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.
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.
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.