts to pick one.
Keith Speights chose Ligand Pharmaceuticals , headquartered in La Jolla, California. The company has 11 products on the market, dominated by Kyprolis and Promacta, but Speights particularly likes the company’s pipeline. Three drugs that use the company’s technologies are in the queue for approval and eight are in late-stage development. “Ligand counts 21 Phase II clinical studies underway,” writes Speights. “The company has the same number of drugs using its technologies in early-stage testing. That’s a grand total of 64 drugs, targeting a wide variety of indications, that are either on the market, waiting to be approved, or in clinical development—that’s more than a number of the biggest biotechs on the planet can claim.”
A big part of the company’s strategy involves partnership with other companies. For example, on July 8 Ligand inked a worldwide license agreement with Gilead Sciences , which will allow Gilead to use the OmniRat, OmniMouse and OmniFlic platforms to identify fully human mono- and bispecific antibodies for a variety of diseases.
And on June 30, the company announced that its OmniAb platform had generated $4 million in combined payments through expansion of previous licensing agreements.
Ligand is currently trading for $125.45.
Brian Feroldi chose Thousand Oaks, California-based Amgen , saying, “This company has grown by leaps and bounds over the past few decades, and it’s no exaggeration to call it one of the most important healthcare companies in the world today.”
Various blockbuster drugs include Neupogen and Epogen, with Enbrel rising 24 percent year over year, and Kyprolis, a cancer drug, showing a growth rate of 43 percent. Nine of the company’s drugs had double-digit growth in recent years, and total company revenue growth was about 10 percent.
Feroldi notes that its new cholesterol drug, Repatha, hasn’t done much for the company’s bottom line, but if a long-term cardiovascular trial proves the drug lowers the risk of heart attacks and stroke, sales could really take off with a potential $2 billion in annual sales. The company also is working to position itself as a dominant player in the biosimilars market.
“Overall, Amgen really is the complete package,” Feroldi writes. “It’s growing, it pays a solid dividend, and it’s trading for only about 13 times next year’s earnings. That’s a combination that any investor can learn to love.”
Amgen is currently trading for $163.68.
The third choice is United Therapeutics , headquartered in Silver Spring, Maryland. The Motley Fool’s Cory Renauer indicates the company has a good track record of launching successful drugs in a small niche, primarily pulmonary arterial hypertension (PAH). He writes, “United Therapeutics has three versions of the drug treprostinil, a synthetic version of a natural vasodilator, on pharmacy shelves for PAH patients at different stages of the disease. Remodulin is delivered by infusion and is indicated for advanced-stage patients, Orenitram is an extended-release pill, and Tyvaso is administered by inhalation.”
From the first quarter of 2015 to the first quarter of 2016, total revenue rose 12.7 percent, even though sales of Remodulin and Tyvaso dropped. Despite that, and following similar historical trends, Renauer says, “I’m expecting growth, as cash flows from its PAH lineup have been successfully used to buy growth. For example, the company purchased U.S. commercialization rights for Adcirca from Eli Lilly for $150 million up front in 2008, and the drug is on pace to reach about $300 million in sales for United Therapeutics this year.”
In 2015, the FDA approved the company’s Unituxin for neuroblastoma, a rare pediatric cancer. That also provided the company with an FDA priority review voucher, which it then sold to AbbVie for $350 million. Unituxin, however, is projected to hit $60 million in sales this year.
United Therapeutics is currently trading for $111.84.
