A few years ago the Profit Alert said we’re entering a “Golden Age” for biotech.
There were just so many driving forces…
There was the “patent cliff” forcing top pharmaceutical companies to acquire new drugs.
There were technological developments in a number of fields like genomics.
And there was the hundreds of billions of dollars of new capital flowing into biotech funding new research and development in this cycle which will create even more innovations.
One of the biggest “breakthroughs,” however, has nothing at all do with any of those factors.
Yet it’s has and will play a major role in propelling the current bull market even higher.
Here’s one example of this “breakthrough,” the hard numbers showing it’s impact, and how it will continue to be a major driving for in biotech and pharmaceuticals for years to come.
The Next Big Biotech “Breakthrough”
A few days ago your editor got a Youtube ad for a treatment for a condition called Binge Eating Disorder, or B.E.D.
The ad was very well produced and it didn’t take much digging to find out why.
The ad took me to www.bingeeatingdisorder.com.
This site lists all the symptoms of B.E.D. and provides a wealth of information about a condition, frankly, I’ve never heard of and sounds like the ideal solution would a strong dose of self-control.
After scrolling down the site’s main page though, it all made sense.
At the bottom of the site is a logo for Shire plc (SHPG).
Shire is a $50 billion pharmaceutical company and maker of the drug Vyvanse, a drug developed to treat Attention Deficit Hyperactivity Disorder (ADHD).
In its first nine months on the market, Shire moved about $1 billion worth Vyvanse.
Clearly Shire’s marketing is working well. The ADHD prescription market is about $7 billion a year. So to go from nothing to $1 billion in nine months is a big success for them.
Now, here’s where B.E.D. comes in.
Shire recently completed a trial using Vyvanse as a treatment for B.E.D.
The trial was successful and Vyvanse is now the first FDA-approved prescription treatment for B.E.D.
This is where it gets really interesting.
The potential market for a B.E.D. treatment is massive.
Here’s some of the B.E.D symptoms from the Mayo Clinic:
- Eating unusually large amounts of food in a specific amount of time, such as over a 2-hour period
- Feeling that your eating behavior is out of control
- Frequently eating alone or in secret
- Feeling depressed, disgusted, ashamed, guilty or upset about your eating
- Frequently dieting, possibly without weight loss
The last one really stands out to me. It probably describes at least 50 million people. With a symptom list like this, it would be a huge market for B.E.D.
More conservative estimates,however, suggest B.E.D. affects three percent of the U.S. population or about nine to ten million people.
With a market potential of that size, Shire’s CEO estimated B.E.D. will add between $200 and $300 million per year to Vyvanse sales.
That’s the absolute critical part of all this and will have a major effect on biotech and pharmaceutical stock valuations in the future.
Assets and Income
The Vyvanse and B.E.D. story is just one of many examples like it around the sector.
Finding new uses and markets for drugs currently on the market or in development is one of the major hidden trends to most investor in biotech and pharmaceuticals.
More importantly, it’s wildly lucrative for these companies and their investors.
In this case, Shire did all the hundreds of millions of dollars worth heavy lifting to get Vyvanse through the approval process as an ADHD treatment.
Then, with a couple additional studies costing probably a few million dollars, the same drug can generate an additional $200 to $300 million in revenue with minimal additional costs.
If you extrapolate this type of action across much of the pharmaceutical market, it’s clear there is still big and highly profitable growth potential for a number of drugs.
In the end, all this just another one of many factors driving biotech stocks and could spark the sector into full-on bubble within a few months or years.