Mad Hedge Biotech and Healthcare Letter
June 11, 2024
Fiat Lux
Featured Trade:
(THE CAPITAL CURE)
(ABBV), (MRK), (PFE), (RHHBY), (JNJ), (AZN), (GSK), (MRNA), (BNTX), (CRSP), (NTLA), (BEAM), (TPTX), (ZNTL), (MRTX), (BPMC), (MGNX), (TYRA), (SPRT), (VRTX), (FOLD), (RARE), (CRBU)
Imagine you're the CEO of a major pharmaceutical company. You've got blockbuster drugs that are raking in billions, a cushy corner office, and a corporate jet at your disposal. Life is good.
But then, you look at the calendar and realize that your patents are about to expire. Suddenly, that jet feels more like a crop duster, and your corner office starts to feel like a broom closet.
That's the reality facing Big Pharma right now. These pharma big shots are sweating bullets over losing their golden geese like AbbVie's (ABBV) Humira and Merck's (MRK) Keytruda.
That’s roughly $300 billion in products about to get kicked to the curb.
But these guys didn't get to the top by sitting on their hands. They've got a war chest of $1 trillion, and they're not afraid to use it.
Major pharmaceutical giants like Pfizer (PFE), Roche (RHHBY), Johnson & Johnson (JNJ), AstraZeneca (AZN), and GlaxoSmithKline (GSK) are about to go on the mother of all shopping sprees.
Why the rush? Because they're staring down the barrel of a patent cliff that's going to make the Grand Canyon look like a pothole.
We're talking $198 billion worth of branded drugs going off the patent cliff between 2021 and 2025. That's a gut-wrenching 56% jump from the last five years.
But don't think for a second that they're just going to sit back and watch their profits go up in smoke. No sir, they're on the hunt for the next big thing, and they've got their sights set on some juicy targets – and biotech is at the top of their list.
Leading the biotech charge are mRNA pioneers Moderna (MRNA) and BioNTech (BNTX), each sitting on a gold mine of potential blockbusters taking on everything from flu to cancer vaccines.
Underdogs like CRISPR (CRSP) biotech stars Intellia (NTLA) and Beam Therapeutics (BEAM) are also squarely in Big Pharma's acquisition crosshairs for their cutting-edge work in genetic disease treatments.
But beyond the headliners, don't overlook the sleeper hits that could catalyze the next big boom.
Oncology, in particular, is a prime hunting ground, accounting for 37% of pharma M&A deal value in 2023 as the $392 billion global cancer drug market continues to boom.
Companies like Turning Point Therapeutics (TPTX) and Zentalis Pharmaceuticals (ZNTL), with their promising targeted therapies for various solid tumors, are particularly attractive prospects.
Mirati Therapeutics (MRTX), focused on KRAS inhibitors, and Blueprint Medicines (BPMC), specializing in precision therapies, have also caught the eye of big pharma with their innovative approaches.
Additionally, companies with late-stage assets like MacroGenics (MGNX), Mereo BioPharma (MREO), and Tyra Biosciences (TYRA) could offer promising near-term revenue opportunities for acquiring companies looking to bolster their oncology portfolios.
Close behind are rare disease treatments, snagging 16% of new drug approvals and 9 of the top 100 deals last year in this $262 billion market ripe for more growth.
This lucrative sector has captivated pharma giants, who see potential in companies like Sarepta Therapeutics (SRPT) and Vertex Pharmaceuticals (VRTX), leaders in rare disease therapies with strong financial performance and consistent growth.
Aside from these, smaller biotechs like Amicus Therapeutics (FOLD) and Ultragenyx Pharmaceutical (RARE), focused on developing innovative therapies for a range of rare diseases, are attracting attention for their potential to address unmet medical needs and deliver substantial returns on investment.
But the real wild card everyone wants a piece of is cell and gene therapies. This medical Wild West is projected to explode to $66.8 billion by 2030, with the FDA already greenlighting 6 cutting-edge therapies like next-gen CAR-T treatments from Caribou Biosciences (CRBU) in 2023 alone.
Notably, the buying frenzy is very much already underway. In fact, 2023 saw the biggest biotech M&A spree in a decade, with a staggering $122.2 billion changing hands as the FDA approved 50% more new therapies.
Pharma mega-mergers also hit $135.5 billion as firms raced to reload pipelines.
Interestingly, these deals are only the tip of the iceberg. As Wall Street predicts, with record-smashing deals, sky-high demand, and new approvals surging, "biotech's got plenty of reasons to be cautiously optimistic."
Especially if interest rates finally cooperate, throwing gasoline on the M&A bonfire and making biotech the belle of the ball as soon as late 2024.
So keep your eyes peeled and your powder dry. I suggest you add these innovative biotech names to your watchlist, and you might just discover the next blockbuster drug or breakthrough therapy that could reshape medicine – and deliver explosive returns in the process.
Mad Hedge Biotech and Healthcare Letter
December 14, 2023
Fiat Lux
Featured Trade:
(EDITING YOUR PORTFOLIO)
(CRSP), (VRTX), (BLUE), (BEAM), (CRBU), (EDIT), (NTLA), (PRME), (VERV), (LLY), (REGN)
In the world of biotechnology, the buzz these days is all about gene editing – a frontier that’s moving at warp speed.
While the journey from sequencing the first human genome took a staggering 13 years, companies like CRISPR Therapeutics (CRSP) have sped up the process, bringing their revolutionary "molecular scissors" concept to market in a mere decade.
It's a thrilling time for investors, with the potential for staggering returns, but the path is littered with clinical and regulatory landmines. This turns choosing the best stocks to put your money into a tricky challenge.
Recently, the FDA gave the green light to two groundbreaking gene therapies for sickle cell disease, developed by Vertex Pharmaceuticals (VRTX) in collaboration with CRISPR Therapeutics and by Bluebird Bio (BLUE).
This disease, predominantly affecting African-American communities in the U.S., has been a target for medical advancement for years.
While the approval is a landmark, it's not without its tremors. Bluebird Bio's stock took a nosedive by 33.9%, triggered by the FDA’s warning label about potential cancer risks linked to their treatment.
In contrast, the treatment by Vertex and CRISPR dodged such warnings, possibly giving it an edge in the eyes of prescribing doctors.
And then there’s the money side of things. Bluebird Bio missed out on a priority review voucher from the FDA, which they were hoping to sell to Novartis for a cool $103 million. That's a tough break.
Meanwhile, the Vertex and CRISPR therapy, now known as Casgevy, boasts the honor of being the first FDA-approved drug using the trailblazing Crispr/Cas9 technology. It's a Nobel Prize-winning innovation that's finally reaching the patients it promises to help.
The approvals of Casgevy and Bluebird Bio’s Lyfgenia, which arrived earlier than expected, mark a significant moment for patients with sickle cell disease.
Although priced in the millions, these treatments offer a potential one-time cure, replacing the traditional, complex regimens. Unfortunately, they are not without their challenges, involving intensive procedures, lengthy hospital stays, and chemotherapy.
This brings us to the investment side of things.
The gene-editing arena is brimming with potential, but it's akin to navigating a labyrinth. With no specific exchange-traded funds (ETFs) focusing solely on gene editing stocks, investors might feel like they're trying to find their way in the dark.
However, a diversified approach could be the lantern in this darkness.
Companies like Beam Therapeutics (BEAM), Caribou Biosciences (CRBU), Editas Medicine (EDIT), Intellia Therapeutics (NTLA), Prime Medicine (PRME), and Verve Therapeutics (VERV) are some of the key players in this space, each with its unique technological platform.
But it's not just the pure-play gene editors that are worth your attention. Giants like Eli Lilly (LLY), Regeneron Pharmaceuticals (REGN), and Vertex Pharmaceuticals have thrown their hats into the ring, making substantial investments in gene editing.
So, how should you play this? If it were my money, I'd spread it around.
Put a chunk in leaders like CRISPR and Intellia. Then, combine these with established players like Eli Lilly, Regeneron, and Vertex to provide a safety net, balancing out the inherent risks of this high-stakes biotech game.
On the other hand, companies like Beam and Verve, representing the next wave of this technology, should not be overlooked, though perhaps with a more conservative stake.
And here's a little hedge for you: keep an eye on smaller players like Caribou Biosciences and Editas Medicine. In this high-stakes game, they could be your ace in the hole.
The gene-editing industry is a roller coaster of innovation, risk, and potential. It's a sector where fortunes can be made and lost in the blink of an eye.
For the savvy investor, a diversified, strategic approach, blending the bold with the stable, could be the key to unlocking the vast potential of this exciting field.
Remember, as with any investment, the key is not just in choosing the right horses but knowing how to spread your bets across the race.
Mad Hedge Biotech and Healthcare Letter
November 16, 2023
Fiat Lux
Featured Trade:
(A GENE GENIE AGAINST CHOLESTEROL)
(VERV), (CRSP), (BEAM), (NVO), (AMGN), (REGN)
CRISPR technology, long heralded as a game-changer in genomics, stands on the brink of a major leap forward. For years, its potential has simmered, but now, it's poised to ignite, promising scientific breakthroughs and significant investment opportunities.
Several pioneering companies employing CRISPR for editing human genomes are at the forefront of this revolution. Their goal? To treat, and potentially cure, a range of genetic diseases. The approaches are twofold: ex vivo, where genes are edited outside the body, and in vivo, with modifications made directly within the body.
Investing in CRISPR gene-editing stocks, however, is not for the faint-hearted. These stocks are characterized by high risk and volatility, demanding a specific investor profile: one that is aggressive and comfortable with risk. For such investors, a company worth considering is Verve Therapeutics (VERV).
Verve stands out, partly due to its relatively modest size with a market capitalization of $732 million. This contrasts sharply with industry peers like CRISPR Therapeutics (CRSP) and Beam Therapeutics (BEAM), valued at $4.47 billion and over $2 billion, respectively. The reason behind Verve's smaller scale is its developmental stage, which lags behind its counterparts.
Established in 2018, Verve has been hailed as a potential leader in next-generation gene therapy, particularly base editing.
You can think of base editing as using a fine-tipped pen to precisely change just one letter in the DNA sequence, without cutting the DNA strand.
In our DNA, there are four "letters" (bases) – A, T, C, and G. Base editing lets scientists directly convert one letter to another (like changing an 'A' to a 'G') without cutting the DNA. This is like fixing a typo in a sentence by carefully erasing one letter and writing in the correct one.
This method is often more precise than CRISPR and less likely to introduce errors because it doesn't involve cutting the DNA strand.
Verve has capitalized on this technology, in-licensed from base-editing pioneer Beam Therapeutics. The company's flagship candidate, VERVE-101, targets heterozygous familial hypercholesterolemia (HeFH), a rare cholesterol disorder.
Needless to say, the stakes are high. The HeFH market is projected to balloon to nearly $60 billion by 2033, positioning VERVE-101 as a potential one-time functional cure and a standard of care in this lucrative market.
Recently, Verve announced that there was a substantial reduction in patients' high cholesterol levels in the first human test of base editing. Despite this, the stock experienced a sharp 41% drop, possibly a misinterpretation of the positive news in an unfriendly biotech market.
The data presented showed Verve's treatment leading to a 40%-55% decrease in harmful LDL cholesterol levels in patients with genetically high cholesterol levels. Verve's approach targets and inactivates the defective gene responsible for high cholesterol levels.
The treatment, however, faced challenges. Two of the Verve-101 trial participants suffered heart attacks, one of which was fatal.
It's crucial to note that the trial specifically included older patients with advanced heart disease, who were already at a heightened risk for cardiac events. The overall safety measures in the study were satisfactory, though, so the FDA has since authorized an expansion of the Phase 1 trial.
Notably, Eli Lilly (LLY) reviewed the trial's results before deciding to buy an option to partner on the Verve treatment. Lilly's decision on teaming up on the cholesterol treatment is expected next year, following the completion of Phase 1 trials.
Additionally, Verve plans to initiate trials for another base-edited therapy, VERVE-102, in the first half of 2024, potentially offering enhanced patient outcomes.
Verve’s trial results match that seen with established medications such as Novartis' Leqvio (NVS), Amgen's Repatha (AMGN), and Regeneron Pharmaceuticals' Praluent (REGN), which are all approved long-term drug therapies.
However, despite the availability of statins and new treatments, a significant portion of these patients fail to maintain healthy cholesterol levels due to cost, treatment adherence issues, or inconsistent healthcare access.
This is where the biotech company’s solution shines. Verve's ultimate goal is to develop a one-and-done treatment to lower cholesterol in the 50 million adults at risk for cardiovascular disease.
While Verve remains a preclinical-stage biotech, its prospects are promising. Its market cap, though modest compared to the commercial opportunity of a functional cure for HeFH, hints at significant growth potential.
With Lilly's track record in developing drugs for underserved conditions, Verve emerges as a compelling investment for those with a high tolerance for risk and an eye on future biotech breakthroughs. I suggest you put this stock on your watchlist.
Mad Hedge Biotech and Healthcare Letter
November 2, 2023
Fiat Lux
Featured Trade:
(SLICING THROUGH DOUBT)
(CRSP), (VRTX), (BLUE), (BEAM), (AMGN), (REGN)
In the intricate world of medical breakthroughs, September 14, 1990, stands out like a sore thumb—or perhaps, a healing one.
On this day, the baseball world was left agog as Ken Griffey Jr. and Sr. knocked out back-to-back home runs, a feat as rare as hen’s teeth.
Meanwhile, in a quieter corner of the planet, a medical marvel was unfolding. Ashanti DeSilva, a 4-year-old with a genetic disorder ravaging her immune system, was about to become the poster child for gene therapy, receiving a groundbreaking treatment that involved a cocktail of modified white blood cells. The aim? To supercharge her immune system and give her a fighting chance at a normal life.
But let’s not sugarcoat it—the road from there to here was anything but a walk in the park. Gene therapy, the promising prodigy of the biotechnology and healthcare sector, had its fair share of teenage rebellion, grappling with safety concerns and delivery vehicle dilemmas. It wasn’t until the early 2010s when gene correction technologies got their act together and safer delivery systems stepped onto the scene, that gene therapy started living up to its potential.
Enter Sickle Cell Disease (SCD), the blood disorder that’s been playing hard to get, affecting around 70,000 Americans and causing everything from anemia to organ damage.
The cure seemed as elusive as a winning lottery ticket until exa-cel, the brainchild of CRISPR Therapeutics (CRSP) and Vertex Pharmaceuticals (VRTX), entered the scene.
This therapy, wielding the mighty CRISPR/Cas9 like a genetic scalpel, takes a patient's stem cells on a rollercoaster ride—harvesting, modifying, and infusing them back into the patient, with the end goal of producing healthy red blood cells.
Looking ahead, CRISPR Therapeutics and Vertex are gearing up for a potential launch of exa-cel in 2024, assuming all the stars align. This innovative gene therapy is poised to be a significant growth catalyst for both companies in the coming decade. Initially, the focus will be approximately 32,000 patients suffering from SCD and TDT.
However, investors need to brace themselves for the price tag, as gene editing therapies don't come cheap. The cost for exa-cel is anticipated to be well north of $1 million, reflecting the complexity and value of this cutting-edge treatment.
At this point, it's crucial to acknowledge that exa-cel is not the only player in this high-stakes game.
A variety of other gene therapies are also vying for the spotlight, with contenders like Bluebird Bio's (BLUE) lovo-cel, Beam Therapeutics' (BEAM) innovative base-edited candidates, and Editas Medicine's (EDIT) competitive CRISPR/Cas9 therapy all in the running.
Now, let’s talk turkey. The financial forecast for exa-cel is looking bright, with CRISPR Therapeutics poised to tap into a $48 billion market opportunity.
Although the treatment has yet to gain FDA approval, the company already has its ducks in a row. It set up 50 treatment centers in the US and 25 in Europe, as well as schmoozed with commercial payers to ensure exa-cel is as accessible as a cold beer on a hot day.
Still, let’s not put on our rose-colored glasses just yet. The biotech sector is as fickle as a cat on a hot tin roof, with CRISPR Therapeutics’ market cap doing the cha-cha in response to industry volatility. With a slew of gene therapies for SCD waiting in the wings, it’s a stark reminder that in biotech, it’s not enough to keep up—you’ve got to lead the pack.
Meanwhile, CRISPR Therapeutics is flexing its muscles with six other clinical trial programs targeting a spectrum of conditions from various cancers to type 1 diabetes, where it is ambitiously seeking a functional cure. With a robust $1.8 billion in cash, equivalents, and marketable securities as of the second quarter and a market capitalization of $3.2 billion, the company is in a strong financial position.
For the astute investors, the real gold is in playing the long game. Rather than getting caught up in the short-term ebbs and flows of the biotech market, the savvy should be pondering how to leverage the current market conditions to their advantage.
After all, CRISPR Therapeutics, with its pioneering gene-editing technology, has the potential to follow in the footsteps of biotech titans like Amgen (AMGN) and Regeneron Pharmaceuticals (REGN), both of which have turned early investments into veritable treasure troves.
Moreover, its financial stability, bolstered by its partnership with Vertex, ensures that funding woes common among smaller biotechs are less of a concern. While it may not be the largest or most prominent player in the biotech arena, the next decade could very well see CRISPR Therapeutics delivering returns that outpace the market. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
February 23, 2023
Fiat Lux
Featured Trade:
(BATTLE FOR GENE THERAPY SUPREMACY)
(CRSP), (NVS), (BIIB), (BLUE), (VYGR), (GBIO), (SIOX), (NTLA), (EDIT), (VRTX), (PRIME), (BEAM)
Gene therapy is arguably one of the most fascinating and revolutionary fields in the healthcare and biotechnology industry.
A significant reason for the excitement behind gene therapy is that it provides the possibility of “functional cures,” such as “one-and-done treatments,” for patients. It’s also why these therapies are some of the most costly on the market.
For example, Zolgensma from Novartis (NVS), which focuses on treating spinal muscular atrophy in infants, has a whopping $2 million-plus price tag. Despite that, it’s considered the best option.
For context, its counterpart, Spinraza from Biogen (BIIB), costs roughly $750,000 in the first year of treatment. Unlike Zolgensma, Spinraza needs to be administered four times each year. After the first treatment, patients would need to pay $350,000 per annum. By the fifth year, Spinraza has surpassed the treatment cost of Zolgensma.
Despite its incredible potential, gene therapy is one of the riskiest bets.
Take Bluebird Bio (BLUE) into consideration. This biotech has won not only one but two regulatory approvals for its innovative gene therapies. One is for Skysona, which targets a rare cerebral condition called adrenoleukodystrophy; the other, Zynteglo, is for the blood disorder beta-thalassemia. Unfortunately, this biotech’s price has slid by more than 90% in the past five years.
Working on gene therapies is filled with complicated and challenging obstacles. Most companies in this segment ended up burning through their cash without successfully launching a marketable product. Some examples of these are Voyager Therapeutics (VYGR), Generation Bio (GBIO), and Sio Gene Therapies (SIOX).
However, there is a field in the gene therapy world that has substantially rewarded investors: CRISPR gene editing.
CRISPR means Clustered, Regularly Interspaced Short Palindromic Repeats, which was discovered by Jenifer Doudna and Emannualle Charpentier. Their discovery won the Nobel Prize for Chemistry in 2020.
Basically, CRISPR is utilized by bacteria to recognize genetic sequences that belong to dangerous or harmful viruses and cleave them via specialized enzymes like CAS-9. Eventually, Doudna and Charpentier discovered that the system could be modified to target and remove, destroy, or even edit damaging genetic sequences in human beings.
This discovery gave birth to many biotech companies. Intellia Therapeutics (NTLA) was the brainchild of Doudna, while Charpentier co-founded CRISPR Therapeutics (CRSP).
Over the past five years, NTLA's share price has risen by 146% while CRISPR skyrocketed by 210%. In comparison, the S&P 500 recorded a 53% gain within the same timeframe.
Given the volatility of the field and market volatility, other CRISPR-centered companies failed to replicate this success.
The share price of Editas Medicine (EDIT) fell by 55% over the past five years. Caribou Biosciences (CRBU) also failed to ride the momentum and slid by 44%.
Still, there are positive updates amid the struggles of the sector.
The latest news is from CRISPR Therapeutics, which expects several catalysts in 2023 thanks to its promising pipeline of candidates and clinical trials. So far, one of the most anticipated catalysts is its biologics license application for its sickle cell disease candidate, which the company aims to file by March 2023.
CRISPR Therapeutics developed this candidate, called exa-cel, alongside Vertex Pharmaceuticals (VRTX). It would be the first-ever Crispr-based therapy to edit or rewrite faulty genes if approved. Based on the company’s data, patients who underwent this one-time treatment have continued to be free of sickle cell disease symptoms.
Every year, 100,000 patients in the US are reported to suffer from sickle cell disease. Many companies have offered treatments for this condition for years but no cure. Hence, CRISPR and Vertex’s one-and-done therapy has received a fast-tracked designation. Consequently, this would give the developers sought-after market exclusivity.
As anticipated, CRISPR Therapeutics’ competitors are hot on its heels with sickle cell disease treatments of their own. To date, Prime Medicine (PRME), Beam Therapeutics (BEAM), Editas, and Intellia have candidates queued for clinical trials.
Overall, the gene editing sector continues to be an exciting and interesting field. Investors looking to take part of the action in this segment should consider buying and holding CRISPR Therapeutics stock for at least five years because the company has a reasonable chance of becoming the most dominant name in the business soon.
