Even Good Biotech Ideas Can Be Financially Dangerous
Alan Tall was a typical, curious kid... aside from the bomb-making attempt. He loved doing experiments with all kinds of things. With a homemade chemistry set, he tried making different gases. Tall just liked to see how things worked.
Even Good Biotech Ideas Can Be Financially Dangerous
By Marc Chaikin, founder, Chaikin Analytics
Alan Tall was a typical, curious kid... aside from the bomb-making attempt.
He loved doing experiments with all kinds of things. With a homemade chemistry set, he tried making different gases. Tall just liked to see how things worked.
That later got him into trouble...
He once tried putting nitroglycerin in a container and throwing bricks at it from the roof. He wanted to see if it would blow up. It didn't work.
But after Tall turned 11, he successfully created a homemade bomb.
He bought potassium perchlorate from his local pharmacy. It's a sand-like chemical compound used in explosives. And he put it in a glass jar with iron filings and a wick to try to make a bomb with his cousin.
It worked. But as the boys ran away, the small explosion launched glass shards everywhere. One lodged under Tall's eye. And more of them ended up in his cousin's back.
Decades later, Tall could still picture his aunt picking glass shards from his cousin's backside.
That stopped Tall's bomb-making attempts. But it didn't stop his love for scientific experimenting.
And a future discovery of his helped set the stage for more research that ultimately ended in a big, expensive failure for the development of a particular drug...
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Building the Groundwork for More Research
Tall pursued his scientific passion by going to medical school at the University of Sydney in Australia.
After a short internship, Tall moved to the U.S. He soon became chief resident of internal medicine at Boston City Hospital.
There, he turned his focus to atherosclerosis. That's the buildup of fats and cholesterol in and on artery walls.
If the buildup happens close to the heart, atherosclerosis can lead to coronary artery disease ("CAD"). It's the most common type of heart disease in the U.S.
Tall wanted to learn more about the causes of atherosclerosis. And he wanted to find a way to prevent it.
He finally made some headway in 1990 after he set up the Division of Molecular Medicine at Columbia University...
There, he identified a new mutation involved in heart disease.
Patients with a mutation in a gene called cholesteryl ester transfer protein ("CETP") also had high levels of HDL (or "good") cholesterol and low levels of LDL (or "bad") cholesterol.
Having a high ratio of HDL compared with LDL is known to prevent blocking of arteries.
This made Tall suspect that blocking or removing the CETP gene would trick the body into producing more HDL.
So, Tall and his colleagues experimented on blocking this CETP gene.
Early tests on mice showed promise. Blocking the CETP gene kept the mice from developing blocked arteries.
But as trials moved to human patients, the results weren't as promising.
However, research into CETP's role in heart disease didn't stop.
Elsewhere in the medical community, other experiments with animals showed promise.
That's when Big Pharma firm Pfizer (PFE) took notice...
Pfizer's Costly Biotech Bet Failed
The company needed a new drug to extend the life of its blockbuster cholesterol-lowering medicine Lipitor.
Pfizer developed a pill that blocked the CETP gene and called it torcetrapib. And by 2006, the company had moved to Phase III clinical trials with 15,000 patients. It wanted to get the drug to market the next year.
But the trial took a bad turn...
It turns out that torcetrapib could cause increases in blood pressure. And high blood pressure itself is a heart disease risk.
The early data showed 60% more patient deaths with the combination of Lipitor and torcetrapib than with those taking just Lipitor.
Pfizer had to stop the trial. The results dashed hopes for an exciting new drug to improve CAD patient outcomes.
It was also a shock – including to Pfizer itself – that a drug that came so close to commercialization had such poor (and deadly) results. Pfizer had bet on this new blockbuster drug and planned to market it at massive scale.
In that sense, Pfizer dodged a bullet... but not before it lost a staggering $800 million developing torcetrapib until its final failure.
Despite the enormous financial firepower of its owner, torcetrapib still had the same fate as about 90% of drugs that get developed. They don't make it all the way.
Folks, the lesson here is simple...
Biotech is exciting. But despite the potential for massive gains, it's a hard path for investors.
Even drugs that seem incredibly promising fail during testing.
Clinical trials take years. And they often produce promising results along the way. But the 90% failure rate speaks for itself.
Keep that in mind before you jump into the next exciting biotech opportunity you come across.
Good investing,
Marc Chaikin
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.73%
3
19
8
S&P 500
+0.63%
58
286
160
Nasdaq
+0.66%
12
63
25
Small Caps
+0.59%
244
1159
486
Bonds
+0.84%
Financial
+1.04%
9
60
4
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain Bearish. Major indexes remain all bearish.
* * * *
Sector Tracker
Sector movement over the last 5 days
Information Technology
+8.65%
Consumer Discretionary
+6.93%
Communication
+5.45%
Industrials
+4.53%
Financial
+3.2%
Health Care
+3.12%
Materials
+2.56%
Real Estate
+1.71%
Utilities
+1.67%
Energy
+1.65%
Consumer Staples
-1.22%
* * * *
Industry Focus
Transportation Services
2
23
19
Over the past 6 months, the Transportation subsector (XTN) has underperformed the S&P 500 by -13.78%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #16 of 21 subsectors and has moved up 2 slots over the past week.
Indicative Stocks
XPO
XPO, Inc.
FIP
FTAI Infrastructure
EXPD
Expeditors Internati
* * * *
Top Movers
Gainers
SBAC
+6.82%
CDNS
+5.77%
HON
+5.4%
ZBRA
+5.16%
SHW
+4.8%
Losers
NXPI
-6.94%
REGN
-6.87%
BRO
-6.0%
ARE
-5.73%
SMCI
-3.41%
* * * *
Earnings Report
Earnings Surprises
CSGP CoStar Group, Inc.
Q1
$0.19
Beat by $0.08
SPOT Spotify Technology S.A.
Q1
$1.16
Missed by $-1.36
BKNG Booking Holdings Inc.
Q1
$24.81
Beat by $7.24
PFE Pfizer Inc.
Q1
$0.92
Beat by $0.24
AMT American Tower Corporation
Q1
$1.04
Missed by $-0.53
* * * *
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