The biotech sector continues to grow as valuations are sky high, based on recent M&A’s within the industry. 2019 started off with a boom with the announcement of two multi-billion-dollar deals valued at a total $82 billion, one of them being among the top 10 highest valuations of all time in the sector.
The sector continues to expand rapidly with new discoveries, IP and tech. Experts and fund managers alike believe that the growth and success of biotech is not just another bubble.
The sector holds a number of well known companies looking to develop the industry’s next big drug therapy such as ChemoCentryx (NASDAQ: CCXI), Akero (NASDAQ: AKRO) and Alexion (NASDAQ: ALXN).
‘Regulators are pressuring companies to cut drug costs and takeovers have become the preferred method of combating looming patent expiries on some of the top-selling medicines they have relied upon in recent years’ says Ivo Staijen, manager of the HBM Global Biotechnology fund.
Innovative companies in the industry, like Oncolytics Biotech (NASDAQ: ONCY) are adopting changes that are helping to transform the sector. Oncolytics develops treatments for cold tumor identification through Pelareorep. Clinical trials have provided us with a multitude of observations and conclusions thus far regarding the effectiveness of pelareorep in normal cells versus cancerous cells.
‘Virtually no other sector offers long-term investors better growth prospects than biotechnology’, says Mario Linimeier, a managing director at Medical Strategy, whose funds include Medical BioHealth.
The M&A deals in the sector accounted for roughly half of the $173.326 billion USD in 14 biopharma drug-based M&A deals recorded for the first half of 2019. This doesn’t include the earlier deals which closed in 2019, such as Takeda Pharmaceutical’s $58.6 billion USD purchase of Shire.
The largest of acquisition this year was Novartis’ (SWX: NOVN) up-to-$1.575 billion USD purchase of IFM Tre, a subsidiary of IFM Therapeutics. That acquisition expanded Novartis’ pipeline with one clinical and two preclinical programs designed to treat chronic inflammation by inhibiting targets in the body.
‘Most investors have exposure to the large pharmaceutical giants but from a value creation perspective they should be invested in earlier-stage companies too. Biotechnology is the backbone of innovation these days,’ says Staijen
For some, that would mean backing giants like New Jersey-based Celgene (NASDAQ: CELG) who develops and markets drug treatments for inflammatory disorders and cancer. Like Seattle Genetics (NASDAQ: SGEN), Celgene (NASDAQ: CELG) also has a flagship product: Revlimid. This drug is approved for the treatment of multiple myeloma and certain types of transfusion-dependent anemias.
The pros have pointed to three main areas where investors can position themselves in this dynamic and fluid market; through tech, through unique drugs and treatments and IP - this is what fills the pipeline.
What’s In The Pipeline?
Investors considering buying a biotech stock need to study the potential of its current products and its pipeline, which refers to the portfolio of the company’s experimental drugs in development.
The IP that drives biotech may be one of the easy entry points for early investors to look at. Oncolytics Biotech (NASDAQ: ONCY) has also solidified a strategic partnership with Pfizer (NYSE: PFE) to study its Pelareorep treatment with plans to develop innovative immunotherapy combinations tackling the most challenging cancers, which could lead to very valuable IP.
Oncolytics Biotech’s (NASDAQ: ONCY) treatment induces selective tumor lysis and promotes an inflamed tumor phenotype through innate and adaptive immune responses to treat a variety of cancers. The company is looking to enter phase 3 testing come 2020.
Being Creative With Your Picks
There are a number of existing companies, like Oncolytics Biotech (NASDAQ: ONCY) that originate in Canada and then co-list on the NASDAQ. This is a great place to seek out competitive biotech companies that have captured the interest of the industry.
If biotech can reach the kind of massive revenue numbers the current data suggests, some of these newcomers may become the future giants of the industry that come to define the future of biotech.
Companies already seeking to take an active lead in this sector include:
ChemoCentryx (NASDAQ: CCXI) develops new medications for inflammatory and autoimmune diseases, and cancer in the United States. The company targets the chemokine and chemoattractant systems to discover, develop, and commercialize orally-administered therapies. Its lead drug candidate is Avacopan, an orally-administered complement inhibitor of the complement C5a receptor (C5aR), is in Phase III development for the treatment of anti-neutrophil cytoplasmic auto-antibody-associated vasculitis.
ChemoCentryx recently announced very positive news announcing “ChemoCentryx and VFMCRP Announce Positive Topline Data from Pivotal Phase III ADVOCATE Trial Demonstrating Avacopan’s Superiority Over Standard of Care in ANCA-Associated Vasculitis” which has sent shares of ChemoCentryx soaring. Yet another example of how high this sector can go.
Akero Therapeutics (NASDAQ: AKRO) is developing medicines to reverse the course of serious metabolic diseases. Right now, that means advancing the company’s lead program, AKR-001, to provide a powerful new therapy for patients with NASH (non-alcoholic steatohepatitis) – a fatty liver disease.
Alexion (NASDAQ: ALXN) is the maker of Soliris, a drug used to treat multiple rare disorders affecting the complement system. Based in Boston since 2018, Alexion remains heavily involved in immune system research as it relates to autoimmune diseases.
For more on Oncolytics Biotech and the broader biotech industry, view the report at USA News Group: https://usanewsgroup.com/2019/10/06/what-if-you-could-teach-your-body-to-fight-cancer/
USA News Group
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