The Best Boring Companies in Biotech
Sometimes great companies have really boring stories. Maybe the company makes great products, or generates big profits and returns, but just doesn’t have the sizzle to get on the TV news, or even keep folks away from the veggie dip at your neighborhood barbecue.
It almost takes work to be boring in biotech, since this is an industry with lots of ingredients for juicy storytelling. There are companies risking big money on cutting-edge science. There are heroes and villains. Many people in the industry are on a mission to make drugs that improve quality of life. There’s fast money, and dark forces at work in the stock market. Cut-throat competition, and short-term profit-driven thinking, sometimes conflicts with the industry’s noble stated purpose. There’s no shortage of controversy about the sky-high prices of drugs, shady marketing practices, self-serving backroom political dealing, and on and on.
Despite all the ways a biotech company can capture public attention, there are lots of companies out there doing good things below the public radar. You can’t sell newspapers, boost ratings, increase page views, or excite followers on Twitter by writing about these firms. Bad as these companies may be for media guys like me, they can be very good for everybody else.
I don’t have a formula for what makes a company “boring” but essentially I’ve sought to list companies below who have accomplished something noteworthy with little notice in the media. Before diving into this list, I need to go with the disclaimer that this is based on my own very limited understanding of these public companies. If I thought they were super-interesting companies that everyone wanted to read about, then I probably would have already done some more digging on them. If you have any other examples of “boring” biotech companies that deserve mention, just leave a comment below or send me a note at email@example.com.
So here goes:
—Pharmacyclics (NASDAQ: PCYC). This Sunnyvale, CA-based company has seen its stock quadruple from $14.82 at the beginning of this year to $58.97 at Friday’s close. The company has boomed on growing evidence that supports its new drug for blood cancers, ibrutinib, which is designed to selectively block a molecular target called Bruton’s tyrosine kinase (Btk). Chemists and molecular biologists have long thought that that Btk would be a good drug target, but for years nobody could really figure out how to properly inhibit it. But that’s truly an inside story. If you were to ask “why does it matter?” the answer is that it could pave the way for treating various B-cell lymphomas. Again, that isn’t going to help you win over readers, viewers, or listeners. Try saying that three times fast, while keeping your audience awake. Not surprisingly, Pharmacyclics was overshadowed by better known companies with clinical trial results at the American Society of Clinical Oncology (ASCO) meeting last month.
—Medivation. This San Francisco-based biotech company (NASDAQ: MDVN) was best known until a couple years ago for taking an old antihistamine from Russia and turning it into a promising new medicine for Alzheimer’s disease. That drug ended up failing in clinical trials, but that didn’t kill Medivation. The company has found its second wind with a potent new drug candidate for men with terminal forms of prostate cancer. Seattle-based Dendreon is the attention hog in this category, partly because of its novel immune-boosting scientific platform, and its various clinical trial controversies, regulatory controversies, insider stock-selling controversies, drug pricing controversy, and various other corporate stumbles. All Medivation has done is follow fast with what could be a best-in-class molecule for prostate cancer, with all steak and no sizzle. To give you some sense of how many people pay attention to these stocks, Dendreon has seen an average daily trading volume of 6.8 million shares per day, while Medivation has seen average daily volume of just 735,000 shares. Yet Medivation stock has more than doubled so far this year, closing at $94.88. It’s currently worth three times as much as Dendreon.
—Ironwood Pharmaceuticals (NASDAQ: IRWD). This company, based in Cambridge, MA, was the bellwether biotech IPO of 2010, coming out of the gate during some dismal times with a market valuation of more than $1 billion. The company has big-name investors, and a CEO who’s a bit of throwback in that he isn’t afraid to say he wants to build a great, independent biotech company. Ironwood has some novel science that’s enabled it to come up with what looks like a novel new drug, linaclotide, for irritable bowel syndrome with constipation and chronic constipation. Nobody really knows how many people have these conditions, or how many will seek treatment with the Ironwood drug. But Forest Laboratories, Ironwood’s partner, has said an estimated 11 million people suffer from irritable bowel syndrome with constipation, and 34 million have chronic constipation (although it says only 8.5 million have sought treatment.) The FDA is expected to decide in September whether Ironwood and its partner can start selling this new drug, at which point the story could get a little more notice.
—Seattle Genetics (NASDAQ: SGEN). For starters, this company’s name is misleading, as it’s not in Seattle (actually Bothell, WA), and it’s not really a genetics company (it’s a cancer drug developer). Even though few people in its hometown know what it does, Seattle Genetics, or SeaGen as it is sometimes known for short, has had a breakout year with the FDA approval of the first truly effective “antibody-drug conjugate” for cancer. That term “antibody drug conjugate” is the proper scientific way for referring to what SeaGen does, which is link targeted antibody drugs to toxins that can give them more tumor-killing kick. If you like military metaphors—and I’m not above using them to help make an important story more interesting—then you could call these “smart bomb” antibodies or “guided missiles” that seek and destroy tumor cells while largely avoiding healthy cells.
Fascinating as that story is, it seems to have generated pretty limited interest in the mass media, although that’s starting to change now that a higher-profile company like Genentech has started carrying the flag in the media for antibody-drug conjugates. SeaGen is also a company that has never gotten itself overleveraged, or offered any outrageous CEO pay packages, or really done much to stir controversy. When it has had a controversy—like when an employee got caught engaging in insider trading—it was handled swiftly and surely so as to not become a distraction.
—Alexion Pharmaceuticals (NASDAQ: ALXN). This company is based in Cheshire, CT, outside Xconomy’s geographic coverage areas, so I have never bothered to write about it (and neither have many other reporters, far as I can tell). But despite its low profile, Alexion has become one of the industry’s most valuable companies on the strength of one super-expensive antibody drug for patients with a disease that hardly anybody has ever heard of:Paroxysmal nocturnal hemoglobinuria (PNH). While Genzyme is the company everybody looks to as the trailblazer in the rare disease drug development field, Alexion has also set an example that many rare disease-focused startups want to follow.
—Cubist Pharmaceuticals. Never heard of Cubist? It’s another company that made its name selling a single product, daptomycin (Cubicin). The Lexington, MA-based company (NASDAQ: CBST) has been around 20 years, and has made its living selling a potent antibiotic used to fight tough-to-treat infections in hospitals. This isn’t a consumer product you’ll ever see advertised on TV. Cubist rode this horse to $736 million in sales last year, which has enabled the company to join the small fraternity of profitable biotech companies. If Cubist can deliver some new antibiotics from its pipeline, that could be a good thing for its shareholders, and for public health. But given how antibiotics are taken for granted in this country—even though drug-resistant superbugs are a cause for concern—don’t expect to hear people scream from the rooftops about success even if Cubist can deliver a couple more Cubicins.
—Halozyme Therapeutics (NASDAQ: HALO). This San Diego-based company says on the “Who We Are” part of its web page that it is “a biopharmaceutical company developing and commercializing products targeting the extracellular matrix for the diabetes, oncology, dermatology, and drug delivery markets.” If you haven’t fallen asleep already, the company keeps going, trying to explain that its technology offers “a novel drug delivery platform designed to increase the absorption and dispersion of biologics.” Drug delivery companies by their nature tend to do the behind-the-scenes grunt work to make drugs more effective, so they tend not to be nearly as glamorous as drugmakers. Yet this company makes a modest amount of revenue from licenses, enough to support a $1 billion market valuation.
—NewLink Genetics. This Ames, IA based company (NASDAQ: NLNK) starts out with a pretty big strike against it, coming from the Midwest, which many on the coasts dismiss as flyover country. My first guess on hearing the name was that it was some kind of crop biotech company. But it’s actually focused on the currently buzzy business of cancer immunotherapy. The company has more than doubled since its November IPO, from $7 a share to more than $15.93 at Friday’s close. And yet this company still can’t buy some attention.
“Nobody seems to know about NewLink or even care,” says Brad Loncar, an independent investor in Lenexa, KS, by email. “Even on days when it has made a nice jump, there is virtually zero chatter about it.” On a website for investors called StockTwits, Loncar says NewLink has three followers, compared to Dendreon’s 645, and Oncothyreon’s 228. The company doesn’t have Phase III data to support its work yet, but its stock has been moving in the right direction.