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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

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pharma biotech industry overview

Pharma/BIOTECH industry overview

Iain Jeromson 18/11/13

introduction
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
Main players
  • Top 10 pharma companies by revenue (2012)
  • GSK and AZ are FTSE 100 constituants
  • Popular with pension funds
biotech vs pharma
Biotech vsPharma
  • 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
  • Drug development is a risky business
  • And a costly one, >$1bn to bring a drug to market
patents
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
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
Industry performance
  • http://finance.yahoo.com/echarts?s=^NBI+Interactive#symbol=^nbi;range=1y;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
opportunities for the industry
Opportunities for the industry
  • Strengthening scientific base
  • Increasing demand for medication
  • Removal of barriers for free trade
challenges for the industry
Challenges for the industry
  • Tighter regulation
  • Annual approval of new drugs has flatlined
  • Rising healthcare costs due to aging population
biotech funds
Biotech funds
  • 2 of the heavyweights in the biotecch sector are…
  • RA Capital- 44% annual returns since 2004
  • http://www.j3sg.com/Reports/Stock-Insider/Generate-Institution-Portfolio.php?institutionid=4698&DV=yes
  • Baker Bros Advisors LLC-
  • http://www.nasdaq.com/quotes/institutional-portfolio/ra-capital-management-llc-693222
acadia pharmaceuticals
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/2-biotech-stocks-with-strong-buyout-potential.html/2/
slide14
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
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 Russel2000 index
analyst opinions
Analyst opinions
  • http://www.marketwatch.com/investing/stock/acad/analystestimates
pipeline
Pipeline
  • http://www.acadia-pharm.com/pipeline/
future
Future
  • Approval for Primavastin estimated for mid 2014
  • Very likely buyout target
risks vs strengths
Risks vs Strengths

Risks

Strengths

Late stage, good data, also presented for multiple indications

Just received funding (from listing on NASDAQ)

  • Clinical trials for primavanserin
  • Need for capital
conclusion
Conclusion
  • Arcadia Pharmaceuticals presents a great opportunity to invest in a biotech company
  • Strong buyout potential
  • Analysts are bullish
  • Recent investment
  • Strong clinical data