Companies Betting on the Next 10 Blockbuster Drugs

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The biotech sector has seen its valuations hit hard in many cases in 2014, but many investors remain excited about the future wave of big biotech drugs — and big biotech profits. The Holy Grail term for a drug in biotech and pharmaceuticals alike is the so-called blockbuster drug, those products which generate $1 billion or more in annual sales. It is these drugs that often excite investors the most.

24/7 Wall St. wanted to evaluate the prospects for several would-be blockbuster drugs. Some of these have approvals already in hand, while others have pending U.S. Food and Drug Administration (FDA) approval verdicts or expanded indications coming soon.

In December of 2013, an approval from the FDA of Sovaldi for its treatment of hepatitis C infections put Gilead Sciences Inc. (NASDAQ: GILD) on track for a potential blockbuster several times over. Sovaldi generated more than $2 billion in sales in its first quarter of full approval alone. The cost of this drug has raised enough eyebrows that congressional inquiries have been made. Another recent blockbuster crossover is from Cubist Pharmaceuticals Inc. (NASDAQ: CBST), whose Cubicin, which treats hospital-borne infections, has now crossed over the line of $1 billion in annual sales.

There are several questions to ask about future blockbuster drugs. The first of course is which drug treatment from which company? Will they get FDA for European marketing approval? Also, how long will these drugs take to become blockbuster drugs? Lastly, what are companies spending in the key research and development (R&D) to get these drugs through approval and to the market?

Having a potential blockbuster comes with much hope, but it also comes with much risk. Not all blockbuster wannabes actually become blockbuster drugs. Some drugs even flop, or they get eaten alive by new competition. It was once believed that Dendreon Corp. (NASDAQ: DNDN) would have a blockbuster on its hands with Provenge for prostate cancer. Unfortunately, the prostate cancer treatment was delayed by the FDA for so long and the drug adoption rate by physicians was low enough (with a price tag of nearly $100,000) that this turned into another Boulevard of Broken Dreams for investors.

Here are 10 potential blockbuster drugs in various stages of approval or marketing.

Aegerion Pharmaceuticals
> Drug: Juxtapid for homozygous familial hypercholesterolemia (HoFH)

Aegerion Pharmaceuticals Inc. (NASDAQ: AEGR) is aiming to target novel therapeutics to treat debilitating and fatal rare diseases, specializing in orphan drugs that in some cases often require less strenuous testing by the FDA. The company’s Juxtapid drug treating familial hypercholesterolemia could potentially generate more than $1 billion in peak sales. J.P. Morgan sees $600 million in sales by 2017. That being said, this is likely a long way off, but 2014 sales are expected to rise more than 300% to $200 million and almost double again in 2015 to more than $380 million. Aegerion has spent a combined $87 million in R&D over the past four years.

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Celgene
> Drug: Otezla for psoriatic arthritis (and psoriasis)

Celgene Corp. (NASDAQ: CELG) likely has a blockbuster on its hands now that the FDA approved Otezla for the treatment of active adult psoriatic arthritis. This approval was just in March of 2014, but it has a twist ahead for a broader indication. The driving force here is that Otezla is the first and only approved oral treatment for this indication. Celgene will be competing against products like Humira, Remicade, Enbrel and others. What may be the real catalyst is that Otezla is being reviewed for a broader psoriasis indication, and this approval decision is not expected to come until late in the third quarter of 2014. Celgene is already one of the largest biotechs in the world by market cap (about $60 billion) with other products on the market, and the company’s total R&D spending across all existing drugs and pipeline drugs has added up to almost $6.7 billion over the past four years combined.

GW Pharmaceuticals
> Drug: Sativex, a cannabinoid medicine, for MS spasticity, cancer pain and neuropathic pain

GW Pharmaceuticals PLC (NASDAQ: GWPH) is no typical pharma or biotech stock, nor is it a mere legalized marijuana or medical marijuana stock. The stock recently flew higher on a dual upside endorsement after Morgan Stanley assigned more than 100% upside, followed by another Jim Cramer endorsement on CNBC. GW Pharma is involved in developing cannabinoid prescription medicines, and sales were not even $50 million in 2013. In late 2013, the firm Lazard hinted that expanded approvals in the United States and elsewhere could ultimately reach the blockbuster status if additional approvals come. Sativex is currently available by prescription for MS spasticity in 11 countries, and it has regulatory approval in 13 more countries with anticipated commercial launches mostly in 2014. The U.K.-based company has spent more than 100 million British pounds on R&D over the past four years combined.