Shareholders of biotech company Myogen
In response, shares were bid up more than 40% in trading on Monday.
Ambrisentan is being targeted at treating pulmonary arterial hypertension, a relatively uncommon but very serious condition that leads to severe shortness of breath in the short term and eventual heart failure in the long term. While only about 200,000 or so people in the world at any time suffer from PAH, insurers are willing to reimburse at a relatively high level, and ambrisentan could have potential sales of as much as $300 million or more per year.
Of course, what's good news for one company in the biotech world can be bad news for another. The success of this ARIES-2 study on ambrisentan is not good news for Switzerland-based Actelion and its drug Tracleer, which is approved and on the market for PAH. Likewise, shares of would-be rival Encysive Pharmaceuticals
This is the good news/bad news of biotech in a single nutshell. Pick the right stock (Myogen, in this case) and you can see big-time gains, given that these shares have gone from a low of under $6 to more than $28 on Monday. Pick the wrong stock, like Axonyx
I wouldn't necessarily push investors to sell their Myogen shares on this good news, but I would make one observation. Investors' reactions to news in the biotech space can be a little counterintuitive, and it's possible that the shares will trade down during the wait for approval (likely early 2007) and perhaps even between approval and launch. There could be worries about competition, pricing, or any of a host of other issues, and analysts looking to make trading calls may blow those concerns out of proportion. After all, it happened with Amylin Pharmaceuticals
Patient longs might find their patience and convictions tested over the coming months. Nevertheless, current Myogen shareholders should enjoy their day in the sun.
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Fool contributor Stephen Simpson owns shares of Amylin Pharmaceuticals but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares). The Motley Fool has a disclosure policy.