Biotech Letter Archives

Announcing the Mad Hedge Biotech & Healthcare Trade Alert Service

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The Mad Hedge Biotech & Healthcare Letter

January 5, 2021/by Mad Hedge Fund Trader

Why AstraZeneca Is Not Just A COVID Play

Biotech Letter

The latest update on AstraZeneca’s (AZN) COVID-19 vaccine candidate has received a lot of attention from investors.

The company and its research partner Oxford University recently landed a deal to deliver 2 million doses of their COVID-19 vaccine weekly to the UK starting mid-January.

This is on top of the massive deal AstraZeneca sealed with India for emergency use approval as well.

While these are exciting updates, the reality is that AstraZeneca aims to market its COVID-19 vaccine candidate at cost.

As the race to supply COVID-19 vaccine to the world continues, it’s undeniable that a huge chunk of the roughly $40 billion COVID-19 revenue would go to the current frontrunners Pfizer (PFE) and Moderna (MRNA).

This is particularly true for Moderna’s case as the biotechnology company employed a revolutionary technology to create its COVID-19 vaccine candidate.

The success of its vaccine so far is indicative of future treatments and even vaccines based on the mRNA technology. This offers incredible promise not only for the current pandemic but for a myriad of rare diseases.

In comparison, AstraZeneca and even Johnson & Johnson (JNJ) opted for more traditional approaches for their COVID-19 vaccine candidates.

While these are also promising, it’s likely that these companies do not anticipate their COVID-19 programs to be the profit centers for 2021.

In fact, there are a lot of good reasons to buy AstraZeneca shares right now – and its COVID-19 vaccine candidate didn’t make the top of the list.

One of the main reasons AstraZeneca deserves a spot in your portfolio is the fact that it already has an established and successful pipeline.

While its COVID-19 program definitely boosted its popularity, this effort was not altogether necessary in terms of the company’s overall growth.

Despite the pandemic that brought down businesses in 2020, including commercial launches of new drugs, sales of AstraZeneca’s new products rose 9% year over year.

In fact, throughout the past 12 months, the company managed to generate approximately $1.9 billion in free cash flow.

In the first nine months of 2020, the company reported core earnings growth of 13% year over year, with a 2.8% dividend.

To close the year with a bang, AstraZeneca announced its $39 billion acquisition of one of our closely-watched biotechnology companies: Alexion Pharmaceuticals (ALXN).

Although this initially didn’t bode well with its investors, AstraZeneca is set to gain the blockbuster franchise composed of the Soliris-Ultomiris duo.

At its current growth rate, Alexion’s prized Soliris franchise is estimated to generate at least $6 billion in sales in 2021.

Meanwhile, Soliris’ longer-lasting version, Ultomiris, which was launched in 2018, is projected to rake in almost twice in profits this year.

Both Soliris and Ultomiris require regular treatment, with the former administered every other week while the latter is an infusion needed every other month.

Although there are less expensive biosimilar options already making the in the market today, particularly for Soliris, the move of Alexion to develop Ultomiris as a longer-lasting and more convenient version all but obliterates any future competition.

Simply put, AstraZeneca will have a monopoly of this market once the acquisition is complete by mid-2021.

Speaking of convenient options for prolonged treatments, AstraZeneca recently gained expanded approval for its easy-to-swallow tablet called Tagrisso. This drug is developed for lung cancer patients with tumors caused by specific gene mutations.

The latest approval allows Tagrisso to be prescribed to newly diagnosed patients who just had their tumors removed surgically.

This presents a lucrative market for AstraZeneca considering that these patients undergo therapy for long periods.

More importantly, AstraZeneca doesn’t really need to market Tagrisso’s value to oncologists.

Clinical results show that the tablet can lower the risk of the disease’s recurrence or even death by as much as 80% among their patients.

Putting these results in the context of AstraZeneca’s records, Tagrisso’s sales for the third quarter of 2020 alone grew by 30% year over year to reach $4.6 billion.

With the recent FDA approval, this number is set to increase to transform Tagrisso into a certified blockbuster drug.

Other than Tagrisso, AstraZeneca has a number of oncology blockbusters in its portfolio and pipeline.

In the first nine months of 2020, the sales of the company’s therapies unit rose by 23% year over year to a record $8.2 billion. Admittedly, Tagrisso contributed a substantial amount.

However, it’s not the sole growth driver in AstraZeneca’s oncology lineup.

Another moneymaker is Lynparza, which showed a 42% jump year over year in its third quarter sales in 2020 to reach $1.9 billion.

This drug, which was initially approved as an ovarian cancer treatment, is now prescribed to treat prostate, pancreatic, and breast cancer. Therefore, the expanded approvals are expected to offer more lift this year.

Another promising addition to AstraZeneca’s oncology pipeline is Enhertu, which the company gained from its $1.35 billion collaboration project with Daiichi Sankyo.

Since the two companies started working together last year, Enhertu has received approval for breast cancer patients who relapse or do not respond to standard care.

Aside from this, Enhertu is also under review as a treatment for stomach cancer.

Although the companies are still awaiting approval, the treatment is reported to have a great chance at approval because of its impressive ability to lower the risk of cancer patients’ death by 41% compared to chemotherapy.

AstraZeneca’s decision to boost its oncology segment by adding the likes of Alexion Pharmaceuticals and collaborating with Daiichi Sankyo guarantees that the company remains in a position to be able to deliver gains no matter what happens to the broader economy.

The continuous success for all the products in AstraZeneca’s pipeline could lead to market-crushing gains.

However, investors who own the stock don’t necessarily need to rely on luck to know that they are set to get a healthy return.

That assurance makes AstraZeneca a great stock to buy today and hold for a long time.

astrazeneca

January 5, 2021/by Mad Hedge Fund Trader

Monopoly is the Name of the Game

Biotech Letter

No other industry has ever been watched as closely in 2020 as the healthcare and biotechnology sector, with drug developers placed under pressure to deliver COVID-19 treatments and vaccines within an unprecedented timeframe.

Despite all the attention and fanfare, the overall performance of the sector’s stocks remained underwhelming. However, 2021 promises to bring in better returns and bring back the industry to pre-pandemic performance.

For perspective, the S&P 500 Health Care Sector Index rose by 8% through mid-December compared to the 13% increase of the S&P 500.

The financial and health crises affected the performance of the subgroups in different ways. For example, the diagnostics subgroup jumped by 31% while the demand for clinical labs was up 18%.

Meanwhile, biotechnology stocks rose by 13%. In comparison, traditional pharmaceutical stocks and even hospitals only managed to record a measly 3% increase.

As for retail pharmacies, this subgroup sank by 18%.

Despite the underperformance of the industry, there are still companies that stood out this year and are poised to soar come 2021.

One of them is Vertex Pharmaceuticals (VRTX).

Vertex is possibly one of the most undervalued large-cap biotechnology stocks in the market today.

This company, which has $61.7 billion in market capitalization, has been continuously growing and transforming into the most dominant player in the cystic fibrosis (CF) space.

Truth be told, Vertex holds the monopoly on the approved drugs used to treat CF, namely, Trikafta, Kalydeco, Orkambi, and Symdeko.

With the recent approvals the company received, this momentum is expected to grow.

Vertex just won additional EU approval for its CF drug Kaftrio. This indicates another cash cow for the company as the drug, also known as Trikafta, already transformed itself into a megablockbuster in the US market.

Apart from its efforts to continuously dominate the CF sector, Vertex also has several moonshots that can eventually turn into major catalysts.

Among those is its partnership with CRISPR Therapeutics (CRSP).

The two biotechnology companies are developing a gene therapy, called CTX001, which can cure rare genetic blood diseases. Specifically, CTX001 is designed to cure beta-thalassemia and sickle cell disease.

Apart from its partnership with CRISPR Therapeutics, Vertex also acquired Semma Therapeutics in 2019 with the goal of coming up with a cure for Type 1 diabetes.

If things go as planned, a gene therapy for this genetic disease will advance to clinical testing by early 2021.

Another under the radar biotechnology stock set to soar in 2020 is Illumina (ILMN).

Illumina, with a market capitalization of $54.10 billion, is the leader in the genomics market.

Since the pandemic broke, the biotechnology sector’s leading manufacturer of hardware for genetic sequencing has been supplying testing kits for hospitals across the US.

Apart from Illumina, other companies in the genomics sectors include Vertex’s partner, CRISPR Therapeutics, which has a market capitalization of $4.48 billion, and bluebird bio (BLUE) with $4.03 billion.

In a nutshell, genomics refers to the analysis of the genetic information found in human cells. Companies working on this field aim to not only develop more accurate and efficient disease testing processes but also come up with more personalized treatments for a range of diseases including cancer.

Looking at Illumina’s profile and even taking into consideration the effects of the recession along with the competitive pressure to be expected soon enough, this biotechnology company is still set to deliver solid returns over the next 3 to 5 years.

Ever since its establishment, Illumina has been hailed as the leader in the gene-sequencing segment.

To date, the company holds almost 90% of the market.

Apart from that, the company has been an active participant in the move to lower the costs of gene-sequencing processes. In effect, Illumina managed to expand its customer reach.

Illumina’s participation in the 13-year Human Genome Project, which started at $3 billion per genome submitted for sequencing in 2003.

Nowadays, the cost has dropped to $800 for each genome, with Illumina eyeing to drop the price to $100 via its NovaSeq platform.

Based on the company’s performance in the past years, Illumina’s revenue is expected to climb higher annually in the next 5 years.

By 2021, the company is projected to report a 21.16% year over year growth in annual revenue to reach 4.23 billion.

Meanwhile, its 2022 annual revenue is estimated to hit $4.79 billion, showing off a 13.37% increase.

Despite the attention it has been receiving, Illumina remains a bargain buy.

This is because the company’s gene-sequencing projects have been moving along at a decent pace even before the COVID-19 crisis hit.

Given the company’s growth and future plans, Illumina is a no-brainer long-term investment. However, investors looking for quick returns might find the company’s pace a bit sluggish for their liking.

Among the biotechnology companies out there today, I think Vertex and Illumina stand out the most because both hold a monopoly in their respective fields.

Sure, there would be competition eventually but the combination of all their strengths and the strong potential of their pipeline put them in a league of their own.

illumina

December 31, 2020/by Mad Hedge Fund Trader

Buy Before the Rally

Biotech Letter

Over the past month, COVID-19 vaccine developers like Pfizer (PFE), Moderna (MRNA), and AstraZeneca (AZN) have offered the world a bit of good news.

For the first time since the pandemic started, we have seen a light at the end of this crisis’ tunnel.

This time around next year, the economy should be close to its normal state.

Before we see the struggling financial market completely recover, you might want to consider buying shares of an under-the-radar COVID-19 vaccine developer that could be on its way to performing better in 2021: Merck (MRK).

Major healthcare and drug stocks rarely get this cheap relative to the S&P 500 in the last 15 years, Merck is a prime example of this once-in-a-blue-moon phenomenon.

Although it was slow to start and report on updates in its COVID-19 vaccine, Merck has been making strides in emerging as a major competitor against Gilead Sciences (GILD) when it comes to developing a COVID-19 drug.

To date, Merck landed a $356 million supply agreement with the US government to deliver 60,000 to 100,000 doses of its oral antiviral drug for COVID-19.

While vaccines are definitely valuable in helping prevent the spread of the virus, there is another important market that healthcare companies are targeting: the hospitalized COVID-19 patients.

With this recent announcement from Merck, it’s obvious that the company has its hands on both the vaccine market and the hospitalized patient group.

In terms of vaccine development, Merck may be behind Pfizer and Moderna but this New Jersey-based titan has one of the leading vaccine franchises in the industry.

The frontrunner in Merck’s vaccine franchise is its cervical cancer vaccine Gardasil, which is estimated to be worth half of its current market value of approximately $200 billion.

The company is also anticipated to record high single-digit earnings growth in the years to come, thanks to the 2021 spinoff of its Organon unit.

Following Pfizer and Mylan footsteps in the newly formed Viatris (VTRS), Organon will be used to unload the slower-growth products from Merck’s current portfolio.

With the purging of its product portfolio of the low-performing treatments comes the expansion of Merck’s R&D courtesy of its $2.75 acquisition of biotechnology startup VelosBio.

Thanks to this deal, Merck will gain access to VelosBio’s prized VLS-101, which is basically a miniature chemotherapy grenade that would disintegrate cancer cells.

This collaboration could turn out into another moneymaker for the company.

Merck is no stranger when it comes to picking winning oncology investments.

The last massive deal it completed was a $1.16 billion deal with AstraZeneca in 2017, with the two companies agreeing to milestone payments of up to $6.15 billion.

This partnership brought to life one of the highest-selling cancer drugs in the world today, Lynparza.

To date, Lynparza is not only used for prostate cancer but also gained expanded approval for breast and pancreatic cancer.

In the third quarter of 2020 alone, even with the pandemic still wreaking havoc everywhere, Merck’s share of profits for Lynparza jumped 59% year over year to reach $196 million—a number that is projected to continue to climb as the drug awaits more approvals from the EU.

Merck offers the most attractive upside case among the healthcare stocks today, with the company projected to report consistent revenue growth until at least 2025.

Moreover, this pharmaceutical company has a strong balance sheet, as seen in its recent acquisitions and potential partnerships still underway.

So far, Merck’s shares are down 12% this year to only $80, with the stock trading 13 times its projected earnings in 2021 at $6.29 per share.

This pharmaceutical giant has a stable dividend yield of 3.3%, which is double the S&P 500.

As the economy continues with its recovery, you can expect Merck to get stronger and the stock should rally sooner rather than later.

Hence, buying it before it completely bounces back could allow you to cash in some spectacular returns.

December 29, 2020/by Mad Hedge Fund Trader

How Vertex is Curing the Uncurable

Biotech Letter

Erratic. Unpredictable. Volatile. Take your pick of the descriptions used when it comes to biotechnology stocks. Each of these adjectives can be a fitting descriptor to the industry most of the time.

However, not all biotechnology companies fall under that category. Some are reasonably stable, offering steady and increasing profits.

Vertex Pharmaceuticals (VRTX) is one of those biotechnology stocks that you can simply buy and hold for over a decade without losing any sleep.

One of the key factors in Vertex’s success is its monopoly on the cystic fibrosis (CF) market.

CF is a rare and life-threatening genetic disease that affects a patient’s digestive system and lungs. To date, there is no cure for this condition that overshadows the lives of 68,000 individuals in the US and the EU. However, there are treatment options for it.

Vertex developed the first-ever FDA-approved drug, Kalydeco, for the condition. As expected, it gained the much-coveted head start that led to its dominance today.

Its closest rivals, Proteostasis Therapeutics (PTI) and Galapagos NV (GLPG), are years away from ever catching up to the Massachusetts-based biotechnology stalwart. Neither has an approved drug as of today.

Since the approval of Kalydeco in 2012, Vertex stock has been enjoying an upward trajectory. With the recent addition of another CF blockbuster, Trikafta, the company is anticipated to keep its momentum.

From the moment Trikafta was released to the market, Vertex’s revenue and bottom line showed impressive growth. The drug, which is a triple combination therapy, is projected to capture almost 90% of the CF market worldwide.

Needless to say, Vertex has made it in the shade for at least the next 5 years, thanks to its CF market dominance.

In its second quarter earnings report, Vertex showed a 62% jump in its revenue year over year to hit $1.52 billion. Its net income of $837 million demonstrated a whopping 213% increase compared to the same period in 2019.

As anticipated, the star of the show was Trikafta.

The drug raked in $918 million in the second quarter alone – an amount higher than the combined sales of all the drugs in Vertex’s product line and an impressive growth from the $420 million it contributed last year.

As Vertex’s bottom line grew, its margins showed substantial improvement as well. Its operating margin for the second quarter of 2020 is at 57% compared to 44% during the same quarter last year.

With Vertex’s key metrics topping expectations, the company changed its 2020 revenue guidance from $5.7 billion to $5.9 billion, showing off a noteworthy increase from the $4 billion in sales it reported in 2019.

Although its CF pipeline has a number of promising candidates, Vertex is also looking outside the market for additional avenues of growth.

One of the most promising and exciting partnerships it forged in the past decade is with gene-editing company CRISPR Therapeutics (CRSP).

Just looking at this collaboration makes it clear that Vertex is once again playing the long game.

What we know so far is that the two companies are working on a treatment, called CTX001, for rare genetic blood disorders sickle cell disease and transfusion-dependent beta-thalassemia.

They are also developing two potential treatments for alpha-1 antitrypsin deficiency (AATD), which is a rare genetic liver and lung disorder that is similar to CF.

Detractors might point out that Vertex is a pricey stock. However, this biotechnology company currently has $71.2 billion in market capitalization.

More notably, it has no debt and holds $5.5 billion in cash. That puts the true value of Vertex at roughly $65.7 billion.

I believe that the biotechnology company’s overall outlook more than does justice for its valuation.

Granted that it is trading at 11 times its revenue and 26 times its adjusted EPS, its consistent performance and promising future ensure that its investors will be getting more bang for their buck.

In a word, Vertex remains a first-rate biotechnology stock to buy.

December 24, 2020/by Mad Hedge Fund Trader

Is This Stock A Discount to Moderna?

Biotech Letter

Eighteen months ago, an unknown vaccine developer called Novavax (NVAX) confronted an existential terror: getting delisted by the NASDAQ stock index.

This threat came on the heels of the company’s second failed vaccine study in less than three years, plunging Novavax shares to less than $1 for 30 straight days and triggering a warning from NASDAQ.

Desperate to keep the company going, Novavax sold two of its manufacturing plants in Maryland, cutting the payroll by over 100 employees.

By January 2020, Novavax only had 166 employees in its roster and was priced at $4 per share.

By December of the same year, Novavax more than tripled its workforce and the stock has risen to $128 per share.

What a difference a year—and a global pandemic—could make.

To date, Novavax stock has already skyrocketed to over 3,000%—shattering even the wildest dreams of its early investors. And this isn’t the best news yet.

Like Moderna (MRNA), another small biotechnology that skyrocketed this year, Novavax is projected to enjoy more room for growth in the succeeding years.

Despite the similarities in their achievements, there has been a notably sizable gap between the valuations of these two biotechnology companies in the Operation Warp Speed list.

The valuation gap would probably make more sense now, especially since Moderna has the golden ticket when it comes to high efficacy results for the COVID-19 vaccine, while Novavax has yet to prove its candidate’s worth.

However, Novavax isn’t out of the race just yet. Novavax plans to end 2020 with a bang by launching pivotal COVID-19 vaccine trials for its candidate, NVX-CoV2373, in the US and Mexico.

While the old saying, “The early bird gets worm,” is frequently accurate and we’ve seen how first-movers generally attain the highest success, this may not be the case here.

In view of the COVID-19 vaccine race, there’s a realistic possibility that Novavax will come out as a bigger winner than Pfizer (PFE) or Moderna (MRNA) in the long run.

Admittedly, it’s encouraging for vaccine developers to know that RNA vaccines, such as Pfizer and BioNTech’s (BNTX) BNT162b2 and Moderna’s mRNA-1273, are effective.

It’s definitely even more encouraging to learn that the second type of vaccine, which is being developed by AstraZeneca (AZN) and Oxford, also offer successful trials.

However, the potential of Novavax’s vaccine candidate proves that there are many ways to skin the cat.

This protein-based vaccine, which also caught the attention of Microsoft (MSFT) co-founder Bill Gates, is expected to show the best results among all the developers.

Although its competitors are months ahead in their tests, NVX-CoV2373 actually outshone the rest of the developers on key metrics in the monkey and even human tests.

Moreover, Novavax’s technology offers versatility, which means it can be applied to other vaccines and treatments as well.

If NVX-CoV2373 gains approval, the company will easily continue this momentum in 2021 and in the next years.

The market opportunity presented by the demand for a COVID-19 vaccine is unbelievable.

Priced at $16 per dose, Operation Warp Speed shelled out $1.6 billion to buy 100 million doses of the Novavax vaccine.

Considering that this is a two-shot vaccine, this would only cover 50 million people.

Although the price may be higher or lower depending on various factors, $16 per dose is a good starting point for a back-of-the-envelope calculation.

What we know so far is that Novavax has already secured agreements to manufacture more than 2 billion doses.

Taking into consideration the price point of $16 for each dose, that easily gives the company a potential revenue of a whopping $32 billion in 2021.

The upside is surreal.

Plus, we still have no guarantee whether the need for a COVID-19 vaccine will be a one-time requirement or a yearly ritual like flu shots, which Novavax also has covered with the production of its new drug, Nanoflu.

As the market continues to swoon over the huge updates from Pfizer and Moderna, it no longer comes as a surprise when other candidates are glossed over.

Novavax isn’t about to start selling its COVID-19 vaccine tomorrow, but it’ll probably release critical data in the next months.

Assuming that it gets regulatory approval by the first half of 2021, it’ll begin to realize the upside almost instantaneously.

At $8 billion market capitalization, Novavax stock could easily triple to $24 billion by the time the vaccine is released.

I believe Novavax offers a potential long, and I find myself getting bullish on this stock.

Although it has a limited pipeline at the moment, I think positive data from its COVID-19 vaccine candidate will serve as a catalyst for this stock to trade much higher in the future.

While I can see that Novavax is widely considered as a dark horse in this race, I believe it’s going to be a dark horse that can lead us out of this darkness soon.

novavax

December 8, 2020/by Mad Hedge Fund Trader

Play Your Cards Right With Moderna

Biotech Letter

The COVID-19 race is entering the home stretch, and it could only be a matter weeks before the world finds out which among the leading vaccine candidates will work.

For months, Moderna (MRNA) has been dubbed as the leader of the pack, with the company’s shares reaping the rewards thanks to this year’s wild growth and promising clinical results.

Now, it looks like Moderna is on the verge of officially claiming the crown as promising reports surfaced from its late-stage clinical trials.

If the Moderna’s COVID-19 vaccine candidate, called mRNA-1273, is proven to be at least 70% effective, the company will immediately ask for an emergency authorization to use it on high-risk patients.

Like Pfizer (PFE), Moderna is also expecting results to come as early as October. With potential delays in the trials, the company thinks the data would be released by November at the latest.

Moderna is also looking into building footprints outside the United States.

Part of its efforts to expand its potential market reach for mRNA-1273, Moderna opened a commercial hub – its first ever – in Switzerland, where it has already been collaborating with Swiss drug manufacturer Lonza (SWX: LONN).

This is a good move for Moderna.

After all, Europe presents a substantial market for the COVID-19 vaccine. For context, the European Union has over 446 million people while the US only has 328 million.

To date, Moderna has agreed to supply 100 million doses of its COVID-19 vaccine to the US government for up to $1.525 billion. The contract also provides for an optional additional 400 million doses, depending on mRNA-1273’s performance in the trials.

Meanwhile, Moderna already secured a deal with the Swiss federal government to deliver 4.5 million of mRNA-1273.

While it has yet to announce a similar deal with the rest of the EU, the company is reported to be in the advanced stages of its negotiations with other member countries, where it is estimated to provide an additional 160 million doses.

Overall, the global manufacturing projection for Moderna falls somewhere between 500 million and 1 billion doses starting in 2021.

Looking at the agreements, we can conservatively say that mRNA-1273 could rake in $12.4 billion in sales for Moderna by 2022.

Despite the current payment plans implying that each dose of Moderna’s vaccine would only cost $15.25, the company already received government funding of roughly $2.5 billion.

Taking those expenses into account, the actual value would be somewhere between $25 and $30 per dose.

In comparison, Pfizer’s vaccine candidate with BioNTech (BNTX) is estimated to cost less than $19.50 per dose while Johnson & Johnson (JNJ) announced that it will offer its vaccine at $10 per dose.

Meanwhile, AstraZeneca’s (AZN) candidate with Oxford University is expected to be even cheaper at $2.96 to $4 per dose.

With its COVID-19 vaccine rivals offering decidedly cheaper options, Moderna will need to leverage its first-mover advantage if it hopes to fight for a decent market share.

Outside COVID-19 vaccine efforts, Moderna has a rich pipeline, with 23 candidates distributed over 22 programs and 6 modalities.

Aside from the urgent need to offer a vaccine to the world, there is another reason why Moderna is focusing on the COVID-19 program right now.

If proven successful, the program can be used to validate another experimental vaccine, called mRNA-1647, which targets congenital cytomegalovirus infection.

Although CMV is identified as one of the leading causes of birth defects in the US, there remains no approved vaccine for it.

However, there is a catch.

Moderna will not be able to reap the full benefits of the CMV vaccine.

In fact, it will only be able to receive 50% of its profits if it becomes successful since mRNA-4157 is being developed alongside Merck (MRK).

The idea is for the drug to boost the oncology sector of Merck, with the goal of finding another blockbuster like the melanoma drug Keytruda.

As impressive as the CMV vaccine is as a product to launch in the market, there is a huge possibility that Moderna would not necessarily benefit from a large windfall because of it.

Aside from Merck, Moderna is also working with another biopharmaceutical giant and competitor in the COVID-19 vaccine race: Vertex (VRTX).

Moderna and the Massachusetts-based giant are collaborating to develop a treatment for cystic fibrosis, a niche that Vertex has dominated for years.

This is actually their second collaboration, but this project seems a tad more ambitious than the earlier one: Moderna and Vertex are working to develop a one-time treatment for cystic fibrosis using mRNA technology.

Basically, the two companies want to use gene-editing techniques to modify a patient’s DNA and correct the cells that cause cystic fibrosis.

The collaboration will span 3 years, with Vertex paying Moderna $75 million upfront. The smaller biotechnology company is also eligible for an additional $380 million in milestone payments plus royalties.

Notably, this is not the first cystic fibrosis treatment collaboration that Vertex formed with gene-editing companies.

Earlier this year, the company also secured a license option with CRISPR Therapeutics (CRSP) to work on practically the same thing.

Clearly, Vertex is hedging its bets on two potential options with this second partnership with Moderna.

Thanks to its trailblazing COVID-19 vaccine candidate, Moderna has become one of the most sought-after stocks of 2020, with its year-to-date growth reaching a stunning 360% last July.

Despite the temptation to bet big on Moderna stocks, bear in mind that early leaders like this biotechnology company will be facing incredible pressure from pharmaceutical titans like Pfizer, Johnson & Johnson, and AstraZeneca – all of which have the capacity to meet the manufacturing and distribution demands across the globe.

At best, a company with Moderna’s size would probably receive a slice of the market in the early days.

At worst, it might struggle to keep a foothold as stronger and larger competitors flood the market with cheaper but equally effective alternatives.

Nonetheless, this is not to say that you should completely avoid smaller biotechnology companies just because they are too small to compete with the larger fish.

Rather, I think it would simply be prudent to invest based on each player’s proven ability and outlined plans to meet the demand at a mass scale.

Doing so would guarantee that you not only limit your risks but also allow you to reap the rewards of successful vaccine deployment. If you play your cards right, then you might even get a handful of different COVID-19 vaccine winners in your back pocket.

moderna

September 24, 2020/by Mad Hedge Fund Trader

Moderna's Big Corona Play for a Small Company

Biotech Letter

Credit where credit is due.

Tiny Moderna Inc (MRNA) has been at the forefront ever since this pandemic broke, with its vaccine program growing in leaps and bounds compared to competitors, like Novavax (NVAX), which has $3.02 billion in market capitalization, and Inovio (INO), which has $2.20 billion.

The latest report on Moderna’s progress pushes it much further ahead of its competitors.

Looking at its timeline, Moderna could have efficacy data on its COVID-19 vaccine, called mRNA-1273, by Thanksgiving.

Moderna’s vaccine, which is similar to the work of Pfizer’s German collaborator BioNTech (BNTX), utilizes a novel approach that inserts small doses of genetic instructions into the cells of humans.

These then trigger the production of harmless proteins, which mimic the SARS-CoV-2 virus. The proteins subsequently alert the body to produce antibodies, making the vaccine a proactive measure that protects people from infection by the actual virus.

Right now, Moderna is in the second stage of the trials. The final stage involving 30,000 people is expected to begin in July.

With the vaccine program well underway, Moderna secured manufacturing capabilities through a strategic collaboration with Swiss biotechnology company Lonza (LZAGF).

This partnership with a manufacturing site ensures that Moderna is on track to deliver approximately 500 million doses of the mRNA-1273 vaccine every year and could handle up to 1 billion doses annually starting from 2021.

With such massive competitors like Pfizer (PFE) and Johnson & Johnson (JNJ) but also other healthcare heavyweights, such as Regeneron (REGN), AstraZeneca (AZN), Eli Lilly (LLY), and Merck (MRK), the best-case scenario for Moderna is to launch its COVID-19 vaccine before its peers.

Considering the progress it has made so far and the 208% jump in Moderna’s shares this year, it looks like investors anticipate that the company can win the COVID-19 vaccine race and capitalize on its future cash-making machine.

After all, no other biotechnology stock has taken more advantage of this health crisis than Moderna. The company exploded from having the biggest IPO in biotechnology history to now being celebrated as the COVID-19 vaccine leader.

Moderna grew from being a biotechnology company worth roughly $4 billion to $5 billion to an impressive $25 billion frontrunner in a few months’ time.

This is especially impressive since Moderna commanded this kind of valuation without having any approved product in the market. In fact, this clinical stage biotechnology company is valued more than several companies with marketed treatments.

While it has no product in the market today, Moderna actually has a robust pipeline that boasts 22 mRNA candidates, with 12 of these already in clinical studies. The lineup includes potential vaccines for the Zika virus along with a promising oncology pipeline.

Prior to the COVID-19 pandemic, Moderna’s lead candidate was its cytomegalovirus (CMV) vaccine called mRNA-1647. CMV, which affects almost 80% of adults in the US alone, is caused by a virus related to those that cause chickenpox and mononucleosis.

Moderna expects the Phase 2 study analysis for mRNA-1647 to be completed by the third quarter of 2020, with Phase 3 set to start by early 2021.

The company is also working with fellow biotechnology companies on potential cancer vaccines.

So far, Moderna has been focusing on two candidates which are also currently undergoing Phase 2 testing.

The first candidate is called mRNA-4157, which is a personalized cancer vaccine developed for melanoma patients.

Moderna is evaluating the combination of this vaccine with Merck’s top-selling cancer treatment Keytruda. This could turn out to be a potent combination considering Keytruda’s track record.

The second candidate is a collaboration with AstraZeneca. The latter licensed the rights to one of Moderna’s heart disease drug candidate called AZD8601. If successful, this drug will be marketed to patients in need of coronary artery bypass grafting (CABG) surgery.

Riding the momentum of its COVID-19 vaccine program, Moderna conducted a secondary stock offering last May. With $1.34 billion in gross proceeds from that sale alone, the company ensured that it’s well-capitalized to fund its development programs.

While its $25 billion market capitalization is pennies compared to fellow COVID-19 vaccine leaders JNJ and Pfizer, the smaller biotechnology company is definitely giving these behemoths a run for their money.

moderna vaccine

June 30, 2020/by Mad Hedge Fund Trader

The Five Frontrunners in the Race for a COVID-19 VACCINE

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
April 28, 2020
Fiat Lux

Featured Trade:

(THE FIVE FRONTRUNNERS IN THE RACE FOR A COVID-19 VACCINE)
(GSK), (SNY), (REGN), (TBIO), (VIR)

We’re finally pulling out the big guns.

Almost five months into this debilitating global pandemic, GlaxoSmithKline (GSK) and Sanofi (SNY) announced a collaboration to come up with a coronavirus disease (COVID-19) vaccine.

These vaccine heavy-hitters not only assured that the product would be ready by the second half of 2021 but also that they would be able to manufacture hundreds of millions of doses every year.

This is actually pretty impressive considering that the typical timeline for a vaccine takes at least a decade.

What we know so far is that Sanofi will conduct tests on its experimental vaccine using GSK’s adjuvants.

Adjuvants are added to improve the efficacy of some vaccines. These can also lower the amount of vaccine protein needed for every dose, boosting the likelihood of creating a shot that can be manufactured in large quantities.

According to GSK and Sanofi, human trials will begin in the second half of 2020.

GSK’s coronavirus adjuvant already demonstrated its value during the H1N1 influenza pandemic back in 2009 when this technology played a major role in the success of the Shingrix shingles vaccine.

As for Sanofi, the giant biotech company will be using a previously approved influenza vaccine for this joint effort.

GSK shares rose by 2% following the announcement while Sanofi got a 4.1% increase.

While both companies shared that they don’t really expect much profit from this COVID-19 vaccine, they plan to reinvest any short-term earnings in preparatory measures to better handle future pandemics.

Aside from this joint effort, GSK and Sanofi are also taking multiple shots in the hopes of solving this COVID-19 health crisis.

Sanofi is testing its malaria drug which contains hydroxychloroquine.

If you recall, this is the same drug that Donald Trump hailed as a “miracle” coronavirus cure earlier this year. Days following the president’s announcement, Sanofi offered to donate 100 million doses of hydroxychloroquine to 50 countries.

On top of that, Sanofi is also working with Regeneron (REGN) to assess whether its existing arthritis treatment Kevzara can work as a coronavirus medication.

It also has an ongoing collaboration with Translate Bio (TBIO) to come up with another COVID-19 vaccine using messenger RNA.

Outside its coronavirus efforts, Sanofi has been looking into streamlining the company’s focus to improve margins and shift into more lucrative growth areas. So far, so good.

One of the more drastic measures is eliminating diabetes and cardiovascular research sector of the company.

Funding for these was reallocated, with the acquisition of cancer and auto-immune biotechnology company Synthorx serving as a strong indication of the direction the company plans to take.

Apart from growing its immuno-oncology department, Sanofi is also betting on eczema treatment Dupixent -- a move that saw them rewarded almost immediately.

The company’s recent earnings report showed that Dupixent sales jumped 135% in the fourth quarter of 2019, with annual sales soaring to an impressive $2.3 billion. This indicates a 152% increase from the year prior.

Riding this momentum, Sanofi received FDA approval to expand the use of multiple myeloma drug Sarclisa in April.

This marks another significant win for the company.

Multiple myeloma ranks second in the list of most common blood cancer types, with the disease affecting roughly 32,000 Americans annually. It cannot be cured as well, which means that treatments are needed throughout the patients’ lives.

Needless to say, Sanofi has several platforms to contribute to finding the cure and even a vaccine for COVID-19. More importantly, the company has managed to transform itself into a more streamlined and innovative business.

Sanofi would be a wise choice for investors interested in a stock to hold for the long term. This company doesn’t only hold a starring role in the search for a coronavirus vaccine but also offers more opportunities beyond the current pandemic.

Meanwhile, GSK is also not limiting its adjuvant technology to Sanofi but to other companies developing COVID-19 vaccines as well. The list includes Vir Biotechnology (VIR) and even Chinese biotech company Clover Biopharmaceuticals.

Despite its active participation in the coronavirus vaccine race, GSK tumbled down to over its 10-year low in March.

Although the pandemic’s negative impact looks discouraging, I think the overreaction is good news for value and dividend traders as the stock now trades at bargain-bin valuations.

Hence, investors could enjoy GSK’s lucrative 5.8% dividend at relatively cheap costs.

It also doesn’t hurt that GSK offers a diversified portfolio that all but guarantees minimal losses for its investors.

Its biggest revenue driver is the pharmaceutical arm of the business, which raked in total revenue of roughly $21.68 billion in 2019.

GSK’s vaccine segment contributed 8.87 billion while the consumer healthcare sector brought in over 11 billion.

Although smaller than its pharmaceutical arm, both segments are quickly catching up to GSK’s biggest moneymaker. In fact, its vaccine segment recorded revenue growth of 21% while its consumer healthcare arm jumped by 17%.

Overall, GSK is a compelling addition to any investor’s portfolio. Its impressive dividend combined with its diversified business makes this biotechnology company a wise choice as well.

The collaboration of GSK and Sanofi is considered as the most significant and promising COVID-19 vaccine effort to date.

This partnership not only maximizes the expertise of the two leading vaccine makers in the world but take advantage of their manufacturing capacity as well, which is a critical concern given that a COVID-19 vaccine would have to be distributed to millions, if not billions, of individuals across the globe.

May 12, 2020/by JP

The Biogen Partnership That May Save Your Life

Biotech Letter

The global economy has been dealt a massive blow because of the coronavirus disease (COVID-19), which has now spread across 181 countries -- and it’s showing no signs of stopping anytime soon.

The recent situation report reveals that COVID-19 has caused over 53,975 deaths and more than 1,030,000 confirmed cases worldwide.

To add to that, the International Monetary Fund recently disclosed their concerns that the pandemic could push the world economy on the brink of a depression. What’s worse is that the fear brought by this possibility is already mirrored by major stock indexes across the globe.

Amid the economic turmoil, the Trump administration came up with an emergency package worth $2 trillion in an effort to help companies particularly in the aviation and healthcare sectors.

However, that won’t be enough in the long run, not even by a little bit.

This is why several biotechnology companies have been scrambling to find a vaccine and a treatment for this quickly spreading disease.

In March, Biogen (BIIB) announced its decision to team up with Vir Biotechnology (VIR) to join the race in looking for a cure for COVID-19.

Due to the urgency of the situation, both companies took an unusual move to simply start working together before even finalizing the details of the agreement. What they only have at the moment is a signed letter of intent.

What we know so far is that Biogen will take charge of the cell line and process development along with the manufacturing of Vir’s monoclonal antibodies.

Vir is a biotech company developing treatment for infectious diseases; its partnership with Biogen will help the smaller biotech to manufacture its COVID-19 drug candidate on a bigger scale. It’s also interesting that the company’s current CEO served as Biogen’s CEO up until 2016.

Prior to this deal, Vir has long been regarded as a biotech company with a strong financial position.

In the third quarter of 2019, the company raked in $320.2 million in cash, cash equivalents, as well as short-term investments. Vir’s balance sheet shows roughly $22.5 million in terms of long-term liabilities. Its recorded $1.4 million in revenue for the quarter.

In terms of its COVID-19 efforts, the company started working on a potential cure in January. Basically, Vir is looking into its library of antibodies to find which one could be used to neutralize the novel coronavirus.

This is actually promising since the company already succeeded in utilizing the same technique for Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS), which are also caused by coronaviruses.

Apart from its COVID-19 efforts, Vir’s pipeline includes a number of potential vaccines and treatments for tuberculosis, HIV, and Hepatitis B Virus (HBV).

If you’re planning to buy this stock, make sure to do so before its lock-up period expires on April 8 to maximize your money’s worth.

Between the two companies though, Biogen has been gaining more attention as a more attractive investment since it’s a blue-chip stock selling for cheap these days.

Biogen is a frontrunner in the multiple sclerosis and spinal muscular atrophy space. The giant biotech is also a leader in the development and manufacturing of biosimilars, which are cheaper versions of biologically based therapies.

Its pipeline also has a number of high-value clinical assets particularly for hard-to-treat neurodegenerative diseases like Alzheimer’s and Parkinson’s.

Its acquisition of Nightstar Therapeutics and recent partnership with Sangamo Therapeutics (SGMO) have also transformed Biogen into one of the red-hot players in the emerging gene therapy market.

Biogen is also sitting on $4.5 billion in cash with a relatively reasonable debt-to-equity ratio of 48.2.

Hence, this giant biotech has no issues paying a dividend and can also be considered more or less immune to the threats of COVID-19. This makes it a stock capable of weathering the ongoing pandemic and even the resulting economic crisis.

Looking at the pipeline of the company, Biogen currently has over 25 drug candidates. Five are already in Phase 3. Meanwhile, its win against Mylan’s (MYL) for its blockbuster Tecfidera ensures that Biogen won’t face competition for this moneymaker until 2028.

However, all eyes are focused on its Alzheimer’s drug Aducanumab.

Since the company’s announcement of this treatment, investors have been on a rollercoaster ride with Biogen withdrawing and eventually going back in.

If it gains approval, Biogen shares will definitely soar. If the drug gets rejected, then the stock will suffer from short-term losses.

According to the Alzheimer’s Association, there are 5.8 million people afflicted by the disease in the United States alone. Needless to say, this represents a lucrative market for Biogen.

With a healthy balance sheet overall and a steady near-term outlook, Biogen is an attractive stock for bargain hunters looking to add a pretty cheap large biotech stock in their portfolio.

The indiscriminate wave of selling brought about by the pandemic has clearly opened a once-in-a-lifetime opportunity, particularly for patient investors. The fact that Biogen is part of Buffett’s own portfolio doesn’t hurt its case either.

biogen

April 3, 2020/by Mad Hedge Fund Trader

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