Sink or swim…

Tremendous failures or vast rewards are the ultimatum of the biotechnology industry. Unfortunately, the odds are more often not in the investor’s favor.

Biotechs are infamous for being notoriously risky investments.

Biotechnology investments are some of the most dangerous, most interesting, and yet some of the most lucrative.

In which other industries are companies so nobly trying to save lives? In which other industries can companies literally burn through millions of investor dollars, often with nothing to show for it?

Stephen D. Simpson, CFA, states it best: “How many other industries sport a warning label that reads ‘Caution: poor stock selection may cost you 90% of your initial investment’?”

Biotechs focus solely on the development of new drugs and clinical research aimed at treating diseases and medical conditions.

They are a long-term, high-risk enterprise.

But with the right insight and analysis, the rewards can be grand for those that are successful.

Here are some areas of the health care market that are untapped or in desperate need of new developments in the coming years.

Liver Disease

Liver disease is characterized by the improper functioning of the liver, causing disorders like hepatitis, fatty liver, cirrhosis, and many others.

Non-alcoholic steatohepatitis, or NASH, is in the sights of more than a dozen drug makers.

NASH occurs when fat accumulates in the liver alongside inflammation and damage. The disease is so slow-moving that many sufferers don’t exhibit symptoms until the damage done is too great.

At this point, the only thing doctors can prescribe is diet and exercise for symptom management.

Approximately one-quarter of the U.S. population (anywhere from 6 million to 15 million people) is believed to have a pre-condition called non-alcoholic fatty liver disease.

Over 20% will go on to develop life-threatening cirrhosis or other related liver diseases.

By 2020, NASH will be the leading cause of liver transplants, says Allergan.

Allergan became the latest to announce that it had two deals to acquire NASH treatments.

Tobira Therapeutics, which Allergan has agreed to buy for $1.6 billion, is preparing to recruit patients for final-stage studies.

It’s competing with startup Intercept Pharmaceuticals and biotech giants including Gilead Sciences and Pfizer to reach a currently untapped market that could be worth billions per year, according to an estimate by RBC Capital Markets analyst Michael Yee.

Investors are also monitoring Gilead’s mid-stage trials that it is expected to present later this year.

Many drug makers are still trying to determine how many different components of the disease (such as inflammation, scarring, and metabolic changes) interact.

They are experimenting with a variety of treatment options.

Companies such as Intercept and Genfit have large clinical trials already underway.

Genfit is developing a drug called Elafibranor, a once-a-day treatment that increases fat metabolism and combats inflammation to “treat the underlying cause of fibrosis,” says Dean Hum, Genfit’s chief scientific officer.

The drug failed to meet primary goals in a mid-stage trial in 2015.

However, it showed promise in a subset of patients with moderate-to-severe forms of the disease. A final-stage trial in 2,000 patients categorized as moderate-to-severe is underway.

The company expects to publish the data in 2018.

Beyond biotech startup companies, many of the biggest companies are buying NASH drugs for millions of dollars.

Gilead paid $1.2 billion for a drug from Nimbus Therapeutics and another from Phenex Pharmaceuticals AG for $470 million. Pfizer is looking to acquire NASH drugs in the near future.

There is a huge market that is currently untapped. The profit potential in this health care division is vast.

Many companies are in the middle of clinical trials, hoping for promising results.

Immuno-Oncology

This untouched portion of the cancer market has the potential to revolutionize and streamline modern advancements in cancer treatment.

Brad Loncar, founder of the Loncar Cancer Immunotherapy Index, and John Bonfiglio of TapImmune told Life Science Investing News:

Investors should be looking into the immuno-oncology area. It’s a subsector of the health care space that is going to come into its own with rapid progress after a tumultuous year in 2016.

Pd-1 inhibitors have revolutionized the treatment of late-stage melanoma. They are starting to be approved for lung cancer, too.

“These are not incremental improvements,” Loncar said. “These are BIG advancements.”

What’s even better is that there is plenty of room for partnerships in this area.

“Everyone realizes that no one drug is going to be panacea for cancer,” says Bonfiglio. “Instead cancer is going to be fought with a combination of different therapies that do different things.”

What if the human immune system provided all the tools necessary to combat cancer?

The idea shouldn’t sound too far-fetched. The immune system can already tackle numerous bacterial and viral infections.

It can actually take on cancer cells, too, when it is able to recognize them.

The problem is, cancer cells are too good at concealing themselves, outmaneuvering the immune response.

It would require a super-powered immune system to root out the cancer cells and eradicate them.

Investigational immuno-oncology treatments are like performance-enhancing drugs for the immune system. In essence, they aim to amplify the body’s own natural abilities.

Bluebird Bio has announced that seven out of nine patients have responded well to its CAR-T therapy for multiple myeloma in recent clinical studies.

TapImmune, another immuno-oncology company, released promising data in November 2016, showing more than 90% of breast cancer patients developed strong T-cell response after receiving the HER2neu vaccine.

According to John Bonfiglio:

I think immuno-oncology has exploded because there’s been some success in this area, and people are now understanding that best way to treat cancer is by using the body’s own immune system to fight the disease. In the beginning of 2000, monoclonal antibodies were just starting to become successful. Now, if you look at the sales of drugs like Herceptin and Perjeta, they’ve risen to approximately six billion dollars a year. People are excited by the idea of expanding the ability of one’s own body to fight cancer.

Instead of subjecting cancer patients to harsh chemical treatments, like chemotherapy, which leaves the body depleted, reinforcing the body’s own arsenal of weaponry not only makes a prime investment opportunity but also has the potential to completely alter the future of cancer treatments with a form of treatment that hopefully produces a higher survival rate.

Neurodegenerative Diseases

What is the difference between dementia and Alzheimer’s disease?

Dementia is an umbrella term used to describe a set of symptoms that includes memory loss, trouble thinking, problem solving, and issues with language caused by damage and deterioration of the brain cells.

Because Alzheimer’s is a disease that destroys the brain, it is one of the primary causes of dementia, along with Huntington’s disease, Parkinson’s disease, and Creutzfeldt-Jakob disease.

As the baby boomer population ages, analysts estimate that Alzheimer’s will consume one-quarter of Medicare spending by 2040.

The Alzheimer’s therapeutics market was valued at $4 billion in 2015.

But as of yet, the biotechnology and pharmaceutical industries have had no effective treatments for Alzheimer’s and dementia.

Billions of dollars have already been invested in targeted antibody drugs designed to help clear out the buildup of amyloid-beta protein plaques that are thought to “gum up” memory and cognition as we age.

Yumanity Therapeutics raised $45 million to create a new discovery drug for neurodegenerative diseases.

Annexon Biosciences, a Stanford branch-off, raised $44 million for research that suggests Alzheimer’s can be fought by stopping the immune system from removing the necessary synapses needed for proper neural functioning.

“Given the urgent need, the enormous market, and the string of failures with anti-amyloid antibodies, like Eli Lily’s Saolanezumab, I’ll suspect we’ll see pharma spread its eggs around into multiple baskets,” says Luke Timmerman, contributor to Forbes and founder of The Timmerman Report.

Axovant Sciences, a biotechnology company located in Bermuda, is working on developing drugs against all dementia symptoms.

Axovant’s latest advancement, Nelotanserin (RVT-102), is proving to be safe and effective in Phase II testing as a treatment for visual hallucinations in dementia with Lewy bodies (DLB) and Parkinson’s disease dementia (PDD).

Based on positive preliminary results, the biotech is getting ready to recruit more patients and prepare for Phase III testing, which is scheduled to begin later this year.

Nelotanserin blocks receptors to reduce hallucinations in patients with DLB and PDD.

The drug will go on to compete with Acadia Pharmaceuticals’ Nuplazid, which has similar functionality within the brain.

The pipeline for drugs combating neurodegenerative diseases looks promising. These treatments are showing effective results where none have before.

The Bottom Line

I must apologize for the lengthy explanation.

But the latest findings from these biotechs hold promise in revolutionizing the future of health care in the coming years.

It’s imperative to remember the key signs to look for and avoid before investing in biotechnology companies.

It is a known fact that biotechs burn through cash.

Find companies that are well funded for their near-term clinical trials. In most cases, biotechs will wait to raise capital until they have good news to announce.

Keep in mind the company’s source of presumed and projected value. Focus attention on companies with multiple drugs in Phase II testing programs.

Observe corporate behavior and philosophy. Investors need to understand the objectives and goals of company management.

Failures will outnumber success, but with patience, research, and attention to detail, it is entirely possible to dig out the winners.

Those will more than pay for the occasional losers.

That’s all for now.

Until next time,

John Peterson
Pro Trader Today