When RNA interference first electrified biologists several years ago, pharmaceutical companies rushed to harness what looked like a swift and surefire way to develop new drugs.
Billions of dollars later, however, some of those same companies are now losing their enthusiasm for RNAi, as it is called. And that is raising doubts about how quickly, if at all, the Nobel Prize-winning technique for turning off specific genes will yield the promised bounty of innovative medicines.
The biggest bombshell was dropped in November, when the Swiss pharmaceutical giant Roche said it would end its efforts to develop drugs using RNAi, after it had invested half a billion dollars in the field over four years.
Just last week, as part of a broader research cutback, Pfizer decided to shut down its 100-person unit working on RNAi and related technologies. Abbott Laboratories has also quietly shelved its RNAi drug development work.
“In 2005 and 2006, there was a very sudden buildup of expectation that RNAi was going to cure many diseases in a very short time frame,” said Dr. Johannes Fruehauf, vice president for research at Aura Biosciences, a small company pursuing the field. “Some of the hype, I believe, is going away and a more realistic view is setting in.”
The issue is that while drugs working through the RNAi mechanism can indeed shut off genes, it has been difficult to deliver such drugs to the cells where they are needed. At a time when hard-pressed pharmaceutical companies are already scaling back research expenditures, RNAi is losing out to alternatives that seem closer to producing marketable drugs.
“I have no doubt that at a certain point in time RNAi will make it to the market,” said Klaus Stein, head of therapeutic modalities for Roche. But he added, “When we looked into this, we came to the conclusion that we have opportunities that have higher priorities.”
Visit Pharmboy here for his previous articles on pharm/biotech stocks and chapters in his TA book.
UK-based GlaxoSmithKline was ranked as the world’s fourth largest player in 2009 (behind US-based Pfizer, France-based Sanofi-Aventis and Switzerland-based Novartis) based on prescription pharma sales. The company was founded in 2000 via the merger of Glaxo Wellcome and SmithKline Beecham and is headquartered in Brentford, London, UK. I wrote about GSK in my first PSW write-up in 2009.
In terms of its therapeutic focus, GSK owes its market-leading position in the global respiratory market to the Glaxo Laboratories legacy. Over 30 years ago, Glaxo launched Ventolin for the treatment of asthma and developed and launched Serevent and Flixotide in 1990. A combination of these two compounds—sold under the brand names Seretide/Advair ($7.8B in 2009). Similarly, GSK’s origins in the CNS market—currently its third largest therapeutic area of focus—can be traced back to the Wellcome and SmithKline scientists. Other therapeutic areas of importance include infectious disease and virology (vaccines).
The merger of Glaxo Wellcome and SmithKline Beecham created a company with a strong portfolio of blockbuster brands including Seroxat/Paxil (depression),now off patent Seretide/Advair (asthma, COPD) which dominates the respiratory arena, Wellbutrin (depression) now off patent, Augmentin (infections) now off patent, Avandia (diabetes), Imigran/Imitrex (migraine) and Lamictal (epilepsy) now off patent. However, since its creation in 2000, GSK has failed to add to its portfolio with any additional blockbuster drug launches. Instead, like its rival Pfizer, GSK has been forced to implement cost reductions in the medium term. Sales of Seroxat/Paxil have been eroded by generics (as have Augmentin and Wellbutrin ) in the US market prior to 2011. In addition, its second largest product Avandia faces declining sales as a result of concerns that have emerged regarding its side-effect profile (e.g., its association with a heightened cardiovascular risk). Many feel that the company faces pressure from investors to revive its performance. and must turn to M&A activity. Thusfar, GSK has been reluctant to make such a move. (Gilead for the HIV franchise?)
What GSK has done instead is sought to in-license product rights in order to boost the sales potential of its portfolio. Of the eight products launched by GSK since 2000, four have been in-licensed (Lexiva from Vertex, Levitra from Bayer, Boniva from Roche and Vesicare from Astellas). However,
Hola fellow PSW subscribers! The week is finally over, and the fluctuations in the market is making many of us jittery. This write up has a few picks for all, one that is conservative, one a bit more risk, and a fly-by-the-seat-of-your-pants short.
First, let’s take a look at the pharma & biotech sector in comparison to the entire market. The Healthcare Spider (XLV) and now the Biotech Spider (XBI) are now under performing the market. The most logical explanation for this is the passage of the health care bill. If the reimbursement is less, pharma and its compadres will also collect less. Many of the companies have already factored in the hit to earnings, so it is known the ramifications going forward. Drugs will always be needed, as they are one of the scientific advances for extending life (which in turn makes medical care more expensive). The population is not getting any younger, so economies of scale will kick in and increase revenue, giving incremental increases in profit (if it is a well run company). So, on to the picks.
Figure 1. Comparison of XLI & XBI against major market indices.
Merck & Company
Merck & Co. traces its origins to Friedrich Jacob Merck who purchased a drug store in Darmstadt, Germany in 1668; and Emanuel Merck who took over the store several generations later, in 1816. Emanuel and his successors gradually built up a chemical-pharmaceutical factory that produced — in addition to raw materials for pharmaceutical preparations — a multitude of other chemicals.
In 1891, George Merck established his roots in the United States and set up Merck & Co. in NY as the US arm of the family partnership, E. Merck (named for Emanuel Merck), which is now Merck KGaA. Merck & Co. was confiscated in 1917 during World War I and set up as an independent company in the United States. Between the wars and during World War II, the company was led by George W. Merck, who oversaw America’s germ-warfare research at Fort Detrick.
Figure 2. 2010 Merck stock price.
Merck has a broad therapeutic focus, with key products historically positioned within the cardiovascular (Zocor, Cozaar/Hyzaar), infectious diseases, endocrine, respiratory
This is a brief article of where the pharmaceutical industry has been, and where it could be headed in the near future. In contrast to past articles where I focused on the pipelines of GSK, LLY, MRK, BMY and ‘biotechs’ GENZ, GILD, and others, this is a summary of the industry. The overall market continues its grind up and I am gun-shy of its continued direction, but with the passage of the health care bill, biotechs that serve niche markets will be well positioned to see a rise both in stock price and potential M&A activity. In addition, as noted on Friday, March 19th on the laggers/leaders of the past month or so, Telecom and Healthcare were at the bottom of the pile. For the review of Big Pharma and some biotech picks at the end, generic companies are excluded from most data (Merck KGaA, Mylan, Teva and Watson).
From 2002 to 2009, the top pharmaceutical companies by sales had growth rates greater than 12% (compounded annually). Unfortunately, this growth is not sustainable and should move towards flat to nominal growth by 2014. The growth decline will challenge these companies to seek more profitable routes, including licensing and acquisitions. Picking the right companies based upon the science is at the forefront of good investing. Not they will all succeed because the science is sound, but understanding the molecule, target, and the disease helps guide smart decisions. Good management helps as well!
Let's start with a summary of potential acquirers. Table 1 is a list of the 15 largest pharmaceutical and biotech companies ranked by healthcare revenue. Some companies (e.g., Bayer and Johnson) have additional revenue which is not included the sales data.
Here’s another terrific post by Pharmboy, this time discussing Generic Drug Makers. – Ilene
Generic Drug Makers
Courtesy of Pharmboy
Coming to the end of a good year, and good riddance for some! Whilst the market has been irrational for some time, it is not about what we think but rather about what others that have money think. I have my notions, and here are a few companies that may do well in the New Year with a passed health care reform bill.
I really like the generic market right now. With patents expiring you can literally gauge how much a generic will make based on the patents expiring in the next few months. These generics are the vultures that follow the in a pack of lions. They have a good way of scavenging for their food and vultures have a distinct relationship with the lions. They may not come up with the drugs but they are definitely going to make a nice margin from them. But the competition is fierce these days, and competitors in the generic market include Watson (WPI), Teva (TEVA) , Dr Reddy’s Labs (RDY), Hi-Tech Pharmacal (HITK), Par Pharmaceuticals (PRX), and Caraco (CPD).
First up, Mylan Pharmaceuticals (MYL) – I know that Phil has liked Teva in the past and I have noted Mylan (#3 in generics), WPI and RDY (pre-GSK rumors). Currently, Mylan has blown through its 52 week high so is it still a buy? In short answer, yes. Mylan’s future comes from a swath of FDA approvals that have come in over the past few months.
Good day to all! The corn is ready for harvest, and the fall season is upon our Pharm. It is time for a quick review to see how we have done, and add a few more goodies to our Plots.
From our 15-Aug-09 list:
Novartis – Buying the $40 Jan10 C @ 6.40 ($1 premium), selling $45 Sept09 for 1.35 (also $1 premium). The $40s Jan10 are now 9.10, and rolled 2X to the $50 Oct, now at $0.45 (small loss on the roll). Net ~$2.1 up for the trade.
Bristol-Myers – Buy outright for the dividend, or buying the $20 Jan10 C @ 2.80 ($0.5 premium), selling $22.5 Sept09 C @ $0.55 and $22.5 P@ $0.7. I think this company has room to run.Bought outright and the stock closed on OPEX at 22.47…..can’t get better than that……Only stock on this position, but looking to sell the Nov09 24/22 P/C for 0.44/0.75.
SNY – Not as confident on the SNY story as of yet. I would sell the $32.5 Sept09 P, being prepared to roll down to the $30 Dec09s.These expired worthless….nice gain.
JNJ Buying the $55 Jan10 C @ 6.50 ($0.5 premium), selling $60s Sept09 C/P for 2.20. $55 Jan10s currently $6.10, and the Sept P expired worthless. Sept09 C rolled to the $60 Oct09 C for a 0.50 credit. Puts not sold as of yet.
Genzyme – Buying the $50 Oct09C @ 4.2 ($1.5 premium), letting it run for the next few days, and then selling $55 Sept09 for 1.25 or better (all premium).$50 Oct09 are currently $6.80 and the $55 Sept09s were rolled up to the $57.5s almost even. These will need cashed out for a $2.5 gain, or to be adjusted to the 50 Apr10 C for 9.8. To help offset the costs, I would sell the $55 Oct09 P for $1 or better. For a net $1 out of pocket and this can be collected by selling 0.50 per month over the next few months. Not too difficult.
Our plays from 14-Sept-09.
I like Shire as a growth story as well as a takeover candidate. The stock just created…
"We have the American Nurses Association, we have the American Medical Association on board," Obama told the weekend crowd in Grand Junction, Colo. "We have an agreement from drug companies to make prescription drugs more affordable for seniors. … The AARP supports this policy."
The drug makers went first in making a deal with the White House, agreeing to pick up $80 billion in additional costs over the next decade to help defray the expenses of the legislation. The American Hospital Association agreed to shoulder an additional $155 billion.
In exchange, both won assurances the White House would protect them against attempts in Congress to seek additional cuts in their projected Medicare and Medicaid payments.
The American Medical Association’s key issue was different. Doctors hope the legislation will allow them to avoid a looming 21 percent cut in payments under Medicare. The cost to the government for that would be about $230 billion over a decade.
Obama also agreed to require individuals to purchase insurance, reversing a position he held during his campaign. "My thinking on the issue of mandates has evolved. And I think that that is typical of most people who study this problem deeper," he said.
The more promotion there is for this package the more leery of it you should be. The reason the AMA, AARP, and now PhRMA are all lining up behind healthcare reform is because everyone of them has been bought out by sweeteners.
While everyone is concerned about rationing, I am concerned about lack of rationing. What incentives does anyone have to hold down costs?
Certainly big PhRMA has to be thinking more drugs will be prescribed or they would not have a huge ad campaign going while pledging $80 billion in lower drug costs. Here are two key questions:
In the spirit of the holidays, I’m sharing a happy truth: many people do, in fact, retire rich. Who are these rare birds and what can they teach us?
Rich Retire #1—The Pension Holder. If you have a large pension in 2014, you likely are or were a government employee. Many government workers receive pensions equal to 75-80% of their working salaries. In some government departments, it’s the unwritten custom for department heads to bump a worker’s salary 20% or so when he or she is a year or two from retirement. This boosts the employee’s base for his retirement pay.
Of course, in the private sector, pensions have gone the way of the slide rule. So let’s move on.
Rich Retire #2—The Small-Business Owner. If a self-employed person builds ...
I want to thank the American people for their patience and resolve during this trying time for our nation. But we did not come here just to clean up crises. We came here to build a future. (Applause.) So tonight, I return to speak to all of you about an issue that is central to that future -- and that is the issue of affordable automobile collision ins...
Those who took advantage of markets at Fib levels were rewarded. However, this looked more a 'dead cat' style bounce than a genuine bottom forming low. This can of course change, and one thing I will want to see is narrow action near today's high. Volume was a little light, but with Christmas fast approaching I would expect this trend to continue.
The S&P inched above 2,009, but I would like to see any subsequent weakness hold the 38.2% Fib level at 1,989.
The Nasdaq offered itself more as a support bounce, with a picture perfect play off its 38.2% Fib level. Unlike the S&P, volume did climb in confirmed accumulation. The next upside c...
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Stocks have needed a reason to take a breather and pull back in this long-standing ultra-bullish climate, with strong economic data and seasonality providing impressive tailwinds -- and plummeting oil prices certainly have given it to them. But this minor pullback was fully expected and indeed desirable for market health. The future remains bright for the U.S. economy and corporate profits despite the collapse in oil, and now the overbought technical condition has been relieved. While most sectors are gathering fundamental support and our sector rotation model remains bullish, the Energy sector looks fundamentally weak and continues to ran...
Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...
I officially bought 250 shares of EZCH at $18.76 and sold 300 shares of IGT at $17.09 in Market Shadows' Virtual Portfolio yesterday (Fri. 11-21).
Click here for Thursday's post where I was thinking about buying EZCH. After further reading, I decided to add it to the virtual portfolio and to sell IGT and several other stocks, which we'll be saying goodbye to next week.
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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