Mad Hedge Biotech and Healthcare Letter
April 7, 2022
Fiat Lux
Featured Trade:
(A BIOTECH DAVID AND GOLIATH STORY)
(ALLO), (NVS), (GILD)
Posts
Back in 1996, a man named Doug Wilson received devastating news. He had chronic lymphocytic leukemia, a kind of cancer that begins with white blood cells. As the cancer progressed, he started going through several rounds of chemotherapy.
In 2009, he was told that the cancer had evolved. More alarmingly, chemo would no longer be an effective treatment for his condition. At that time, his doctor suggested a bone marrow transplant. Unfortunately, none of his family members were a good match.
With the cancer getting worse and nothing else left to try, Olson learned about a clinical trial for a new type of cancer treatment: CAR T-cell therapy.
The goal is to re-engineer the immune cells in the laboratory and transform them into weapons to hunt down killer cancer cells.
In 2010, Olson signed up for the trials.
Fast forward to 2022, Olson has become the poster child for the benefits of CAR T-cell therapy.
While oncologists are highly reluctant even to whisper the word “cure” when it comes to cancer, this term was thrown around several times during the news conference at the University of Pennsylvania.
The event, led by immunologist Carl June, presented data from 10 years of follow-up on the patients with leukemia who participated in the trial back in 2010.
Olson’s data demonstrated that CAR-T could cure cancer patients, with zero leukemia cells found in his blood 10 years after the treatment.
For decades, the mainstays of cancer treatments have been surgery, radiation therapy, and chemotherapy.
With the emergence of CAR T-cell therapy, the fourth pillar of oncology may very well be the answer to this debilitating and fatal disease.
After all, CAR T-cell therapy has improved patients’ lives where other treatments failed to work.
Unlike chemo and radiation, this therapy targets the tumors with higher precision instead of killing both the healthy and cancerous cells.
CAR T-cell therapy dates as far back as the 1950s when the potential was studied following a bone marrow transplantation. That marked the first time that healthy living cells were infused into patients with blood cancer in an effort to control the disease.
But it was as early as the 1900s when researchers noted T cells' capacity to easily find, identify, and then kill cancer cells. The cells follow a “guide” to lead them to the tumors to achieve this. This introduced the role of antibodies as priceless medical and scientific tools.
In 2017, the groundbreaking approvals of two CAR T-cell therapies proved to be the climax of over 60 years of research on this immunotherapy.
Five years after it started working with the University of Pennsylvania, Novartis (NVS) became the first-ever biotechnology company to earn FDA approval for its CAR T-cell therapy: Kymriah.
Kymriah was first launched to target acute lymphoblastic leukemia in 2017. Since then, the indications for this treatment have expanded, and the latest is its application as an approved therapy for large B-cell lymphoma.
The other groundbreaking CAR T-cell therapy approved in 2017 is Kite Pharma’s large B-cell lymphoma treatment Yescarta.
In the same year, Gilead Sciences (GILD) acquired Kite Pharma for $11.9 billion and instantly became a major player in the CAR T-cell therapy space.
Thus far, Gilead and Novartis have remained the biggest names in this segment.
However, another biotech appears to be making a play in becoming the frontrunner in the CAR T-cell therapy space: Allogene Therapeutics (ALLO).
Unlike its competitors, Allogene is regarded as a speculative biotech play.
Despite its smaller market capitalization of $1.35 billion compared to Gilead’s massive $76.38 billion and Novartis’ jaw-dropping $223.18 billion, this biotech prides itself on an extensive pipeline filled with CAR T-cell therapies under development.
More importantly, Allogene has developed the AlloCAR T technology platform, which harvests healthy T-cells from other healthy donors.
In contrast, older CAR T-cell methods required harvesting the T-cells from the patients themselves.
Among its candidates, the most exciting integration of this technology is ALLO-316. This is the first program developed for renal cell carcinoma or kidney cancer patients.
This is an excellent first indication for the biotech due to the sheer size of the kidney cancer market. Globally, this segment is projected to reach $9.4 billion by 2026.
Where ALLO-316 and several of the candidates in the pipeline stand out is in their ability to go after CD70—a highly sought-after protein in cancer treatments.
This is an extremely promising breakthrough because tumor cells hijack this protein to accelerate the invasion of the immune system. This results in the high expression of CD70, which then inhibits the body’s anti-tumor response.
This is where ALLO-316 truly shines. This CAR-T therapy can precisely target CD70.
Add that to the patented AlloCAR T technology, and you get a highly effective and safe off-the-shelf CAR T-cell therapy with multiple applications.
Therefore, it offers the biotech incredible flexibility to utilize the therapy for hematologic malignancies or blood cancer and even solid tumors.
Needless to say, this opens the door to so many indications involving tumor expressions of CD70, including multiple myeloma, non-small cell lung cancer, cervical cancer, and ovarian cancer.
The CAR T-cell area, albeit exciting, remains relatively new that it’s challenging to figure out which companies will emerge as the most dominant forces.
At this point, Novartis and Gilead are looking like the strongest bets considering their financial and marketing capacity.
Both companies have more than sufficient revenue streams to tinker with the technology until they find a space that would truly pay off.
However, Allogene has the markings of a biotech that could upend the CAR T-cell industry—if its off-the-shelf solutions work out.
Currently, one of the biggest hindrances in this immunotherapy is the cost, and Allogene’s treatments appear to be the solution that could exponentially broaden their use.
Overall, Allogene is an interesting speculative biotech play to check out. Looking at its pipeline and patented technology, this company can revolutionize some cancer treatments in the future.
Mad Hedge Biotech and Healthcare Letter
February 15, 2022
Fiat Lux
Featured Trade:
(AN EMERGING LEADER IN THE HEALTHCARE REVOLUTION)
(CRSP), (VRTX), (EDIT), (NTLA), (PFE), (NVS), (GILD), (RHHBY), (BMRN), (QURE), (SGMO), (CLLS), (ALLO), (BEAM)
Mankind has always imagined a future filled to the brim with technological advancements serving as the panacea to all our ills.
One of the prevailing ideas focuses on the developments found in the healthcare sector.
Movies, television shows, graphic novels, and books have all pictured a world with such revolutionary technologies capable of not only diagnosing but also curing any and all types of diseases.
Since the introduction of these ideas, many have believed that these would remain in the fictional universe. However, these “ideas” have slowly transformed into reality.
One of the biggest indicators that we’re heading in that direction is the 2020 Nobel Prize in Chemistry by Jennifer Doudna and Emmanuelle Charpentier. The two were recognized for their pioneering work in CRISPR-Cas9.
Basically, Crispr-Cas9 functions like molecular scissors.
What makes this technology incredible is that Crispr-Cas9 can classify a single address out of 3 billion letters within the genome by using only a particular sequence. With this, we can repair thousands of genetic conditions and even offer more potent ways to battle cancer.
This Nobel Prize led to commercializing the 2012 discovery, Crispr-Cas9, at breakneck speed, with gene-editing companies like CRISPR Therapeutics (CRSP), Editas Medicine (EDIT), and Intellia Therapeutics (NTLA) gaining a considerable boost in their values.
Surprisingly, the trajectory of these gene-editing stocks took a tragic turn in 2021.
In fact, the once-upon-a-time-market-darling CRISPR Therapeutics saw its market capitalization brutally shaved off from $8.7 billion to $4.55 billion in the past months.
No matter how we look at it, there’s genuinely no way to sugarcoat the reality: the market has been second-guessing CRISPR Therapeutics’ ability to truly deliver on its promise.
That is, investors have started to wonder whether the company’s early stage success would amount to anything commercially.
CRISPR Therapeutics is currently working on a treatment that would implant tumor-targeting immune cells on cancer patients. The company is also prioritizing therapies that could edit cells to treat diabetes.
So far, it has made significant progress in developing treatments for a genetic disorder called sickle cell.
In the US alone, at least 100,000 people suffer from sickle cell disease, with 4,000 more born every year. Conservatively, we can estimate at least 3,000 patients availing of this one-time treatment at over $1.6 million a pop.
To date, CRISPR Therapeutics has five candidates under clinical trials for diseases like B-thalassemia, sickle cell disease, and other regenerative conditions.
It has four more queued, which target diabetes, cystic fibrosis, and Duchenne muscular dystrophy.
Compared to its rivals in the space, it’s clear that CRISPR Therapeutics is ahead when it comes to product development and trials.
Two of its candidates, transfusion-dependent beta thalassemia treatment CTX001 and sickle cell disease therapy CTX110, have already been submitted for clinical tests for safety and efficacy.
Recently, Vertex (VRTX) boosted its 2015 agreement with CRISPR Therapeutics by 10%, with the deal reaching $900 million upfront to push for quicker results in developing CTX001.
This is a crucial move for Vertex, but more so for CRISPR Therapeutics as CTX001 holds a highly lucrative addressable market.
The additional funding significantly widened the gap between the Vertex-CRISPR team and bluebird bio (BLUE) in the race to launch a new gene-editing therapy targeting sickle cell disease and beta thalassemia.
To sustain its growth, CRISPR Therapeutics’ strategy is to develop drugs that only require mid-level complexity but can rake in generous financial rewards.
This is a similar tactic used by bigger and more established biotechnology companies like Pfizer (PFE), Novartis (NVS), and Gilead Sciences (GILD).
Evidently, this strategy is a great way to ensure cash flow.
Aside from its earnings from the commercialization of these products, CRISPR Therapeutics can also attract larger companies to buy the intellectual property of their breakthrough treatments.
After all, startups generally get 100% premiums in contracts with Big Pharma.
Good examples of this are Novartis that bought AveXis and Roche’s (RHHBY) purchase of Spark Therapeutics.
The Roche-Spark agreement led to the first ever FDA-approved treatment since gene therapy trials started in the 1990s. It was for the genetic blindness therapy Luxturna, which received the green light in 2017.
The second approved treatment was a muscle-wasting disease therapy Zolgensma, which was the fruit of the Novartis-Avexis acquisition.
Both conditions are rare, but the financial rewards are impressive.
At $2 million for each treatment, Zolgensma sales reached $1.2 billion annually. At the rate the therapy is selling, Novartis estimates that Zolgensma will surpass the $2 billion mark in 2021.
Novartis and Roche aren’t the only ones partnering with smaller gene editing companies.
Pfizer has been working with biotechnology companies BioMarin Pharmaceutics (BMRN) and UniQure (QURE) to develop a treatment for blood-clotting disorder hemophilia.
The COVID-19 frontrunner is also collaborating with Sarepta Therapeutics (SRPT) to come up with a treatment for Duchenne muscular dystrophy.
Gene editing has also served as the foundation for several biotechnology companies out there today like Sangamo Therapeutics (SGMO), Cellectis (CLLS), and Allogene Therapeutics (ALLO).
The market size for gene editing treatments is estimated to be worth $11.2 billion by 2025, with the number rising between $15.79 billion to $18.1 billion by 2027.
This puts the compounded annual growth rate of this sector to be at least roughly 17%.
While this is already groundbreaking with only a handful of companies knowing how to utilize the technology, the gene-editing world has come up with a more advanced technique than Crispr-Cas9.
The technology is founded on the “base editing” or “prime editing” technique, which is the simplest type of gene editing that alters only one DNA letter.
So far, one company holds exclusive rights to this technology: Beam Therapeutics (BEAM).
When the technology became public, Beam stock has increased sixfold since its IPO in February 2020.
This latest development can resolve thousands of genetic diseases. However, it still requires further trials since “base editing” can also trigger damaging responses from the body.
Overall, I think CRISPR Therapeutics is the most promising among these high-risk stocks.
The data from two of its candidates, CTX001 and CTX110, are promising. The added funding from Vertex boosts the confidence of investors that a regulatory approval is well on its way.
The company is also sitting on a massive cash pile and investing aggressively across different rare disease programs.
While the company has yet to be considered a major force in the biotechnology world, the potential multiple successes of its products could generate a company worth hundreds of billions.
This potential alone offers an investing opportunity with a substantial asymmetric advantage for its current share price.
However, bear in mind that the stock is not for conservative investors considering risks.
More importantly, its pipeline requires patience. Hence, CRISPR Therapeutics should be played as a long-term investment.
Mad Hedge Biotech & Healthcare Letter
April 27, 2021
Fiat Lux
FEATURED TRADE:
(THE FUTURE OF MEDICINE)
(CRSP), (VRTX), (EDIT), (NTLA), (PFE), (NVS), (GILD), (RHHBY),
(BMRN), (QURE), (SGMO), (CLLS), (ALLO), (BEAM)
Winning the Nobel Prize in 2020 provided biotechnology companies more traction on Wall Street.
The victory led to commercializing the 2012 discovery, Crispr-Cas9, at breakneck speed, with gene editing companies like CRISPR Therapeutics (CRSP), Editas Medicine (EDIT), and Intellia Therapeutics (NTLA) gaining considerable boost in their values.
Since then, the total market value for the products of these three has more than doubled in recent months to reach $23 billion.
Basically, Crispr-Cas9 functions like molecular scissors.
What makes this technology incredible is that Crispr-Cas9 can classify a single address out of 3 billion letters within the genome by using only a particular sequence. With this, we can repair thousands of genetic conditions and even offer more potent ways to battle cancer.
The market favorite among the gene editing companies so far is CRISPR Therapeutics, with $8.72 billion in market capitalization.
In comparison, Editas has $2.76 billion while Intellia Therapeutics has $4.15 billion.
CRISPR Therapeutics is currently working on a treatment that would implant tumor-targeting immune cells in cancer patients. The company is also prioritizing therapies that could edit cells to treat diabetes.
So far, it has made significant progress in developing treatments for a genetic disorder called sickle cell.
In the US alone, at least 100,000 people suffer from sickle cell disease, with 4,000 more born every year. Conservatively, we can estimate at least 3,000 patients availing of this one-time treatment at over $1.6 million a pop.
To date, CRISPR Therapeutics has five candidates under clinical trials for diseases like B-thalassemia, sickle cell disease, and other regenerative conditions.
It has four more queued, which target diabetes, cystic fibrosis, and Duchenne muscular dystrophy.
Compared to its rivals in the space, it’s clear that CRISPR Therapeutics is ahead when it comes to product development and trials.
Two of its candidates, transfusion-dependent beta thalassemia treatment CTX001 and sickle cell disease therapy CTX110, have already been submitted for clinical tests for safety and efficacy.
Recently, Vertex (VRTX) boosted its 2015 agreement with CRISPR Therapeutics by 10%, with the deal reaching $900 million upfront to push for quicker results in developing CTX001.
This is a crucial move for Vertex, but more so for CRISPR Therapeutics as CTX001 holds a highly lucrative addressable market.
The additional funding significantly widened the gap between the Vertex-CRISPR team and bluebird bio (BLUE) in the race to launch a new gene editing therapy targeting sickle cell disease and beta thalassemia.
To sustain its growth, CRISPR Therapeutics’ strategy is to develop drugs that only require mid-level complexity but can rake in generous financial rewards.
This is a similar tactic used by bigger and more established biotechnology companies like Pfizer (PFE), Novartis (NVS), and Gilead Sciences (GILD).
Evidently, this strategy is a great way to ensure cash flow.
Aside from its earning from the commercialization of these products, CRISPR Therapeutics can also attract larger companies to buy the intellectual property of their breakthrough treatments.
After all, startups generally get 100% premiums in contracts with Big Pharma.
Good examples of this are Novartis that bought AveXis and Roche’s (RHHBY) purchase of Spark Therapeutics.
The Roche-Spark agreement led to the first-ever FDA-approved treatment since gene therapy trials started in the 1990s. It was for the genetic blindness therapy Luxturna, which received the green light in 2017.
The second approved treatment was a muscle-wasting disease therapy Zolgensma, which was the fruit of the Novartis-Avexis acquisition.
Both conditions are rare, but the financial rewards are impressive.
At $2 million for each treatment, Zolgensma sales reached $1.2 billion annually. At the rate the therapy is selling, Novartis estimates that Zolgensma will surpass the $2 billion mark in 2021.
Novartis and Roche aren’t the only ones partnering with smaller gene editing companies.
Pfizer has been working with biotechnology companies BioMarin Pharmaceutics (BMRN) and UniQure (QURE) to develop a treatment for blood-clotting disorder hemophilia.
The COVID-19 frontrunner is also collaborating with Sarepta Therapeutics (SRPT) to come up with a treatment for Duchenne muscular dystrophy.
Gene editing has also served as the foundation for several biotechnology companies out there today like Sangamo Therapeutics (SGMO), Cellectis (CLLS), and Allogene Therapeutics (ALLO).
The market size for gene editing treatments is estimated to be worth $11.2 billion by 2025, with the number rising between $15.79 billion to $18.1 billion by 2027.
This puts the compounded annual growth rate of this sector to be at least roughly 17%.
While this is already groundbreaking with only a handful of companies knowing how to utilize the technology, the gene editing world has come up with a more advanced technique than Crispr-Cas9.
The technology is founded on the “base editing” or “prime editing” technique, which is the simplest type of gene editing that alters only one DNA letter.
So far, one company holds exclusive rights to this technology: Beam Therapeutics (BEAM).
When the technology became public, Beam stock has increased sixfold since its IPO in February 2020.
This latest development can resolve thousands of genetic diseases. However, it still requires further trials since “base editing” can also trigger damaging responses from the body.
Overall, I think CRISPR Therapeutics is the safest among these high-risk stocks.
The data from two of its candidates, CTX001 and CTX110, are incredibly promising. Plus, the added funding from Vertex boosts the confidence of investors that regulatory approval is well on its way.
The company is also capitalizing on the surging price of its stock and investing aggressively across different rare disease programs.
While the company has yet to be considered a major force in the biotechnology world, the potential multiple successes of its products could generate a company worth hundreds of billions.
This potential alone offers an investing opportunity with a substantial asymmetric advantage for its current share price.
However, bear in mind that the stock is still a risk and should be played as a long-term investment. Hence, you should buy on dips.
