The Motley Fool's readers have spoken, and I have heeded their cries. After months of pointing out CEO gaffes and faux pas, I've decided to make it a weekly tradition to also point out corporate leaders who are putting the interests of shareholders and the public first, and are generally deserving of praise from investors. For reference, here's my previous selection.
This week, I'm turning my attention to the biotech arena in order to highlight one of 2013's hottest stocks and CEOs, Marc Beer of Aegerion Pharmaceuticals (NASDAQ:AEGR).
Kudos to you, Mr. Beer
Sometimes putting my foot in my mouth is part of being a Motley Fool contributor. Thus far I have been so wrong on Aegerion that it's not even funny. With the stock approaching $100 per share, I've been decisively negative on the company since roughly the mid-$15 level. Yeah... it's that bad. Despite still being personally skeptical of its valuation, I'm not too proud to give credit where credit is due -- and that's with Marc Beer and his research team.
The pinnacle of Aegerion's success has been the development and approval of Juxtapid in the U.S. by the Food and Drug Administration for the treatment of a rare disease known as homozygous familial hypercholesterolemia, or HoFH. It is a genetic disorder that affects how the body deals with cholesterol, resulting in high levels of LDL-cholesterol (the bad kind), which can lead to multiple cardiovascular complications and a significantly higher chance of premature death. Worldwide, about one in 500 people have the disease, but being based on genetics, having a direct relative (sibling, parent, or child) with the disease puts the odds of you having HoFH at 50-50.
Under normal circumstances, developing a rare disease drug is encouraged because there's rarely any competition, resulting in uncontested demand and often high annual drug prices. As Aegerion's luck would have it, a competing drug for HoFH was developed at around the same time and approved by the FDA just weeks later.
Kynamro, developed by Isis Pharmaceuticals (NASDAQ:IONS) and Sanofi (NASDAQ:SNY), is an injectable medication designed to treat HoFH. From a logistics standpoint, I saw how Aegerion's pill to treat HoFH would steal the show from an ease-of-use standpoint, but I just couldn't wrap my hands around the large price discrepancy between Isis and Sanofi's Kynamro, which was priced at $176,000 per year compared to Juxtapid at $235,000 per year. Then, just months ago, Beer decided to raise the price on Juxtapid to $295,000 per year from $235,000 per year which I felt would be the death knell for sales of the drug. Little did I know, convenience and safety have, for now, won out.
One of the biggest draws for patients and physicians alike in using Juxtapid has been its results during clinical trials. Both Juxtapid and Kynamro exhibited the potential for liver toxicity in trials; however, the Kynamro arm in late-stage trials also presented abnormal tissue growth (neoplasms) in 3.1% of patients. This finding didn't stop Kynamro from being approved, but it did give an already easier-to-use drug like Juxtapid all the more reason to be priced at nearly $300,000 per year.
As of the second quarter, Aegerion reported an impressive 215 patients taking Juxtapid with a dropout rate of less than 10%. Remember, these figures come just six months after the drug was approved. In addition, the drug, known abroad as Lojuxta, was also approved to treat HoFH in the EU just days ago.
A step above his peers
Usually when I'm busy praising CEOs, I like to mention what they've done for shareholders in terms of introducing share buybacks or boosting a dividend. With Aegerion you don't get either of those perks, but you get something even more impressive: huge share price appreciation and unwavering support from its CEO!
Perhaps most impressive from a shareholders' perspective, shares have gained a clean 750% since debuting on the Nasdaq Composite less than three years ago. Shares didn't really take off, though, until last year when news of Juxtapid's success in trials became apparent. Over the trailing year, Aegerion shares have increased by 523% -- or in another context, by an average of 3.6% per week for the past year! That's right, Beer's leadership produced better gains in just over a week over the past year than you'd get had you held a 30-year U.S. Treasury bond for an entire year!
Furthermore, Aegerion's success hasn't resulted in big sales by its largest shareholders -- including Beer. If you review the insider activity over the past two years, you'll find very few sales (and those sales you do see are from large institutional shareholders) and plenty of automatic purchases from directors, including Beer. In fact, Beer hasn't sold a single share of Aegerion's stock despite its mammoth rise, so you know his interests are tied to those of his investors.
Being at the moment unprofitable, I wouldn't expect Aegerion to be a big donator; but looks can be deceiving. Being a rare-disease drug developer, Aegerion is a premier sponsor along with Sanofi and Amgen (NASDAQ:AMGN) for the Familial Hypercholesterolemia Foundation. Donating within the fields it operates in is usually a way to garner favorable PR from the community and physicians alike.
And, as you might have imagined, Aegerion's employees are pretty well taken care of, too, with employees looking forward to health, dental, and 401(k) plans, company-paid insurance plans, and a casual work environment.
Two thumbs up
Sometimes the little things, like executing on developing and launching a drug and tying your interests to that of shareholders can make a CEO great. Aegerion's greater than 500% return over the trailing 12 months is a testament to Beer's rock solid leadership, as his is commitment to the FH Foundation. I may not agree with the stocks' valuation here, but I undeniably have to recognize that Beer is an incredible CEO worthy of two thumbs up.