Emisphere Technologies' (NASDAQ:EMIS) popularity soared yesterday after the company announced that Novartis (NYSE:NVS) agreed to a licensing deal to develop an experimental oral formulation of recombinant human growth hormone (rHGH).
More than 900,000 of the company's shares changed hands following the announcement, a huge jump from the stock's average volume of 64,000 shares. The heady trading activity aside, by the end of the session, the stock locked in just more than a 2% gain. Today, the shares are down more than 8%.
In the case of Emisphere, it seems that both enthusiasm and caution are warranted. The firm, which belongs to a category known as drug-delivery companies that includes Alkermes (NASDAQ:ALKS) and Flamel Technologies (NASDAQ:FLML) among others, is working in a particularly important and vexing area: oral delivery of injectable drugs, including biologics.
As I've mentioned here before, biologics are typically administered via intravenous infusion and/or injection. This fact adds to the expense of biologics therapy, in addition to making these treatments uncomfortable for patients, most of whom would no doubt prefer to pop a pill. Commercializing oral formulations of biologic drugs would therefore be a major breakthrough and a profit bonanza for the lucky company or companies that manage the feat.
Novartis' agreement to fund development of Emisphere's oral version rHGH is a positive sign, and successful clinical trials would help validate the firm's eligen technology. But Emisphere will remain a risky play in the near term. Its revenue for the first six months of this year came in at just $147,000, leaving the company with a net loss of about $19 million. While Emisphere will receive up to $34 million over the course of oral rHGH's trials, considering the lengthy development timeline for experimental medicines, this is not a huge sum. The real money would come from royalties if oral rHGH is approved, but this revenue would not materialize for years, if ever.
Nevertheless, Emisphere and its ilk bear watching. Biologic drugs are increasingly important treatment options. Lowering their cost and improving the convenience of their administration will remain high priorities, and drug-delivery companies are working hard to tackle these challenges.
Check out the latest on Motley Fool Hidden Gems' recommendation Flamel Technologies in Flamel Shot Down by Fool contributors Carl Wherrett and John Yelovich. Or sign up today for a free trial to Hidden Gems to learn more.
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
