WINDSOR, ONTARIO / ACCESSWIRE / March 5, 2016 / The Wealthy Biotech Trader (or “WBT”), an investment newsletter focused on showing everyday investors new opportunities in rapidly growing, little-known biotech, pharmaceutical and medical device stocks releasing impressive news and making market moves, would like to highlight a recent statement made by the French Drug giant Sanofi’s CEO David Meeker in the Financial Times last week.
Sanofi (NYSE: SNY) made a splash in rare disease R&D when it traded $20 billion for Genzyme in 2011, and now the French drug maker is on the hunt for deals “up to” that size as acquisitive rival Shire PLC (NASDAQ: SHPG) angles to dominate the space. This statement may have left the deal size open to small cap players as well as bigger companies in the mid-cap range. A months-long slump in valuations has made once-pricey targets suddenly more affordable.
The idea dovetails with Sanofi’s recent statements on how it plans to reverse its slumping growth, as recently appointed CEO Olivier Brandicourt has repeatedly said the company is interested in deals big and small to counteract creeping competition and sluggish sales for its banner products. And rare diseases could be an ideal field to boost Sanofi’s margins–Orphan drugs like Genzyme’s Cerezyme treat small numbers of patients but command high prices, and insurers have traditionally been willing to shell out for such therapies on the belief that they prevent costlier outcomes for sufferers of rare disease.
Here are a few companies that Sanofi could look to for potential investment:
One small player in the medical device and bio-electronic space is Endonovo Therapeutics (ENDV) out of California.
ENDV has a bioelectronic device, which upon FDA approval, intends to utilize its novel electromagnetic technology to treat acute liver failure (ALF), if approved. This non-implantable, non-invasive device would be potentially used on patients to reduce inflammation and cell death providing an optimal environment conducive to regeneration.
With fewer than 4,000 people developing this ailment yearly in the United States, it should qualify as a rare disease whereby the company intends to apply for a humanitarian device exemption substantially reducing the time and cost of ENDV bringing this product to market. For a second kick at the can, ENDV has an additional platform utilizing its technology to expand and enhance stem cells in a stem cell transplant that once proven in forthcoming medical trials could essentially allow patients to receive a bone marrow transplant from any donor with no risk of rejection or being affected by Graft vs. Host Disease (GVHD). GVHD, which affects fewer than 400,000 people in the United States per year as well, is potentially another rare disease and the company has previously announced plans to apply for an Orphan Drug Designation.
The company is currently raising the necessary capital this year to rapidly advance their technology through the FDA process to treat both of these rare diseases.
One of the more obvious companies that Sanofi may look to is one where they already have money at work. MyoKardia, Inc. (MYOK) is a company with an initial focus on the treatment of heritable cardiomyopathies, a group of rare, genetically-driven forms of heart failure that result from biomechanical defects in cardiac muscle contraction.
In 2014, MyoKardia forged a strategic worldwide collaboration with Sanofi to discover, develop and advance first-of-its-kind targeted therapeutics for HCM and DCM. From a market size standpoint you do not get bigger than the cardio market (heart related problem) as it is the most common cause of death with cancer in a close second.
Another (recently famous) player in the rare disease space is Retrophin, Inc. (RTRX). It’s a shame we came upon this name because of its previous ties to the pharma bad boy Martin Shkreli because it is a seriously impressive company.
Retrophin is a fully-integrated biopharmaceutical company dedicated to delivering life-changing therapies to people living with rare diseases who have few, if any, treatment options. The Company’s approach centers on its pipeline featuring clinical-stage assets targeting rare diseases with no approved treatment options.
With a top line on a parabolic growth curve and a deep clinical pipeline of new potential drivers, this ticker is a prime example of “the baby being thrown out with the bathwater” with reference to the recent tough markets for small cap biotech firms. With over $300 million in cash, a projected turn to cash generation in 2016, and a projected 40% revenue growth rate, it’s hard to say RTRX is not undervalued but the recent downdraft in the markets. If we were Sanofi, I would be taking a real long hard look at this name for a potential acquisition.
Last on our list is Aegerion Pharmaceuticals, Inc. (AEGR). AEGR is a biopharmaceutical company dedicated to the development and commercialization of innovative therapies for patients with debilitating rare diseases. AEGR is growing sales of their two products nicely, but have not projected to stop losing money on an operating cash flow basis for 2016 which is concerning. With two potential drug candidates in clinic and the potential for the existing two marketed products to expand ex-US this name could eventually show some value. Currently, they may also draw some attention from Sanofi—only time will tell.
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