3 Lessons From the Biggest Biotech Event of 2014

Pleasing regulators has long been the biggest hurdle on the road to success for biotechnology firms. Going forward, providing hospitals more bang for their buck will become equally important. Here are three companies that fit the bill.

Jan 23, 2014 at 8:00AM

Last January, Dr. Joon Yun, President of Palo Alto Investors, dubbed J.P. Morgan's annual health care conference the "Burning Man" of biotechnology. Long ago, it was an under-the-radar collection of exciting new companies begging to be noticed. Like the music festival, the conference has gone mainstream, but that doesn't mean it isn't a great place to pick up on important trends in biotechnology and health care as a whole.

One underlying trend is the increasing reliance on analysis of health care delivery efficiency. Recent federal health care reforms aim to tie reimbursements to patient outcomes. If effective, simply running more tests, and providing more treatments should become less profitable. Here's how Sangamo BioSciences (NASDAQ:SGMO), Biogen Idec (NASDAQ:BIIB), AMAG Pharmaceuticals (NASDAQ:AMAG), and Portola Pharmaceuticals (NASDAQ:PTLA) fit the bill.

Curing chronic diseases
When it comes to outcome-based medicine, Sangamo has a platform that should have a large market opportunity. The company owns a gene-editing technology based on zinc-finger proteins. The fingertips can be engineered to bind a specific sequence of DNA. The company insists it can permanently switch on, or off, the expression of any gene.

The whole idea sounds just too good to be true, but innovative powerhouse Biogen Idec has been convinced to the tune of a $20 million upfront payment. The companies recently announced a partnership to develop beta-thalassemia and sickle cell therapies. The basic terms of the deal leave Sangamo responsible for research and development activities until it can be proved to work in humans. Biogen Idec should take the reigns at that point, providing Sangamo with milestone payments, and double digit royalties if there are any sales.

In the laboratory, Sangamo has shown its compound can enter CD34 stem cells of patients with either beta-thalassemia or sickle cell and permanently knock out their BCL11A gene. This process allows those cells to produce fetal hemoglobin at therapeutic levels.

These chronic conditions require lifelong care, or bone marrow transplant, at great expense. If this partnership manages to produce a functional cure, you can bet cost-conscious health care providers will beat a path to Sangamo's door.

Pumping iron
AMAG Pharmaceuticals derives nearly all of its revenue from the sale of Feraheme. This is an injection for intravenous use for the treatment of iron deficiency anemia (IDA). Currently, Feraheme is only approved in the US for treatment of chronic kidney disease (CKD) in adults.

Its main selling point is ease of administration. Due to its unique coating, iron remains circulating in the blood, but is steadily absorbed over a longer period. This means IDA patients with CKD require fewer infusions to maintain healthy levels of circulating iron.

A label expansion that would vastly increase the product's potential market to all adult IDA patients with an oral iron intolerance is under review. It seems the FDA has been dragging its regulatory feet. In September 2013, the FDA requested additional information and extended its decision date to January 21, 2014. The company met with the regulator on January 7, but apparently the application is still in limbo.

On January 13, 2014, the company released preliminary fourth quarter and full year results for 2013. Annual Feraheme revenue grew 28% in 2013. Given an increasingly cost conscious environment in the US, and the possible label expansion, I think we can expect some movement in this company's share price very soon.

A simpler anticoagulant
Portola Pharmaceuticals may soon turn the world of blood thinners on its head. Less than a year after its IPO, the company has an oral once-daily inhibitor of Factor Xa, named betrixaban, in a pivotal Phase 3 trial for prevention of blood clots known as venous thromboembolisms (VBTs).

After various types of surgery, patients are typically given enoxaparin as an injection in a hospital setting. The drug itself is safe, but keeping it at an effective level in the bloodstream is difficult, and requires a fair amount of monitoring. Patients are typically given enoxaparin post surgery, but stop after they're sent home. Far too often, patients then develop blood clots that pose serious health risks and require rehospitalization.

Betrixaban is a pill that can be taken once daily to continue prevention of VBTs without extensive monitoring. So far, it appears to maintain effective levels in the bloodstream without going overboard. Payers often penalize hospitals if patients are rehospitalized shortly after their discharge. If approved, betrixaban is likely to be very widely prescribed, saving health care providers a bundle.

Final thoughts
Winning approval will always be necessary, but providing more bang for every buck is becoming more important each year. There's a great deal of buzz surrounding the application of "Big Data" in medicine to streamline efficiency. That's all fine and good, but you don't need a database server to know the above programs are all capable of increasing capital efficiency in their respective health care settings.

Make health care reform work for your portfolio
Obamacare seems complex, but it doesn't have to be. In only minutes, you can learn the critical facts you need to know in a special free report called Everything You Need to Know About Obamacare. This FREE guide contains the key information and money-making advice that every American must know. Please click here to access your free copy.

Cory Renauer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers