New Oncology Drug Makes Bayer Look Like a Buy

With the economy on the edge of a cliff and the imminent danger of European debt contagion, investors actively engaged in the market right now have already exhibited their willingness to consider risk. Still, one area that Wall Street seems to be avoiding is biotech. The compounded danger of a high stakes segment and the current volatility has many investors seeking out more reliable options. This, alongside recent high profile examples such as Denderon, which reached $45 per share before falling back down to $11, has prompted a declining interest in biotechnology and especially oncology.

For that reason though, there are several well priced and highly attractive options within the sector, with the most recent example being Germany’s Bayer (BAYRY) and the Norwegian biotech Algeta. Together the companies have developed an experimental drug that has succeeded in extending the lives of patients suffering from advanced prostate cancer. Titled, Alpharadin, the drug operates by attacking tumors that exist within the bone with small doses of radiation. The data comes from late-stage studies of the product released this past weekend.

Many oncology drugs appear promising in early stage studies but fall apart upon later investigation. Alpharadin has followed another trajectory. Enthusiasm for the drug has increased in recent months as more data reveals its success in improving symptoms within the bones and extending the lives of trial patients. Alpharadin has been put on the fast track by the FDA and is being celebrated as a potentially groundbreaking advance in the treatment of prostate cancer.

Investigators said the treatment prolonged survival by an impressive 44 percent with studies indicating patients treated with Ampharadin lived a median average of 14 months as compared with 11.2 months with the use of a placebo.  Beyond this, the treatment did something unique as compared to receiving direct radiation treatments; it avoided destroying healthy tissue while attacking tumors, softening side effects and thereby improving not only the length of life but the quality as well.

The reason for this is the ability to delay bone metastases from forming as a result of its ability in trials to eradicate cancer cells more effectively than previous methods. The narrow target range of the drug allows for more accurate and persistent treatment because of the lack of devastation to the surrounding tissue.

Bayer has said that it will apply for U.S. approval by the beginning of next year, a move that has the potential to thwart the efforts of competing companies like Amgen (AMGN), which has their own cancer drug in the works.

If the biology is getting to be a bit much, the most recent estimates for the drug may elucidate the profit potential here. Ampharadin is anticipated to reach peak sales of $1.7 billion once it completes its FDA approval and begins distribution.

Too boot, Bayer, perhaps because of the worry surrounding the risk of an early stage oncology investment, is still trading wildly beneath its 52-week highs in spite of the positive news.

Beyond its latest prostate cancer drug, last week, European authorities optimistically appraised Bayer AG’s application to broaden the use of its blood thinning drug Xarelto to incorporate patients in danger of stroke. Several weeks ago the U.S. FDA advisory panel recommended Xarelto for stroke prevention, sending shares higher.

The strength of these products, in addition to the impressive existing offerings at the German based company may make this a biotech  risk worth taking.