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Pharma/BIOTECH industry
overview
Iain Jeromson 18/11/13
Introduction
• Pharmaceutical companies develop drugs to
treat diseases through their R&D department
(also acquire compounds from biotechnology
companies), sector is very active in
acquisitions
• It can take 12 years from compound discovery
to first sale
Main players
• Top 10 pharma companies by revenue (2012)
• GSK and AZ are FTSE 100 constituants
• Popular with pension funds
Biotech vs
Pharma
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•
•
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Biotech companies are often smaller
And younger
Research driven- rarely sell anything
Have used the advancements in genetics to spur
on innovation- biotech didn’t exist before the
80s- pharma is over 100 years old
• Biotech use genetic manipulation of
microorgansims to make highly complex biologic
compounds such as antibodies and proteins
Drug development
• Drug development is a risky business
• And a costly one, >$1bn to bring a drug to
market
Patents
• New chemical entities are patented by pharmaceutical
companies
• A granted patent allows exclusive rights to
manufacture and sell the drug for 20 years
• After 20 years generic forms of the drug may be
manufactured by third parties, this leaves a window of
less than 8 years for a pharma company to capitalise
with sales and “repay the debt of R&D”
• After this 20 year window a so called patent cliff is
reached where sales of the branded original
dramatically, usually by 90%
Industry trends
• A move towards biologic drugs, and away
from traditional small molecules
• Major restructuring of large multinational
pharma companies due to weak drug
pipelines, see GSK and Pfizer
• Many biotech IPOs recently-
Industry performance
•
http://finance.yahoo.com/echarts?s=^NBI+Interactive#symbol=^nbi;range=1y;compare=;indicator=volume;chartty
pe=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
Opportunities for the industry
• Strengthening scientific base
• Increasing demand for medication
• Removal of barriers for free trade
Challenges for the industry
• Tighter regulation
• Annual approval of new drugs has flatlined
• Rising healthcare costs due to aging
population
Biotech funds
• 2 of the heavyweights in the biotecch sector
are…
• RA Capital- 44% annual returns since 2004
• http://www.j3sg.com/Reports/StockInsider/Generate-InstitutionPortfolio.php?institutionid=4698&DV=yes
• Baker Bros Advisors LLC• http://www.nasdaq.com/quotes/institutionalportfolio/ra-capital-management-llc-693222
• Both have a position in my company of
choice…
Acadia Pharmaceuticals
• NASDAQ:ACAD
• “Acadia Pharmaceuticals is a biopharmaceutical company
focused on innovative treatments that address unmet medical
needs in neurological and related central nervous system
disorders. Acadia Pharmaceuticals has been one of the best
performing stocks across all industries, having generated a
return of more than 300% year-to-date. The company is a
perfect example of why following the smart money is typically
a smart move for investors. The Baker Brothers, one of the
best performing biotech hedge funds in the world, took an
early position in Acadia Pharmaceuticals and have seen its
holdings in the company soar to a value of approximately
$550 million.”
• Tom Meyer http://wallstcheatsheet.com/stocks/2biotech-stocks-with-strong-buyout-potential.html/2/
Info
• Current price per share $23.29
• Primavastin will potentially be a blockbuster
drug (>$1bn in sales per year)
• Developing drugs to treat conditions such as
Alzeimers
Recent news
• Very positive phase III data for their lead
candidate- due for phase 4 middle of next year
• 20/05/2013- added to NASDAQ biotech index
• 07/01/2013- added to the Russel 2000 index
Analyst opinions
• http://www.marketwatch.com/investing/stock/acad/analystestimates
Pipeline
• http://www.acadia-pharm.com/pipeline/
Future
• Approval for Primavastin estimated for mid
2014
• Very likely buyout target
Risks vs Strengths
Risks
• Clinical trials for
primavanserin
• Need for capital
Strengths
• Late stage, good data, also
presented for multiple
indications
• Just received funding (from
listing on NASDAQ)
Conclusion
• Arcadia Pharmaceuticals presents a great
opportunity to invest in a biotech company
• Strong buyout potential
• Analysts are bullish
• Recent investment
• Strong clinical data
Acadia Pharmaceuticals