2 Red-Hot Biotechs to Buy Ahead of FDA Decisions
Is it worth rolling the dice on Flexion and Synergy?
David Liang
(Pfoolishly)
Nov 29, 2016 at 8:07AM
Gambling
Image source: Pixabay.
Investing in biotech is always a risky business. The chances of a drug making it from phase 1 to FDA approval can be as low as 10%. However, once a drug passes phase 3, investors can breathe more easily as drugs with positive phase 3 trials have a more than 80% chance of being approved by the FDA for commercial use. Investors willing to take on a little risk could be well served by buying into biotechs ahead of these final FDA decisions. With that said, here are two of the best biotech names with FDA approvals anticipated in the next 12 months.
Synergy Pharmaceuticals
Synergy Pharmaceuticals (NASDAQ:SGYP) is a small-cap biotech focused on the development and commercialization of novel gastrointestinal therapies. Synergy's lead product candidate is plecanatide, a once-daily tablet indicated for treatment of chronic idiopathic constipation (CIC) and irritable bowel syndrome with constipation. In June and July of last year, Synergy released top-line data from a pair of phase 3 pivotal studies testing plecanatide in CIC. Both trials were successful, with the 3-milligram and 6-milligram doses demonstrating strong statistical significance in beating placebo (21% response rate for the 3-milligram dose and 19.5% for the 6-milligram dose, compared to 10% for the placebo group). On this news, Synergy filed a New Drug Application (NDA) with the FDA for review and now has a pending decision due on Jan. 29, 2017.
Should plecanatide be approved for treatment of CIC, it will compete with the current market leader, Allergan plc and Ironwood Pharmaceuticals' collaboratively marketed CIC treatment Linzess. Linzess has been growing like gangbusters with sales up 40% in the third quarter, currently in its fourth year on the market. Ironwood management has projected annual sales of Linzess to surpass $1 billion by 2020. With Linzess commanding the dominant position in CIC, should Synergy's plecanatide be treated as just an also-ran? I, for one, don't believe so. A deeper look into the data reveals that plecanatide has a better adverse event profile compared with Linzess. The most common adverse event, diarrhea, occurred in 5.9% and 5.5% of the tested population for the 3-milligram dose and the 6-milligram dose, respectively. This compares to 16% occurrence of diarrhea for Linzess patients. Given CIC is not a life-threatening condition, lifestyle considerations like tolerability could play a meaningful role in choosing one CIC therapy over another. Given the choice of plecanatide versus Linzess, I think patients would more likely switch to plecanatide.
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