3 Drug Companies Treating Multiple Sclerosis
usman is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the last six months, the NASDAQ biotechnology index has risen by an impressive 26.72%. This means that biotech stocks, on average, had more than double the return of S&P 500 index. These impressive returns are, however, difficult to understand because medical news has not reported any major breakthrough treatment for the various dangerous diseases that exist today. This fact rings a bell in my mind and I ask myself whether these valuations are based on some solid information or not. It is not even possible to ascertain what percentage of biotech companies will be able to put drugs on the market in the coming months.
I have identified three companies that are involved in developing drugs for Multiple Sclerosis, or MS. For the purpose of this analysis, we must first understand what the disease is all about.
MS is a disease which is, at present, non-treatable. It is an auto-immune disease in which the body’s own immune system attacks the insulation around nerve fibers causing symptoms such as blurred vision, walking difficulties and fatigue. There are almost 400,000 Americans and more than 2 million people worldwide who suffer from MS. According to Sanford C. Bernstein & Company, the market for MS drugs is close to $14 billion annually with $8.5 billion representing the United States market only.
Stagnation for this company
With its major focus on developing an MS drug by the name of Ampyra, Acorda Therapeutics (NASDAQ: ACOR) is my first pick. The company has been pleased over the fact that its drug was accepted by the FDA for MS therapy. However, the use of the drug has only been found to improve the walking speed of MS patients.
As mentioned before, the disease causes a number of health problems and walking difficulties is just one of them. Therefore, a drug which only improves the walking speed of MS patients is not a very attractive solution for the disease.
Ampyra sales clocked at $266.1 million in 2012, and the company’s net sales guidance is in the range of $285 million-$315 million for 2013. This company forecast solidifies my opinion that the drug is not a big hit in the market. Therefore, we can expect the sales of this drug to stagnate in the coming future.
Other than that, the company has also been conducting studies for diazepam nasal spray, which will help treat people with epilepsy who have cluster seizures (acute repetitive seizures). I don’t expect the company to report any solid findings in the coming months. I would, therefore, give a sell recommendation to investors for this stock.
A solid drug in making
Another player in the biotech industry with significant focus towards developing MS treatment is Receptos (NASDAQ: RCPT). The company’s drug RPC 1063 is in the mid-stage testing phase. The drug will help treat MS and inflammatory bowel disease. Some analysts believe that RPC 1063 could be a successful multiple sclerosis treatment of its type. The drug possesses an excellent safety profile in non-clinical toxicology studies.
Since 2011, the company has been increasingly investing in the research and development of new drugs, and it is yet to report some solid revenue figures. The management of the company has a strong track record, particularly in the development of MS therapies.
It is estimated that RPC 1063 will reach the market in 2018 or 2019, and after that, it can expect a patent protection of nine to ten years so that the company can reap the benefit of its research and development. I am hopeful about this company’s future and I would give a buy recommendation to investors for this stock on a long horizon.
A successful range of drugs
Having already made two successful drugs to treat MS, Biogen Idec (NASDAQ: BIIB) is my third pick. The company is significantly larger than the previous two companies on the basis of market capitalization and the number of drugs that are in its pipeline.
Biogen’s AVONEX and TYSABRI are two drugs that have been effective for many MS patients. The company has recently gotten its third drug for MS treatment, Tecfidera, approved by the FDA.
The compound inside the drug, dimethyl fumarate, has significantly lower side effects. Furthermore, Biogen anticipates that the drug will have broad appeal in the market because it is administered orally and has a favorable safety profile. The drug is currently under review by the regulatory authorities in Australia, Switzerland, Canada and the European Union.
Once cleared, Biogen will benefit from increased sales of Tecfidera in these countries as well. The approvals will also make Biogen the leader in MS drugs. Biogen is not stopping there, as it has three other drugs in its pipeline for MS treatment.
Companies in the biotech industry operate in a risky environment. The risks can only be minimized when companies are focusing their research and development on developing treatments for different diseases or when a company has a proven track record of successful drug developments for a particular disease.
I take the practical approach towards companies, and, in my opinion, those companies which deliver results are the ones to invest in the biotech industry. Biogen and Receptos are two picks from the biotech industry with bright future prospects.
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