It was 10 years ago that professional basketball player Magic Johnson announced to the world that he had tested positive for the HIV virus that causes the dreaded disease AIDS.
Noting the swift passage of time and, more importantly, the fact that the ever-smiling Magic is indeed still among us, is the cover story "Life After Death" in the current issue of Sports Illustrated.
In the United States, the typical AIDS drug cocktail costs more than $20,000 annually per patient. Such medications are part of a growing industry, with 18 drugs on the market and many others in clinical trials.
Accounting for $5 billion of the $100 billion in worldwide sales of the pharmaceutical industry last year, sales of such drugs are projected to grow to $13 billion by 2007.
"The AIDS/HIV industry is dynamic and the prices of its stocks have come down with the rest of the market, providing long-term investment opportunities," observed Chrystyna Bedrij, director of research for Griffin Securities in New York. "Some of the smaller companies have huge potential for a very big score — unless they fail — and that means they're for the speculative investor."
For example, the share price of Immune Response was cut in half this year after one of its drugs under development failed to slow the growth of the AIDS virus, with the giant Pfizer pharmaceutical firm terminating its partnership in the venture.
The industry focuses not only on those yet to be treated but also on those successfully controlling the disease through medication.
"Because the virus is active and mutates frequently, the treated population develops a resistance to a lot of these drugs," explained Navdeep Jaikaria, analyst with Mehta Partners, a New York investment firm focusing on pharmaceuticals and biotechnology. "That creates a great unmet need for additional drugs."
With the number of individuals controlling the disease expected to increase at a 7 percent rate over the next five years, this group is now the industry's driving force.
"There's a solid group of drugs out there now selling relatively aggressively and sharing the market," pointed out John McCamant, editor of the "Medical Technology Stock Letter" in Berkeley, Calif. "The key for getting new classes of drugs developed is not just showing that they're better than current drugs, but that they can help patients who have become resistant to current therapies."
A potential investor should keep in mind that the sales of AIDS drugs constitute just a portion of the largest drug companies, which means one must carefully analyze the company in its entirety.
The drug cocktail known as Highly Active Antiretroviral Therapy (HAART) combines three types of drugs, according to a Griffin Securities research study of the industry's key stocks:
Nucleoside reverse transcript inhibitors, which provide "decoy" building blocks. The huge firm GlaxoSmithKline (GSK) is dominant, with Bristol-Myers Squibb (BMY) also in a strong position. In the near future, products from Triangle Pharmaceuticals (VIRS) and Gilead Sciences (GILD) should also be significant.
Protease inhibitors, which are extremely powerful but have relatively strong side effects such as stress on the heart. Merck & Co. (MRK) provides the standard of care, though Pfizer (PFE) is gaining market share. Others are E.I. du Pont de Nemours (DD) and Abbott Laboratories (ABT), with additional drugs in the pipeline from Bristol-Myers Squibb as well.
Non-nucleoside reverse transcript inhibitors, which restrict the activity of the reverse transcriptase enzyme. This area is dominated by DuPont, with Pfizer also significant.
Among other promising treatments are entry inhibitors that are used in addition to existing regimens. Trimeris (TRMS), Progenics Pharmaceuticals (PGNX) and Aethlon Medical (AEMD) are the leaders. Roche (RHHBY) currently has joint ventures with both Trimeris and Progenics.
In immunology, there are Chiron (CHIR) and Aethlon Medical (AEMD), with a product from Hollis-Eden Pharmaceuticals (HEPH) in trials. The competition to find an effective preventive HIV vaccine is understandably intense, with VaxGen's (VXGN) completing Phase III trials on its product this fall and Cel-Sci (CVM) currently in clinical studies.
Among those companies noted by Griffin, Jaikaria especially likes the stock of Gilead Sciences, Trimeris and GlaxoSmithKline.
Europe and the U.S. will provide the bulk of industry profits and no price cuts are likely, predicted Neil Sweig, pharmaceutical industry analyst with Ryan, Beck & Co. in New York. On the other hand, we can expect continued heavy discounting in Africa and other developing nations that can't afford to pay for necessary drugs.
Andrew Leckey answers questions only through the column. Address questions to Andrew Leckey, "Successful Investing," 98 Henry St., Dept. 183, Brooklyn, N.Y. 11201, or by e-mail at successinv@aol.com.