Invest in a Healthy Liver

Sentiment on the biotech sector seems to be improving recently. Part of this may be due to risk-on money migrating from the energy and mining sectors due to big declines in those areas.We are going to do something a bit different today by highlighting several attractive biotech plays that are focused on the liver. The liver is the largest internal organ in the human body and its proper function is indispensable for many critical metabolic functions, including the regulation of lipid and sugar metabolism, the production of important proteins, such as those involved in blood clotting and purification of blood. There are over 100 described diseases of the liver, and because of its many functions, these can be highly debilitating and life-threatening unless effectively treated. Liver diseases can result from injury to the liver caused by a variety of factors, including hepatitis C or HCV, hepatitis B virus, or HBV, obesity, chronic excessive alcohol use or autoimmune diseases. This fight is personal to me, as I have a brother in law with stage four cancer. There are a myriad biotech companies focused on the liver and the diseases of that organ. Here are a few I find attractive and own in my own portfolio. It is hard to talk about firms focusing on liver disease without starting off with Gilead Sciences (GILD). The company's hepatitis C treatment Sovaldi is on its way to over $11 billion in sales in its first year of launch, the most successful drug rollout in history. Sales should increase next year as the company is just getting started distributing this drug in Europe and still is in the process of getting approval in Japan, which has one million individuals affected by hepatitis C. The company also just got its hepatitis C combo drug Harvoni approved by the F.D.A. The combo drug will have fewer side effects and cost less than the previous combo product. In addition, Gilead gets to keep the whole amount instead of splitting the revenue with another company that produced the other side of the previous combo. Gilead's earnings are going to almost quadruple this year to approximately $8 a share. Next year, the company should earn $10 a share. Despite this growth, the stock sells at just over 11x forward earnings. Going out on the risk scale, I also own Conatus Pharmaceuticals (CNAT). The company's lead and main product is Emricasan. This drug is a first-in-class, orally active pan-caspase protease inhibitor designed to reduce the activity of all ten human caspases, which are enzymes that mediate inflammation and cell death. Currently, this compound is in five Phase II trials to treat different afflictions of the liver. If any of these prove successful, the stock should shoot significantly higher. The company has a $120 million market capitalization, about 40% of which is represented by cash on the balance sheet. Finally, I still like Dynavax (DVAX), a company seeking a vaccine for hepatitis B. Hepatitis B is the most common serious liver infection in the world. It comes in two varieties; acute and chronic. Although the disease is not nearly as lethal as hepatitis C, investing in its treatment is a large opportunity nonetheless. The company recently completed enrollment of over 8,000 individuals into a Phase III trial to test this vaccine. Dynavax previously conducted trials for this product, Heplisav-B, and got encouraging results. However, the F.D.A. did not believe the study was large enough, sending Dynavax back to the drawing board and cratering the stock. It bottomed at $1 a share after that but has rallied recently to $1.70 a share. That is still a far cry from the $4.50 a share it achieved prior to the completed previous Phase III trials. The larger study should be completed in the second half of 2015. Given the size of the opportunity, this is an attractive high risk/high reward play in the space.

Invest in a Healthy Liver

Drugs for liver diseases are good opportunities.

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