Eyetech’s products for fighting eye diseases make it worth watching
Dear Mr. Berko:
What can you tell me about a company called Eyetech? It trades at $42 a share and my nephew, who works for the company, told me that I should buy as much of the stock as I can. The company doesn’t make any money, but he insists that big things are happening, and that they are producing a medication that will eliminate blindness in older people who have macular degeneration. I would like to invest $10,000 in Eyetech if you think it’s good.
O.F., Moline, Ill.
Eyetech Pharmaceuticals Inc. (EYET-$42.10) went public last January at $30 a share, and by July it had climbed to $49 on a rumor that the Food and Drug Administration would approve one of its premier ophthalmological products.
EYET is a biopharmaceutical company that is developing novel therapeutics for eye diseases. It focuses primarily on conditions that affect the back of the eye — primarily the retina — because this is where the largest potential market opportunities are.
The company’s secret weapon is an injectable solution called Macugen, which has had uncommon successes in the treatment of age-related macular degeneration (AMD) and diabetic macular edema, or DME. Both AMD and DME are serious retina diseases that cause vision loss and blindness.
Based on results of trials that commenced in early 2001, the FDA may allow EYET to file a new drug application and give Macugen fast-track approval for the treatment of AMD and DME.
This could be a monstrous moneymaking product for EYET. AMD and DME are probably the two leading causes of vision loss and blindness among adults. In fact, many of us probably know someone who is affected by AMD or DME.
More than 16 million people in the United States suffer from some form of AMD, and hundreds of thousands of new cases arise each year. Because AMD usually affects folks over the age of 50, the incidence of this disease should increase significantly as the Baby Boomers age and life expectancy increases.
Fewer folks — about 500,000 — suffer from DME, and there are about 70,000 new cases each year in the United States. EYET believes that the prevalence of AMD and DME in Europe is similar to the United States. Because existing treatments for AMD and DME are limited, there is an unmet need for this new therapy. Evidence indicates that Macugen is so effective that it has the capacity to be a solid blockbuster drug.
The apparent success of Macugen must certainly be grounds for Eyetech’s rush to $42 a share, that plus the fact that some investors believe Pfizer Inc. (PFE-$24.97) might want to adopt EYET permanently. Just a few years ago, the PFE folks signed a $750 million pact to help develop Macugen. And in the wake of the FDA’s Dec. 17 approval of Macugen to treat neovascular (wet) AMD, the two companies have announced plans to jointly market the drug.
The company has zero debt, piles of cash, 41 million shares outstanding and a market cap of $1.7 billion. In 2003, EYET generated $41 million in revenues and lost $41 million. This year, Eyetech easily could lose $40 million to $44 million, but in 2005 there’s a good chance that EYET will earn 75 cents to 90 cents a share. This could be a superb fit for PFE, which has the ability to smoke the market with Macugen. And if PFE makes a move on EYET, Wall Street thinks a $52 to $56 share adoption price might be reasonable.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at firstname.lastname@example.org.