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In late April of this year a biotech deal turned the heads of few investors. But those who knew what was going on were quick to realize the potential. And the company that got the deal done has enjoyed a 20% rally in the subsequent six months. I think this is just the beginning.
Spoiler alert – I’m not going to reveal the name of the company today. But I will on Thursday, when I’ll join the rest of the Wyatt Research team in a subscriber-only teleconference. We’ll be discussing the market, sectors we’re bullish on and specific stocks we like right now. You can sign up to participate here.
One of the companies I’ll discuss is a $70 billion company with leading therapies for various forms of cancer. Prior to April, this company’s drugs didn’t extend far beyond cancer treatment, with the exception of a few licensing deals and a treatment for psoriatic arthritis.
And they still don’t…at least not yet. But I expect this is going to change within the next couple of years as the company has a potential miracle drug in the works.
The company’s newest developmental drug, known simply as GED-0301, was acquired from a little-known Italian biotech company earlier this year. The miracle drug is a treatment for Crohn’s Disease.
Crohn’s is a chronic gastrointestinal disease that is believed to be genetic, and for which there is no known cure. Treatments are aimed at controlling symptoms, and roughly two-thirds of people with the disease will require surgery at some point in their lives.
Treatment for Crohn’s is a big market, estimated at more than $4 billion worldwide. Current treatments not only don’t cure the disease, but they have to be injected. In contrast, GED-0301 can be taken orally. And in early studies the drug appears to be extremely effective.
According to Phase I trial data, GED-0301 was given to 15 patients and 100% of them responded, with 47% of them achieving six-month remission after only seven days of treatment.
The acquiring company had more information than just Phase I data to go on of course, which is why it was willing to complete the deal on record terms that made it the highest acquisition price ever paid for a mid-development-stage asset.
The drug was acquired for a cool $2.75 billion, which included $710 million up front, and the rest dependent upon regulatory approvals and sales milestones.
While the price of admission was considerable, the potential prize is even more so.
GED-0301 might well be this company’s next blockbuster. If all goes well, it’s entirely possible that the drug could generate $2 billion in annual sales, on the conservative end. At the high end, $3 billion or more is on the table.
At that level of sales, the drug would absolutely dominate the global market for Crohn’s Disease, and create a durable blockbuster drug that could add as much as 40% to the company’s current sales.
Clearly there is some work to be done before this miracle pill hits drugstores. Phase I data is the only data publicly available.
But Phase II data is being revealed right now at the United European Gastroenterology (UEG) meeting which is taking place in Vienna, Austria.
Presumably this data should be good. The Phase II study is also much more robust, including a sample size of 166 patients (versus 15 for Phase I) and 14 days of treatment (versus 7 days for Phase I).
I’m sure you can Google all the information I’ve discussed and find out the name of the biotech company. But where’s the mystery in that?
On Thursday, I’ll not only discuss updated Phase II data, I’ll also discuss this company’s latest earnings results, which will hit the newswires only a few hours before our teleconference event.
Remember to sign up here, and I’ll talk to you on Thursday.
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