A Company With a Lot of Positives
usman is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
This year has brought great prospects for biotech companies. Despite the fact that the biotech industry is a speculative growth segment, investors poured their money into this industry. I think this change in the public’s investment decision is not due to some altered perception regarding stock purchases. They are still following the most basic guideline of investing: the greater the risk, the greater the return. The difference is that the investor is now ready to take a little more risk by taking on biotech stocks. A number of different companies have performed well this year. Let’s see which of them are going to perform better in the future too.
Celldex with its list of risk minimizers
Biotech is not that simple to analyze, and anyone who has had some association with investment in a biotech stocks knows that the most important thing to look for are the risk minimizers of the company. If the risk minimizers for a company are sufficient then it can be a worthwhile asset for you.
Recently, I came across the drug portfolio of Celldex Therapeutics (NASDAQ: CLDX), and I was quite impressed with it. The company has more risk minimizers than any other company I have seen.
First of all, Celldex has a strong pipeline of products in clinical trial stages. Out of seven drugs in its pipeline, one of them is in phase III and three are in phase II clinical trials.
Secondly, the company’s main drug, Rindopepimut, a phase III component for the treatment of glioblastoma, is an orphan drug. The component has been designated with the status of an orphan drug by both the FDA and EU. This means that once it is approved by the FDA its price would be sky high. This is because orphan drugs are rare medicines for very rare diseases and you don’t have alternative treatments.
Another risk minimizer of the company is CDX-011 which is an antibody drug conjugate. It targets GPNMB, which is the protein responsible for the causes of breast cancer, melanoma and brain tumors. Antibody drugs are also in demand these days because they work on strengthening the immunity of a body to counter the disease.
It is hard to find a trashy company in the biotech sector these days. All of the companies have something to offer in the future and are currently performing pretty well. Some of the peers of Celldex have also had good runs this year.
Another drug maker Seattle Genetics (NASDAQ: SGEN) competes with Celldex on the basis of its antibody conjugates. Seattle has a more superior pipeline of antibody drugs because it is its only point of focus, whereas Celldex has diversified operations and has only two drugs in the antibody category. Moreover, Seattle Genetics already has an FDA approved drug on the market known as Adcetris, used for the treatment of lymphoma.
Also with Rindopepimut, Celldex is also under competition with companies making orphan drugs. One of these companies is Alexion Pharmaceuticals (NASDAQ: ALXN), which has been quite successful lately. The company got its first orphan drug, Soliris, approved by the FDA in 2011. This effected the profitability of the company drastically, with its net income increasing from $175 million in 2011 to $255 million in 2012. This was an escalation of over 45% and it gave the company more confidence regarding the success of orphan drugs.
Currently, Alexion is conducting further research on the compound of lead drug Soliris, and other than that, has 5 to 6 other compounds in the pipeline. Most of its pipeline compounds are is phase II clinical trials, which indicates that they are close to getting FDA approvals. With only one approved drug, Alexion experienced such a huge increase in income, imagine what it might achieve when more of its products in its pipeline get approved. Once Rindopepimut gets onto the market, it is expected to bring the same fortune for Celldex as Soliris is bringing for Alexion.
Celldex has a lot of factors that can ensure its success. Its strong pipeline products, with most of them in mid or late stage clinical trials, confirms the fact that it is very near an FDA approval. Its areas of research include treatments and drugs for cancer which are highly sought after these days. Additionally, the company has an orphan drug component, which upon its approval can be sold at a sky high price. All in all, I would say that the company has different set of operations and all of them are performance drivers for the company’s stock in the future. Therefore, I would advise investors to buy Celldex, as it is a solid investment opportunity.
The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.
usman iftikhar has no position in any stocks mentioned. The Motley Fool recommends Seattle Genetics. 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!