February 12, 2007
Investing in the Pharmaceutical Underdogs
In the last twenty years, major pharmaceutical companies have spent millions of dollars in attempts to create new, revolutionary drugs. However, much to the avail of these large companies they have often failed and abandon projects when it appears that further research will not be cost effective.
When the major pharmaceutical giants such as Merck and Abbott give up, smaller companies try and solve mysteries of the abandoned drugs in attempts to making large profits. For example, GPC Biotech, a small German company, has just completed clinical trials for a prostate-cancer drug that that had previously been abandoned by Bristol –Myers Squibb Co. Furthermore, Dr. Huxley’s company, Speedel Holding AG, has just sold a drug called Aliskiren to Novartis that will help treat hypertension patients. When Dr. Huxley took her company public it was a very lucrative endeavor with shares currently trading at $136.
Companies that specialize in perfecting one or two abandoned drugs are sometimes successful due to the face that the entire business of these companies depends on the development of a small number of projects. Although producing one successful drug can make these companies rich, it is often hard to find venture capitalists that will invest in these risky endeavors. Many other hurdles also exist because of extensive FDA regulations and required clinical trials. So it is up to each individual investor to determine whether these types of companies are really worth the risk.
Posted by jcip at February 12, 2007 08:48 PM