The biotechnology sector is off to a strong start in 2015. The iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) has gained more than 12% already this year, compared to a gain of just under 5% for the NASDAQ.
The biotech sector had a decent run in 2014 as well, as it outperformed the broader market. This was after a phenomenal year in 2013. So what is driving gains in this sector?
Major pharma companies have seen significant loss of revenue due to patent expirations in the last three to four years so the need of the hour for many of these companies is to strengthen their pipeline.
While many companies have boosted their pipeline by increased spending on R&D, acquisitions remain an excellent way to get hold of potential blockbuster drugs.
On Wednesday, AbbVie Inc. (NASDAQ:ABBV), which is about to lose patent on its top drug Humira, announced the acquisition of Pharmacyclics Inc. (NASDAQ:PCYC). Apart from acquisitions, many pharma companies are also entering into licensing deals and collaboration agreements.
Late last year, Janssen Biotech had signed a major deal with Geron Corporation (NASDAQ:GERN). The trends in the biotech sector augur well for smaller companies like Islet Sciences Inc. (OTCQB:ISLT), which is engaged in the development of new medicines and technologies for the treatment of metabolic disease.
Earlier today, ISLT announced that it has been granted a U.S. patent for using sodium/glucose co-transporter 2 (SGLT2) inhibitors to treat non-alcoholic fatty liver disease (NAFLD) and non-alcoholic steatohepatitis (NASH).
The patent is entitled "Progression Inhibitor for Disease Attributed to Abnormal Accumulation of Liver Fat." A strong IP portfolio is very important for early stage biotech companies like ISLT.
Earlier this week, ISLT had also entered into an exclusive license agreement with Brighthaven Ventures LLC for rights to develop and commercialize a novel SGLT2 inhibitor, remogliflozin etabonate, in the licensed territory. The company noted that the U.S. patent granted to it is an important part of the patent portfolio licensed in the agreement.
James Green, CEO of Islet Sciences, said that the U.S. patent adds significant value to the development of remogliflozin etabonate as a NASH/NAFLD drug.
The news has given a strong boost to ISLT shares in trading today. The stock had registered significant gains in the previous trading session as well. However, ISLT could be an interesting stock to watch in the mid-to long-term as well, given the rising deal making activity in the biotechnology sector.
