Small product base, huge potential
San Francisco-based Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) develops and markets cancer treatments. It currently has just two approved products, Kyprolis and Nexavar, that are both in EvaluatePharma’s list of the 30 highest selling orphan drugs in 2018.
Proteasome inhibitor, Kyprolis, comprised just $64 million of the company’s 2012 revenue of $362.2 million. In 2018, the MM treatment is expected to add $1.52 billion to the company’s top line.
Sales of Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX)’s liver and kidney cancer treatment, Nexavar, are shared with Bayer. The two companies split Nexavar sales of $1.02 billion in 2012. Expected sales of Nexavar in 2018 are about $1.46 billion.
Financially, Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) is one of the shakier companies mentioned, but the explosive top line growth from Kyprolis alone makes it very tempting.
Tomorrow’s cystic fibrosis blockbuster
The last two years have been very exciting for Boston-based Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). In May 2011, the company won its first FDA approval for hepatitis C treatment, Incivek. The company’s cystic fibrosis treatment, Kalydeco, was approved less than a year later.
Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) recorded total sales of $1.5 billion in 2012. Just $172 million of 2012’s revenue was from Kalydeco. In 2018, EvaluatePharma expects Kalydeco sales alone to reach $1.7 billion.
Like Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) has also allowed its bottom line to hover between profits and losses over the past several years. Both are sporting reasonably strong balance sheets for emerging pharma companies. Rather than take on debt to fund their expansions, both companies have relied on share dilution.
Rookie of the year or last season’s MVP
Personally, I prefer the slower, steadier growth from companies like Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), and Celgene Corporation (NASDAQ:CELG). Both companies have already proven that they are capable of maintaining profitability while continuing to advance their pipelines. As usual, riskier companies, like Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), offer much larger potential.
While the overall outlook for the pharmaceutical industry going forward is flat to negative, specialized treatments are going to be the bright patches of sun between the clouds. I hope you’ve found at least one or two companies here that you feel are worthy of further investigation.
The article 4 Companies Riding the Orphan Drug Rocket originally appeared on Fool.com.
Cory Renauer has no position in any stocks mentioned. The Motley Fool recommends Celgene and Vertex Pharmaceuticals. Cory is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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