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speedybure (< 20)

The Next Bio-Tech Giant: The 5th King

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June 29, 2009 – Comments (0) | RELATED TICKERS: AMGN , CELG , GENZ.DL


In my opinion there are currently 4 kings of the biotech world. These include Genetech (which still retains their name despite roche buying the remaining shares), Amgen, Celgene & Gilead. But there is one, the only which I have an interest in, other than Amgen (for Desonaub for colon cancer), that warrants some big time attention. Carl Ican ever began buying shares until he realized there were no changes to made.

That company is....... GENZYME: For those unfamiliar with this unique company here is a brief backround, from my blogsite:

"Genzyme, who had a very broad range treatment, catering to numerous “niche” markets, is the company I’m making reference to. This strategy was unprecedented until recently as they target those diseases that strike a very small part of the population. This, however, has given them “fast track status” on the majority of their drugs, referred to as “orphan drugs”, consequently resulting in longer patent lives than the industry average. Genzyme began moving drugs onto the market that treated a select few with some type of rare disease, but have gradually brought bigger and bigger drugs in front of the FDA with remarkable success. Over the last 2 years they have successfully brought 3- mini blockbuster drugs on line with several more in the pipeline in addition to some real blockbusters in the oncology arena. Unlike other mega biotech giants like Amgen whose main focus is in a single specialized area (that being oncology for Amgen), Genzyme has a very diverse portfolio in terms of treatments afflicting main medical arenas. Their target market covers 6 main areas including cardiovascular disease, renal disease, Diagnostics, genetic disease, bio-surgery & most recently Oncology (which they have achieved enormous success in the small time spent here). They have built up a strong capital position before entering the world of oncology as the research tends to be expensive relatively speaking. They have done this through exploiting various niche markets as well as making contractual strategic alliances with such companies as Isis (The leader in the development in RNAI technology, which the scientific world believes is the future for cancer treatments). " 

The real potential lies in their second to none pipeline, which should propel growth for a substancial period of time. Along with their ongoing attempts getting their currently approved drugs, passed by overseas regulators, they have 12 stage 3 drugs, 24 stage 2 drugs & 10 stage 1 drugs. This is especially impressive because they have one of the best track record in terms of approvals out there. They also have a tight strategic alliance with the premier Rnai technology leader in Isis Pharma, which is the future of cancer treatments.  

Brief Run-Down of the Pipeline: I will skip the stage 1 drugs as those can't be taken seriously as of yet. This can usually be said of stage 2 drugs as well, but give genzym's amazing track record, it is worth mentioning. 

STAGE 2: Parkinson(Gene therapy) , Breast Cancer(modenal), AML(CLOLAR) , CLL(CAMPATH COMBO) , D&B MS (ATALUREN) and many more including kidney disease treatment without dialisis. 

STAGE 3: (THE BEST I HAVE SEEN) : GAUCHERS DISEASE, AML (CLOLAR COMBO), LIVER TRANSPLANT(THYMOGLOBIN), GRAFT VS HOST& CROHN"S ((PROCHYMAL) , MULTIPLE SCELOROSIS (ALEMTUZUNAB), OSTEOARTHRITIS (SYNVTEC) 

The point was just to mention a few potential blockbusters off the top of my head. They also have numerous drugs catering to those diesease, which built them up so far. In other words, this is the same old genzyme except they are packed to the bone with mainstream treatments (some mentioned above and some which i skipped all toghether such as alheimers, huntington's and several more). Not to mention the several stage 2 not mentioned above. Remember they have historically had 50-75% longer patent lifes on their drugs as they are able to pass them through the FDA process very efficiently.  

Valuation: The current NPV of approved drugs is appprox 7.5-11 billion (depending on their success overseas) and a 12% discount rate, which is conservative given the fact these are already approved. Keep in mind the market cap in current around 15 billion, with an enterprise value close to 14 billion. In other words 60-70% of the current price is made up if you value their pipeline at 0. They will soon have 3 drugs that will have sales of 1 Billion a year each (give or take 10-15%). I think their stage 3 pipeline could warrant their current market cap! Only time will tell, but one thing can be said: Genzyme will be considerably higher a year or two from now. I have done an in depth valuation analysis, so anyone reading this who wishes to take a gander, just post a comment and I will publish it on google docs. 

 Side Note: I Think it would be a good strategy to buy 2 jan '10 calls on AMGN just for their upcoming review of Desonaub in front of teh FDA. Blockbuster drugs usually cause the company to have a run up starting 2 months or so before the FDA date, So if you bought 2 now, you could sell 1 or 2 before the actual date and likely make anice profit, or do like myself self one before and one after. Just something to think about in Biotech land.......     

 

 

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