Biotech is one of the most lucrative of all industries. The success of a single drug has the potential to generate billions of dollars annually.
Understand that there does indeed exist an altruistic motive, the primary intention of developing compounds to provide new treatments for unmet needs for the good of the species. Yet the profit motive remains--business is still business and revenue generating potential certainly has its place in providing perspective among the panoply of therapeutic avenues that could be pursued.
Investors in biotechnology generally follow a couple methods in selecting for a company with tremendous upside. One of the primary strategies is identifying a company involved in white-hot, bleeding edge area of research. A second method is to identify a niche company with an orphan or completely novel drug that, if successful, is protected from competition for several years. Success in either one of these areas will greatly increase the likelihood of a larger financial windfall for all involved.
Considering the first of these investment methods brings us to one of the hottest frontiers in neuro-biotechnology: autism. With a 10-17% annual growth rate, Autism Spectrum Disorder is the single fastest growing developmental disease in the world today. About 1% of the United States population, ages 3 to 17, is afflicted with autism spectrum disorder and more children will be diagnosed with autism this year than with AIDS, diabetes & cancer combined. Even with these stunning facts, there is NO drug available on the market today that addresses the core issues of autism. There are many drugs designed to allay autistic symptoms, e.g., Ritalin. But none that address the core issues of the autistic brain. Presently, there is one drug approved by the FDA for such use, the antipsychotic, Risperidone, produced by Johnson & Johnson (NYSE: JNJ, Stock Forum) and approved for use in infantile autism. Risperidone has not been without its critics, though, as many question the use of the antipsychotic medication. With President Obama recently earmarking $1 billion for studies extending through 2018, biotechnology companies have realized both the great financial and humanitarian benefits that can result with the successful development of a compound for autism and have begun a push to develop therapeutic compounds.
From an investor’s standpoint, the two aforementioned methods describe why finding companies that are vying for position in this area can yield great long-term rewards. The research and development required to bring one of these drugs to market is still several years away; but some ground-level entries should be considered. Precious few pharmas have engaged in significant autism drug research and only ONE is developing a 100% novel compound. So let's survey the industry's landscape.
Novartis (NYSE: NVS, Stock Forum), the Swiss biotech giant, recently announced that they are conducting research on a compound that they believe can benefit several areas of illness including Fragile X Syndrome and autism. While the studies have been small in scale, the results are promising. In the article released by www.theautismnews.com in April, Dr. Mark C. Fishman, president of the Novartis Institutes for BioMedical Research stated, “We have been reluctant to make this public because we still need to do more experiments, do them correctly and in a bigger way.” Dr. Fishman continued, “But our group feels pretty good about the data.” The compound that Novartis is researching for autism is an existing compound that they believe can possibly be re-applied as a treatment for autism.
Pfizer, Inc. (NYSE: PFE, Stock Forum), the largest drug manufacturer in the world, assembled a 14-member autism research team in 2009. While Pfizer has not disclosed much about their research, they seem to be searching for general biological correlates of the autistic brain to direct their focus. Issues with neurotransmitters, more specifically the overabundance of neural connections, may be a key in addressing core issues of autism and may hold a key to a treatment. "We've always been interested in this area but we didn't have the targets," said Martin Mackay, Pfizer's president of global research and development, in an interview. Mr. Mackay followed up with, "Now we do."
Truly exceptional success comes from bringing our two aforementioned investment methods into coincidence. And Cellceutix, a biotech company with a powerful pipeline of bleeding-edge therapeutics for humanities unmet needs, may have affected just such a happy marriage. Cellceutix Corporation (OTC:BB: CTIX, Stock Forum) is the dark horse investment candidate as they continue developments of KM-391, their compound for the treatment of autism. With a research team led by Dr. Krishna Menon, who was a Presidential Award winner and key researcher for the blockbuster drugs Alimta and Gemzar during his time at Eli Lilly (NYSE: LLY, Stock Forum), Cellceutix is developing a novel compound to address the core issues of autism. In a recent press release regarding their preclinical studies, Dr. Menon stated, “I am very encouraged by the research results that we are achieving with KM-391 and its development potential as a treatment for autism. In our testing, we have simulated specific characteristics of an autistic brain and behavioral symptoms that result from them. KM-391 has been shown to significantly improve both the physical conditions in the brain and behaviors resulting in our animal models.” Cellceutix is particularly attractive due to several factors. For starters, they are the only company with a completely novel compound, not a derivative of another or a mere re-application. Secondly, the current stock price is only at 45 cents; they are still “sliding under the radar” while Novartis and Pfizer are trading at $49 and $16, respectively. The potential gains from a successful commercialization of KM-391 are astounding. Finally, historically Big Pharma has suffered from a dearth of organic pipeline development and research imagination, often looking instead to synthetically acquire it by gobbling up smaller biotechnology companies like Cellceutix, with promising compounds. History may very well repeat itself in the not-too-distant future.
No matter what investment strategies a person implements to grow their portfolio, everyone is always looking for the investment that can produce lucrative gains. Publicly-traded biotechs that are aggressively pursuing a treatment for autism are few and far between. As autism drug research continues to crescendo, the battle for market share will carry on. Sowing a proper education will prove itself once again to reap great gains for the vigilant investor.
Disclosure: The author does not hold positions in any of the stocks mentioned