Pfizer Partners With Young Little Known Biotech For Products With Huge Potential Value

Pfizer Partners With Young Little Known Biotech For Products With Huge Potential Value

Since its lows in mid-October, biotech stocks have sparkled, particularly the Big four – Amgen (AMGN), Biogen Idec (BIIB), Celgene (CELG), and Gilead (GILD) – which have demonstrated sustainable growth pathways. With the market’s renewed volatility in recent days, they have pulled back some, which only made them much more reasonably priced.

But the more attractive buys in the sector, say some seasoned investors, are the less known and small-cap biotechs that already have products in the market as well as new drug candidates in the pipeline that have great promise of becoming blockbuster drugs.

One such company is OPKO Health (OPK), a New York Stock Exchange-listed biotech with a market cap of $3.7 billion that just signed a worldwide partnership deal with Pfizer (PFE) on one of its products that has the potential of enhancing the portfolio value of both companies. Shares of OPKO leaped some 8%, to $8.86 a share, after the company announced on Dec. 15 the development and commercialization agreement with Pfizer. Since then, the stock has jumped to more than $9 – and rising.

Compared with Pfizer, the largest U.S. pharmaceutical company and one of the world’s biggest with revenues last year of $51.5 billion, OPKO is tiny with 2013 sales of $96.5 million. But OPKO, a diversified biopharmaceutical and diagnostics company developing therapies in endocrinology and renal associated diseases, as well as molecular diagnostic tests in prostate and other cancers, is on the rise whose revenues has jumped from $13.15 million in 2009.

The agreement with Pfizer is centered on OPKO’s growth hormone product, Lagova hGH-CTP, aimed at treating growth hormone deficiency in adults and children, as well as for the treatment of growth failure in children born small for gestational age who fail to show catch-up growth by two years of age.

The present market for the treatment of human growth failure is about $3.5 billion worldwide, growing at 5% a year –and already dominated by Pfizer, says Dr. Phillip Frost, chairman and CEO of OPKO. Pfizer should be able to expand its share of that market to more than 50%, he adds.

Under the agreement, OPKO will retain much of the responsibilities for developing Lagova, and receive significant cash up front, and will have the ability to use Pfizer’s marketing muscle to help adoption of the product when it is approved.

“Overall, we view the partnership as positive,” says Rohit Vanjani, analyst at Oppenheimer, who rates OPKO as “outperform” with a 12-month price target of $12 a share. Pfizer’s involvement “will help de-risk the program as well as drive larger worldwide sales,” he adds.

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Pfizer Partners With Young Little Known Biotech For Products With Huge Potential Value

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