invest in biotechs going after unmet needs

[not BIT specific but I posted this on the PRR thread and someone there requested I post it here too so I assume it's relevant to BIT thread, similar to PRR]

http://www.fool.com/investing/general/2011/10/28/invest-in-biotechs-going-after-unmet-needs.aspx

By Brian Orelli | More Articles
October 28, 2011 | Comments (0)

Wow!

Is there really any other way to describe the launch of Vertex Pharmaceuticals' (Nasdaq: VRTX  ) hepatitis C drug Incivek?

We got a first peek at the launch in the second quarter, but that was only six weeks ago. The third quarter offered the first look at a full quarter of revenue. And what a quarter it was: $420 million in net sales of its new hepatitis C drug. Assuming nothing surprising pops up, Incivek will reach the magic $1 billion blockbuster status in its first 12 months on the market. That's easily the most successful launch in recent memory. Dendreon (Nasdaq: DNDN  ) , Acorda Therapeutics (Nasdaq: ACOR  ) , and Avanir Pharmaceuticals (Nasdaq: AVNR  ) could learn a thing or two.

The unmet need of hepatitis C patients is a big reason for the successful launch of Incivek. The current treatments -- Roche's Pegasys and Merck's (NYSE: MRK  ) PegIntron -- only cure about half of the patients they treat. Adding Incivek increases that number substantially and allows for a shorter duration of Pegasys or PegIntron, which is helpful given the nasty side effects of those drugs.

Keep in mind that unmet need may be necessary for a launch this successful, but it isn't sufficient to get you there. Incivek still had to post better cure rates than Merck's second-generation drug, Victrelis; if their efficacy had been similar, I'm not sure we'd be drooling over Incivek sales right now. Just look at Human Genome Sciences' (Nasdaq: HGSI  ) Benlysta; it's the first new lupus treatment in 50 years, but sales last quarter were just $18.8 million, partially because doctors aren't convinced by the efficacy.

At a market cap topping $8.5 billion, there are still a lot of Incivek sales built in to Vertex's valuation. To grow further, Vertex has to keep growing sales of Incivek and gain approval for its cystic fibrosis drug Kalydeco next. A successful launch of that product would certainly help. But would you expect anything less? Cystic fibrosis is another unmet medical need.