The biotech industry is a marvel among traders and investors because it can double your investment, or halve it, based on a single clinical study. Millions, sometimes billions, of research dollars are poured into developing new drugs and bringing these therapies to market — $49 billion throughout the entire industry last year, according to PhRMA. However, a vast majority of drugs discovered in the laboratory setting will never see the light of day.
Source: Idaho National Laboratory, Flickr.
Based on data from Medscape, only about one in every 5,000 to 10,000 researched drugs in preclinical trials will be approved by the Food and Drug Administration. This means there’s quite the premium given to biotech stocks because of solid clinical data, and quite the haircut when it doesn’t pan out.
Although there seem to be hundreds of drugs approved by the FDA and dozens of biotech stocks to choose to invest in, very few are truly stable investments over the long term. Quite a few biotech companies are burning through their cash with, or without, any FDA-approved drugs and look as if they may join numerous peers that have come before them by declaring bankruptcy or liquidating their assets. Keep in mind that there are a lot of factors that can change within a biotech company’s product portfolio and that can completely reverse my speculations here, but at the moment, I’d say the following three biotech stocks are on the path toward running out of cash and ideas.
Idenix Pharmaceuticals Inc (NASDAQ:IDIX)
Dubbed the unluckiest biotech on Earth by Foolish biotech guru Brian Orelli, Idenix Pharmaceuticals Inc (NASDAQ:IDIX), which is primarily focused on developing hepatitis-C therapies, has a dubious streak of FDA clinical holds over the past three years.
In 2010, its then lead compound IDX184 and IDX320 were both placed on clinical hold by the FDA, with the company eventually scrapping IDX320. In 2012, IDX184 and IDX19368 were placed on clinical hold after a patient taking Bristol-Myers Squibb‘s BMS-096984 died from taking a hep-C drug that worked very similarly to IDX184 and IDX19368. Not surprisingly, Idenix Pharmaceuticals Inc (NASDAQ:IDIX) scrapped both of these drugs as well. Finally, earlier this year it was announced that the FDA had placed a clinical hold on IDX20963, its current lead drug, until the company turns in preclinical safety data to the FDA. Call it the mid-stage curse, but Idenix Pharmaceuticals Inc (NASDAQ:IDIX) can’t seem to get anything past the FDA.
By comparison, both Gilead Sciences, Inc. (NASDAQ:GILD) and AbbVie (NYSE:ABBV) are right on track to get their oral hep-C pills approved over the next year. Gilead Sciences, Inc. (NASDAQ:GILD)’s sofosbuvir mopped the floor with the placebo in all four of its late-stage trials, while AbbVie’s drug combo was effective in eliminating all detectable levels of the disease after 12 weeks in 77 of 79 patients in a mid-stage trial. With sofosbuvir already under review by the FDA and AbbVie’s combo drug likely heading to an NDA filing next year, Idenix Pharmaceuticals Inc (NASDAQ:IDIX)’s window of opportunity has pretty much closed.
With $177.6 million in cash and a burn rate that should come in around $90 million annually, I see very few options left for the company other than big dilutive share offerings. That’s bad news for shareholders and all the more reason to avoid Idenix Pharmaceuticals Inc (NASDAQ:IDIX)’s stock.
Idenix may have come as a shock to some of you, but for biotech-savvy investors, the vultures have been eyeing Celsion Corporation (NASDAQ:CLSN)’s carcass ever since its top-line HEAT trial results were released at the end of January for its toxin delivery system designed to treat certain types of cancer, ThermoDox.
