There are investment opportunities in every sector, but biotechs launching new drugs offer a unique investment opportunity to take advantage of hyper-growth as sales increase dramatically. Quarter-over-quarter growth of 50% to 100% isn’t unheard of at the beginning of drug launches.
Here are a few investment opportunities from companies that have recently launched drugs.
An orphan investment opportunity
While that’s a pretty small number, it’s only the first quarter the drug has been on the market. For the remaining three quarters of the year, Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) is looking for sales between $14 million and $24 million. And that only includes U.S. sales. The drug, which will be called Lojuxta in Europe, should be launched next year based on a stamp of approval from the European Committee for Medicinal Products for Human Use last month.
Finding patients is the biggest challenge; Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) believes there are about 3,000 patients in the U.S. with HoFH and another 3,000 in the EU. As of the first-quarter conference call, Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) had 75 patients on therapy, so there’s considerable room to ramp up.
A fat investment opportunity
Two, in fact. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) and VIVUS, Inc. (NASDAQ:VVUS) have both recently launched obesity drugs.
For VIVUS, Inc. (NASDAQ:VVUS) and Eisai Co., Ltd (TYO:4523), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)’s marketing partner, the problem obviously isn’t finding patients. They’re everywhere. The opportunity is huge.
But the companies have to convince doctors that treating obesity with drugs is the right move after Fen-Phen and Abbott Laboratories (NYSE:ABT)‘ Meridia left doctors worried about side effects that might show up after a drug is on the market. It’s going to take time getting them comfortable with prescribing the drugs to a large number of their patients. And obesity drugs haven’t typically been covered by insurance, so they’ve had an uphill battle with reimbursement as well.
Investment opportunity in expanding indications
But the true potential for Iclusig is in expanding into the first-line indication, which requires investors to take a long-term approach to owning Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA).
The Epic trial, which pits Iclusig against Novartis AG (ADR) (NYSE:NVS)‘ Gleevec in patients with newly diagnosed chronic myeloid leukemia, is expected to complete enrollment by the end of the year and read out the primary endpoint a year later. Gleevec — to give some context on Iclusig’s potential — racked up $4.7 billion in sales last year.
Best investment opportunity?
Of the four companies, Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) looks like the best bet to me. I have no doubt that Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) can get Iclusig to blockbuster status, but at a market cap of $3 billion, there are a lot of sales already priced in. Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR), by contrast, is only a $1.7 billion company. The potential market for Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)’s and VIVUS, Inc. (NASDAQ:VVUS)’s obesity drugs is probably the largest of the three, but they’re also the most risky; it could take years for the companies to change the prescription habits of doctors and convince most insurers to cover the drugs.
The article Investment Opportunities in Drug Launches originally appeared on Fool.com is written by Brian Orelli.
Fool contributor Brian Orelli has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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