Mad Hedge Biotech and Healthcare Letter
May 21, 2024
Fiat Lux
Featured Trade:
(THE FAT’S IN THE FIRE)
(RHHBY), (LLY), (NVO), (AMGN), (VKTX), (PFE), (MRK), (SNY), (ABT)
Posts
Well, well, well, look who's decided to crash the obesity-drug party. Roche (RHHBY), the Swiss pharmaceutical giant, has just unveiled some pretty impressive early-stage results for its weight-loss drug, CT-388. And let me tell you, this could be the start of something big.
Now, I know what you're thinking: "Another weight-loss drug? Yawn." But trust me, this is no ordinary contender.
In a small trial, patients who received CT-388 saw an average placebo-adjusted weight loss of 18.8% after just 24 weeks. That's right, 18.8%.
While it's hard to compare trials, experts are saying these numbers might even give Eli Lilly's (LLY) Zepbound, the current king of the market, a run for its money.
Let's take a step back and look at the bigger picture. The obesity drug market has been on fire lately, with everyone going gaga over these miracle pills.
Lilly and Novo Nordisk (NVO) have been dominating the scene with their drugs, Zepbound and Wegovy, but that hasn't stopped a whole host of other companies from trying to get a piece of the pie.
Merck (MRK), Sanofi (SNY), Abbott Labs (ABT), and Eisai have all tried their hand at weight-loss drugs and ultimately thrown in the towel.
More recently, Pfizer's (PFE) daily oral pill, danuglipron, has faced hurdles due to side effects. Amgen's (AMGN) drug, MariTide, is in Phase 2 studies and showing promise. And let's not forget Viking Therapeutics' (VKTX) VK2735, which has earned the nickname "twincretin" for its dual targeting of GLP-1 and GIP receptors.
So, what makes Roche's CT-388 so special?
Well, for starters, it's a GLP-1/GIP receptor agonist, which is similar to Lilly's Zepbound. In the Phase 1 trial, all participants achieved more than 5% weight loss, with 85% losing more than 10%, 70% shedding more than 15%, and a whopping 45% dropping more than 20% of their body weight. That's some serious weight loss.
Of course, there were some side effects, mainly mild to moderate gastrointestinal issues, but hey, that's the price you pay for looking fabulous, right? Roche is also testing CT-388 in patients with Type 2 diabetes, so stay tuned for updates on that front.
Now, I know you're all dying to know how CT-388 stacks up against the competition.
Notably, the drug's data looks strong compared to earlier studies of Zepbound. In fact, CT-388's efficacy results appeared "numerically higher" than Zepbound's.
But let's not get ahead of ourselves. Lilly still has a multi-year lead on Roche, so CT-388 isn't an immediate threat. However, it does suggest that the future of this rapidly growing market is up for grabs.
Now, let's talk about Roche. It’s the world's seventh-largest pharma company by market cap, sitting at around $205 billion. They pulled in $65 billion in revenue in 2023, second only to Johnson & Johnson (JNJ).
But here's the kicker—they've been struggling with growth, and their share price has taken a hit, down more than 25% over the past three years.
Contrast that with Eli Lilly and Novo Nordisk. Lilly's share price shot up 290% in three years, and Novo's climbed 226%.
Even though their revenues were less than half of Roche's in 2023, their market caps are sky-high. Why? Because of their blockbuster GLP-1 agonist drugs, Zepbound and Wegovy, which have shown jaw-dropping weight-loss results.
But could CT-388 be the underdog story Roche needs?
With the obesity market estimated to reach a staggering $100 billion by 2030, and over 1 billion people worldwide suffering from obesity, the potential is enormous.
Of course, there's still a long way to go for CT-388. Cross-trial comparisons can be tricky, and Roche's Phase 1 trial was much smaller than Lilly's pivotal study of Zepbound.
Plus, we don't have all the juicy details on patient characteristics, dose titration, and long-term weight loss just yet.
But here's the thing: Roche has scale and infrastructure on its side. It could potentially outmuscle smaller players like Viking and Boehringer Ingelheim.
And if CT-388 can match or even surpass the performance of current and future GLP-1 agonists? Well, let's just say those peak revenue forecasts might be in for a surprise.
So, is Roche the dark horse you should bet on in the obesity-drug race? If you're looking to get in on the action without paying the premium commanded by Lilly and Novo, or taking on the higher risk of smaller players, Roche might just be the ticket.
With promising mid-single-digit revenue growth on the horizon and a strong position in other areas like oncology and autoimmune disorders, Roche could be a smart play for anyone keen on the obesity drug market.
As for me? Well, you know I love an underdog story. And CT-388 might just be the Cinderella story of the year. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
May 16, 2024
Fiat Lux
Featured Trade:
(THE COMEBACK KID OF VACCINES)
(NVAX), (SNY), (BNTX), (PFE)
Mad Hedge Biotech and Healthcare Letter
May 14, 2024
Fiat Lux
Featured Trade:
(EARS TO THE GROUND)
(REGN), (LLY), (FENC)
When your kid is part of a cutting-edge trial for hearing restoration, you're practically glued to their every reaction. That's the case for the parents of the first little one to receive Regeneron's (REGN) experimental gene therapy, DB-OTO.
This groundbreaking treatment delivers the missing otoferlin protein to the sensory hair cells in the ear, restoring signal transmission and, theoretically, giving these kids the gift of hearing.
The baby, part of the CHORD trial, started responding to sounds at home way before the docs officially confirmed it.
"Beautiful" is Regeneron described this early sign of progress. Turns out, nothing beats seeing your kid react to the world of sound for the first time.
Let me give you the basics of this therapy. So, imagine the sensory hair cells in your ear as a team of tiny dancers. They groove to the vibrations of sound, signaling to your auditory nerve and ultimately your brain.
Kids with this specific genetic hearing loss have the dancers, but they're out of sync – they can't communicate that signal to the brain. DB-OTO is like giving these dancers a choreographer, delivering the missing otoferlin protein, and restoring the signal transmission.
Actually, DB-OTO isn't entirely a Regeneron creation. They snagged it up when they acquired Decibel for $109 million in 2023. But this wasn’t a hostile takeover – these two companies had been working hand-in-hand on DB-OTO since 2017, making the deal a no-brainer. Heck, Regeneron even brought over the team behind the project to keep things running smoothly.
And as it turns out, Regeneron and Decibel didn't have to reinvent the wheel (or the eardrum) with their delivery method.
They took a page from the cochlear implant playbook, making it easier for ear, nose, and throat docs (ENTs) to jump on board when this therapy eventually hits the market. They figured that they could just take this groundbreaking technology and make it work with techniques surgeons already know like the back of their hands. Smart move, right?
One unexpected twist? The family noticed the kid's voice sounded less harsh without the cochlear implant.
Now, that's not a hard data point, but it hints that DB-OTO might offer something unique: a more natural hearing experience compared to cochlear implants, which tend to have a robotic sound that takes some getting used to. Cochlear implants bypass the ear altogether, zapping the auditory nerve directly. Effective, sure, but not exactly the most elegant solution.
It's not just about regaining hearing – it's about unlocking a child's world. Regeneron’s ASGCT presentation showcased patient 1's incredible journey: responding to sounds at 3 weeks, meaningful sounds by 6 months, and even hearing with the cochlear implant turned off at 24 weeks.
A second 4-year-old patient is also showing promising signs, with improved hearing at the same early time points. Side effects? Nothing more than a common ear infection, which was easily treated.
But this wasn't an overnight miracle. Regeneron and Decibel brainstormed this idea six years ago, putting their heads together to figure out where they could make a real difference. They seem to have found their niche.
And they didn't just buy one therapy – they snagged a whole pipeline of possibilities. There's AAV.103 for a different type of hearing loss, and AAV.104 for another genetic form. They're even tackling balance issues, because apparently, ears do more than just listen. These additional therapies fit into Regeneron's broader strategy of becoming a leader in the auditory space.
Next, let's talk dollars and cents, shall we?
Regeneron shelled out $213 million (if you include those fancy CVRs) for Decibel. That's a hefty bet, but they're banking on DB-OTO getting regulatory approval in multiple countries by 2028. Ambitious? Absolutely. But the potential payoff for patients – and investors – could be worth it.
As expected, Regeneron's not the only one with their stethoscope in this growing market.
Eli Lilly (LLY) wasn't far behind, scooping up Decibel's rival Akouos for a whopping $487 million in late 2022. Plus, they're also gunning for that otoferlin gene therapy prize.
And don't forget Fennec Pharmaceuticals (FENC), who snagged FDA approval for their chemo-induced hearing loss treatment last year. Looks like everyone wants a slice of this pie.
Now, for the data geeks (I know you're out there).
Regeneron's Q1 results were a tad underwhelming for Wall Street, with EPS at $9.55 (below the $10.17 estimate) and revenue dipping slightly to $3.15 billion, mostly due to the COVID drug Ronapreve drying up.
But take that out of the equation, and revenue actually grew 7%. Not that bad.
And there's good news elsewhere. Sales of Dupixent and Libtayo are soaring, up 24% and a whopping 45% respectively. That's where the future lies.
Sure, they've had some bumps in the road (the FDA rejecting odronextamab wasn't ideal), but their Eylea HD launch is gaining steam, with $200 million in sales already.
These successes, coupled with the potential of DB-OTO and the other auditory therapies, paint a promising picture for Regeneron's future growth.
So, what should you do? Keep your eyes on their pipeline, especially those new oncology and weight-loss treatments. And with a $3 billion stock buyback plan, Regeneron's showing they're confident in their future.
This might not be a slam dunk, but it's a bet on a company that's not afraid to swing for the fences in the biotech game. With a strong pipeline, a track record of innovation, and the financial muscle to back it up, Regeneron is positioning itself to be a major player in this growing market.
For those willing to ride out the bumps, the long-term payoff could be music to their ears.
Mad Hedge Biotech and Healthcare Letter
May 7, 2024
Fiat Lux
Featured Trade:
(PACKING A HEAVIER PUNCH)
(AMGN), (NVO), (LLY), (REGN)
Amgen (AMGN) is having a moment. Early results for their injectable drug MariTide sound pretty darn promising.
But it’s not all roses and sunshine at Amgen. The company also dropped the curtain on AMG786, an experimental oral weight-loss pill that just wasn't cutting it.
It’s tough in the pharmaceutical arena, especially since this whole weight-loss drug market is a gold rush right now. Eli Lilly (LLY) and Novo Nordisk (NVO) are cleaning up, and even Pfizer (PFE), despite their hiccup, isn't going to roll over that quickly.
Now, back to MariTide. Calling it a "multi-blockbuster" sounds flashy, but investors want to see if it can crack the hold those big two already have. Amgen's got a decent track record though, so I wouldn't write them off just yet.
The early scoop on MariTide is pretty tantalizing. The last round of Phase 2 trials showed that three monthly shots could significantly trim the waistline, with the heftier doses keeping the pounds off for up to four months post-treatment.
Actually, MariTide’s core strength is that it’s just once-a-month jab — an easier regimen compared to the weekly routine required by current front-runners like semaglutide and tirzepatide.
Speaking of the competition, Novo Nordisk’s semaglutide and Eli Lilly’s tirzepatide have been seeing users pack the pounds back on pretty quickly after stopping treatment.
That’s not ideal, and it’s exactly the kind of opening Amgen is looking to capitalize on with MariTide.
Now, let’s broaden our scope. It's a bit of a misnomer to just call it an “obesity pipeline” because, let me tell you, this technology is dipping its toes into much more than just shedding pounds.
Those GLP-1 agonists like semaglutide and the double-duty “double G” agonists like tirzepatide? They’re not just one-trick ponies.
Aside from battling the bulge, they’re making waves in treating diabetes, slicing through cardiovascular risks, and even exploring new frontiers like osteoarthritis and sleep apnea.
Heck, they’re even peeking into Alzheimer’s prevention — Novo Nordisk is already revving up for a phase 3 trial.
Despite these lucrative offshoots though, obesity remains the arena’s juggernaut.
Novo Nordisk’s latest data, as bleak as it might seem for global health, paints a picture of a market vast enough to entice anyone. Think about it—out of 813 million people wrestling with obesity, only one million are currently on these incretin drugs.
And with projections pointing to numbers ballooning to 1.2 billion by 2030, well, the potential market is jaw-dropping.
If Amgen’s MariTide hits the mark, we could be talking about a whopping $20 billion in annual sales from just this one contender in about 7-8 years, spanning obesity and a few neighboring conditions.
That’s even if they face a dogfight over pricing and if the average price per patient hangs below what the big guns like Novo Nordisk and Eli Lilly are currently pulling.
Now, think about this — current estimates peg Amgen’s growth from $33 billion this year to a modest $35.1 billion by 2033. My take? That’s wildly conservative.
If you ask me, Amgen's obesity pipeline alone, even with just modest success, could blast those numbers out of the water.
But let's not kid ourselves – MariTide alone won't make Amgen king of the obesity market. To truly capitalize on the segment’s potential, Amgen might need to consider teaming up with those emerging stars working on preserving lean body mass, or even big players like Regeneron (REGN).
They could take a couple of routes here. One slick move could be scooping up some smaller biotech firms or cozying up to bigger fish through partnerships or in-licensing deals to beef up their treatment options.
Alternatively, Amgen could play it cool and simply pair MariTide with their own upcoming products once they hit the market. Sure, this might keep things simple, but it kind of feels like leaving money on the table, isn’t it?
Admittedly, it’s still early days when it comes to these weight loss treatments. One thing's for sure: the next few years will be a wild ride for obesity drugs. After all, it’s clear that the GLP-1 craze is doing for pharma what AI hype is doing for tech stocks. It’s like a rising tide lifting all boats.
Looking ahead, the big winners in the next 18 months are looking to be Novo Nordisk and Eli Lilly. These guys are leading the pack, while others might just not make it to the finish line, ending up as flops in the stock market drama.
Yet, through all this, Amgen stands out as a dark horse.
Even if the obesity pipeline doesn't turn out to be their golden ticket, Amgen's strategic positioning could still deliver solid long-term value.
But, and here’s the kicker, if MariTide and its potential combo treatments hit their stride as hoped, Amgen could sprint ahead in this fast-paced market race — not just in obesity but in those juicy, adjacent niches too. This could spark some serious value creation that current forecasts haven't even begun to factor in.
So, while the market’s getting its gears grinding, Amgen might just surprise us all. I say keep this stock on your watchlist.
Mad Hedge Biotech and Healthcare Letter
May 2, 2024
Fiat Lux
Featured Trade:
(BUT WEIGHT, THERE’S MORE)
(LLY), (NVO)
You know that feeling when you find a crumpled $20 bill in an old jacket? That’s a little like what Eli Lilly must be feeling with tirzepatide, only replace that $20 with a cool $34 billion forecast by 2029. Yeah, it’s been that kind of party over at Lilly.
Tirzepatide, the magic ingredient in both Zepbound for weight loss and Mounjaro for diabetes, is turning heads—and not just because it’s raking in the cash. This drug is proving to be a one-stop-shop for boosting Lilly’s bottom line and shaking up the market.
Since Zepbound’s launch in November 2022, Lilly’s stock has been on a tear, skyrocketing from $349.95 to a whopping $733.51.
That’s a gain of over 109%. It’s like Eli Lilly has turned into the Usain Bolt of the biotech and pharma sector, sprinting past the S&P 500 and its pharma peers without breaking a sweat.
Actually, Lilly's got a double-whammy against the competition. Not only does Tirzepatide keep raking in successful studies, but it's also got a sweet price point.
We're talking about Zepbound being a good 20% cheaper than Novo Nordisk's (NVO) big hitter, semaglutide.
Essentially, patients get the same results, but a lot less strain on their wallet. This combination easily gives Lilly a serious edge in the diabetes and obesity drug battle.
But wait, there’s a hiccup. Despite the blockbuster status of Zepbound, there’s a bit of a snag recently with this drug—supply can’t keep up with demand.
It makes you wonder whether this is a classic case of "too much of a good thing," right?
This shortage has even made the US Food and Drug Administration limited availability list. But fear not, Lilly’s got plans to boost production with a new facility in Concord, North Carolina by year-end.
Still, this supply problem didn’t stop Lilly from coming up with tirzepatide’s latest party trick: tackling obstructive sleep apnea (OSA).
Basically, OSA disrupts your sleep by making your throat muscles a bit too enthusiastic at night. They tighten up and block your airway, leaving you gasping for air (not exactly the recipe for restful sleep). Untreated OSA can be a serious health hazard, linked to heart problems down the line.
And here's a scary statistic: 80 million adults in the US have sleep apnea, but a whopping 85% of those cases go undiagnosed. That's right, millions are unknowingly battling a condition that disrupts sleep, increases the risk of heart problems, and leaves you feeling like a zombie all day.
Given these figures, it’s not surprising that Lilly’s looking to turn this challenge into the next big opportunity.
In fact, recent studies have shown tirzepatide could reduce those pesky episodes of stopped breathing during sleep by about 30 times an hour compared to a placebo. Talk about a breath of fresh air.
So, how much money will tirzepatide rake in at its peak? Well, it's already approved for diabetes AND obesity, but there's room for even more growth.
To date, Lilly is projected to rake in $25 billion in peak sales for this drug, but with recent developments, even that seems low.
Think about this: Tirzepatide made over $5 billion last year – its first full year on the market.
Then, it snagged the obesity indication in November 2023, now pharmacies can't keep it on the shelves, showing demand is off the charts.
Now, I know you’re wondering if you’ve missed the boat with Lilly’s stock price more than doubling in a blink.
But here’s the kicker: there’s potentially a lot more upside. Beyond tirzepatide, Lilly’s got a full deck with new drugs and a solid dividend that’s been fattening wallets at a rapid clip—up 101.6% in the last five years alone.
So, what’s the bottom line? If you’re looking to park some cash in a stock that has a track record of turning medical breakthroughs into gold, you might want to give Eli Lilly a closer look.
After all, betting on a company that’s leading the charge in medical innovation can sometimes feel like finding that $20 bill—only a lot, lot bigger.
Mad Hedge Biotech and Healthcare Letter
April 30, 2024
Fiat Lux
Featured Trade:
(HITTING CTRL+ALT+DELETE ON DRUG R&D)
(DNA), (GOOGL), (JNJ), (ILMN), (JNJ), (ALTO), (GROIV)
