Mad Hedge Biotech & Healthcare Letter
August 4, 2020
Fiat Lux
Featured Trade:
(MERCK’S SLOW BUT STEADY COVID-19 HEADWAY)
(MRK), (GILD), (REGN), (AZN), (PFE), (MRNA), (ABBV), (BMY), (RHHBY)
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Is it truly better late than never?
Merck has been decisively cautious in its approach of potential COVID-19 treatments and even more so when it comes to their vaccine candidates.
Recently though, the company has finally offered a glimpse of its progress.
The first promising update is Merck’s work on MK-4482, which is an antiviral candidate aimed at treating COVID-19 patients. Basically, this candidate works by preventing the SARS-CoV-2 from replicating.
The laboratory results showed that an increasing dose of MK-4482 can effectively halt the progress of the virus in a patient’s system.
Judging from the timeline followed up to this point, Merck plans to begin huge trials by September.
The MK-4482 is expected to compete with Gilead Sciences’ (GILD) Remdesivir, with the Merck candidate possibly edging out the latter.
This is because the SARS-CoV-2 tends to mutate, rendering Remdesivir less potent the next time it is administered to patients. In comparison, MK-4482 has demonstrated an ability to fight off the mutated versions of the virus.
MK-4482 also comes in tablet form, making it a preferable and more convenient option compared to Gilead’s intravenous infusion and even Regeneron’s (REGN) injectable antiviral cocktail REGN-COV2.
On the COVID-19 vaccine front, Merck has been working with Thermis Biosciences in developing a candidate based on a measles virus vector platform originally developed by the Institut Pasteur researchers.
However, this is not Merck’s only shot on goal.
The company is also collaborating with the International AIDS Vaccine Initiative to develop another vaccine candidate, V590.
The two are using the same platform that Merck created for its already approved Ebola vaccine. The goal is to start human testing by the third quarter of 2020.
Merck is also looking into offering a single-dose vaccine instead of the double dose shots its competitors are working on, with one of its candidates developed to be taken orally instead of via injectibles.
If they succeed, then Merck’s vaccines will be more accessible and convenient for a lot of patients.
Aside from developing V590, Merck plans to use the same approved technology to advance its other antivirals in its clinical testing pipeline.
In fact, Merck’s move to acquire Thermis Bioscience demonstrates the company’s resolve to focus on strengthening its vaccine program. The primary expectation for this newly formed partnership is to come out swinging and eventually win big on the COVID-19 vaccine race.
The victory will then serve as a springboard for a new and powerful revenue stream for Merck, which would serve to quiet the fears of the company’s investors fretting over the patent expiration of blockbuster drug Keytruda.
The impending loss of exclusivity for cancer treatment Keytruda has been hanging over Merck’s head for quite some time now.
Aside from the potential biosimilar competition, Keytruda has been facing stiff competition against biotechnology giants like Bristol Myers Squibb (BMY), Roche (RHHBY), and Regeneron.
Needless to say, fears over this have been overshadowing the company’s impressive internal pipeline – a reaction that pretty much mirrors the experience of AbbVie (ABBV) on the pending patent loss of its blockbuster Humira.
However, Merck has been working on products that could rake in an additional $13 billion to $18 billion to its sales every year.
The list includes immuno-oncology antibody candidates, additional vaccines, and even HIV treatments.
The company also has more than $40 billion on its balance sheet, putting it in a favorable position to acquire more companies or products that could bolster its franchise.
Since the pandemic broke out, Merck has lagged behind its COVID-19 rivals AstraZeneca (AZN), Pfizer (PFE), and Moderna (MRNA).
Looking at its progress and future plans though, it looks like the company has set out to achieve a tortoise over the hare victory particularly in the COVID-19 vaccine race.
With incredible uncertainty hovering over the rest of 2020, it is only natural to seek stocks for an all-weather portfolio.
While there are many factors to consider, looking at businesses that allocated sensibly to capital expenditures and R&D is definitely a great way to start.
Merck’s strategic partnerships with companies like Thermis Biosciences, Taiho Pharmaceuticals, and Astex Pharmaceuticals also play significant roles in this aspect.
Although Merck has not provided a particularly strong performance so far this year, this biotechnology and health care giant is poised to stage a strong comeback when the dust settles.
Global Market Comments
August 4, 2020
Fiat Lux
Featured Trade:
(MEET THE ITALIAN LEONARDO FIBONACCI)
(MRK), (GILD), (REGN), (AZN), (PFE), (MRNA), (ABBV), (BMY), (RHHBY)
Mad Hedge Biotech & Healthcare Letter
July 28, 2020
Fiat Lux
Featured Trade:
(EARLY WINNERS ARE TURNING UP IN THE COVID-19 VACCINE RACE)
(MRNA), (AZN), (PFE), (JNJ), (MRK), (BNTX)
In less than six months since the pandemic broke, the world has come up with 140 vaccine candidates in pre-clinical trial phase and 23 undergoing the clinical evaluation stage.
However, the race to produce a COVID-19 vaccine recently intensified after three of the leading laboratories shared promising progress from their early human trials.
Among the frontrunners, AstraZeneca (AZN), Pfizer (PFE), and Moderna (MRNA) are dubbed as the “most ambitious” primarily due to their tight timelines for approval and their seemingly unreachable goals in terms of the total doses they could produce this year.
All the vaccine developers that released their results claimed that their candidates triggered strong immune responses with patients experiencing only minor side effects.
According to their data, their vaccines elicited similar responses as those observed from the individuals who recovered from COVID-19.
Moderna, which was the first developer to test its mRNA-1273 vaccine in humans, announced that Phase 3 of its human trials would start on July 27. This will involve 30,000 volunteers.
Moderna’s vaccine makes use of a genetic material, called mRNA, from the SARS-CoV-2 to trigger the body’s immune system to fight off the virus.
Meanwhile, AstraZeneca’s partnership with Oxford University produced what could be the most closely followed COVID-19 vaccine thus far. The candidate is tentatively known as AZD1222.
Even before the vaccine’s efficacy gets proven, the company already received a total order of 2 billion doses worldwide. Early estimates indicate that AstraZeneca can produce a million doses of its COVID-19 vaccine by September.
This partnership’s project is so sought after that rumors keep persisting that Russian spies are out to steal the research.
AstraZeneca’s approach is similar to the technique used by another vaccine maker outside the US, China’s own Cansino Biologics.
Both developers altered the genes of the adenovirus, which is another common virus, modifying it to harmlessly mimic the SARS-CoV-2. This will then induce an immune response from the body.
While Moderna was the first to enter human trials, AstraZeneca and Oxford’s candidate was the first to start the Phase 3 tests.
The reason that AZD1222 is gaining more traction than Moderna’s vaccine is because one dose of AstraZeneca’s candidate elicited an antibody response in more than 90% of the participants and a second dose managed to hit 100% -- the same level found among convalescent COVID-19 patients.
Among the three, though, Pfizer and BioNTech (BNTX) stand out because this is the only collaboration that refused government funding from the US.
This partnership uses the same approach as Moderna, with its early results also showing off promising immune responses from the participants.
Although the details have yet to be officially released, Pfizer landed its first government contract. The deal is with the UK and the New York-based biopharmaceutical company is expected to deliver 30 million vaccine doses between 2020 and 2021.
Aside from Moderna, AstraZeneca, and Pfizer, two more companies were included in Donald Trump’s Operation Warp Speed.
The fourth company is Johnson & Johnson (JNJ). The biotechnology and healthcare titan has yet to release results, with its first human trials scheduled this July and late-stage tests expected to start as soon as September. JNJ’s goal is to produce a vaccine by early 2021.
The fifth contender in the COVID-19 vaccine race is Merck (MRK).
While the rest of the developers are focusing on speed, Merck insists on taking its time before releasing their results. The company has made no announcement on its plans for human studies, with its leaders warning against accelerating the safety protocols.
At this point, there’s still no accurate way to determine the price of the COVID-19 vaccine. Nonetheless, investors are already smelling big money for this program.
A glaring example of how the COVID-19 crisis has pumped funds into biotechnology and healthcare companies is Moderna’s trajectory this year.
Prior to this pandemic, Moderna had a market capitalization of roughly $7 billion. Since February, though, this number has more than tripled its value at $23 billion.
While it is not the case for all the companies in the vaccine race, the excitement over it is understandable.
Let’s indulge in a bit of a back-of-the-envelope calculation.
If we base the estimates on the recent vaccines for diseases like meningitis B and the shingles, which cost somewhere between $300 and $400 for an entire course, then we can assume that the COVID-19 vaccine could fall near $500 per course.
That means vaccinating the entire population would rake in more than $150 billion to the company --- virtually all of its profit.
Inasmuch as that presents a lucrative opportunity, most of the leading companies already announced that they do not intend to make a profit off their COVID-19 programs.
These include Moderna, JNJ, and AstraZeneca. Meanwhile, Pfizer has yet to make that announcement.
Global Market Comments
July 14, 2020
Fiat Lux
Featured Trade:
(UPDATE ON THE COVID-19 VACCINE FRONTRUNNER)
(AZN), (MRNA), (RHHBY), (LLY), (PFE), (JNJ)
With the flu season just around the corner and herd immunity nowhere in sight, the pressure to develop a COVID-19 vaccine becomes even more urgent. From where things stand right now though, it looks like we could have a vaccine either already available on the market or ready to hit the market around this time in 2021.
We know we’ll need hundreds of millions of vaccine doses, and the majority of the vaccine programs today are getting built on industrial-scale vaccine platforms. This is positive news.
On an even more positive update, a handful of biotechnology and health care companies are now on late-stage testing for the COVID-19 vaccine.
Leading the charge so far is AstraZeneca (AZN), which received $1.2 billion in financial assistance courtesy of the US government’s Operation Warp Speed program.
AstraZeneca is working on an experimental vaccine, called AZD1222, with the University of Oxford and China National Pharmaceutical Group (Sinopharm).
So far, this is the only COVID-19 vaccine candidate in late-stage Phase 3 trials.
The trials are scheduled to be conducted in different countries, with some already in progress in South Africa, Brazil, and of course, the UK.
The stage will enroll over 10,000 people in the UK alone. The goal is to determine AZD1222’s efficacy in a sizeable group aged 18 and older.
What we know about AstraZeneca’s vaccine candidate is that it’s created from a weakened version of adenovirus, which comes from one of the virus types that causes the common cold. It also includes genetic material from COVID-19, which was added to help the patient’s body recognize the pathogen and trigger a defense mechanism to fight off the infection.
Researchers say that the best-case scenario is for the Phase 3 efficacy results of the AstraZeneca vaccine to be available by this fall.
However, AstraZeneca remains an attractive stock even sans its Covid-19 program thanks to its remarkable drug pipeline. With the foresight to stockpile drugs during this pandemic, the company’s earnings are projected to continuously grow.
In the past five to six years, AstraZeneca has been aggressive in investing in its pipeline to combat patent losses. Now, the company joins Roche (RHHBY) and Eli Lilly (LLY) in the list of companies with the most innovative candidates that are poised to launch commercial products capable of driving growth in the next decade.
A notable growth driver for AstraZeneca is its cancer franchise, particularly its key drug Tagrisso, which is set to tap into a massive market.
Before AstraZeneca was dubbed the leader in the COVID-19 vaccine race, there was Moderna (MRNA). Actually, this small biotechnology company is also expected to begin its late-stage Phase 3 trial in July.
Like AstraZeneca, Moderna is also one of the companies included in the Operation Warp Speed project and received $483 million from the government.
Unlike AstraZeneca, Moderna appears to be experiencing delays due to conflicts between the company’s experts and the US government scientists.
While Moderna shares jumped by over 200% since the pandemic started, these reported tensions represent a risk for its investors. It is particularly alarming because the company is a clinical-stage biotechnology company with no marketed products.
Although Moderna’s timeline remains to be the most aggressive, it could easily drown in the competition.
Keep in mind that other companies competing for the top spot in the COVID-19 race are all established and armed with extensive experience in launching new drugs to market. The list includes Pfizer (PFE), which has a market capitalization of $185.86 billion, and Johnson & Johnson (JNJ) with $375.40 billion.
Needless to say, the inexperience of companies like Moderna could prove to be a handicap in this highly competitive race.
Mad Hedge Biotech & Healthcare Letter
July 7, 2020
Fiat Lux
Featured Trade:
(THE BILLIONS IN CROSS-PRESCRIBING FOR COVID-19),
(INCY), (NVS), (REGN), (SNY), (RHHBY), (LLY), (AZN), (GILD)
Although there is no obvious connection between cancer and viral infections, Delaware-based biotechnology and pharmaceutical company Incyte (INCY) is optimistic that its blood cancer treatment Jakafi can offer a solution to the COVID-19 pandemic.
The research on Jakafi’s efficacy against the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) started in April. It’s rooted in the premise that since the drug works by inhibiting the immune cells, then it can be effective in suppressing the body’s response to the coronavirus attack.
This is promising considering that the immune system bears the brunt of the most deleterious effects of the virus, with the patients’ own cells attacking their bodies that subsequently leads to death.
Jakafi received its first approval back in 2011. While it was discovered and marketed by Incyte in the US, this drug is sold by Novartis (NVS) outside the country under the name Jakavi.
Apart from Incyte, other companies working on a similar strategy of using an autoimmune disease drug to treat COVID-19 complications include Regeneron (REGN), Sanofi (SNY), and Roche Holding’s (RHHBY).
Outside its COVID-19 efforts, Incyte is also looking into expanding the market for Jakafi.
In 2019, Jakafi sales grew by 21% to reach $1.7 billion. Revenues were derived from the drug’s three approved uses, namely, myelofibrosis, polycythemia vera, and acute graft-versus-host disease.
For 2020, Incyte estimates sales to grow to hit $1.8 billion to $1.95 billion, paving the way for Jakafi to become a $3 billion brand.
So far, Incyte is hoping to achieve this by expanding Jakafi’s indications to include atopic dermatitis. The goal is to submit this for approval by the fourth quarter of the year.
Another COVID-19-related effort linked to the company is testing rheumatoid arthritis drug Olumiant, which Eli Lilly (LLY) licensed from Incyte.
Eli Lilly is investigating this drug in partnership with the National Institute of Allergy and Infectious Diseases (NIAID) hoping Olumiant can be used to treat critically ill COVID-19 patients.
Other companies looking into the same plan are Roche with Actemra and AstraZeneca (AZN) via Calquence.
Aside from that, NIAID is also looking into the efficacy of Olumiant when combined with Gilead Sciences’ (GILD) lead COVID-19 candidate Remdesivir.
Looking into Incyte’s earnings history, it’s safe to say that the company is on its way to a brighter financial future.
Last year, Incyte’s total global revenue reached $2.16 billion, showing a 15% increase from 2018.
Aside from its best-selling drug Jakafi, Incyte has another potential blockbuster in its portfolio in the form of blood cancer treatment Iclusig. This drug, which the company licensed from Ariad Pharmaceuticals, added $90 million in sales last year.
In addition, Incyte earned $226 million in royalties from Novartis’ sales of Jakafi outside the US and $80 million from Eli Lilly’s Olumiant sales last year.
As for Incyte’s pipeline for 2020, the company kicked off the second quarter with an early FDA approval of bile duct cancer treatment Pemazyre.
This new medication is also anticipated to be another bestseller for Incyte, with a $17,000 price tag for every treatment cycle.
On average, each patient requires eight to nine cycles in a span of six months. This puts the cost for every patient somewhere between $136,000 and $153,000.
At this rate, Pemazyre can rake in $50 million for 2020 alone.
Given that the world is still struggling with the pandemic, the company reported a modest peak sales estimate for Pemazyre at $140 million.
While this may not be enough to move the needle, Incyte is optimistic that the number will rise once the crisis is behind us.
More importantly, Incyte offers a fast-growing portfolio along with promising pipeline candidates that could give bigger biotechnology companies a run for their money.
Mad Hedge Biotech & Healthcare Letter
June 30, 2020
Fiat Lux
Featured Trade:
(MODERNA’S BIG CORONA PLAY FOR A SMALL COMPANY)
(MRNA), (INO), (NVAX), (JNJ), (PFE), (BNTX), (LZAGF), (REGN), (AZN), (LLY), (MRK)
