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The One Word You Should Know in Biopharma Right Now

Before you become impressed with a particular biopharma company's drug, you'll want to know this detail

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A couple of large-cap names with underestimated biologic portfolios and pipelines are Novartis (NVS) and Sanofi (SNY), according to Societe Generale’s Stephen McGarry. Either would be an adequate name to add to a stock portfolio in need of some biotech exposure. However, given the difficulty any company is apt to experience in copying another biotech developer’s biologic R&D, the advent of this young class of drugs levels the playing field in favor of smaller biopharma names.

Take a small outfit called CEL-SCI (CVM) as an example. This $60 million organization is developing a head and neck cancer biologic treatment called Multikine, currently in Phase 3 trials. Though other head and neck cancer therapies are on already on the market, and still more are in development, Multikine has shown tremendous efficacy … far better than several other current treatment options, as well as other trial-stage drugs.

More important to investors, should Multikine win the FDA’s approval, it will be practically impossible for another biotech outfit to reproduce a biosimilar of this “complex biologic therapy.” Indeed, CEL-SCI had to walk on eggshells just to build a dedicated manufacturing facility so it could proceed from Phase 2 to Phase 3 trials. Moving the drug’s production anywhere else could have altered the outcome of the synthesis process, even if using the same equipment.

So, for a competitor to build a whole new Multikine manufacturing facility from scratch — without even a clear understanding of the manufacturing process — would be little more than grasping at straws.

Bottom Line

Biologic drugs not only have years of patent protection, but are inherently well-protected from generic competition once their patent expires. The size of the company developing the drug means nothing. Meanwhile, traditional chemically synthesized drugs (even new ones) have a known and relatively short lifespan before generics begin to chip away at their revenue.

Just something to bear in mind before becoming enamored with a particular biopharma company’s pipeline and portfolio.

James Brumley does not have a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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