Sector Watch: Biotech stocks

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Biotechnology investments often offer big risks, but huge potential rewards. New drugs, such as ones in development by Emergent BioSolutions (NYSE:EBS) and ChemGenex (Nasdaq:CXSP), can provide multi-billion dollar payoffs once sales commence.

Emergent BioSolutions is a profitable biopharmaceutical company developing immunobiotics for use against infectious diseases. Its lead product, BioThrax, is the only FDA-approved vaccine for preventing anthrax, a potential bioterrorism weapon spread by airborne bacteria. BioThrax sales were $169.8 million in 2007, and Emergent has already supplied over 16 million doses of BioThrax to U.S. government agencies. Last year the company entered into a three-year $448 million deal with the U.S. government to supply an additional 18.75 million doses. About 12 million remain to be delivered on this contract. The cash flow from BioThrax sales is being used to fund the development of new vaccines. Emergent has vaccine candidates for typhoid and hepatitis B in late-stage development, and is working on a post-exposure anthrax therapeutic, along with early stage development vaccine candidates for botulinum, group B streptococcus and Chlamydia.

Emergent’s typhoid vaccine candidate entered Phase II clinical trials this July. Study results are expected by year-end and Phase III trials are likely to commence in 2009. Typhoid poses a major health threat in many developing countries with an estimated 22 million cases occurring each year. Typhoid vaccines exist but require multiple doses to be effective. Emergent has the only single-dose preventative. The company’s hepatitis B vaccine candidate is also in Phase II trials. Hepatitis B infections are a serious global health problem with an estimated 350 million chronically infected cases worldwide. In addition, animal studies are underway of an anthrax immune globulin therapeutic designed for post-exposure use, and human clinical trials are scheduled for 2009. 

In addition to its in-house research, Emergent fills out its product pipeline with late-stage compounds acquired from others. It recently acquired an anthrax post-exposure therapeutic from AVANIR and an anthrax vaccine candidate from VaxGen that has already completed Phase II studies. In addition, Emergent is acquiring FluBlok, a recombinant flu vaccine candidate in Phase III trials and other product candidates from Protein Sciences. FluBlok is the industry’s first recombinant influenza . . .

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