You've probably heard the saying that investing in the biotech sector is akin to throwing money down on the roulette table because you may wind up with a multibagger or simply walk away empty-handed depending on the success of a company's pipeline.
Rest assured, there have been some incredible success stories this year in the biotech sector with a number of stocks absolutely on fire. Keryx Biopharmaceuticals and Insys Therapeutics, just to highlight two, have both roughly quintupled in value since the year began.
But there's a dark side to the biotech sector as well. Sometimes potential blockbuster drugs don't pass muster in clinical trials like we'd hope and occasionally FDA-approved drugs flop on the open market due to safety issues that come up later or simply to poor marketing decisions. Here's a look at five once-promising FDA-approved drugs that disappointed investors in a big way in 2013.
Heading into the year, there was a lot of hope that triglyceride-reducing medication, Vascepa, developed by Amarin (NASDAQ:AMRN) and currently approved to treat cases of hypertriglyceridemia (triglyceride levels above 500 mg/DL), would be able to add a supplemental new indication to its repertoire. The goal was to get Vascepa prescribed as a triglyceride-lowering treatment for patients with readings between 200 mg/DL and 499 mg/DL, which would have dramatically boosted its target audience.
Unfortunately, the Food and Drug Administration would have none of it. Its advisory panel soundly rejected its recommendation for approval and, the FDA wound up stripping Amarin of its special protocol assessment for Vascepa. Now it looks as if Amarin's only option, should it want an expanded indication for Vascepa, is to run a costly heart attack safety trial, which won't have results available until 2017. Shares are off 81% year to date.
Talk about a case where things went from bad to train wreck in just a couple of weeks! Developed by Ariad Pharmaceuticals (NASDAQ:ARIA), Iclusig is an FDA-approved blood cancer drug that Ariad was betting big on to get an expanded indication in treating chronic myeloid leukemia.
However, in early October a two-year follow-up study noted an inordinate number of arterial thrombosis events in patients taking Iclusig (11.8%) compared to a study conducted a little more than a year prior (8%). This follow-up safety study prompted the FDA to put Iclusig on a partial clinical hold, coerce Iclusig to completely shelve its CML trial known as Epic just two weeks later, and most recently for Ariad to temporarily suspend sales of Iclusig in already-approved indications. With seven of its eight remaining clinical trials involving Iclusig in some way, Ariad is certainly swimming around in some murky water at present. Ariad shares are down 88% on the year.
Talk about a disappointing drug that could make this list year after year. Dendreon's (NASDAQOTH:DNDNQ) Provenge, a metastatic prostate cancer immunotherapy vaccine, was supposed to be a $4 billion-plus drug at one time, but has been stymied by the lack of a licensing partner, its $93,000 price tag, and a sea of tough competition domestically and in Europe.
Earlier this year Dendreon noted that Provenge sales would fall on a year-over-year basis in the U.S. and it announced just yesterday its second round of restructuring, which will once again include more job cuts. There have even been rumors on Wall Street that Dendreon is considering putting itself up for sale, but I wouldn't hold your breath that a buyer will be found. Certainly, not all hope is lost here as Dendreon did gain marketing approval for Provenge in Europe, but clearly the luster has long worn off this former biotech darling. Shares are off 51% year to date.
Belviq & Qsymia
Finally, what discussion of high hopes being replaced by utter disappointment would be complete without mentioning the two FDA-approved anti-obesity drugs Belviq, made by Arena Pharmaceuticals (NASDAQ:ARNA), and Qsymia, made by VIVUS (NASDAQ:VVUS).
Peak sales estimates for both drugs were easily in the $1 billion to $2.5 billion range shortly following their approval given that 35.7% of the country is considered obese and roughly two-thirds qualifies as obese or overweight according to the body mass index calculation. This broad audience has not, however, translated into consistent sales for either drugmaker.
VIVUS, which has no marketing partner, has delivered truly dismal sales of just $16 million through three full quarters despite being on pharmacy shelves for almost a full year longer than Belviq. Qsymia struggled early on to gain coverage through insurers but is simply not having much luck reaching its target audience of obese people with a BMI over 40. Admittedly, Qsymia's less favorable safety profile relative to Belviq may also be playing a role in its underperformance.
Then we have Belviq, which was expected to outperform but took what seemed like an eternity to get scheduled by the Drug Enforcement Agency. Since that time, sales of Belviq have stumbled out of the gate despite the marketing assistance of Eisai, a recently announced licensing expansion, and the beginning of a marketing campaign for Belviq. In the third quarter, Eisai recognized total sales of just $5.4 million, to which Arena is entitled 31.5%. Unless sales rebound in a big way next year, these two drugs could become one of the bigger flops of the decade.
Shares of Arena and VIVUS are off 44% and 34%, respectively, year to date.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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