NPSP: Fighting Osteoporosis

10/17/2003 12:00 am EST

Focus:

John McCamant

Editor, Medical Technology Stock Letter

"Osteoporosis represents a large and growing market opportunity for investors," says John McCamant, editor of The Medical Technology Stock Letter."Despite the size of this market, there are not a lot of biotech companies developing cutting-edge drug candidates. Our favorite investment in the osteoporosis field remains NPSP." Here’s his review.

"Osteoporosis is a systemic skeletal disease that is characterized by low bone mass and the progressive structural deterioration of bone tissue. This leads to fragile, brittle bones and a significantly increased susceptibility to fractures of the hip, spine, and wrist. Osteoporosis is a major health threat that is expected to grow significantly as the Baby Boomers age. The disease primarily targets women, who represent 80% of patients. Osteoporosis is responsible for more than 1.5 million fractures in the US annually, representing a direct cost to the healthcare system of $17 billion.

"Bone is living, growing tissue. It is made mostly of collagen—a protein that provides a soft framework; and calcium phosphate—a mineral that adds strength and hardens the framework. The combination of these two ingredients makes bone strong, yet slightly flexible, so that bones can withstand stress. Throughout a person’s lifetime, bone is continually being formed and broken down.

"A product which we expect to be a major player in the osteoporosis treatment arena is Preos, developed by NPS Pharmaceuticals (NPSP NASDAQ). Preos is a recombinant version of full-length human parathyroid hormone (PTH), which is a naturally occurring protein that plays a key role in bone metabolism. Clinical testing has shown that intermittent dosing with Preos, in which PTH levels rise rapidly and then return to normal levels within a few hours, actually stimulates the growth of new bone. The next significant event for NPSP will be the release of the final data from the two-year preclinical studies for Preos, likely to occur next month.

"In our view, NPSP represents a compelling buy at current levels. The controversy surrounding the proposed merger with Enzon earlier this year created pressure on the stock from which it has yet to fully recover. The silver lining in this is that we are currently being presented with a company whose market capitalization does not accurately reflect the fact that it could have two drugs on the market within the next two years, and a solid drug pipeline behind that. We believe that NPSP has significant upside from current levels. We recommend purchase at prices below $35, with a long-term target of $60 per share."

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