Editor's Note: Normally this intelligence would go to paid-up members of Bill's Private Briefing, but this debut is going to be so big, and the medicine so important, that he wanted to give everyone a chance to tap this $21 billion market. The shares start trading on Thursday, Aug. 6, so there's some time to get in position. Here's Bill...
This soon-to-debut company is a biotech that's doing late-stage research in an area we've been following closely over the past few weeks.
The company is developing an oral immunotherapy that's designed to lessen the effects of peanut allergies, a malady we told you about in a report on a stock that's soared nearly 40% since Radical Technology Profits Editor Michael Robinson told us about the company back in April 2014.
So let's take a look at the allergen issue and then "drill down" on this tremendous opportunity...
A Bad Problem Getting Worse
The company is Aimmune Therapeutics Inc., a Brisbane, Calif.-based company that will trade on the Nasdaq with the ticker AIMT once it goes public on Aug. 6.
We have a special vantage point on this peanut-allergy issue because of that earlier recommendation from 2014.
Shares of that Lansing, Mich.-based company - whose products include kits designed to test for the presence of peanuts in food - rocketed 21% in a single day's trading back on July 21 after the company delivered better than expected results.
That company's financial results, and stock-price gains, underscore the very real significance of the peanut-allergy problem - and the financial opportunity it represents for companies with treatments or related solutions.
As I said in that earlier report, parents who have children with peanut allergies are very focused on this malady.
My wife, Robin, and I have an eight-year-old son, Joey, and we've been lucky: So far, he's displayed no major food allergies.
But I grew up with a cousin who had a serious dairy allergy, and Joey right now has a friend and classmate who suffers from peanut allergies. So I've seen - firsthand - how scary these allergies can be.
And it's not just kids who suffer from this.
According to Food Allergy Research & Education Inc. (FARE) - a nonprofit organization that focuses on this issue - about 15 million Americans have food allergies, including all those at risk for life-threatening anaphylaxis.
Anaphylaxis is a rapidly progressing, life-threatening allergic reaction that can result in airway constriction, heart rhythm irregularities, and even intestinal attacks. The most severe cases can put a person into shock - or even kill them.
And it's not just a U.S. problem.
More than 17 million Europeans have a food allergy, FARE says. And hospital admissions for children experiencing several allergic reactions have surged sevenfold over the past 10 years, according to the European Academy of Allergy and Clinical Immunology (EAACI).
If you're talking about children under 18, this very serious malady affects one in every 13 kids - about two in any classroom you walk into.
And the problem has soared in recent years.
According to a 2013 study by the Centers for Disease Control and Prevention (CDC), food allergies among children zoomed about 50% between 1997 and 2011. The economic cost of this is nearly $25 billion. But if you're a parent of one of these kids, that "cost" runs a distant second to the worry you feel every time your son or daughter buys a school lunch, goes to a friend's birthday party, goes out to eat with others, or snags a snack while at a friend's house.
Every three minutes, a food-allergy reaction triggers a visit to a hospital emergency room - to the tune of 200,000 visits a year. And the CDC says food allergies are responsible for 300,000 doctor visits by kids under 18.
A Very Compelling IPO
Until researchers can fully understand the cause of this increased allergen sensitivity, testing - with kits like those made by Neogen Corp. (Nasdaq: NEOG) - are one safety-enhancing alternative.
Aimmune is attempting to do just that - create treatments that lessen the sensitivities sufferers have to food allergies.
The company was founded in 2011. It plans to raise $125 million by offering 8.3 million shares at a price range of $14 to $16 a share.
At the midpoint of that offering range - $15 a share - Aimmune Therapeutics would have a market value of $585 million.
The deal is expected to price this week and start trading Thursday.
[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]
There are four reasons this company intrigues me enough to mention it even before it goes public. Those reasons are:
Aimmune is tackling a big issue: We cited a bunch of statistics earlier. The peanut-allergy problem alone is massive and growing. One study found that instances of this malady in U.S. children rose at a constant growth rate of 10% a year from 1997 to 2008 - and experts believe it has continued to rise since then.
The market is wide open: There are no currently approved medical therapies to cure food allergies or prevent their effects. A French biotech is working on a "patch" treatment (similar to a nicotine patch) that could be on the market in 2018. But there's plenty of room for a number of players: The market for food-allergy drugs could be extremely lucrative, worth nearly $21 billion a year, according to a recent study in the Journal of Allergy and Clinical Immunology.
The company is getting substantial support from the U.S. Food and Drug Administration: The FDA has granted Aimmune's lead investigational drug its "Breakthrough Therapy Designation" status. And back in September 2014 - before the company had even issued its phase 2 clinical trial data - the FDA granted the drug candidate its "Fast Track Designation."
This isn't an early-stage startup: Aimmune will be in phase 3 trials this year. Phase 3 is the last of three rigorous studies that must be traversed before a drug can be approved as a commercial product. Though this would still be a very high-risk stock, with biotechs and clinical trials, the later the stage, the lower the risk.
Now that we've seen the four reasons we like this stock, let's take a closer look at the drug itself.
This Is Incredibly Advanced Technology
Aimmune's lead drug candidate is called AR101.
It's a pill that provides users with protection from peanut allergens at a level that's supposed to "substantially exceed" what someone might be accidentally exposed to - by eating the wrong food, for instance.
The drug candidate is a mix of naturally occurring proteins and lab-created ingredients. Patients would take the pill with some of the food they usually eat.
AR101 was developed from Aimmune's "characterized oral desensitization immunotherapy" system - referred to internally as CODIT. The company found that it could "desensitize" food-allergy sufferers by gradually increasing their doses of food allergens over a period of months.
Aimmune's CODIT system follows a systematic dosing regimen that begins with very low doses of the allergen. Once desensitized, the patient takes a "maintenance" dose of the drug to maintain that manufactured "immunity."
It's striking that the FDA saw fit to bestow its two new designations, which are designed to cut the time it takes to get needed new drugs to market.
Indeed, these are the same two designations granted to Pharmacyclics Inc. (Nasdaq: PCYC), the blood-cancer pioneer that we recommended to you back in our April 2012 special report, The Biotech Buyout Binge.
In March, AbbVie Inc. (NYSE: ABBV) - another Private Briefing recommendation - stunned investors by announcing it was buying Pharmacyclics for $21 billion. Subscribers who acted on our recommendation grabbed an 818% profit.
The FDA granted the "Breakthrough Therapy" designation to the oral AR101 drug for peanut-allergic children four to 17 years of age.
The "Breakthrough" status was granted to expedite development and review of new drugs and biologics that are aimed at serious - or even life-threatening - conditions.
This isn't done arbitrarily: The FDA requires preliminary clinical evidence that the drug may demonstrate substantial improvement over available therapies on one or more clinically significant endpoints.
What will happen here is that the FDA will work closely with Aimmune Therapeutics on the subsequent development of AR101. That includes giving the company guidance on what evidence it will need to generate to support approval of the drug as quickly as possible.
As mentioned earlier, the "Breakthrough" designation was one of two special designations that AR101 received from the FDA. In September 2014, the FDA granted AR101 its "Fast Track" designation.
The "Fast Track" designation is a way of expediting a drug that meets a life-threatening malady - usually one that's underserved or isn't being served at all.
"We are very grateful for the FDA's recognition of the large impact AR101 could have in reducing the incidence of life-threatening allergic reactions in people with peanut allergies," Aimmune CEO Stephen Dilly said. "Currently, there are no approved medical therapies to treat the more than two million children and adolescents in the United States and Europe with peanut allergy who are vulnerable to reactions from accidental exposures. We are eager to continue working closely with the FDA and to receive its guidance to help make AR101 available to patients as soon as possible."
In its phase 2 study of AR101, 100% of the 23 patients who completed the regimen tolerated exposure to at least 443 milligrams of peanut protein, and 78% of those patients tolerated exposure to a cumulative amount of 1,043 milligrams of peanut protein. Dr. Wesley Burks presented the study results at the European Academy of Allergy and Clinical Immunology (EAACI) Congress 2015.
With its phase 3 trial, Aimmune Therapeutics plans confirm the drug's effectiveness in desensitizing peanut allergies in both children and adults.
We'll watch this as the IPO comes down the pipeline. We're also looking at other ways to play this.
More from Bill
Money Morning's Executive Editor Bill Patalon uses a secret investment strategy that has handed his readers more than 257 winning investments, including 192 double- and triple-digit peak gains. Once you see the secret, you'll immediately understand why it works so well. Click here.
About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning at Money Map Press.