3 Drugmakers Facing a Pivotal 2015

By Markets Fool.com

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Source: www.bio.org

Pharmaceutical companies have been some of the best performing stocks lately due to the confluence of an aging U.S. population and new regulatory avenues within the Food and Drug Administration that have led to an uptick in drug approvals. As the chart below nicely illustrates, for example, theiShares Nasdaq Biotech Indexhas left all over the major U.S. indices in the dust over the past two years:
IBB Chart

As several game-changing experimental drugs are expected to gain approval soon, this trend should continue into 2015 and perhaps beyond, making drug companies a compelling group to consider as an investment vehicle. Even so, some drugmakers will obviously fair better than others next year, and choosing which ones to invest in can be a dizzying process, especially given that there are literally hundreds of publicly traded biopharmas now.

To help with this process, I think investors should take a deeper look intoIsis Pharmaceuticals,PTC Therapeutics, andGW Pharmaceuticals. Here's why.

Isis has a one of a kind clinical pipeline
Isis has one of the deepest and largest clinical pipelines in all of biotech that can boast of four drugs indicated for rare diseases in late-stage trials, and 29 total drugs under development. Next year, this number is expected to climb to around 36 drugs undergoing clinical trials, showing the immense promise of its novel antisense based therapeutic platform.

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Isis' rapidly evolving platform has also attracted major research partners likeAstraZeneca,GlaxoSmithKline, andBiogen Idec, resulting in over $108 million in milestone payments so far this year. The net result is a clinically oriented company with one of the strongest balance sheets around, sporting more than $575 million in cash at the end of the third quarter.

Critics have pointed out that Isis' first and only approved therapy, Kynamro, for a rare condition that causes extremely high triglyceride levels, has a worrisome side effect profile that includes potential liver damage. Since Kynamro's approval, though, management has made major strides toward refining its antisense technology, culminating in the so-called "2.5 version" of its platform. According to management, this more refined approach allows for higher dosing regimens and a reduced risk of serious adverse events.

With literally dozens of clinical catalysts next year, Isis is certainly worth keeping an eye on in 2015.

PTC is firing on all cylinders following Translarna's approval
PTC Therapeutics has officially launched its Duchenne muscular dystrophy, or DMD, drug Translarna in Europe and commenced a late-stage trial for the drug exploring its use in cystic fibrosis patients with non-sense mutations. As an added bonus, the company is close to filing a New Drug Application with the Food and Drug Administration for Translarna's DMD indication before the end of 2014 as well.

The downside risk with this drugmaker, though, is that Translarna's EU approval is "conditional", meaning that a full regulatory decision will be dependent on the outcome of the ongoing late-stage study that is expected to readout by the end of 2015. If this confirmatory trial pans out, though, PTC looks woefully undervalued at these levels, given Translarna's potential to reach blockbuster status.

Source: gwpharm.com

GW is benefiting from the marijuana craze
GW Pharmaceuticals has become one of the most closely watched drugmakers in the industry because its product portfolio and clinical pipeline are based on marijuana-derivatives, namely cannabinoids. Given the dearth of reputable public companies operating in the marijuana space these days, investors have pinned their hopes on GW as a way to benefit from the movement to legalize marijuana in the U.S.

On the bright side, GW does have a potent clinical pipeline with drugs in development for blockbuster indications like type 2 diabetes and glioma (a form of brain cancer).

Nonetheless, the company's sole commercial product, Sativex, indicated forspasticity associated with multiple sclerosis, hasn't exactly set the world on fire in terms of sales. Despite being approved in 24 countries outside the U.S., Sativex sales are likely to fall short of hitting even $10 million in 2014.

Looking ahead to 2015, GW's pipeline should generate numerous data readouts that could shed light on whether its cannabinoid-based platform can meet the market's lofty expectations. At present, shares are trading at a noteworthy 30 times trailing-12-month revenue, suggesting the market is extremely optimistic about this pipeline.

Should you buy any of these stocks right now?
I find these three drugmakers intriguing because they all have multiple clinical or regulatory catalysts on the horizon in 2015. Put simply, it's doubtful that they will be trading anywhere near where they are today by the end of next year. That doesn't necessarily mean they are great buys now.

I've owned shares of Isis since the second-quarter pullback, but am leery of adding more following its huge run up. PTC and GW, on the other hand, need to convince me that their clinical programs don't harbor any landmines before I jump into these stocks.

The article 3 Drugmakers Facing a Pivotal 2015 originally appeared on Fool.com.

George Budwell owns shares of Isis Pharmaceuticals. The Motley Fool recommends Isis Pharmaceuticals. 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.