Considering that 90% of prescription drugs being developed by biotechnology companies will fail during clinical trials, it can be tough to know which biotech stocks to seize upon and which stocks to shun. Instead of focusing on unproven companies offering more promise than profit, a better investment strategy may be concentrating on biotech companies like these five that are already marketing fast growing treatments.
Passing the baton
Gilead Sciences' (NASDAQ:GILD) Sovaldi has been a runaway success since launching last December. The drug is the fastest medicine to ever reach the $1 billion blockbuster sales mark and with more than $8 billion in sales during its first nine months on the market, Sovaldi is flirting with being the top selling drug on the planet.
Sovaldi sales totaled more than $2 billion in the first quarter and accelerated to more than $3 billion in the second quarter before slipping back to $2.8 billion in the third quarter ahead of the launch of Harvoni -- Gilead's next generation hepatitis C drug. Since Harvoni offers patients a better chance for a cure, Harvoni will displace Sovaldi as the top selling hepatitis C drug in 2015. However, Sovaldi will still be available for sale in markets where Harvoni has yet to win approval. Regardless of whether its Sovaldi or Harvoni, industry watchers expect Gilead's hepatitis C franchise will achieve similar success next year; especially, given the fact that just 100,000 of the nearly 3 million people diagnosed with hepatitis C in the U.S. have been treated with Sovaldi so far.
Shifting away from injections
Biogen's (NASDAQ:BIIB) Tecfidera was the third oral medicine for the treatment of multiple sclerosis relapses to win over regulators, but despite the late start it's become the top seller of the the three in the U.S. and is quickly gaining ground in Europe, too. As a result, Biogen reported that Tecfidera sales increased from $286.4 million last year to $787 million in the third quarter.
That brought Tecfidera's sales through the first nine months to nearly $2 billion, up from just $479 million in 2013. However, investors are digesting whether that success will continue following news that a Tecfidera patient has passed away after being diagnosed with a rare brain disease known as PML. However, before investors get nervous, they may be better off taking the long view. After all, doctors and patients have been aware of the risk of PML in MS therapies for years, cases of PML are uncommon, and the risk of PML hasn't slowed sales of MS drugs in the past. Assuming that this PML case is similarly isolated, Tecfidera sales are likely to continue climbing as the drug wins approval in more global markets.
Uprooting an established therapy
Johnson & Johnson's (NYSE:JNJ) Xarelto is one of a class of new factor Xa inhibiting anticoagulant drugs seeking to displace warfarin's decades long dominance in the market.
Because doctors have embraced factor Xa inhibitors for their friendlier dosing, easier monitoring, and arguably better safety profile, Xarelto has been a runaway success for J&J. In the third quarter, Xarelto's sales jumped by 68% to $414 million, bringing year-to-date sales to $1.09 billion, up 84.5% from a year ago.
Sales could head even higher if Portola (NASDAQ:PTLA) is able to usher andexanet alfa, its factor Xa antidote, successfully through regulators. The lack of such an antidote has kept doctors from prescribing factor Xa drugs like Xarelto to patients most at risk for bleeding episodes, such as seniors prone to falls. As a result, the approval of an antidote could significantly increase market demand for Xarelto.
Changing of the guard
Since winning FDA approval in 2012, Medivation (NASDAQ:MDVN) and Astellas' (NASDAQOTH:ALPMY) Xtandi has been winning away market share from Johnson & Johnson's prostate cancer drug Zytiga.
Medivation hasn't reported its third-quarter results yet, but Astellas reported six-month results for the April through September period last week. According to Astellas, U.S. sales of Xtandi totaled $334 million over the past six months, up 70% from last year. Astellas also reported that sales of Xtandi in Europe totaled 104 million Euros, or roughly $130 million during the last six months. Add in sales in other markets like Japan and Xtandi is almost tracking at a billion dollar blockbuster annual sales rate.
We'll get Medivation's take on the third quarter on Nov. 8, but given that Xtandi just won a critical label expansion in September that allows for its use in pre-chemotherapy patients, sales could head markedly higher as it eats away more market share from Zytiga next year.
Another arrow in the quiver
Celgene (NASDAQ:CELG) is best known for its $4 billion-a-year multiple myeloma drug Revlimid, but investors should increasingly be paying attention to Pomalyst.
Pomalyst is Celgene's most recently approved drug for use in treating multiple myeloma and the drug is used as a third line therapy in patients whose disease returns after taking Revlimid and J&J's Velcade. Since most multiple myeloma patients see their disease return, demand for Pomalyst is growing quickly.
Pomalyst's sales surged 103% higher year over year in the third quarter to $181.2 million. Pomalyst's biggest market is the U.S. where the drug recorded sales of $118.3 million last quarter, up 53.6% from last year. But Pomalyst is growing far more quickly overseas. Launches in additional European countries lifted non-U.S. sales of Pomalyst from $12.5 million in Q3, 2013 to $62.8 million in Q3, 2014, up 409%. As sales continue to climb in the U.S. and momentum builds overseas, Pomalyst appears on track to achieve the coveted billion dollar blockbuster sales pace soon.
Picking biotechnology winners and losers can be a struggle, but sticking with leading companies marketing established blockbuster treatments may help investors build a stronger portfolio. That's because sales from top selling drugs provide companies with valuable cash that can be used to develop new medicine, while also providing insulation against inevitable pipeline failures.
Todd Campbell owns shares of Gilead Sciences, Biogen, Medivation, Portola, and Celgene. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned. The Motley Fool recommends Celgene, Gilead Sciences, and Johnson & Johnson. The Motley Fool owns shares of Gilead Sciences and Johnson & Johnson. 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.