Mad Hedge Biotech & Healthcare Letter
June 8, 2021
Fiat Lux
FEATURED TRADE:
(THE BIGGEST NEWS IN BIOTECH TODAY)
(BIIB), (ESALY), (LLY), (RHHBY), (DNLI), (SRPT), (IONS), (ICPT), (SAVA), (ANVS), (CI), (CVS)
Posts
It’s not typical for stock market news to alter the lives of millions of people across the globe, but this is what Biogen (BIIB) managed to accomplish this week.
The company received accelerated approval from the US Food and Drug Administration (FDA) for its controversial Alzheimer’s disease treatment, Aducanumab.
The drug, which is now marketed as Aduhelm, marks a potential breakthrough medication for over 6 million Americans suffering from the debilitating illness and to possibly billions all worldwide.
Basically, Aduhelm targets what Biogen calls “a defining pathology of the disease” by decreasing the amyloid beta plaque levels in the brains of patients suffering from Alzheimer’s disease.
Biogen shares spiked by roughly 60% following the Aduhelm news, with the pop in the biotechnology stock even more impressive than what was initially predicted.
This latest FDA approval also brings a ray of hope for the biotechnology industry.
Biotech shares have been in a slump this year, with the SPDR S&P Biotech ETF (XBI) falling by 9.2% thus far.
Potential second-order effects of the Biogen win can easily be seen in other developers of Alzheimer’s disease treatments.
Although the moves may not be as dramatic as Biogen’s, several biotech companies benefited from the good news.
Directly benefiting from it is Japanese drugmaker Eisai (ESALY), which has been working with Biogen on Alzheimer’s disease treatment. This company’s American depository receipts climbed by 48.2% after the news broke.
Eli Lilly (LLY), which is also working on its own Alzheimer’s therapy, saw its shares go up 9.3%.
Even Roche (RHHBY), which is still in the early stages of its development of a similar treatment, enjoyed a 1.6% increase, while an under-the-radar biotech company, Denali Therapeutics (DNLI), experienced a 7.8% increase.
Other smaller companies that benefited from Biogen’s news include Sarepta Therapeutics (SRPT), Ionis Pharmaceuticals (IONS), Intercept Pharmaceuticals (ICPT), Cassava Sciences (SAVA), and Annovis Bio (ANVS).
In terms of pricing, Aduhelm is estimated to cost $56,000 per year.
Although there is still no definite number in terms of how much Aduhelm could generate in sales for the company, there have been early estimates prior to this news.
Before this accelerated approval, Aduhelm was projected to add at least $16 billion in market capitalization to Biogen.
If successful, the drug can contribute a minimum of $10 billion in sales annually—a performance that would make Aduhelm one of the best-selling drugs of all time.
At this price point as well, the drug could peak at $5.7 billion by 2027.
Understanding that the cost is too high for some, Biogen has been working on establishing partnerships with healthcare and insurance companies to help patients cover the expenses.
So far, Biogen has been negotiating with Cigna (CI) to come up with terms to make Aduhelm available to Alzheimer’s patients via a value-based contract.
That is, the pricing will be assessed based on how responsive the patient will be to the treatment.
Biogen has also been working on collaborating with CVS Health (CVS) to develop more efficient ways to implement cognitive screenings in urban markets.
The two companies have been looking into boosting testing within underserved communities to improve early diagnosis, with the project commencing by September.
Some cities included in this initiative are Washington, D.C., Los Angeles, Dallas, Chicago, South Carolina, Atlanta, New York, Detroit, and Philadelphia.
Biogen has finally regained its momentum thanks to this accelerated and unprecedented approval.
That means we can expect Biogen to leverage this massive revenue stream to round out the rest of its programs and boost its R&D, as well as possibly compensating its shareholders with share buybacks and even dividends in the second half of this decade.
Mad Hedge Biotech & Healthcare Letter
October 29, 2020
Fiat Lux
FEATURED TRADE:
ROCHE ENTERS COVID-19 FIGHT IN STYLE
(RHHBY), (REGN), (GILD), (MRK), (ALNY), (IONS)
Roche (RHHBY) is making quite an entrance in the COVID-19 antiviral treatment race, forking out $350 million in cash to gain rest-of-the-world rights to a promising new drug created by Massachusetts-based biotech company Atea Pharmaceuticals.
This is an exciting development because the partnership between the two companies holds incredible promise in the search for a COVID-19 cure.
In May, Atea Pharmaceuticals essentially dropped all its projects and rebranded itself as a COVID-19 fighter, attracting a stunning $215 million in its venture round.
Among the marquee names that invested in this 7-year-old biotechnology company are Bain Capital and RA Capital.
Going back to its work with Roche, the $350 million cash is expected to fund the ongoing clinical trials of Atea’s very own COVID-19 antiviral treatment called AT-527.
So far, the candidate is in its Phase 2 trial and slated to start global trials or Phase 3 by early 2021.
Apart from being a potential COVID-19 treatment, AT-527 is also under development as a Hepatitis C medication.
In terms of where AT-527 stands in the COVID-19 treatment race, this drug belongs to the same class as Gilead Sciences’ (GILD) Remdesivir and Merck’s experimental candidate with Ridgeback Biotherapeutics called MK-4482.
Like Remdesivir and MK-4482, Roche’s AT-527 is designed to inhibit the replication of SARS-CoV-2, the virus that causes COVID-19.
Unlike Remdesivir though, which is only available through intravenous infusion, AT-527 is an oral drug, making it a more convenient option.
This isn’t the first time that Roche’s COVID-19 efforts came under the spotlight.
Earlier this month, its COVID-19 work with Regeneron (REGN), called REGN-COV2, has been dubbed as a leading candidate in the race because of the high-profile patient who used it: President Donald Trump.
This partnership with Regeneron is expected to ramp up the manufacturing process by at least 3 and a half times compared to their individual capacities.
Outside its COVID-19 efforts, Roche has proven to be a good long-term investment.
Admittedly, the company’s third-quarter report missed the mark by 4% due to aggressive biosimilar competition. However, Roche’s pipeline of newer products has been growing nicely.
Because of biosimilar competition, sales of cancer and immuno-oncology treatments like Avastin fell by 30%, Rituxan slipped by 33%, and Herceptin dropped by 38%.
However, the performance of Roche’s new drug lineup showed promising results, with sales of these products showing off a 32% growth in the third quarter of 2020.
For example, sales of multiple sclerosis drug Ocrevus rose by 37%, while revenue from cancer treatments like Perjeta climbed 17%, Kadycla rose by 33%, and Tecentriq jumped by 49%. Meanwhile, sales of hemophilia medication Hemlibra increased by 57% .
All in all, the hits and misses cancelled out each other this quarter.
Despite the disappointment in these results, Roche stood by its full fiscal year guidance.
This is a strong indicator that the company sees a brighter fourth quarter. Overall, Roche remains in good shape.
Tecentriq has been expanding to cater to other indications such as liver cancer and even some immuno-oncology applications.
Hemlibra continues to outperform its peers, holding on to 25% of the US market share for Hemophilia-A. Even Ocrevus has been outperforming others.
Regarding pipeline developments, Roche has been pouring resources for the trials of NASH drug candidate Crovalimab, which is now in Phase 3.
The acquisition of Inflazome in September and Enterprise Therapeutics in October indicate that Roche is looking to expand in the cystic fibrosis space as well.
Its recently inked agreement with Dyno Therapeutics also signals its plans to work on gene therapies, making itself a potential threat to the likes of biotechnology companies Alnylam (ALNY) and Ionis (IONS).
Looking at everything it has done and has yet to offer, I believe that Roche shares are undervalued at below the high $40s.
This company has a healthy lineup and promising R&D strategies combined with the capacity to buy high-potential assets.
I can see the company generating mid-single-digit cash flow growth on a long-term basis, and I even expect additional improvements to the dividend.
Given the returns you can get from Roche, I can say that this stock is very much worth consideration for any investor interested in quality growth.
Mad Hedge Biotech & Healthcare Letter
January 23, 2020
Fiat Lux
Featured Trade:
(BIOGEN’S BIG ALZHEIMER’S BET),
(BIIB), (BMY), (PFE), (IONS), (MYL)
Biotech giant Biogen (BIIB) failed to impress in 2019. Surprisingly, the company is sticking to its strategy this 2020.
Despite the majority of biotech companies posting market-beating gains last year, Biogen’s shares suffered a 1.4% loss to their value. Taking a look at its performance, there are three obvious reasons why Biogen stock lost ground in 2019.
For one, its revenue generation, particularly for the multiple sclerosis portfolio, flatlined last year. Another reason is the company’s move not to acquire another company the way Bristol-Myers Squibb (BMY) took over Celgene.
Biogen’s decision to not make any major acquisition in 2019 was deemed as an inability to achieve significant business development milestones, thereby failing to positively influence the company’s near-term outlook.
The third reason is Biogen’s decision to halt trials for its widely anticipated Alzheimer’s drug candidate, Aducanumab, in March 2019.
With so much invested in the development of this product, the investing community expected Biogen to completely drop the project altogether.
However, it seems that Biogen has found a way to resolve the issues it initially encountered in the Aducanumab study.
In October 2019, the company announced its plan to resurrect all its Aducanumab-related efforts. To show its commitment to the plan, Biogen kicked off 2020 with a massive purchase from Pfizer (PFE).
Since Biogen aims to apply for regulatory approval by early 2020, the company has been aggressively pursuing avenues to ensure that its Alzheimer’s drug candidate will get the green light as soon as possible.
One of its efforts is its $700 million deal to buy Pfizer’s castoff drug, PF-05251749.
The Pfizer drug was created to treat Irregular Sleep-Wake Rhythm Disorder suffered by Alzheimer’s and Parkinson’s disease patients. This condition, also known as Sundowning, affects 20% of those afflicted by these neurological diseases.
According to the terms of the deal, Biogen will shell out $75 million upfront to gain the rights to the Pfizer drug.
The company will also pay an additional $635 million in the form of milestone payments. Pfizer will receive tiered royalties as well.
On top of this $700 million deal with Pfizer, Biogen also added another $45 million to fund its Alzheimer’s research with Ionis Pharmaceuticals (IONS). Apart from these, the two companies have been working on ION859, which is a possible treatment for Parkinson’s disease.
As if all of these are not enough to show Biogen’s dedication to finding the cure for Alzheimer’s disease, the company has a similar drug in its pipeline: BAN2401. This new drug, which uses a similar approach to Aducanumab, is actually already in its late-stage testing phase.
However, Biogen’s deal with Pfizer is not the first of its kind.
Prior to this, the company paid a whopping $300 million upfront to Bristol-Myers Squibb to own the rights to neurological drug Gosuranemab. Unfortunately, that study failed to deliver the desired results.
Even though Biogen has yet to actually file for regulatory approval for Aducanumab, the company is already preparing for the treatment’s launch this year. This is a rather confident move especially in light of the niggling doubts on the drug’s approval.
Apart from working on Aducanumab, Biogen has been testing for a higher dosage for spinal muscular atrophy medication Spinranza. This is done as a precautionary measure against Novartis’ (NVS) blockbuster gene therapy Zolgensma.
Its exclusive rights on Tecfidera, which has been challenged by Mylan (MYL), is also anticipated to hold until 2028. This means Biogen can still expect to reign supreme in this niche, hanging on to its blockbuster drug that raked in $4.3 billion in 2018 alone and $2.15 billion in the first half of 2019.
In addition to Alzheimer’s and Parkinson’s disease, Biogen is active in searching for treatments for Lou Gehrig’s disease along with stroke and choroideremia as well.
Biogen has also set in motion its plan to venture into rare eye diseases via its $800 million acquisition of Nighstar Therapeutics back in June 2019.
Notably, though, Biogen has been steering away from any major acquisition in 2020.
This strategy could be a stroke of genius if the company’s bet on Aducanumab pays off.
