This Biotech Stock Looks Great for the Long Run
Terry is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When you are looking to add a biotech stock to your portfolio, most of the small cap biotech stocks have a small-sized pipeline. Also, the small cap biotechs tend to target one area; for example, they may only target cancer. This brings up a biotech that will have substantial value in the future. This biotech company is known as Opko Health (NYSE: OPK) which has diversified itself in targeting many types of diseases.
Diversity is the key to success
The types of categories that Opko is diversified in are: Rolapitant, AntagoNAT, and JNK kinase. There are other areas as well, such as 2 diagnostic tests, but these are the important ones to focus on in this article. The company is run by Chairman, and CEO Dr. Phillip Frost. Dr. Frost is best known for buying up small cap biotech companies and then selling them to big pharmaceutical companies. For example Dr. Frost sold IVAX for $7.5 billion to Teva back in 2005. This is part of what the CEO Dr. Frost has done to be known as a success in the biotech industry.
Rolapitant was a drug that was acquired by Opko from Schering-Plough. The drug is used to treat cancer patients who are suffering from nausea and vomiting from chemotherapy. This drug is currently in a phase three trial, and will be huge for this company if it is approved by the FDA. One key advantage about this drug is that it works in cancer patients several days after it's taken. Dr. Frost knew of a biotech company that has dealt with this type of drug before, so he licensed it out to Tesaro. Opko will receive milestone payments, and royalty from sales when the product is approved for marketing.
AntagoNAT is an RNA drug that helps create proteins. Opko also acquired the company that led the research in this RNA oligonucleotide field. This company, that Opko acquired back in 2011, was a privately held company known as CURNA. The good part about this drug is that it is not specifically made to target only one disease. With this drug, the company can go after cancer, heart disease, metabolic disorders, and genetic anomalies. If all goes well with early stage toxicology tests, the company can make billions from this type of drug.
There are many types of Neurodegenerative disorders, and it seems that Opko may have the drug molecule to help these patients that suffer each day. Opko had licensed a drug from Scripps Research Institute in which it stops cell death in neurodegenerative disorders. A lot of the neurons in diseases like Parkinson's disease arise from cell death. This drug that Opko licensed was shown in preclinical models in animals to stop this cell death. This market is of substantial size coming in at $2.6 billion, so, this success would bring a lot of value for the company.
Probability of acquisition
Opko now has a lot of trial candidates in a variety of disease areas. One company that might acquire Opko might be Pfizer (NYSE: PFE). Pfizer needs new therapies for its pipeline. It is losing a lot of patents on drugs in the market, and it will need to acquire a company like Opko with a big pipeline of various drugs. Pfizer had lost the patent of Lipitor back in 2011, and at the peak point of its sales, the drug had achieved sales of $12 billion. Also, Pfizer has Viagra going off patent in the U.K., which will hurt sales. I think that Pfizer can benefit from acquiring the diversified pipeline of Opko to continue producing blockbuster drugs on the market.
Another big pharmaceutical company that would want to take a look at Opko is Merck (NYSE: MRK). Merck is struggling big time in the research and development of late stage drugs. Many analysts are saying that the company's osteoporosis drug odanacatib doesn't seem like it will lay out good results. Also, many analysts are skeptical of the cholesterol drug Vytorin. Vytorin is supposed to reduce risk of heart attack and strokes in patients. Merck, so far, has shelled out $8 billion and has had a huge blunder of misses in late stage trials. The company may benefit by acquiring Opko as it may give the struggling big pharma a huge boost.
Opko has a lot of mid stage and late stage products that will boost its value in the coming months. Long-term investors should do their due diligence and learn about the fundamentals of the company. Dr. Frost is known for building up small cap biotech stocks, and then selling them later to big pharma for billions of dollars. As mentioned, many big pharmaceuticals companies are seeking small cap biotechs to acquire so Opko would definitely be a good stock to own.
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Terry Chrisomalis 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!