Buy These Biotech Companies for Long-Term Growth
Madhukar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
According to IBISWorld, revenue of global biotechnology companies will surge to $262 billion this year, up by 12.7%, year-over-year. This growth is due to rising research and development of new drugs, along with well-established production, commercialization, and distribution processes.
Here are three biotech companies that are developing new drugs, which have potential to provide upside to each company in the future. Will this potential translate into any interesting investment opportunities?
New blockbuster drug in the making
ACADIA (NASDAQ: ACAD) is developing its new drug, “Pimavanserin”, which is used for the treatment of Parkinson’s disease psychosis, or PDP. This disease is the second most common neurological disease after Alzheimer’s disease psychosis, or ADP. There are around 500,000 patients in the U.S. suffering from this disease. The company will file an application with the U.S. FDA for the drug’s approval in the second half of next fiscal year and will launch it in 2015. Pimavanserin is expected to generate revenue of $108 million in 2015 from U.S. PDP patients and will reach peak sales of $348 million in 2018.
ACADIA is also testing Pimavanserin for the treatment of Alzheimer’s disease psychosis, or ADP. The company will initiate a level two feasibility trial in the second half of this year and invest around $28 million this year in trials. There are around 5.4 million Americans suffering from Alzheimer’s, and psychosis develops in 50% of cases, providing a huge potential market. The company expects to achieve revenue of $27 million from treating ADP in 2017, which will peak at $546.4 million in 2022.
New drugs for cancer treatment
Celldex's (NASDAQ: CLDX) new drug “Rindopepimut” showed positive results in treating patients suffering from glioblastoma multiforme, a form of brain cancer. This vaccine is also known as CDX-110.
It is a promising drug, as the overall survival rate of patients using it increased from 12-16 months, to 20-22 months in the preliminary result. Celldex will conduct further clinical trials in phase three, and it plans to launch Rindopepimut by 2016 in the U.S. The drug will generate revenue around $119 million by 2016.
Additionally, Celldex is developing Conjugate, or CDX 011, which will be used in the treatment of breast cancer, more specifically to target Glycoprotein non-metastatic b, or GPNMB, which is a gene associated with triple-negative breast cancer, or TNBC. The company has completed two phases with the drug so far, and CDX 011 achieved a response rate of around 32%. There are around 9,000 patients with high GPNMB triple-negative breast cancer. Celldex will initiate the pivotal studies on in the second half of this year. It anticipates initial sales from the drug will be around $24 million in the U.S. in 2016 and reach peak sales of $534 million in the coming years.
Promising drug pipeline
Alnylam (NASDAQ: ALNY) achieved positive results for its new drug, ALN-TTR02, which is used in the treatment of TTR-mediated amyloidosis, or ATTR. Mutation in the TTR gene, which is predominantly found in the liver, causes ATTR.
AALN-TTR02 has shown a 93% reduction in wild-type and mutant transthyretin, or TTR, genes. TTR genes cause abnormal amyloid proteins that damage organs and tissue, which can result in death. Alnylam will initiate the phase three trial by the end of this year, and this drug might receive approval by next year, or by 2015, in the U.S. There are around 50,000 patients globally suffering from various kinds of ATTR. Therefore, this will generate revenue of around $4.6 million in 2016 and reach $57.4 million in 2017.
Alnylam is also developing ALN-AT3 for the treatment of hemophilia and rare bleeding disorders. Patients suffering from hemophilia bleed for longer time than normal. The company plans to initiate phase one testing of ALN-AT3. Results from animal testing are promising, as it has reduced Antithrombin levels. Antithrombin is a protein that inactivates enzymes responsible for blood coagulation. A six week dosage was given to animals and showed positive results. Alnylam will file an investigational new drug application this year, and phase one will begin. Hemophilia is a hereditary disorder, and there are around 40,000 patients in the U.S. and European Union. This drug will access the global hemophilia market, which will grow from $8.9 billion last year to $11.4 billion by 2016, up by a Combined Annual Growth Rate (CAGR) of 5.9%.
Bottom line for investors
All these companies have a few drugs in the pipeline, which provide a promising future. ACADIA's new drug Pimavanserin has huge potential in ADP and PDP treatment. Positive results from clinical testing will boost investors’ confidence in this stock.
Celldex is focusing on treating both breast cancer and brain cancer, as it is moving ahead with new drugs Conjugate and Rindopepimut.
ALN-TTR02 drug could be a game-changer for Alnylam, and ALN-AT3's future growth prospects are sound.
I will recommend buying these three stocks for long-term growth.
Obamacare will undoubtedly have far-reaching effects. The Motley Fool’s new free report, “Everything You Need to Know About Obamacare,” lets you know how your health insurance, your taxes, and your portfolio could be impacted. Click here to read more.
Madhukar Dubey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!