Biotech Drug Investing

Brian Hicks

Written By Brian Hicks

Posted September 19, 2013

In today’s rapidly growing biotech industry, there is a drive for smaller companies to come out with new drugs that will help reduce the size of tumors or provide a better quality of life for patients suffering from life threatening illnesses.

biotechDrugs that provide relief for such diseases as cancer, leukemia, and sickle cell anemia are hot commodities right now, and Big Pharma is on the prowl for acquisitions of smaller companies on the edge of major therapeutic breakthroughs. And the FDA is looking to get these types of drugs approved faster for the sake of improving the lives of Americans who are fighting debilitating diseases.

But there is one drug that will be in high demand once it is approved by the FDA. It doesn’t treat any form of disease, and it does not cure anything.

Its development name is ATX-101, and it treats submental fat – otherwise known as the “double chin.”

Now, if you’re a biotech investor looking for serious therapy treatments, you may think this investment wouldn’t be worthwhile. But hear me out for a second.

Biotech Beauty Investing

We know the cosmetic and beauty field is a multi-billion dollar industry – appealing to people’s insecurities about their facial and body images. The so-called double chin effect is a problem that plagues many people as they age or gain weight, and it can have severe implications on a person’s self-esteem.

Technically, there is no treatment for submental fat other than cosmetic surgery, which is something many people are either uncomfortable with or cannot afford. Others say exercise is the best way to reduce double chin, but this is easier said than done, since many people do not have the time or stamina to engage in intense physical activity, and a double chin is genetic in some people.

In our quick-fix oriented society, people want results without the heavy lifting.

The company behind the drug is Kythera Biopharmaceuticals (NASDAQ: KYTH), and shares jumped 20 percent on Tuesday when the test results were released, closing at $42.21 the following day. Over 1,000 tests were conducted in the U.S. and Canada, with minor side effects ranging from swelling to bruising, but nothing major.

So how does the drug work?

ATX-101 works in the same way as a simple Botox injection. Essentially, it is a purified form of deoxycholic acid, which is a natural molecule that helps break down fat cells. To reduce the double chin, injections are administered in timed intervals of six injections four weeks apart.

If it receives approval, ATX-101 could be the first FDA-approved drug specifically treating neck fat. This is great news for you as an investor because it means no competition from other companies. The product will surely turn the heads of consumers and the biotech industry, and there is already talk of it being acquired through potential buyouts.

Company Growth

The company has two choices going forward, and both look promising.

Kythera can grow exponentially, and there is talk of the company coming out with future products that tackle body fat using the same type of method as ATX-101.

And there is also the possibility of a buyout, in which Kythera could gain access to greater funding from a larger medical firm or work side by side with researchers from a large company in developing a slew of innovative treatment methods.

Bayer AG (OTC: BAYRY) already holds the marketing and development rights to ATX-101 outside of North America, and the German company asked the EU to approve the drug in 2014.

Bayer is one of the top Big Pharma companies, so I wouldn’t be surprised if the company acquired the full North American rights to ATX-101.

Other companies that may acquire Kythera, and have been behind big buyouts in the past, are Johnson & Johnson (NYSE: JNJ) of the U.S., GlaxoSmithKline (NYSE: GSK) of the U.K., and Novartis (NYSE: NVS) of Switzerland.

The company is expected to file for FDA approval in the second quarter of 2014.

The company went public last October and raised $72.6 million in IPO funds, which helped fund the research. The company has no other products in testing stages or on the market, but ATX-101 will certainly garner enough investment interest.

Sales for the drug are expected to reach $500 million per year.

Whether Kythera is bought out or not, the sales will keep this company in high demand from investors. These types of companies have options in accepting or rejecting a buyout offer, and you can be sure this company will accept the best the offer on the table.

A buyout is too early at the moment, but it will be interesting to see which big biotech firm comes out with the best offer.

Stay tuned for the future of this company.


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