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Backing Biotech Growth with Manufacturing Strength: Brian Wilson
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Brian  Wilson The focus of most small biotech and pharma companies is on discovery—looking for that next breakthrough in gene therapy, diagnostics, drug delivery and the like. While Bio-Wire.com's Brian Wilson has explored and written about the possibilities in these fields, he sees potential outside the traditional discovery sphere, in companies focused on low-profile tasks like contract manufacturing services. In this interview with The Life Sciences Report, Wilson names one of his favorites in that space, and discusses a pair of companies using contract manufacturing services to advance their own development strategies.

The Life Sciences Report: Brian, your business, Bio-Wire, broadly covers the small pharma and biotech communities. What do you view as some of the key areas of development among these companies today?

Brian Wilson: The biotech community has become much better at understanding and manipulating genes, so there is enormous developmental potential in the application of modern genetics technology toward many rare disease indications. Much of the attention in the industry is now being placed on diseases that are particularly difficult to treat using conventional therapies. These advances also help us develop biomarkers, which creates opportunity in the diagnostics space.

"There is enormous developmental potential in the application of modern genetics technology toward many rare disease indications."

I also think we'll see significant development in drug delivery technology, which increases the efficiency and safety of existing therapeutics. Also worth mentioning is the huge progress being made in immunotherapy—particularly in the oncology indications.

TLSR: How do you see these different spaces developing over the next 5–10 years?

BW: The U.S. Food and Drug Administration (FDA) seems to be increasingly lenient, so I think we'll see the introduction of a large number of new therapies and refined diagnostic tests to the market. We should also see the introduction of enhanced versions of older drugs that will utilize advances in drug delivery technology. We should see a lot of progress in cancer treatment too, since so much effort is being placed there.

TLSR: Some of the companies you follow provide contract manufacturing services. Do you see this as a long-term solution to meeting the needs of small companies? Wouldn't it be more efficient to bring that expertise back in house?

BW: It is simply not cost-effective for a small life science company to acquire and maintain a facility that adheres to the FDA's current good manufacturing practices (cGMP) regulations. Highly sophisticated pharmaceutical products can also be prohibitively difficult and/or expensive to make. A contract manufacturing organization (CMO) offers far more flexibility at a lower overall cost to most pharma developers.

TLSR: BioZone Pharmaceuticals Inc. (BZNE:OTCBB) is a company that provides contract services. What is it about the company business model that attracts you?

BW: BioZone is nicely positioned as a CMO. It has its own drug delivery platform, which allows it to generate income from its contract manufacturing business while developing enhanced delivery formulations of over-the-counter and generic compounds. BioZone can also issue licensing agreements. This provides stability for the business, with enormous potential for growth in the future.

TLSR: You mentioned that BioZone provides formulation services. Can you talk about the acquisition of licenses for BioZone's drug solubilizing technologies by OPKO Health Inc. (OPK:NYSE)?

BW: Certainly. In February 2012, OPKO and BioZone entered into a limited license agreement that gave OPKO exclusive rights to BioZone's QuSome drug delivery technology in ophthalmological indications, as well as non-exclusive rights in other indications. This gives OPKO the right to utilize the technology, and may provide BioZone with extra income later on.

"The FDA seems to be increasingly lenient, so I think we'll see the introduction of a large number of new therapies and refined diagnostic tests to the market." "A contract manufacturing organization offers far more flexibility at a lower overall cost to most pharma developers."

TLSR: What is unique about the BioZone technology?

BW: In many cases, drug delivery can be enhanced through the use of tiny, artificial, phospholipid "bubbles" known as liposomes, which essentially trap and carry drugs farther into a patient's tissues. QuSomes are second-generation liposomes that utilize a different lipid in their construction. They are far more stable than other technologies, and therefore much more versatile as a vehicle for drug delivery.

TLSR: With the current focus on outsourcing in today's pharma economy, it is understandable that pharma and biotech companies would want a more secure stake in contract organizations. Why is a company like MusclePharm Corp. (MSLP:OTCPK), which focuses primarily on nutritional supplements, interested in BioZone?

BW: MusclePharm has been looking to streamline manufacturing for its product line, which makes a quality CMO like BioZone a great fit. The QuSome technology may also be of interest to the company, since liposomes have been used to deliver nutrients as well as pharmaceuticals to the body.

TLSR: How do you see the nutraceutical sector holding up against more mainstream pharmaceuticals?

"The aging U.S. population creates a natural wave of demand for healthcare products, which bodes well for both developmental and commercial pharmaceutical companies regardless of the political climate."

BW: MusclePharm has a prominent brand, and operates in a niche market that has been built largely on brand association. Still, competition from mainstream pharmaceutical companies exists. Competitive pricing in the nutritional supplement market can be a problem, and it's the reason that MusclePharm should be interested in delving into the manufacturing side of its business.

TLSR: You currently follow MusclePharm. Why did this company catch your attention, as opposed to other nutritional supplement companies?

BW: MusclePharm has the branding, and is therefore trusted by customers that would be interested in high-end nutritional supplements. It has developed a very strong association with professional athletics, making the company comparable to major sports brands like Under Armour Inc. (UA:NYSE) or Adidas AG (ADDYY:OTCPK).

TLSR: What is your overall view about the future direction of biotech and pharma companies in light of current social and political pressures?

BW: I think the immediate pressure would be placed on cost cutting in healthcare services rather than healthcare products, which makes the pharmaceutical space attractive from an investment standpoint.

The aging U.S. population also creates a natural wave of demand for healthcare products, which bodes well for both developmental and commercial pharmaceutical companies regardless of the political climate.

"Although the macro environment presents certain challenges to the broader economy, the biotech and pharma industry tends to exist in its own little universe."

Reimbursement for more expensive drugs has been holding strong despite all the pressure to reduce expenditure on healthcare, which is why product development for rare disease indications should continue to flourish. I also think that private research and development in the life sciences space will continue to expand dramatically in coming years as we continue to utilize recent advances in genetics technology in pharmaceutical development.

Although the macro environment presents certain challenges to the broader economy, the biotech and pharma industry tends to exist in its own little universe. Because of this, I expect overall growth to continue for quite some time.

TLSR: Thanks for your time, Brian.

BW: Thank you.

Brian Wilson has been covering biotech stocks for two years, and has been published extensively in the online investment community. He founded Bio-Wire.com in 2012 to provide a more streamlined content platform for biotech investors, and continues to provide high-level content. Prior to founding Bio-Wire, he worked in the life sciences industry and attended Vanderbilt University.

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DISCLOSURE:
1) Daniel Levy conducted this interview for The Life Sciences Report and provides services to The Life Sciences Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: MusclePharm Corp., OPKO Health Inc. Streetwise Reports does not accept stock in exchange for its services.
3) Brian Wilson: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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