Why You Should Watch Amgen and Inovio Today

Good Morning fellow, Fools! Let's check in on the movers in health-care today.

Amgen may have another blockbuster drug

Amgen (NASDAQ: AMGN  ) could be a winner today after news hit early this morning that its experimental drug romosozumab for the treatment of osteoporosis in postmenopausal women helped to significantly increase bone mineral density, or BMD, in a mid-stage trial. The results were published in the New England Journal of Medicine, which is one of the most selective medical journals. Based on these promising mid-stage results, Amgen is now testing the drug in a late-stage trial that will enroll up to 10,000 patients, with final results expected by the end of 2015. The drug is being co-developed with Belgian pharmaceutical company UCB.

What's most important to note is that romosozumab showed significantly greater increases in BMD compared to the current standards of treatment, namely Merck's (NYSE: MRK  ) Fosamax and Eli Lilly's (NYSE: LLY  ) Forteo. In its heyday as a frontline treatment for osteoporosis, Fosamax saw peak sales of $3 billion per year before losing patent protection. Forteo is currently on track to pick up where Fosamax left off and earn over a billion in sales by next year, showing the strong demand for osteoporosis drugs in general.

Why is this development important to a huge pharma like Amgen? Because romosozumab looks like a superior treatment compared to the currently available therapies, Amgen and UCB believe the drug could see peak sales of $6.6 billion. In short, romosozumab could be a megablockbuster, if approved. The drug's approval would thus be a material event even to a behemoth like Amgen. As such, you may want to dig deeper into this compelling story. 

Is Inovio ready to break out?

Inovio Pharmaceuticals (NASDAQ: INO  ) was one of the top performers in health care last year, and is already pushing higher on the first day of trading in the New Year. Specifically, Inovio shares are up nearly 4% in pre-market at the time of writing this article. What's interesting is that this movement is not associated with a clear cut news event. Instead, it appears that investors are rushing to get into this hot biopharma before prices climb even higher.

So what's driving the share price appreciation? While Inovio has a number of promising pre-clinical and early stage vaccine candidates, my take is that investors are squarely focused on the company's lead clinical candidate VGX-3100. VGX-3100 is a synthetic DNA vaccine being tested in a mid-stage trial as a possible treatment for cervical dysplasia. Inovio is expected to release topline results from the study by mid-2014.

Why is this vaccine worth keeping tabs on? Simply put, VGX-3100's clinical results will either validate the company's entire synthetic vaccine platform, or possibly sink it. So while VGX-3100 could be a blockbuster in its own right due to the size of the potential market, this trial has much broader implications for Inovio as a whole. If the trial is successful, it validates Roche's (NASDAQOTH: RHHBY  ) recent licensing deal with Inovio that could generate up to $422 million in milestone payments, and it would significantly de-risk the company's other clinical candidates for HIV, Influenza, and other cancer types.

My take is that the company's market cap of roughly $600 million is factoring in the significant risk of the upcoming data readout. Other cutting edge vaccine-makers like Novavax, for example, are commanding a much higher premium right now. In short, Inovio still looks cheap based on prevailing sector trends despite its monstrous rise in 2013, but this bargain isn't risk-free. Foolish investors thus might want to keep tabs on this one going forward.

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