The biotech sector is a fast growing market opportunity for investors, especially those with a taste for high risk and long-term views. Biotechnology is the technological application of modifying living organisms to develop useful products for human purposes. Biotechnology has applications in four major industrial areas: healthcare (medical), agriculture, industrial uses, and environmental uses. There is a reason the sector has drawn so much attention in the market. The profits that can be generated if you are invested in the right deals at the right time are astronomical.
The US is the leading consumer of biotechnology products internationally and holds the world’s largest scientific base. The government has long since supported biomedical and other biotechnology research and development giving the country a competitive edge in the development and commercialization of biotechnology. The biotech sector promises the ability to address global problems including human health, food generation and security, environmental sustainability, and clean energy. As the industry continues to grow, new products are developed, the environment and human health benefits, and the economy is strengthened.
The largest component in the sector and the focus for us now is the medical aspect of biotech and what that means for the health care industry. An aging global population, an outbreak of diseases, and the need for new and improved drugs fortify the potential for the biotech sector now and in the future.
There are many companies looking to make it big in the biotech sector. Two worth noting are GlycoMimetics (GLYC) and GW Pharmaceuticals (GWPH) ; both whom are achieving success and developing new products for the unmet needs in the medical industry.
GlycoMimetics is a clinical-stage, publicly traded biotechnology company that uses exclusive glycobiology technology to discover and develop novel glycomimetic drugs to address unmet medical needs diseases in which carbohydrate biology plays a role.
Founded in 2003, the company has developed a robust, diversified product pipeline and continues to advance its research and provide hope for patients with clinical treatment needs. All of GlycoMimetics’ compounds have been discovered internally, strengthening the company’s expertise on the specialized chemistry and understanding of carbohydrate biology.
The Company is currently developing a pipeline of glycomimetic drug candidates that inhibit disease-related functions of carbohydrates, such as inflammation, cancer, and infection. GlycoMimetics second quarter results (ended June 30, 2014) report the company value at USD$66.2 million. CEO Rachel King states, “Our second quarter achievements reflect important progress in advancing our lead drug candidates and our emerging clinical pipeline.”
GW Pharmaceuticals aims to maintain a global leading position in the development of plant-derived cannabinoid therapeutics through the development of pharmaceutical products that reach the unmet needs in the market. The company provides patients with serious conditions with valuable medicine that can make a difference in their lives.
Founded in 1998, the company is focused on developing a portfolio of cannabinoid medicines which are medicines that contain controlled substances, including Sativex (for the treatment of MS spasticity and cancer pain) and Epidiolex (for the treatment of childhood epilepsy).
The GW team has extensive experience and knowledge in the field and maintain in-house control over all aspects of the product development process including botanical research, extraction technology, formulation, clinical trials, and regulatory affairs. GW also enters into commercial licence agreements with major pharmaceutical companies who will market and sell the products.
Another company to keep an eye on is Sirona Biochem (SRBCF) . Although it has a much smaller market cap than the first two mentioned above, the leverage is definitely greater with Sirona for those that have appetite for the space.
Similar to GlycoMimetics, Sirona uses biotechnology to make advances in the medical world. Founded in 2009 by its current chairman, Dr. Howard Verrico, Sirona is a cosmetic ingredient and drug discovery company. The company has developed a proprietary technology that has stabilized carbohydrate molecules making the drugs more efficient and safe.
In 2011, Sirona acquired TFChem, a French based research lab, and together they have perfected the chemistry method. The French Government is extremely supportive of Sirona’s efforts and even helped publish a video which highlights Sirona’s work.
Sirona focuses on two main areas they feel have strong market potential and high return on investment: therapeutics, and cosmeceuticals. Unlike most traditional biotech companies whose outcomes tend to be binary, Sirona reduces their risk by licensing out their compounds to major pharmaceutical companies for an upfront fee and a piece of future earnings. Their downside risk is protected by the upfront fee they receive and they get to keep a percentage of the revenue if and when the drug goes to market.
Sirona and TFChem have recently received CDN$1.2 million funding for its anti-aging project from the French government. The anti-aging product market is valued at USD$220 billion and now Sirona has the opportunity to start testing their compounds and contribute to the market’s success.
The company has also entered into the areas of anti-inflammatory and infectious diseases. In a joint venture in Bloom Burton & Co., Canada’s pre-eminent Life Sciences investment bank, Sirona has achieved the first batch of an anti-inflammatory compound. This is the beginning of the plan to identify and design a library of compounds to address the unmet market needs in the areas of rare or neglected diseases.
As it continues to license its compounds successfully, Sirona’s end goal is to become a take-out target to some of the major pharmaceutical companies. It’s developing a high margin, managed-risk business in two lucrative market places and should be an attractive acquisition for anyone looking to penetrate the space. The royalties it has already received from its skin lightening compound will be active in early 2015 and it will also receive payments during the development of SGLT2. The expansion of TFChem will allow Sirona to take on more projects and finish them more quickly.
There have been a number of acquisitions in the space that show promise to a small company like Sirona which gives me more confidence in the space they are operating in. Optimer Pharmaceuticals Inc. was acquired by Cubist for an upfront cash offer of $551 Million; GlycoMimetics’ partnership with Pfizer worth over $340 Million, and Glycart’s acquisition by Roche.
All this is only supposed to tell you that Sirona is worth watching at these levels. The company is supported by some very good names in the business and if the company continues to leverage their talent and license their compounds, Sirona Biochem could be a sleeper we don’t want to miss.
As Sirona begins to increase their exposure internationally, investors are beginning to realize the company’s potential and are taking advantage of the opportunity. Whether you are interested in a smaller company such as Sirona Biochem or larger corporations like GlycoMimetics and GW Pharmaceuticals, both options offer an open door into the biotech sector with the potential for a higher return on your investment.
As always, if you have any questions, please do not hesitate to get in touch with me anytime. I look forward to hearing from you.