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Drug Roundup - May 25, 2011
There have been several noteworthy developments in the drug space recently, which will likely have a material impact on the companies in this sector and the markets they serve. Companies featured in this review include Pfizer (PFE - Free Pfizer Stock Report), GlaxoSmithKline (GSK), Merck & Co. (MRK - Free Merck Stock Report), Roche Holding AG, Johnson & Johnson (JNJ - Free Johnson & Johnson Stock Report), Inspire Pharmaceuticals, Vertex Pharmaceuticals (VRTX), Novartis (NVS), Gilead Sciences Inc. (GILD) and Eli Lilly & Co. (LLY).
Stocks in the Pharmaceuticals industry have trended downward over the past week in tandem with the broader market. Mounting concerns regarding the European debt crisis have had a considerable impact on investor perception and several high-profile drugmakers have felt the effects. Since May 16th, shares of Pfizer have declined about 2.8%, GlaxoSmithKline (-2.8%), Roche (-2.7%), Johnson & Johnson (-1.3%), and Merck (-1.0%).
Drugmakers To Bet Big on Epigenetics
Cancer medications are currently the world’s top-selling drug category with over $22 billion in U.S. sales in 2010. Typically, pharmaceutical companies invest substantial amounts of money to find treatments that either kill cancerous tumors with chemotherapy or block the mutated genes that help fuel growth. However, a third approach has surfaced in recent years that involves targeting cells before they become cancerous in the first place through the use of Epigenetic drugs. Epigenetic drugs are designed to introduce substances into the body that mask certain gene expressions, which cause an increased risk of tumor formations. These drugs differ from commonly used chemotherapy medicines in the way they work to eliminate a major risk factor systemically, instead of directly affecting the formation of established tumors. While the goal of certain chemotherapy drugs is to prevent the formation, epigenetic drugs are intended to remove the compounds that prevent the body from eliminating the tumor on its own. Several high-profile drugmakers including, Novartis, Eli Lilly, and GlaxoSmithKline have already begun investing in Enigenetics and analysts believe the payoff could be in the billions of dollars if found effective for common types of cancers such as those effecting the lungs, breasts, and prostate. We look for more of Big Pharma to increase spending on the new approach in the coming years.
Merck Acquires Inspire
On May 16th, Merck completed its $430 million acquisition of eye-care specialist, Inspire Pharmaceuticals. Inspire generated about $106 million in revenue in 2010 and its cornerstone product, Azasite ($43 million), should help strengthen Merck’s ophthalmology segment and better position the business for future growth. Merck noted it will likely retain a portion of the company’s sales force due to its experience and strong relationships within the ophthalmology community, but will close down its Raleigh, NC. headquarters before year’s end. Following the completed transaction, shares of Inspire have ceased trading on the NASDAQ.
Roche Teams Up With Rival Merck
On May 17th, Merck announced it had formed a partnership with Roche Holding AG to co-promote its recently approved hepatitis C treatment, Victrelis. Victrelis is expected to go head to head with Vertex Pharmaceutical’s comparable product, Incivek, to gain control of the multibillion hepatitis C market. Incivek received regulatory approval on May 23rd igniting a marketing battle between the two.
Johnson & Johnson Wins Approval For New AIDS Drug
On May 20th, this company announced that U.S. regulatory approval had been granted for its AIDS treatments product, Edurant. The drug represents the first approved AIDS treatment in over three years and clears a hurdle for a planned combination with Gilead Sciences’ drug, Travuda. Analysts estimate the combined product could generate up to $1 billion in sales annually.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.