Scanning The Biotech Landscape
Despite the
anemic malaise in the technology sector of the Nasdaq, I believe the
next few months will be very kind to many biotechnology companies. As a base,
the major biotechnology indexes have been holding their own and many companies
have recovered nicely since the March cardiac arrest. The Amex Biotech Index
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is close to approaching its spring highs and the Nasdaq Biotech Index
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is up over 40% for the year. Is there room to improve? I believe there is,
particularly for several companies. Historically, the last several months of the
year have been good to the biotech industry. During these months, there are
several major medical meetings highlighting data on developing new drugs. This
should create a spark for companies looking to gain the industry spotlight.
EntreMed
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Remember this company? It burst onto the cancer-treatment scene by a coming-out
article by the New York Times several years ago. That day, the company
became known to everyone with a remote interest in biotech stocks and the
potential to cure cancer. Its stock price loved the attention. However,
like all things, its fifteen minutes of fame ended and the stock price soon
followed. It had been hovering below the radar screen until recently.
EntreMed has been testing several anti-angiogenic drugs in humans and is
scheduled to report some data in the upcoming weeks. Anti-angiogenic compounds
choke off the blood supply to many types of cancers, with very few side effects.
The science behind their effectiveness is real and makes sense. When this
company came out of obscurity after the Times article, its pre-clinical
data to treat cancer in mice was fantastic. However, to go from mice to men is a
giant leap and we may soon get a glimpse of how gigantic.
EntreMed is scheduled to report phase
I clinical data on one of its anti-angiogenic compounds the week of November 7-11,
2000. A symposium on new drugs in cancer treatment is taking place in Amsterdam
during that time period. EntreMed is also scheduled to present data for the
first time from its phase I clinical trial going on in the U.S. If there is any
indication that the data is supportive, this stock will move.
Genelabs
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This company has developed a new drug to treat the disease SLE, Systemic
Lupus Erythematosus. Lupus is a disease where the body starts attacking its
own organs. The disease primarily affects women and has no cure. The drugs used
today to treat it are not very effective and have many side effects. Genelabs
filed with the FDA for a new drug application on Sept. 26, 2000 and was recently
granted priority review. Priority review means the FDA will speed up its review
of the new drug because of the paucity of treatments currently available for
Lupus. The clinical studies involving Genelabs’ new drug shows it to stop
disease progression in close to 70% of patients. I expect the FDA to make a
decision on this drug in the next few months and expect it to be positive. The
market for a new Lupus drug can exceed $100 million each year, so keep this
company on the radar screen.
Inhale Therapeutic Systems
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This company is developing technology to deliver drugs more effectively and
was recently highlighted in Barron’s. It is perfecting an inhaled
delivery system that can be applied to a broad range of widely used drugs. Many
drugs today have to be given by injections to be effective, and yes, this means
a shot. If a shot can be avoided and the drugs given another way, many patients
would be much happier. Inhale Therapeutic Systems’ flagship project is an
inhaled form of insulin to treat diabetics. The company is developing this with
Pfizer and Aventis SA and is in the final stage of human trials. It is several
years ahead of its rivals. Diabetes is a huge market for drugs and services and
an inhaled form of insulin to treat diabetics would easily generate over $1
billion/year in revenue.
Icos Corporation
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Icos is developing the next big drug to treat erectile dysfunction or
impotence. Pfizer’s Viagra now rules the landscape and is really not threatened
by any of its lesser rivals. However, Icos is about to change that landscape. Its
new drug for impotence, called Cialis, has been shown to be as effective as
Viagra and not have some of its side effects. The company is completing the
final phase III clinical trial in males and currently has an ongoing phase II
trial in females. The impotence market for males and females is a $1-2 billion
market and Icos is poised to start taking a bite out of that market. The company
may present some of its phase III trial data before the year is out and is
expected to apply for FDA approval by the middle of next year.
Affymetrix
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I could not leave you without talking about several companies in the genomics
sector. I love this sector and Affymetrix is a good place to start. The company
is the dominant maker of DNA chips, also called gene chips, used to sift through
the wealth of genetic information being discovered. A DNA chip is a glass slide
with thousands of pieces of known genetic material on it. This chip is what
helps scientists identify important, active genes related to disease amongst all
the excess material present in the genome. The gene chip industry is growing,
and growing fast. The demand for Affymetrix’s product was so strong last quarter
that the company posted its first-ever profit ($300,000 compared to a $5.8
million loss a year ago). The Street loved this unexpected news and responded in
kind. Affymetrix expects more profitable quarters ahead, given the expected
growth in the genomics industry. Despite the emergence of new competition and
some nagging patent litigation, I expect Affymetrix to maintain its greater-than-50%
market share for several years.
Abgenix
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Abgenix is a leader in the development of near-human monoclonal antibodies
as potential new drugs. Its XenoMouse technology uses genetically
engineered mice to produce monoclonal antibodies in great quantity. Monoclonal
antibodies are a promising new drug technology with more specificity and fewer
side effects than many of today’s therapies. The market for these new drugs is
growing and Abgenix’s technology is in high demand by many pharmaceutical and
biotechnology companies. This was clearly evident when Abgenix surprisingly
posted a small third-quarter profit for the first time. There should be more
profitable quarters in this company’s future as it continues to solidify itself
as the leader in monoclonal antibody production.
Millennium Pharmaceuticals
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This company has been visited before and is a leader in the genomics sector.
Millennium is in the business of identifying genes related to disease and using
the information in these genes to develop new drugs. The company has a strong
business platform with a broad range of applications. Millennium has the ability
to find new genes, interpret their function and analyze what proteins they
produce, and develop more effective drugs to treat disease. It is aligned
with a variety of major pharmaceutical companies and is developing its own
products. The company expects the FDA to approve its first two potential revenue-generating
products over the next several months. The first is a new drug to treat leukemia
developed with Ilex Oncology and the second is a genetic test to the predict the
spread of melanoma. This company should be on the near- and very long-term radar
screens.
Inkine
Pharmaceuticals
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This company recently received FDA approval for its first product and should start to see revenues by the beginning of the year. The product is a pill patients take to clean out their colon prior to colonoscopy or colorectal surgery. Today, there are over 10 million colonoscopies performed each year and most patients must ingest a bitter-tasting liquid to get their colon clean. Many times, the preparation is worse than the actual procedure. If I were a patient and had the choice between several pills and a gallon of bitter-tasting liquid to get my colon clean, I would take the pills. Inkine is also working on several other drugs, one in particular to treat a disease called Idiopathic Thrombocytopenia Pupura or ITP. They are expected to present some phase III clinical data on the effectiveness of this drug in Novermber and I expect this will cause some movement in the stock. The company also has a drug in the pipeline to treat inflammatory bowel disease, a difficult disease to treat today.Â
