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Biotech Drugs to Watch In 2010

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Significant treatments seeking FDA approval this year and the stocks behind them.

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The economy is on the upswing and the FDA is going to have a busy year ahead with all of the biotech drugs that are expected to face its regulatory might.

If you're a savvy investor willing to take a little risk, and you have the time to wait patiently for the FDA (because the agency often takes its time coming to a decision), now is the time to put your money into biotechs. A handful of stocks hold particular promise in 2010.

Weight loss will be top of mind in 2010 as three little biotechs battle for the big market of diet pills. Arena Pharmaceuticals (ARNA) and Vivus (VVUS) both submitted their new drug applications to the FDA in December and, if all goes as planned, Orexigen Therapeutics (OREX) will be submitting its papers sometime in this quarter.

Vivus's Qnexa has the most successful weight-loss numbers with patients losing an average of 15% of their body mass.

"If Qnexa continues to show weight loss and minimal or no rebound during months 12-24 of treatment, it could provide a meaningful marketing advantage over other obesity compounds which have yet to show that," said Leerink Swann analyst Steve Yoo. "We believe this may be a high bar but Qnexa is the drug best poised to show such results given the excellent efficacy data." (See, Obesity and ED: Two Big Markets, One Tiny Company)

But Qnexa's safety data could give the FDA some pause. It combines two drugs -- the diet drug phentermine and the epilepsy drug topiramate. While phentermine still has a negative association with the failed Fen-Phen combination, it's not the problem. Topiramate has been shown to cause cognitive and depression side effects when used long-term.

Meanwhile, Arena's lorcaserin looks the best safety-wise, but might not offer enough benefit to be worthwhile.

One, two, three, or none of these drugs could make it to market. It will be up to the FDA to evaluate which of these drugs has the best risk-reward profile. Despite the major market that would be served by these drugs, it's important to keep in mind that diet and exercise will still be the safest, most successful alternative. (See, Biotech's Race to Battle the Bulge)

Weight loss, of course, is directly tied to the ever-expanding market for diabetes treatments. Novo Nordisk (NVO) and Amylin Pharmaceuticals (AMLN) should already be on the radar for their work in the diabetes market. Denmark's Novo Nordisk is eagerly awaiting an FDA opinion on its diabetes drug liraglutide. The drug will be the second from the GLP-1 class to hit the market should it get approved, but some doubts still remain after data showed that the drug caused thyroid tumors in rodents.

Amylin and Eli Lilly (LLY) will be closely watching the FDA's decision concerning liraglutide. A long-acting version of their Byetta (exenatide) is also in the queue; its number is up on March 5. The once-weekly version of this GLP-1 drug presents a new form of convenience for patients, but has raised questions at the FDA for the amount of time it stays in the body and the possible repercussions if a patient has an adverse reaction. (See, For Big Pharma, Diabetes Means Big Business)

For patients with multiple sclerosis, walking could become a little easier this year. Acorda Therapeutics (ACOR) and Biogen Idec (BIIB) face the FDA on January 22 with their drug Famipridine-SR. The medicine got the thumbs up from the FDA's advisory panel, but its success will hinge heavily on the label and the companies' risk evaluation and mitigation strategy regarding patients that are considered "non-responders." The drug will be the first aimed at improving walking for patients with the degenerative disease.

Dendreon (DNDN) will be looking for redemption this year as it awaits approval for its prostate cancer vaccine Provenge on May 1. The company has been running new drug trials to show that it reduced overall risk compared to a placebo since receiving a complete response letter in 2007. Dendreon is hoping for a lucrative partnership with Big Pharma should Provenge be approved.

Mannkind
(MNKD) will be a breath of fresh air for investors if it can get its inhaled insulin Afresa past regulators next week. The category, which was previously occupied by Pfizer's (PFE) Exubera, has been a bit of a flop. Yet, Mannkind also plans to seek approval for a smaller, more convenient inhaler that will make it a more practical option than Exubera was. Analysts worry that the product will take time to penetrate the market if doctors are weary about pulling out the prescription pad.

"Although we believe Afresa is a better product than Exubera, physicians may be skeptical of inhaled insulins in light of the Exubera experience," said Leerink Swann's Josh Schimmer.

If Mannkind can pull it off, the reward will be plentiful; the rapid-acting insulin market is currently worth $4.4 billion worldwide.

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No positions in stocks mentioned.

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