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Investing in biotech companies can be intimidating, especially for investors without a science background. But there's hope. Understanding the naming system can make things easier to piece together, giving you confidence to invest in the sector.
Here's a breakdown of some of the suffixes that biotech companies use to name their generic drugs:
-afil: Erectile dysfunction drugs that inhibit phosphodiesterase 5 usually end in -afil. Pfizer's (NYSE: PFE ) Viagra (sildenafil), and Eli Lilly's Cialis (tadalafil) are members of the group.
-alol: Alpha and beta blockers, which includes a multitude of drugs, usually end in -alol.
-caserin: Drugs that stimulate the serotonin receptor end in caserin like Arena Pharmaceuticals' (NASDAQ: ARNA ) Belviq (lorcaserin). The drug is approved to treat obesity, but drugs that activate the serotonin receptor can do other things. Wyeth was developing one, vabicaserin, as an antipsychotic, for instance.
-mab: Drugs that end in -mab are usually monoclonal antibodies. Monoclonal means they bind to a protein in one specific site. Monoclonal antibodies usually inhibit the protein they're designed to bind to. AbbVie's (NYSE: ABBV ) Humira (adalimumab), for instance, binds to tumor necrosis factor-alpha, which prevents it from activating a cascade that stimulates the immune system.
-sartan: Blood pressure drugs that block the activation of angiotensin II AT1 receptors usually end in -sartan. Merck's Cozaar (losartan) and Novartis' Diovan (valsartan) are both in this class of drug.
-statin: This is an obvious one. Statins, which lower cholesterol by inhibiting HMG-CoA reductase, usually end in -statin. Interestingly, the companies also used a similar naming situation (ending the drugs in -or) for many of the brand names as well: Pfizer's Lipitor (atorvastatin), Merck's Zocor (simvastatin), and AstraZeneca's Crestor (rosuvastatin). As far as I know, the companies weren't required to follow a similar naming for trade names, but it probably just made sense after the first couple did it.
-vir: Most antiviral drugs end in -vir, although not every drug used to treat viral infections uses the scheme. Gilead Sciences (NASDAQ: GILD ) had two HIV drugs turned down by the Food and Drug Administration this week: elvitegravir and cobicistat. The latter doesn't end in -vir, likely because cobicistat is considered a booster; its job in the drug cocktail is to inhibit human proteins responsible for breaking down the other drugs.
What's in a name?
Biotech companies usually give drugs at least three different names during their development. Drugs often start with a code name. Pfizer, for instance, names its early stage drugs PF- followed by a series of numbers. Next, biotech companies assign generic name using the system outlined by the U.S. Adopted Names Council. Finally, drugs are given a brand name that's regulated by the FDA.
There's no standard for when a company switches from one name to another. Some biotech companies start using brand names while the drug is still in development while others wait until the drug has been approved by the FDA.
Waiting has its advantages; the FDA has been known to reject brand names, usually because they're too close to a current drug name. The agency wants to avoid prescriptions being filled incorrectly because of doctor's messy handwriting.
VIVUS' (NASDAQ: VVUS ) Qsymia, for instance, was originally called Qnexa. The biotech company took awhile to get its sales people in place after approval, so it probably didn't have a bunch of manufacturing and sales materials with Qnexa on them printed before the approval. But all the branding opportunities as the drug worked its way through the drug development process were wasted. A Google search for Qnexa on Google results in about 610,000 hits!
Who will win the obesity drug market?
Can VIVUS pick up its lagging sales and fend off the competition, or will Arena Pharmaceuticals reign supreme in the obesity space? If you're in the dark, grab copies of The Motley Fool's premium research reports on VIVUS and Arena Pharmaceuticals to get must-know information, including an in-depth look at the obesity market and reasons to buy and sell both stocks. Click now for an exclusive look at Arena and VIVUS -- complete with a full year of free updates -- today.