Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Novartis AG (ADR) (NVS), Alexion Pharmaceuticals, Inc. (ALXN), Celgene Corporation (CELG), Onyx Pharmaceuticals, Inc. (ONXX): 4 Companies Riding the Orphan Drug Rocket

Small product base, huge potential

San Francisco-based Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) develops and markets cancer treatments. It currently has just two approved products, Kyprolis and Nexavar, that are both in EvaluatePharma’s list of the 30 highest selling orphan drugs in 2018.

Proteasome inhibitor, Kyprolis, comprised just $64 million of the company’s 2012 revenue of $362.2 million. In 2018, the MM treatment is expected to add $1.52 billion to the company’s top line.

Sales of Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX)’s liver and kidney cancer treatment, Nexavar, are shared with Bayer. The two companies split Nexavar sales of $1.02 billion in 2012. Expected sales of Nexavar in 2018 are about $1.46 billion.

Financially, Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) is one of the shakier companies mentioned, but the explosive top line growth from Kyprolis alone makes it very tempting.

Tomorrow’s cystic fibrosis blockbuster

The last two years have been very exciting for Boston-based Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). In May 2011, the company won its first FDA approval for hepatitis C treatment, Incivek. The company’s cystic fibrosis treatment, Kalydeco, was approved less than a year later.

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) recorded total sales of $1.5 billion in 2012. Just $172 million of 2012’s revenue was from Kalydeco. In 2018, EvaluatePharma expects Kalydeco sales alone to reach $1.7 billion.

Like Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) has also allowed its bottom line to hover between profits and losses over the past several years. Both are sporting reasonably strong balance sheets for emerging pharma companies. Rather than take on debt to fund their expansions, both companies have relied on share dilution.

Rookie of the year or last season’s MVP

Personally, I prefer the slower, steadier growth from companies like Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), and Celgene Corporation (NASDAQ:CELG). Both companies have already proven that they are capable of maintaining profitability while continuing to advance their pipelines. As usual, riskier companies, like Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), offer much larger potential.

While the overall outlook for the pharmaceutical industry going forward is flat to negative, specialized treatments are going to be the bright patches of sun between the clouds. I hope you’ve found at least one or two companies here that you feel are worthy of further investigation.

The article 4 Companies Riding the Orphan Drug Rocket originally appeared on Fool.com.

Cory Renauer has no position in any stocks mentioned. The Motley Fool recommends Celgene and Vertex Pharmaceuticals. Cory is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.