Two Drugs Competing for an One-In-A-Million Disease
By Kanak Kanti
...The current situation in the market is that shares of biopharmaceuticals surge to astronomical levels simply on the basis of positive results of clinical trials and/or FDA approvals.
The market values Aegerion at $2.2 billion and Isis at $3.02 billion. While Aegerion is being valued simply on the basis of one drug, albeit a high priced one, Kynamro comprises of roughly 50% of Isis’ valuation based on future revenue estimates. Juxtapid is priced at $295,000 and Kynamro at $176,000.
What is being relegated to the background is the fact that HoFH is considered to be a one-in-a-million disease and the two companies must compete for market share from among a small pool of patients. According to rough estimates, there are about 400 HoFH patients in the US, which puts the size of the market between $70 million and $78 million, which both companies would be sharing.
Investors also need to be aware of the staggering cost of inventing new drugs, which could be anything between $4 billion to $11 billion for major pharmaceutical companies. No one knows this better than Isis as it spent approximately $2 billion since 1989 when it was founded and could get only one drug approved for an AIDS related virus, which did not sell. While Isis had $372 million in cash and cash equivalents as on March 31, 2013, Aegerion had only $140 million, which seems insufficient considering the poor state of their income statements....