Investors seeking to find the next great pharmaceutical company may want to concentrate on emerging biopharma. The smaller members of the group are driving growth in research. Moreover, they have less need for a partner or to be acquired to develop their drugs, according to a report by health care research firm IQVIA (IQVA).
About two of every three patents on drugs launched last year were awarded to emerging biopharmas. According to the report, they also accounted for nearly the same percentage of drugs in the late stages of testing.
One emerging biopharma that has a drug in phase 3 testing is Genfit SA (GNFT, Financial). The French company went public at the end of March with an initial public offering price of $20.32. It now trades at just short of $25. The company’s focus is liver disease. A big part of its hopes is pinned on elafibranort for treating the liver disease nonalcoholic steatohepatitis, or NASH. If the drug proves to be effective, it could be a big boost to Genfit shares inasmuch as the market for NASH is substantial and there are no approved drugs to treat the disease.
In fact, Reports and Data, in a late February report, said Elafibranor is projected to be one of the fastest-growing drugs in the NASH market, which is expected to reach more than $13 billion by 2026, growing at a compound rate of more than 50% during the forecasted period.
A more familiar name in the NASH race, large-cap Gilead Sciences (GILD, Financial), suffered a major setback in late April when its category candidate selonsertib fell far short in another Phase 3 trial. Loyal investors have been waiting patiently for Gilead to return to the glory days, when the stock price climbed nearly 600% from August 2010 to June 2015, reaching $117. Since then, its shares have dropped to about $65. Still, trading at a modest price-earnings ratio of just over 15 and with a dividend yield approaching 4%, Gilead may be worth considering.
Getting back to the emerging biopharmas, another company with good prospects in the NASH race appears to be CymaBay Therapeutics Inc. (CBAY, Financial), which is based in California. If you were smart enough to buy the stock in January 2016, you undoubtedly have a big smile on your face. At the time, shares were trading for about a dollar; they’re now over $12.
Despite the run-up, boosters think there's still plenty of upside. Of the 10 analysts covering the company, nine rate it a buy or strong buy; the latest analyst to initiate coverage, B. Riley FBR, began coverage in early February with a neutral rating. The consensus target price is nearly $22. The company’s three biggest institutional investors are Carillon Ser Tr-Carillon Eagle Small Cap Growth Fund, the Vanguard Total Stock Market Index Fund (VTI, Financial) and iShares Russell 2000 exchange-traded fund (IWM, Financial), according to an article in GV Times.
CymaBay recently reported promising Phase 2 results for its NASH treatment seladelpar, as noted in a press release.
Investors also may want to research several other emerging biopharmas with NASH drugs in Phase 2 trials, including Galmed (GLMD, Financial), Viking Therapeutics (VKTX, Financial) and Immuron (IMRN, Financial).
Disclosure: The author holds no positions in any of the equities mentioned in this article.
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