March 20, 2014
ISIS makes it to 1st Tier, NVAX & SGMO Join Tier 2
SuperBios: Amgen, Biogen, Celgene & Gliead – These four companies (a.k.a. The Four Horsemen) have emerged as the leaders of the biotechnology sector and have become true global players that, due to their size and innovation, can compete evenly with the Big Phama companies on the traditional pharmaceutical fronts – in-house drug development, regulatory and sales. In our view, what is separating the Big Four from Big Pharma and their higher growth rates is their ability to strike more productive and valuable deals with smaller biotechs. Time and time again over the last few years we have seen the Big Four ink partnerships and make strategic acquisitions that traditionally have been the exclusive turf for Big Pharma. MTSL recommendation Celgene fits this bill as they have done a tremendous job of leveraging their Imid technology platform with acquisitions (e.g., Abraxane, Avila, etc.) and forming numerous development deals to augment their pipeline.
1st Tier biotech companies exceed $3 billion in market capitalization, usually have at least one marketed product and have become profitable or are on their way towards profitability. In addition to an approved drug, Tier 1 Biotechs have solid to very deep R&D pipelines to fuel future growth. ALKS, INCY, PCYC, and now ISIS all exhibit these characteristics. The validation of either an individual blockbuster drug (PCYC) or pipeline (ISIS) are often what drive a biotech valuation into the 1st Tier, and sometimes you find a true gem like INCY that has both a blockbuster drug (Jakafi) and a stellar pipeline (JAKs & IDO). In our view, at least one of our current recommendations will join the SuperBios.
2nd Tier biotech companies have a market capitalization between $500 million and $3 billion, and represents the MTSL sweet spot with six of our recommendations residing here when factoring in the two new members – NVAX & SGMO – minus ISIS to graduation to the 1st tier. Tier 2 biotechs usually have a recently approved drug that either is early in its launch (PCRX) or in some cases is royalty bound (IMGN) and/or are not yet profitable. Other Tier 2 biotechs have a late-stage drug development candidate that addresses a large market opportunity. Another type of Tier 2 company are ones with deep and potentially powerful drug discovery platforms that are relatively earlier in development either not yet been fully validated by registration-type data or Wall Street. The shareholder base transformation from more speculative retail base to a more sophisticated institutional investor is also a major influence on who advances to the next Tier. In our view, NVAX was a classic example in the second half of 2013 as mutual and hedge fund managers began to accumulate shares as the RSV program was de-risked. With the recent pullback in its shares, we continue to emphasize NVAX in front of the upcoming larger Phase II RSV vaccine data release.
3rd Tier biotech companies have a market capitalization of under $500 million. These companies are more speculative in nature as they are relatively early and/or may have hit a bump in their clinical trial development. Balancing out their inherent risk is their tremendous upside if they deliver value creating data. It is within the realm of Tier 3 biotech that the proverbial “homerun†stock that all investors dream of lives. In this Tier, we would emphasize OGXI and ANTH as highly speculative investments with upcoming binary events and exceptional risk/rewards.
MTSL Portfolio – Risk Profiles
CLINICAL TRIALS WATCH – Relevant New Studies or Changes Posted on Clinicaltrials.gov for our MTSL Portfolio and/or Related Companies since last Issue:
ALKS – A Study of Different Titration Schedules of ALKS 5461 in Adults With Major Depressive Disorder (MDD) – Clinicaltrials.gov – Alkermes
CELG – Efficacy and Safety Study of Apremilast in Subjects with Moderate to Severe Atopic Dermatitis – Clinicaltrials.gov – Celgene
INCY/NVS – A Clinical Study of Ruxolitinib in Patients With Primary Myelofibrosis, Post-polycythemia Vera Myelofibrosis, or Post-essential Thrombocythemia Myelofibrosis – Clinicaltrials.gov – INCY/NVS
Scripps Translational Science Institute – Apolipoprotein CIII Reduction Via Colchicine – Clinicaltrials.gov – TG Therapeutics
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