Parking
Biotech Industry to Benefit From New Drugs Next Year: Outlook
12/27/2000
cnetinvestor.com
AVIR IMMU
Washington, Dec. 27 (Bloomberg) -- The biotechnology industry will
introduce a wave of new drugs next year and advance hundreds of
experimental medicines through late-stage trials, adding momentum to
a sector that was a top performer in 2000.
More than 20 new drugs from industry giants including Amgen Inc. and
Genentech Inc., and smaller companies such as Enzon Inc. and
Coulter Pharmaceutical Inc., may boost biotech stocks, analysts said.
Investor enthusiasm over the potential for genetic research helped drive
up biotech shares the past year. Few revolutionary treatments made it
to market during the year, though. Next year, new products may make
a record number of biotech companies profitable even as they invest in
research and development.
''Investors will realize that Amgen, Genentech and the other profitable
biotech companies aren't a fluke,'' said Tim Bepler, who manages the
$300 million Orbitex Health and Biotechnology Fund. ''That's really
going to (attract) more mainstream investors.''
The Nasdaq Biotech Index has gained 22 percent this year, making it
the best-performing sector on the Nasdaq.
''It's probably in a long-term bull market,'' said Stephen Flaks, manager
of the Flaks Partners LP fund. ''A lot of funds are very underweighted in
biotech and there will be a lot of catching up to do.''
Still, the volatility that marked biotech investing the past several years
is likely to continue next year. Adding to volatility early in the year will be the expiration of lock-up
restrictions on the sale of millions of shares from initial public offerings last July and August. Those
shares could flood the market in January and February, putting pressure on stocks already trading.
More than 95 biotech drugs won U.S. regulatory approval for sale or expanded use since 1995, more
than triple the 27 drugs approved during the first half of the 1990s, according to the Biotechnology
Industry Organization.
Positioned for Approval
After approvals in 1997 and 1998 that included MedImmune Inc.'s Synagis, Immunex Corp.'s Enbrel,
Genentech's Herceptin and Genentech's and Idec Pharmaceuticals Inc.'s Rituxan -- drugs which had
total sales of $1.1 billion in 1999 -- the past 12 months have been quiet by comparison.
Many of the U.S. Food and Drug Administration's approvals of biotech products in 1999 and 2000
cleared the way for wider use of existing compounds rather than for the introduction of new ones.
Consequently, biotech investors focused more on genetic research prospects instead of on actual
biotech drug products.
Now, high-profile drugs are positioned for approvals. Earlier this year, more than 350 biotech
compounds were in late stages of testing, according to the Biotechnology Industry Organization. That
compares with more than 300 compounds a year earlier.
''There's enough new products waiting approval that it will spur more investor interest once they start
to roll in,'' said Kurt Von Emster, partner at MPM Capital Advisors, which invests in biotech stocks.
Drug Introductions
Among these is Amgen Inc.'s improved version of its blockbuster anemia drug Epogen, the No. 1
biotech drug in the U.S. The new drug, known as Aranesp, can be taken less often than Epogen and
is still just as effective.
Amgen is awaiting approval for Aranesp in kidney-disease patients -- where Epogen is currently used
-- and also plans to seek FDA permission to market Aranesp to anemic cancer patients. That would
pit Amgen's drug against Johnson & Johnson's Procrit, which is typically given to cancer patients
once a week. Less frequent dosing could give Aranesp an edge.
Genentech, Tanox Inc. and Novartis AG are targeting the allergy and asthma market with their Xolair
drug, which analysts say could have peak annual sales of about $240 million. Gilead Sciences Inc.
could seek approval for an AIDS drug, tenofovir, which appears to combat strains of HIV that are
resistant to other therapies.
And Idec and Coulter Pharmaceutical Inc. have each filed for FDA approval for their drugs for
non-Hodgkin's lymphoma. Idec's Zevalin and Bexxar, which Coulter is developing with SmithKline
Beecham Plc, both work by attaching a particle of radiation to a cancer-seeking antibody, allowing
doctors to deliver the cell- killing effects of radiation with pinpoint precision.
Idec's Second Drug
Zevalin would be Idec's second drug, and the first it developed on its own. Idec developed Rituxan with
assistance from Genentech, which shares marketing rights to the drug. Schering AG has rights to
market Zevalin overseas.
''Idec is launching its second product and maintaining strong growth,'' said Eric Ende, an analyst with
Banc of America. ''They are really becoming a true biopharmaceutical company.''
The advances will extend beyond the big-name companies. Smaller firms such as Enzon and Imclone
Systems Inc. are set to introduce their first drugs on the market next year with Peg- Intron for
hepatitis C and C225 for cancer, respectively.
Mountain View, California-based Aviron could also have a hit with its first product, Flumist, a nasal
spray flu vaccine it developed with American Home Products Corp. Aviron shares have nearly
quadrupled this year in anticipation of the introduction.
''For the 2002-2003 flu season, it could be a $500 million drug,'' said Avnish Patel, analyst at Fred
Alger Management, which owns biotech shares.
More Biotechs Profitable
As many as 30 biotech companies will turn profitable next year, up from 17 three years ago, said Jay
Silverman, analyst at Robertson Stephens.
That increase may raise the bar for risks investors are willing to tolerate as they assess a company's
technology, product pipelines, and prospects for approvals and sales, analysts said.
''The market is differentiating towards companies with near- term profitability. That's likely to continue
even more as we come into a relatively sour market and investors are becoming very risk averse,''
Bepler said. |
