To most people, cigarettes are often associated with lung cancer. However, smoking also causes other severe respiratory problems, such as COPD (chronic obstructive pulmonary disease). COPD occurs as a result of emphysema, which breaks down lung tissues — causing chronic cough, increased sputum production, and shortness of breath. COPD is currently the third leading cause of death in the United States, and is estimated to cost the country $42.6 billion in healthcare and productivity costs annually. Unlike asthma, COPD is hard to reverse, and generally worsens over time.
Traditional treatments for COPD include inhaled bronchodilators, vaccinations, oxygen therapy, and rehabilitation. However, most of these treatments are considered inadequate, with a high degree of “exacerbations” in which patients’ conditions gradually worsen. Therefore, Wall Street perked up on news that three major pharmaceutical companies are introducing some new COPD treatments for this under-penetrated market.
Theravance Inc (NASDAQ:THRX) primarily focuses on treatments for respiratory disease, bacterial infections, and central nervous system ailments. However, it mostly relies on strategic collaborations with larger companies to help cover R&D and marketing costs. Theravance’s primary pulmonary and respiratory programs — Revlar/Breo, Anoro, and Maba — were all developed through partnerships with GlaxoSmithKline plc (ADR) (NYSE:GSK).
Theravance Inc (NASDAQ:THRX) and GlaxoSmithKline plc (ADR) (NYSE:GSK)’s main CPOD treatment, Breo Ellipta (also known as Revlar Ellipta), was approved by the FDA in May. It is the first once-daily inhaled corticosteroid long-acting treatment for COPD. Since its approval, Theravance shares have risen 17%. Breo Ellipta is a long-term maintenance therapy for COPD sufferers, designed to reduce airflow obstructions and exacerbations. The drug is expected to hit the market in the third or fourth quarter this year.
Not a one-trick pony
However, investors shouldn’t dismiss Theravance Inc (NASDAQ:THRX) as another one-trick pony biotech stock. The company still generates substantial revenue from its other treatments, which helped it post a narrower than expected loss of $0.37 per share last quarter. This was a slight improvement over the loss of $0.42 it reported in the prior year quarter, and also topped analyst estimates by $0.22 per share. Revenue, however, declined slightly from $1.4 million to $1.3 million, falling short of the $4 million that analysts had expected.
Theravance Inc (NASDAQ:THRX) also has other treatments in its development pipeline, including treatments for bacterial infections and ADHD, but its respiratory drugs remain the primary reason for investing in the company. However, the company’s aggressive development of its pipeline caused R&D expenses to rise 7.4% year-on-year to $31.7 million, while general and administrative expenses spiked 50% to $11.4 million due to higher legal and accounting costs.
Theravance Inc (NASDAQ:THRX) is also gearing up to split into two separate publicly traded companies, Royalty Management Company and Theravance Biopharma. Royalty Management will retain the development of respiratory candidates, while Theravance will focus on the discovery, development, and commercialization of small-molecule therapies focusing on untapped markets.
Novartis nipping at their heels
Another rising name in COPD treatments is diversified pharma giant Novartis AG (ADR) (NYSE:NVS). Novartis has been developing a once-daily bronchodilator inhaler, known as the Ultibro Breezhaler, aimed at relieving the symptoms of COPD. Ultibro was developed through a combination of two bronchodilators — indacaterol and glycopyrronium bromide, which significantly decreased the rate of exacerbations during clinical trials. Indacaterol relaxes the muscles of the airways as glycopyrronium dilates them.
This combination treatment recently received a positive endorsement from the European Committee of Medicinal Products of Human Use. Novartis AG (ADR) (NYSE:NVS) is expected to pursue a filing with the FDA in the U.S. by the end of 2014, which means that it will arrive considerably later than current products from Theravance Inc (NASDAQ:THRX) and GlaxoSmithKline plc (ADR) (NYSE:GSK).
In the long term, however, Novartis AG (ADR) (NYSE:NVS)’ product could become a major threat, especially if the Ultibro Breezhaler is considered a better once-daily treatment than Breo/Revlar Ellipta.
The Foolish bottom line
Biotech investors should watch the COPD market carefully. Considering that the disease is forecast to continue to be the third leading cause of death worldwide for the next decade, demand for improved treatments will remain high.
Theravance Inc (NASDAQ:THRX) and GlaxoSmithKline plc (ADR) (NYSE:GSK) scored a major victory by bringing the first viable once-daily inhaled treatment to the market in May, but Novartis AG (ADR) (NYSE:NVS) is closing in fast. At the end of 2012, there were 54 different treatments being developed for COPD, with some major names like AstraZeneca plc (ADR) (NYSE:AZN) and Pfizer Inc. (NYSE:PFE) working on new treatments.
Therefore, I believe that competition will heat up and COPD treatments will evolve and improve significantly over the next few years, to the benefit of patients and biotech investors alike.
Leo Sun has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Which of These COPD Treatments Will Come Out on Top? originally appeared on Fool.com.
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