3 Biotech Companies That Are Making Incredibly Smart Moves

By Markets Fool.com

The market shelf-life for medicine is limited by patent expiration and competitors that are all-too-eager to trump one another. That makes it exceedingly difficult for biotech companies to remain in front of the pack. In order to maintain their lead, drugmakers need to think smarter and act more quickly than their peers. Here's how three leaders, Gilead Sciences, Amgen, and BioMarin, are doing just that.

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1. Buying time
In the middle of November, Gilead Sciences spent $125 million to buy a priority review voucher it will be able to use to fast track FDA review of any drug of its choice. Gilead Sciences bought the voucher from Knight Therapeutics, a Canadian drugmaker, in an auction last month.

Source: Gilead Sciences.

The priority review approval pathway was created in 2007 to incentivize drug developers to create new therapies for neglected disease. However, a third market of sorts has materialized for priority review vouchers that have been awarded to drugs that are no longer being developed or aren't likely to be actively marketed. The ability to sell those vouchers to another company allows the seller to recoup some development costs and gives the buyer a four-month-shorter period for FDA review, which could potentially mean millions of dollars in additional sales if the voucher is used for a blockbuster drug.

Gilead hasn't indicated which drug it will use the coupon for, but the hepatitis C drug market is heating up, with new competition likely coming soon from AbbVie. One possibility is that Gilead plans to use the voucher to accelerate to market its third-generation hepatitis C drugs, which are currently under development. But the company could use the voucher for any of its drugs, so only time will tell how the company plans to outmaneuver competitors.

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Source: BioMarin.

2. Betting on an approval
When it comes to developing treatment for rare diseases, few are as skilled as BioMarin. The company is building a rare disease franchise that already includes five drugs.

Naglazyme, a treatment for mucopolysaccharidosis VI, or MPS VI, a rare, life-threatening inherited disorder, is the company's best seller. BioMarin charges a jaw-dropping $365,000 per year for the drug and as a result, Naglazyme sales totaled $246 million through the first nine months of this year. Across all five of its drugs, BioMarin had sales of $176 million in the third quarter, putting it nicely on pace toward the company's $1 billion-a-year sales target.

However, BioMarin isn't relying solely on those drugs catapult growth higher. The company made a big splash last month when it announced the acquisition of Prosensa, a biotech company with a phase 3 trial under way for drisapersen, a treatment for a rare genetic muscle disease called Duchenne's Muscular Dystrophy, or DMD. At an estimated 10,000 people, the patient population for drisapersen is small. But given there are few treatment options for the life-shortening disease, BioMarin clearly believes drisapersen could become another top seller. As a result, BioMarin agreed to pay Prosensa investors up to $840 million, including $680 million up front, and royalties on any eventual sales. Of course, for that to happen, drisapersen will need to win FDA approval, and that's still a big question mark. Last year, Prosensa reported disappointing phase 3 results of drisapersen that derailed hopes for a quick FDA go-ahead. Instead, drisapersen is being evaluated under a rolling review by the FDA. Obviously, BioMarin thinks it can push drisapersen across the finish line sooner rather than later. If it's right, their acquisition could prove savvy. Management thinks that an early approval could make the deal accretive to earnings by 2017.

3. Embracing an emerging market
Amgen is already one of the planet's biggest drugmakers, but to stay on top, Amgen is spending big money to develop next-generation generic versions of top-selling biologics. Those biosimilars could prove to be multibillion-dollar blockbusters given that biologics are among the globe's top-selling medicines.

Many of those biologics, including AbbVie's top-selling Humira, are set to see their patents expire in the next few years. When that happens, the market for biosimilars could evolve similarly to the market for small-molecule generic drugs. Back in the late 90s, the generic drug market was small and emerging, but it's since evolved into a market that represented about 30% of the $329 billion in U.S. drug spending last year. In October, Amgen reported data from a head-to-head phase 3 trial it's conducting between its biosimilar, ABP-501, and AbbVie's Humira. That data showed that ABP-501 met its target of bioequivalency in both safety and efficacy in plaque psoriasis patients. That could position it nicely to compete for billions of dollars in biosimilar revenue when Humira loses patent protection in 2016. Since biologics like Humira account for about 28% of all drug spending every year (and climbing), the potential revenue for biosimilars could prove to be significant.According to a presentation made at the Jefferies 2014 Global Healthcare Conference last month, Amgen expects to launch biosimilars between 2017 and 2019 that could generate up to $3 billion in sales annually.

Moving the needle
These biotechnology companies are among the most successful in execution, both in terms of ushering new drugs through clinical trials to market and turning those drugs into commercial successes. While Gilead Sciences, BioMarin, and Amgen's moves are incredibly intriguing, they're far from the only decisions being made to deliver future investor-friendly growth. Regardless, they serve as examples of how forward-thinking biotechnology companies need to be if they hope to dominate their markets for years to come.

The article 3 Biotech Companies That Are Making Incredibly Smart Moves originally appeared on Fool.com.

Todd Campbell owns shares of Gilead Sciences and BioMarin. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned. The Motley Fool recommends BioMarin Pharmaceuticals and Gilead Sciences. The Motley Fool owns shares of Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.