Diversity in a Small Package

Fledgling biotechnology companies are often involved in disparate businesses and develop new treatments and technologies for a variety of ailments—and then wait to see what sticks. Occasionally, though, those companies put together an interesting mix of successful businesses and therapeutic areas through acquisitions and internal development efforts.

With a market capitalization of £1.35 billion, BTG PLC (London: BTG) is a compelling case in point. This innovative mid-cap biotechnology company is involved in several different therapeutic lines, most of which are the result of acquisitions and licensing agreements.

One of BTG’s more esoteric business lines is specialty pharmaceuticals. One of the company’s drugs that falls into that category is Crofab, used to treat snakebites.

About 100,000 people annually die after being bitten by a venomous snake, but the number of laboratories producing anti-venom, which is used to counteract the effects of the venom, has been shrinking. Crofab effectively treats the venom of North American crotalid snakes, more commonly known as pit vipers, including rattlesnakes, copperheads and water moccasins.

The company’s specialty pharmaceuticals line also includes Digifab and Voraxaze.

Digifab is used to treat patients suffering from digoxin toxicity or overdoses. Digoxin is commonly used to treat some cardiac arrhythmias and heart failure. Despite its therapeutic value, the drug is based on a toxic compound found in plants such as foxglove, so overdoses are extremely dangerous. But with nearly 6 million Americans treated for heart failure and more than 650,000 new cases diagnosed each year, digoxin is becoming an increasingly common drug in American households.

Even patients who are taking the medication as prescribed are at risk of developing digoxin toxicity, because the drug is cleared from the body by the kidneys, an org! an that loses function due to age and disease.

Voraxaze is used to treat toxic concentrations of methotrexate in a patient’s blood. Methotrexate is a drug that interferes with normal cell growth and is used to treat cancers of the blood, bone, lungs breasts and other parts of the body. Again, thanks to the aging of the American population and unhealthy lifestyle choices, cancer has become an increasingly common disease in the US. As a result, methotrexate use is on the rise.

All three drugs are used primarily in hospital emergency rooms and are sold directly in the US.

In addition to those three drugs, BTG also licenses Zytiga from Johnson & Johnson (NYSE: JNJ) and Lemtrada from Sanofi (NYSE: SNY).

Zytiga is approved for use in the US and European Union (EU) for the treatment of both pre- and post-chemo metastatic castration-resistant prostate cancer (mCRPC). Sequential sales of the drug have been growing rapidly over the past two years, largely due to its demonstrably high efficacy. The fact that it was approved to treat mCRPC on a pre-chemo basis a year ago has also helped, making the drug much more cost effective.

Lemtrada is used in the treatment of relapsing-remitting multiple sclerosis (MS), at which stage patients suffer “attacks” of MS rather than a chronic form of the disease. Lemtrada helps lessen the frequency of those attacks and was approved by the EU this past September. It is under review in the US and the Food and Drug Administration has requested additional safety information on the drug.

In addition to its specialty pharmaceuticals and licensing businesses, BTG also has an interest in the interventional medicine business, which consists primarily of treatments for cancer and varicose veins.

The company’s EkoSonic Endovascular System uses ultrasound to essentially loosen clots, allowing for lower doses of clot-dissolving drugs. BTG’s drug Varithena was also approved for the treatment of varicose veins in ! the US in! November; BTG expects it to produce sales of about $500 million by the end of next year or early 2015.

The company’s interventional oncology product is a bead that can elute drugs or deliver radiation to very specific areas of the body to target cancers. The procedure to implant the bead is generally considered non-surgical and is performed by an interventional radiologist.

During the first half of this year, the company reported higher profits and revenues, up 18 percent and 7 percent year-over-year, respectively. Revenue reached £153 million while pretax profit hit £32.7 million. Earnings per share were up 21 percent to 6.8 pence from 5.6 pence in the same period last year.

On track to achieve revenues of £275 million and £285 million this year, it seems quite likely that BTG could achieve its goal of more than £600 million in revenues by the end of the decade, particularly when you consider it had revenues of just £75 million 2008.

All of BTG’s product lines face significant future growth, particularly the company’s TheraSphere beads which are still largely underutilized despite their superior targeting abilities. The company’s EkoSonic system is also a major potential growth driver, with less than 15 percent of US cases being treated with interventional procedures each year, even though they speed recovery times.

The best way to purchase BTG shares is directly on the London Stock Exchange through any number of brokers, which now offer direct access to international markets. That said, there are BTG shares which trade in the over-the-counter (OTC) market under the ticker BTGGF. Those OTC shares aren’t particularly liquid though, with only about 2,500 shares trading on an average day.

BTG PLC is a good buy on the London Stock Exchange up to 700 pence, or over-the-counter in the US up to 10.50.