As Digestive Disorders Rise, Small Caps Take Charge

October 21st, 2013
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While many people deal with minor digestive troubles from time to time, more than 60 million people in the US live with more chronic digestive diseases. Millions of people are hospitalized each year as a result of these conditions, which range from Irritable Bowel Syndrome (IBS) to chronic constipation. Some gastrointestinal diseases can be addressed with lifestyle changes, but not all.


Follow up:

Not only are gastrointestinal diseases threatening to individuals’ health, they can also pose a challenge for the economy. In Canada, the economic impact just from IBS patients missing work is estimated to be more than $6.5 billion per year. Other, more serious or chronic conditions may impact the economy even further - for example, in 2004, the economic impact of digestive diseases overall on the US economy was $141.8 billion.

IBS and other gastrointestinal conditions are also big business for pharmaceuticals companies. As author Bill Flook put it,

IBS is a hot niche: The overall market for IBS drugs is expected to grow at a 14 percent annual rate through 2019, according to pharmaceutical research company Decision Resources Inc.”

Many small cap companies are now working to develop solutions for digestive and gastrointestinal diseases.

One such company, Ventrus Biosciences Inc (Nasdaq:VTUS), based in New York, NY, is currently undergoing late-stage trials for two potential products: VEN 307 and VEN 308, both topical treatments for various digestive issues. VEN 307, diltiazem cream, is a treatment to help relieve pain for patients with anal fissures. The company estimates that there are up to 4.3 million cases of anal fissures in the US. While diltiazem cream is a common treatment for anal fissure pain, it must be specially mixed for each patient. VEN 307 is currently undergoing Phase III trials. VEN 308, a phenylephrine gel, helps to treat fecal incontinence associated with ileal pouch anal anastomosis (IPAA), a surgical procedure that’s part of a colectomy. This topical treatment aims to help IPAA patients with fecal incontinence to improve their sphincter control. The treatment is currently undergoing PhaseII trials. VTUS closed October 7th at $3.23, down $0.10, with a market cap of $58.62 million. Its 52-week trading range is $1.91 - $3.92.

New York City, NY-based Synergy Pharmaceuticals Inc (Nasdaq:SGYP) is currently developing products to treat chronic ideopathic constipation (CIC), IBS and inflammatory bowel disease (IBD) along with additional gastrointestinal conditions. One such drug, Plecanatide (SP-304) is currently undergoing Phase II trials for an IBS-C indication, and Phase III trials for a CIC indication. This oral drug mimics the functions of uroguanylin, a gastrointestinal hormone found in humans. The company is also undergoing Phase II trials for SP-333 with an indication for IBD. Synergy recently created a new subsidiary, ContraVir Pharmaceuticals Inc, to hold the company’s FV-100 assets. Earlier this year, the company completed a merger with Callisto Pharmaceuticals, Inc, a company that developed therapeutics for cancer. SGYP closed October 7th at $4.41, up $0.01, with a market cap of $380.57 million. Its 52-week trading range is $2.98 - $7.44.

Sucampo Pharmaceuticals Inc (Nasdaq:SCMP), based in Bethesda, MD, develops treatments for a range of conditions, including gastrointestinal diseases. The company markets lubiprostone under the trade name Amitiza. The oral drug is a treatment for CIC and opioid-induced constipation (OIC, or constipation from opiate-based pain medications), as well as IBS with constipation. Sucampo partners with Takeda Pharmaceutical Co Ltd to market Amitiza, though the company lost arbitration to sever ties with the Japanese company last year - a move which caused their stock to drop 25%. SCMP closed October 7th at $6.38, up $0.10, with a market cap of $266.71 million. Its 52-week trading range is $4.41 - $10.48

As awareness for IBS and other gastrointestinal diseases continues to grow, there may be a market opportunity for small caps and other companies to develop new marketable treatments. Doctors and patients who are better informed about gastrointestinal diseases could create a savvy new market for gastrointestinal pharmaceuticals. Health care investors may be interested in keeping an eye on this specific sector to find opportunities. New breakthroughs in pharmaceutical treatments for all types of digestive disorders could not only provide new treatment options for the patients who need them, but also present a significant opportunity for investors.

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