As the heat and humidity begin to rise, consider these biotech stocks to make your portfolio sizzle this summer.
Since I first profiled Advanced Life Sciences
As a near-term catalyst, in the new few months the company is expected to report phase 3 top line results for its Gabapentin GR for nerve pain arising from shingles. Gabapentin GR has a much larger sales potential than both of the currently marketed products combined, since it is a widely used drug (including the treatment of many off-label conditions) that is currently taken three to four times daily. The company's version of gabapentin will only be dosed one to two times daily, which should be enough of an advantage to warrant premium pricing and gain market share in an off-patent environment that is currently dominated by generic forms of the drug. I believe shares of Depomed are attractively valued at present, and represent a buy at current levels in anticipation of positive phase 3 results and potential licensing deals for both existing products and drug candidates in the company's pipeline.
Beyond the potential call option exercise by Glaxo, Theravance has a deep pipeline of products with huge sales potential. Telavancin is the company's most advanced drug candidate, with an expected FDA approval in early October. Telavancin is a powerful IV-administered antibiotic which is reserved for serious infections that are resistant to other antibiotics. The company has partnered with Canadian-based Astellas for the drug and is set to receive an additional $95 million in milestone payments, along with a tiered royalty rate based on net sales that ranges from the high teens to high 20s on a percentage basis. Astellas will pay all commercialization costs for telavancin. The drug's unique, dual mode of action differentiates it from currently used antibiotics, giving the drug a reasonable chance at reaching the highest tier for royalties on annual sales exceeding $500 million.
Astellas also has an option to license another antibiotic in Theravance's pipeline that is a combination (heterodimer) of two distinct antibiotic modes of action in one molecule that is also designed for serious infections resistant to standard treatments. Another potential big seller in the pipeline is TD-5108, a once-daily drug designed to treat gastrointestinal motility disorders such as chronic constipation, constipation-predominant irritable bowel syndrome, severe heartburn, and related conditions. This category is a billion-dollar opportunity for Theravance with a current void caused by the March 2007 withdrawal of Zelnorm from the market and the 2000 suspension of Propulsid, both because of heart concerns. Finally, Theravance has an additional Beyond Advair collaboration with Glaxo, with the goal of developing once-daily products for respiratory conditions such as asthma and COPD that improve upon Glaxo's $4 billion Advair franchise. Look for clinical trial data on most of the aforementioned pipeline drugs during the latter half of this year.
Since I first profiled ThermoGenesis
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Fool contributor Mike Havrilla, R.Ph., B.S., Pharm.D., is a Rite Aid pharmacist who lives, writes, works, and enjoys running on the streets and trails in the small Pennsylvania town of Portage. He invites your comments and feedback. Mike does not have a position in any company mentioned in this article. GlaxoSmithKline is an Income Investor recommendation. The Fool has a disclosure policy.