Mad Hedge Biotech and Healthcare Letter
July 16, 2024
Fiat Lux
Featured Trade:
(SMALL GIANTS RISING)
(GMAB), (OPHLY), (VRTX), (INCY), (BIIB), (AHKSY), (ALNY), (ARGX), (BGNE), (MRNA), (NBIX), (BNTX), (IPSEY), (CTLT), (NVO), (LLY), (JNJ), (GILD), (ABBV), (MRK), (SNY), (BMY), (GSK)
Remember when David took down Goliath? Well, history's repeating itself in the biotech arena, and this time, David's got deep pockets and a Ph.D.
Since April, I've been watching a trend on the so-called "next-generation" players in biotech and healthcare world. It reminds me of the massive changes I witnessed in Asian markets back in the '70s.
Over the past months, companies like Genmab (GMAB), Ono Pharmaceutical (OPHLY), Vertex (VRTX), Incyte (INCY), Biogen (BIIB), and Asahi Kasei (AHKSY) have been making waves that would impress even the most seasoned surfer. And these next-gen dealmakers aren't just dipping their toes in the M&A pool - they're doing cannonballs.
With cash reserves that would make Scrooge McDuck blush, these companies are overturning industry norms, already joining the prestigious $100 billion market cap club. At this celebration, the champagne flows freely.
So, what’s the play here?
With IPOs cooling down like day-old coffee, companies eyeing public debuts are now ripe targets for acquisition, more tempting than a juicy peach.
This fresh class of biotechs, unphased by the FTC's scrutiny that acts like kryptonite to pharma giants, are acting more like rocket fuel for these agile consolidators.
They slide through regulatory gaps faster than a greased pig at a county fair, grabbing six out of ten biopharma M&A deals in the second quarter alone. They’re not just taking a slice of the pie—they’re rewriting the recipe.
And if we're talking about firepower? These newcomers boast an average of $3.8 billion in pro forma adjusted cash, which isn't just walking-around money — that's "buy a small country" money.
But don't think for a second that this cash is just sitting pretty in their coffers. These upstarts are putting their money where their mouth is.
Take Incyte, for instance. They flexed their financial muscle with a $2 billion buyback in May 2024, sending a clear message to the market: "We're here to play, and we're playing to win."
And that's just the tip of the iceberg. The industry as a whole is lounging on a cool $1.5 trillion. That's enough liquidity to stretch the imagination — perhaps even to purchase a small planet. Mars, anyone? Elon might give us a discount.
But this financial might isn't just about buying power – it's about survival. As I said before, Big Pharma is teetering on a patent cliff that threatens to erode their revenue streams. To stay competitive, they're scrambling to replenish their pipelines, acquiring promising assets and gobbling up innovative technologies with the voracity of Pac-Man on steroids. And it's not just the usual suspects making moves.
This sense of urgency has created a fertile ground for an emerging cohort of aggressive dealmakers. Companies like Alnylam (ALNY), argenx (ARGX), BeiGene (BGNE), Moderna (MRNA), Neurocrine Biosciences (NBIX), BioNTech (BNTX), and Ipsen (IPSEY) are biting off more than the market expected them to chew, and they're coming to the table hungry.
And these companies aren't just nibbling around the edges. They're making bold moves, acquiring cutting-edge biotech firms with promising pipelines. We're talking oncology, epilepsy, kidney diseases, cardiovascular plays – it's like someone turned a medical textbook into a shopping catalog.
In fact, even the big boys are flexing their muscles.
Novo Holdings (NVO) dropped a jaw-dropping $16.5 billion on Catalent (CTLT). That's not even for a drug - it's for manufacturing. Talk about betting on the picks and shovels in this biotech gold rush.
Eli Lilly (LLY) just plunked down $3.2 billion on Morphic Therapeutic (MORF), betting big on inflammation, immunity, and oncology.
Johnson & Johnson's (JNJ) been on a shopping spree, too, snagging Numab's Yellow Jersey for $1.25 billion and Proteologix for $850 million. Both plays in inflammation and immunity - clearly, they've found their sweet spot.
Biogen's not twiddling its thumbs either, striking a deal with HI-Bio worth up to $1.8 billion.
Not to be outdone, Gilead (GILD) shook hands with CymaBay Therapeutics to the tune of $4.3 billion. Even AbbVie (ABBV), playing it cooler, still dropped a cool $250 million on Celsius.
Meanwhile, Merck's (MRK) set its sights on EyeBio for up to $3 billion, focusing on ophthalmology.
Sanofi (SNY), Bristol Myers Squibb (BMY), GSK (GSK) - they're all in, placing their chips on everything from rare diseases to generics to asthma. Clearly, the Big Pharma giants are also trying to keep up with this shift.
As the biotech field evolves, watching these underdogs will be like watching history in the making — where today's Davids become tomorrow's Goliaths. I suggest you keep a close eye on the names above. Adding them to your portfolio would mean you’re not just watching the giants rise — you’ll be a part of the story.
Mad Hedge Biotech and Healthcare Letter
July 2, 2024
Fiat Lux
Featured Trade:
(TWO-STEPPING TO A CANCER CURE)
(GILD), (AZN), (RHHBY), (PFE), (MRK)
I was at a biotech conference in San Francisco, nursing a cup of black coffee and trying not to fall asleep during yet another startup pitch.
Suddenly, I overhear a conversation that makes me perk up faster than if someone had mentioned a 50% off sale on vintage aircraft parts.
"Did you hear about TwoStep Therapeutics?" someone whispered. "They've got Bertozzi, Cochran, and Levy on board."
Now, I've been following the biotech scene longer than I've been flying planes, and those names made my ears perk up faster than an air traffic controller during a thunderstorm. I nearly choked on my coffee trying to catch every word.
As it turns out, TwoStep Therapeutics isn't just another flash-in-the-pan biotech startup. These folks are diving headfirst into the shark-infested waters of immunotherapy and antibody-drug conjugates (ADCs).
And let me tell you, they're not packing pool noodles – they're armed to the teeth with intellectual firepower.
Now, I've seen more biotech startups than there are hedge funds in Connecticut, but this one's got my attention. Why? They're not here to do the same old cancer-fighting waltz.
Instead, they're attempting to solve a Rubik's Cube of cancer treatment – and they might just have the brainpower to do it.
Let's talk about that brainpower for a moment. TwoStep's advisory board reads like a "Who's Who" of biotech brilliance.
We're talking Nobel laureate Carolyn Bertozzi, Stanford's Jennifer Cochran, and Ronald Levy – the wizard behind rituximab. It's as if they raided the faculty lounge at Stanford and offered stock options instead of tenure.
That means TwoStep's not just another me-too biotech. They're cooking up a platform of peptide conjugates that can bind to five different tumor-associated integrins.
In layman's terms? They're building a cancer-fighting multi-tool that makes current treatments look like plastic sporks.
CEO Caitlyn Miller isn't just another lab coat with a PowerPoint presentation either. She's got skin in the game – or rather, genes.
Her stepfather battled oral cancer for 14 years before passing away. I don’t need to tell you, but that's the kind of motivation you just can't buy.
Now, before you start salivating over potential returns faster than Pavlov's dogs at dinnertime, remember: This is early-stage biotech.
We're talking more risk than a game of Russian roulette with five bullets. But for those of you with iron stomachs and a penchant for moonshots, TwoStep might be worth a spot on your watchlist.
Their $6.5 million seed round is chump change in biotech land, but it's not about the size of the boat, it's the motion of the ocean. And with backers like NFX and Alexandria Venture Investments, they've got some serious propulsion.
TwoStep isn't going after the low-hanging fruit either. They're not interested in well-trodden paths like bladder or breast cancer.
No sir, they're setting their sights on tough customers like head and neck and colon cancer. It's a gutsy move, but in biotech, sometimes you've got to swing for the fences.
It's worth noting, though, that TwoStep isn't alone in this high-stakes game.
Big pharma's been falling over themselves to get a piece of this action. Gilead Sciences (GILD) shelled out big bucks for Immunomedics to get their hands on Trodelvy.
AstraZeneca (AZN) has been playing in this sandbox for a while with Enhertu. Even the Swiss giant Roche (RHHBY) is in on the game, not to mention Pfizer (PFE) and Merck (MRK).
So, there you have it. TwoStep Therapeutics: the new enfant terrible of the biotech world, armed with more brainpower than a MENSA convention and ambitions that could make Elon Musk blush.
Will they revolutionize cancer treatment or become another cautionary tale in biotech textbooks?
The jury's still out, but one thing's for sure – watching this unfold will be more entertaining than a CNBC stock ticker on stimulus check day.
Mad Hedge Biotech and Healthcare Letter
June 25, 2024
Fiat Lux
Featured Trade:
(MORE THAN MEETS THE (WALL STREET) EYE)
(MRK), (PFE)
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
May 21, 2024
Fiat Lux
Featured Trade:
(THE FAT’S IN THE FIRE)
(RHHBY), (LLY), (NVO), (AMGN), (VKTX), (PFE), (MRK), (SNY), (ABT)
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
April 30, 2024
Fiat Lux
Featured Trade:
(HITTING CTRL+ALT+DELETE ON DRUG R&D)
(DNA), (GOOGL), (JNJ), (ILMN), (JNJ), (ALTO), (GROIV)
