Billion dollar blockbuster status is the Holy Grail pursued by every drugmaker, but developing blockbuster drugs isn't easy.
According to the Tufts Center for the Study of Drug Development, it costs $1.4 billion to develop and commercialize a new therapy, and that expense, plus a clinical trial failure rate that eclipses 90%, means that the odds are stacked against biotech companies. However, that doesn't mean that there aren't some promising drugs in development that could someday be big winners. These three companies are working on drugs that could be blockbusters someday.
No. 1: Receptos Inc. (NASDAQ:RCPT) -- Ozanimod
Multiple sclerosis is one of the biggest markets for drug spending, and a significant amount of that spending is captured by a handful of players. Receptos hopes that its drug ozanimod will turn it into one of them.
Ozanimod is an oral drug for relapsing MS that Receptos is studying in phase 3 trials and comparing to Biogen's Avonex, which currently makes $3 billion per year.
In mid stage trials, ozanimod reduced brain lesions associated with MS while also delivering a safety profile that stacks up well against other top-selling oral MS medications, including Tecfidera, Gilenya, and Aubagio.
If the ozanimod phase 3 trials suggest that ozanimod is a better drug than Avonex, Receptos could capture a healthy chunk of Avonex's market share. Additionally, if safety data remains compelling, ozanimod could also win away share from Tecfidera, Gilenya, and Aubagio. Those three drugs posted combined sales of more than $5.5 billion last year.
Granted, a lot can happen in clinical trials that could derail ozanimod -- and then it's very likely that Receptos shares would take a beating. However, for investors willing to take on some risk, ozanimod could make it worthwhile.
No. 2: Esperion Therapeutics (NASDAQ:ESPR) -- ETC-1002
Esperion Therapeutics founder Roger Newton is the co-inventor of Lipitor, the planet's top selling statin, used to control cholesterol in patients at risk of heart disease. Newton is attempting to repeat his prior success with ETC-1002, a next-generation therapy that, when combined with the use of statins, can further lower bad cholesterol levels in patients.
During phase 2 trials, patients taking ETC-1002 alongside statins saw their bad cholesterol shrink by as much as 24% versus statins alone.
That showing could mean that ETC-1002 eventually becomes an intriguing oral alternative to highly-anticipated PCSK9 inhibitors, which are injection-based cholesterol-busting medicines for which analysts have forecast peak sales that stretch into the multiple billions of dollars annually.
Since statins are prescribed to tens of millions of patients in the U.S. alone and have historically been the planet's top selling medicines, ETC-1002's blockbuster opportunity may be compelling enough to justify the risk of a phase 3 failure.
No. 3: Achillion Pharmaceuticals (NASDAQ:ACHN) -- ACH-3102
Thanks to the launch of new oral hepatitis C drugs that offer cure rates in the 90% range without the use of prior-generation, side-affect laden, injection-based therapies, spending on hepatitis C drugs is soaring.
According to Express Scripts, the roll-out of Gilead Sciences' Sovaldi and Harvoni -- two pricey, new HCV medications that became billion dollar blockbusters months after their respective launches -- led to hepatitis C drug spending sky-rocketing 742.6% last year.
Gilead Sciences' drugs were big-time commercial successes because they dramatically reshaped HCV treatment, and, while Achillion won't be able to deliver cure rates that are all that much better than Sovaldi and Harvoni's mid- to high-90% rates over a 12-week treatment course, it might be able to significantly shrink treatment duration.
Achillion is studying ACH-3102, a next generation 5S5A inhibitor that, when combined with Sovaldi, cured 100% of patients over an eight week period in a small phase 2 trial. The company followed that up with another small trial in which the combination cured 100% of patients in just six weeks. And now the company is seeing whether or not the the approach works after only four weeks as well.
If it does, ACH-3102 could, at a minimum, become an intriguing adjunct therapy used alongside Sovaldi. At a maximum, it could be combined with Achillion's ACH-3422, a Sovaldi alternative, for an all in-house option. Either way, if its trials succeed, then Achillion could have a blockbuster on its hands, given that sales of Sovaldi and Harvoni combined to total $12.4 billion last year.
Tying it together
Biotech investing isn't for the faint of heart. Biotech stocks can pop or drop significantly based on clinical trial data, and that makes them too risky for most investors. However, for investors who are willing to traffic in the industry, there can be substantial reward to be had if Receptos, Esperion, and Achillion's drugs pan out.
Todd Campbell owns shares of Gilead Sciences, Esperion, and Achillion. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool owns and recommends Express Scripts and Gilead Sciences. 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.