May 3, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Everybody would love to invest in stock just before a company’s share value skyrockets, but there’s often considerable risk associated with those companies. Writing for The Motley Fool, Cory Renauer discusses bluebird bio , which he’s calling a high-risk moonshot, then discusses three companies whose stocks might explode with far lower risk.
Bluebird focuses on gene therapy, and it has a number of products in the pipeline, with only two in Phase II/III. Those are Lenti-D for cerebral ALD and LentiGlobin for transfusion-dependent beta-thalassemia.
On April 20, the company announced interim data from its Phase II/III study for its Lenti-D product in pediatric patients with cerebral adrenoleukodystrophy (CALD), which were very promising, they are only based on three out of 17 patients in the study. Renauer said, “I have argued that Bluebird might sway the FDA to approve a lentiviral-vector derived product without data from a single, randomized, blinded, and controlled study—the sort of data it always demands when considering new therapies for diseases with existing treatments—but it’s an extremely limited indication.”
And for his taste, the likelihood of the company getting more approvals that would make the company profitable are fairly slim.
So with that in mind, he suggests three companies that have “explosive potential” but aren’t quite so risky. They are Merck & Co. , Biogen , and Vertex Pharmaceuticals .
Merck’s a solid company anyway, but its Keytruda, one of the first immuno-oncology drugs approved, is being investigated for use in more cancer types—many, many more. It’s being investigated in more than 200 trials and in more than 100 combination therapies in more than 30 tumor types. One example is a Phase III trial in combination with Incyte ’s epacadostat in melanoma. After agreeing not to use that combination, a PD-1 blocker and IDO1 inhibitor in melanoma, Merck bought Iomet Pharma so it now has its own IDO1 inhibitor to study in combination with Keytruda.
In short, Keytruda had $524 million in sales its first year on the market and is only going to expand. Renauer writes, “I’ll be surprised if it doesn’t at least double this year. If just a handful of those combination studies in other tumor types lead to further label expansions, Keytruda could boost the company’s annual sales of $39.5 billion last year by more than $10 billion in the years ahead.”
Cambridge, Mass.-based Biogen hit the news today when it announced it is spinning off its hemophilia business into a separate, public company. But in terms of its shot at soaring stocks, Renauer and pretty much everyone else is looking to the company’s aducanumab for Alzheimer’s disease. Anything in Alzheimer’s research is high risk, but even a modestly successful drug can rake in a lot of money. But the drug has showed a statistically significant improvement in two measures of cognition over placebo. As a result, the drug was streamlined past Phase II trials and directly into a Phase III clinical trial.
Unfortunately, there’s likely to be no news on the drug this year. One of the other company’s intriguing pipeline drugs is Anti-LINGO, which appears to regenerate nerves damaged by MS.
Renauer notes that if aducanumab fails in the trial, the company could try a combination therapy with Eisai’s BACE inhibitor E2609. “From an investor’s standpoint, a win for Biogen’s Alzheimer’s programs would be a lot of icing on an already big cake.”
Vertex is clearly a company to watch. It brought out Kalydeco and Orkambi for cystic fibrosis (CF) and they brought in about $1 billion last year. But CF is a complicated disease caused by about 2,000 known mutations in the CFTR gene. Vertex’s drugs only treat some of them … so far.
Renauer does indicate that the company might be higher risk than Biogen or Merck, writing, “With Vertex shares trading at about 52-times forward earnings, it’s the riskiest of these three alternatives to bluebird bio. Given its dominance of the cystic fibrosis space and room to grow, I’d say it’s a far safer bet in the long-run.”
There have been hints that Vertex might be in the market to buy a company, as well. Pricing for Orkambi is a controversial subject, costing $259,000 per year. Alternately, the company announced in October 2015 that it has a collaboration deal with Cambridge, Mass.-based CRISPR Therapeutics to see if CRISPR-Cas9 techniques can be used on CF and sickle cell disease. It’s also expected to start making a profit sometime this year.
