'dem Bones, 'dem Bones

11/04/2005 12:00 am EST

Focus:

John McCamant

Editor, Medical Technology Stock Letter

"Osteoporosis is an under-appreciated disease that is poised to grow significantly," notes John McCamant, in his Medical Technology Stock Letter, one of the most consistently interesting newsletters around. Here he looks at a biotech play in the field.

"An estimated ten million people in the US have osteoporosis, and 18 million have low bone density. The disease is known as the ‘silent thief,’ with 6.6% of the population undiagnosed. Illustrating the seriousness of the disease and its impact on an aging population was the first-ever report from the Surgeon General, which calls on healthcare professionals to help Americans maintain healthy bones by evaluating risks for patients of all ages, recommending bone density tests for women over the age of 65 and for any man or woman who suffers even a minor fracture after age 50.

"In general, approved therapies for osteoporosis can be divided into two categories. Anti-resorptive drugs have shown moderate to good success at slowing or stopping bone loss and have been shown to reduce the rate of certain fractures. These positive effects are the result of their ability to change the rate of bone turnover by reducing resorption. A second category of treatments has the ability to actually build bone, not just stop its loss. The osteoporosis treatment landscape was significantly altered in 2002 by the first of these treatments, which was Eli Lilly’s Forteo.

"Also in this category is Preos, which is a treatment from NPS Pharmaceutical (NPSP NASDAQ). The company has certainly had its share of controversy over the last two years as the bears have hammered away at the company and its stock valuation. However, we believe that some of the negatives emphasized by the bears have been successfully rebutted through a combination of data and a better understanding of the drug candidate by doctors.

"We continue to believe that Preos will be a significant drug, and will generate at least $200-300 million in sales within a few years after launch. The company’s current market capitalization does not reflect this potential. In addition, a good portion of the risk has been removed from the NPSP story over the past year and the new drug application for Preos has been accepted by the FDA for filing, removing some of the regulatory risk.

"In addition, the recent publication of the PaTH data in the New England Medical Journal was a significant accomplishment, and has helped increase the awareness of Preos with doctors who treat osteoporosis patients. Expanding Medicare reimbursement for osteoporosis diagnostics will encourage doctors to test more often for the disease, which will lead to greater drug usage—given the large undiagnosed patient population. In our opinion, NPSP is the best investment opportunity within the osteoporosis treatment sector."

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