In Pharma, Taking a Closer Look at Next Level Down Opportunities

Investors always look for big opportunities, which prove hard to find. Everyone watches the massive market capitalization of industry leaders. Sometimes, the giant companies are slow to move. For example, Pfizer PFE actually lost about $47 billion in market cap over the last year, while Johnson & Johnson JNJ lost $40 billion. However, in the pharmaceutical industry, the opportunities in what we might call “the next level down” can be enormous. These are the companies that are moving ahead, some faster than others, but which are heading toward breakthroughs in this dynamic industry.

In previous columns, we discussed oncology and immunology. Massive acquisitions are underway. It would be good to review a few stars that may be ready for a leap in value. Keep in mind that in this industry, any true leap of technology that will save lives or improve the quality of service will be grabbed by a hungry industry. 

Let’s consider several instances. Madrigal Pharmaceuticals, Inc. MDGL is a company to watch. Resmetirom moves ahead in Phase III clinical trials. This product is a liver-directed selective thyroid hormone receptor beta agonist, used to deal with NASH, non-alcoholic steatohepatitis. If Phase III proves successful, company value will rise. According to the National Institute of Diabetes and Digestive and Kidney Diseases, “… about 1.5% to 6.5% of U.S. adults have NASH.” As I’ve written before, rare diseases are getting a good deal of attention from companies with great research skill.

Promising Research

Alnylam Pharmaceuticals, Inc. ALNY also possesses attractive features. It trades near its 52-week high. Market cap is already above $25 billion. The main reason for its strong value is that this company has no shortage of actual products and very promising research interests, which include genetic medicines, cardio-metabolic diseases, hepatic infectious diseases, and central nervous system (CNS)/ocular diseases. More products are in development including givosiran, which is designed to deal with adolescent patients who suffer from AHP, acute hepatic porphyria.

Interest is growing in rage inhibitors. NASDAQ-listed Mirati Therapeutics MRTX is working on Adagrasib, known by its brand name, Krazati. This medication treats  lung cancer. Adagrasib is an inhibitor of the RAS GTPase family. The company’s market capitalization at the date of writing is about $2.8 billion. Watch for additional rage inhibitor successes to expand rapidly in the coming months.

One home run in oncology, one really promising breakthrough that is near launch stage will propel a company’s value. Recent successes include Japan’s Eisai thanks to its lecanemab, which addresses Alzheimer’s disease, Down syndrome and traumatic brain injury. Also, Sarepta Therapeutics SRPT stands out for delandistrogene moxeparvovec, which deals with Duchenne muscular dystrophy.

Here is an interesting difference between high tech and pharma: areas such as artificial intelligence hold great promise, but they have not come together in a compelling series of products and services that make money. What new, marketable things, for example, can robots really do in the next five or ten years? Compare that to a single cancer breakthrough. If it improves on the current cancer treatment regimen, the financial impact will be huge.