While some of the biggest biotechs have recently struggled with continuing their impressive paths to success, investment bank Cowen & Co. took a future look at the industry and predicted 10 biotechs its analysts believe will grow to lead the industry.
«Stalled products, high-profile clinical failures, management dysfunction, dry pipelines, and overly conservative business development have made some [large-cap biotechs] look more big pharma than even some big pharmas,» the Cowen report stated, citing examples such as Amgen, Celgene and Gilead.
The Sept. 28 report emphasized four key factors in making the picks: (1) a business with low clinical development risk and high sales potential; (2) a de-risked mid- to late-stage pipeline; (3) a proven scientific or business strategy to drive long-term growth; (4) «credible management that can reliably drive execution of the pipeline and strategy.»
Here are the 10 mid-sized biotechs that Cowen believes will become the next generation’s top biotechs. Order is alphabetical.
Market capitalization: $4.5 billion
Approved drug(s): Idhifa (enasidenib) and Tibsovo (ivosidenib)
Top pipeline prospect(s): Mitapivat, a PKR activator in two pivotal studies
Reasons for optimism: Cowen sees Agios’ base business peaking at $1 billion in revenue with an additional boost from Celgene-provided royalties for Idhifa. Their analysts highlighted the company’s embrace of personalized medicine, where the focus is on drugs with available biomarkers.
Reasons for caution: While its outgoing CEO will become executive chairman, it will be worth watching how the company transitions to its new leader, Jacqualyn Fouse, a former Celgene executive. And, as with all biotechs, the transition from R&D promise to commercial reality can be a challenge. How quickly Agios can turn its recent approvals into profit will be a key test.
Market capitalization: $8.9 billion
Approved drug(s): Onpattro (patisiran)
Top pipeline prospect(s): Givosiran, for acute hepatic porphyrias; and fitusiran, for hemophilia and bleeding disorders
Reasons for optimism: Alnylam stands out for its work in RNA interference, which led to the landmark approval of Onpattro in August. Cowen views RNAi as «not just a prolific engine of drug candidate generation, but also capable of addressing diseases that are otherwise undruggable.»
Reasons for caution: While the approval of Onpattro was unquestionably a scientific breakthrough, commercial success is still a question. Ionis and Pfizer could bring rival drugs to market and pricing will be an area to watch as well. The influential watchdog group ICER recently found Onpattro «far exceeds» its cost-effectiveness thresholds.
Market capitalization: $17.5 billion
Approved drug(s): Palynziq (pegvaliase), Brineura (cerliponase alfa), Vimizin (elosulfase alfa), Kuvan (sapropterin dihydrochloride), Aldurazyme (laronidase) and Nagalzyme (galsulfase)
Top pipeline prospect(s): Valoctocogene roxaparvovec, in Phase 3 for hemophilia A; and Vosoritide, in Phase 3 for anchondroplasia
Reasons for optimism: Cowen praised BioMarin’s pipeline as «the deepest, most mature pipeline of rare disease therapies of any company currently.» The biotech already brought seven products to market and has several more in various stages of development.
Reasons for caution: While securing approval for seven drugs is no easy feat, few of BioMarin’s products are seen as blockbusters-to-be. Much of the recent excitement around the company is concentrated on its hemophilia gene therapy, which has clear promise but a number of clinical hurdles to meet yet.
Market capitalization: $7.8 billion
Approved drug(s): None
Top pipeline prospect(s): Lenti-D, in Phase 2/3 for cerebral adrenoleukodystrophy; bb2121, in Phase 3 testing for multiple myeloma; and LentiGlobin, for transfusion-dependent beta-thalassemia)
Reasons for optimism: Bluebird said earlier this year they plan to file three therapies for approval by the end of 2019. Recent data released in September reinforced Lenti-D’s strength in efficacy and safety and the company is among the leaders in BCMA-targeting CAR-T therapy.
Reasons for caution: Gene therapy is as promising as it is risky, with numerous challenges in manufacturing, pricing and potential commercialization. The required time and cost to bring products to market may test investor’s faith, making setbacks all the more damaging. Rivals in CAR-T could also upset Bluebird and partner Celgene’s plans.
Market capitalization: $14.8 billion
Approved drug(s): Jakafi (ruxolitinib), Iclusig (ponatinib) in the EU, Olumiant (baricitinib)
Top pipeline prospect(s): Ruxolitinib, for acute and chronic graft-versus-host disease; itacitinib; and several early-stage cancer drugs
Reasons for optimism: «Incyte’s expert medical chemists have been prolific in the generation of promising small molecules targeting oncology and immunology targets,» the Cowen report stated. «Despite recent setbacks, management still has an above-average track record of execution, including driving commercial success of Jakafi.»
Reasons for caution: The Delaware-based biotech missed on a crucial Phase 3 trial with the IDO inhibitor epacadostat, which essentially ended that candidate’s potential for combination use in cancer treatments.
Market capitalization: $11.2 billion
Approved drug(s): Ingrezza (valbenazine) and Orilissa (elagolix)
Top pipeline prospect(s): Opicapone, in Phase 3 for Parkinson’s disease; and NBI-74788, in Phase 2 for congenital adrenal hyperplasia
Reasons for optimism: Neurocrine strikes Cowen with a solid all-around business, noting a proven drug discovery process that yielded Ingrezza and Orilissa as well as an Ingrezza launch that beat «modest investor expectations.»
Reasons for caution: Neuroscience is a notoriously challenging field and, with few wholly owned clinical assets, the biotech could feel the pain of a clinical setback more acutely.
Market capitalization: $6.6 billion
Approved drug(s): None
Top pipeline prospect(s): Brexanolone, in registration phase for postpartum depression; SAGE-217, in Phase 2 and 3 for various indications; and SAGE-324, in Phase 1 for Parkinson’s disease
Reasons for optimism: The main draw for Cowen is «the commercial promise of its late-stage pipeline with $3B+ potential in major depressive disorder and broader PPD alone, not even including other programs in essential tremor and insomnia.» Clinical successes for brexanolone and SAGE-217 have raised investor expectations.
Reasons for caution: A lot will be riding on Sage’s bet on an sped-up clinical development pathway for SAGE-217. The FDA signed off on the company’s in June, but future updates will likely be closely watched.
Market capitalization: $10.5 billion
Approved drug(s): Exondys 51 (eteplirsen)
Top pipeline prospect(s): Golodirsen, for certain Duchenne muscular dystrophy patients; casimersen, for DMD; and a micro-dystrophin gene therapy
Reasons for optimism: As Cowen highlighted, Exondys 51 has found commercial success, with peak sales estimates of more than $700 million despite modest efficacy for Duchenne muscular dystrophy. The biotech’s pipeline, particularly in gene therapy, could make it a key player in DMD down the road as well as in the present.
Reasons for caution: The FDA’s OK of Exondys 51 was one of the most controversial approvals in the agency’s recent history. To clear FDA scrutiny with future products, Sarepta may need to see stronger results in the clinic going forward. Recent bullishness around its gene therapy was tied to results in just three patients. Whether that efficacy holds up in a larger group is a critical question.
Market capitalization: $12.5 billion
Approved drug(s): Adcetris (brentuximab vedotin)
Top pipeline prospect(s): Enfortumab vedotin, for solid tumors; tisotumab vedotin, as a tissue factor; and tucatinib, for HER2 breast cancer
Reasons for optimism: Adcetris could grow to be a blockbuster drug for Seattle Genetics. It already has picked up five approved indications from the FDA and, on Monday, scored positive results in another key Phase 3 study.
Reasons for caution: Commercial execution will be key for Seattle Genetics, which hopes to expand the market for Adcetris. The biotech has bet heavily on antibody-drug conjugates. Can it expand into immuno-oncology as well?
Market capitalization: $3.8 billion
Approved drug(s): Crysvita (burosumab-twza) and Mepsevii (vestronidase alfa)
Top pipeline prospect(s): Small molecule UX007, for fatty acid oxidation disorders; and gene therapies DTX301 and DTX401
Reasons for optimism: Cowen seems sold on Ultragenyx’s leader. The bank’s report stated its «most unique value lies in the experience and company-building strategy driven by its founding CEO, a pediatric geneticist and original CMO of Biomarin.»
Reasons for caution: Ultragenyx has yet to turn a profit and expects «significant losses for the forseeable future,» according to its most recent quarterly filing. Its gene therapy candidates, meanwhile, are still early in development.
A Product Manager with expertise in pharma marketing and sales operations