Global Market Comments
May 19, 2020
Fiat Lux
Featured Trade:
(THE 2020 DARK HORSES OF BIOTECH)
(AMRN), (THOR), (SAN), (NBSE), (OHRP),
(MRNA), (MRK), (AZN), (VRTX), (RGLS), (ARWR)
Posts
One of our dark horses came in a big winner this morning.
No, I did not go to the Golden Gate Fields race track on San Francisco Bay and win big on a horse with 5:1 odds, although I might as well have.
Moderna (MRNA) soared to $85 this morning on news of a successful trial of a new Covid-19 vaccine. We recommended it on January 19 at $17.78 for precisely this reason.
Never mind that the trial only involved a mere eight patients, involved RNA, and won’t be available in bulk for two years. That’s all the market wants to hear today.
So, if you are interested in playing the long shot game, I am re-running my January 9 research piece, which was sent out to paid subscribers of the Mad Hedge Biotech & Healthcare Letter. If you want to subscribe to the letter, which has been pulling in long shots on a weekly bases recently, please click here.
For all the flak the healthcare sector has received for the exorbitant prices of its products and services, there’s no denying the fact that this industry had an incredibly remarkable decade -- and biotechnology proved to be one of the most lucrative markets when it comes to stocks that actually double or triple in value, sometimes even overnight.
The primary reason for this is that no one could predict the success or failure of clinical trials with any degree of accuracy, forcing investors to take into account elements of surprise in the valuation process in biotech.
Companies that analysts believe to be prime candidates for acquisition early on in their life cycle would end up repeatedly failing to lure viable tender offers for years. Meanwhile, dark horses emerge from the leftfield and snap up the best deals.
A good case in point would be how experts and investors alike missed the mark on Amarin Pharmaceutical’s (AMRN) cardiovascular treatment Vascepa. On the outset, analysts pegged the new prescription omega-3 treatment as a failure and a money sinkhole.
Instead, Vascepa surpassed all expectations and is now hailed as the fish oil supplement to demonstrate clear-cut cardiovascular benefits to high-risk heart attack patients.
In 2019 alone, Vascepa grew by 85% compared to its 2018 report, coming in between $410 million and $425 million in sales -- and 2020 is expected to be an even better year for this drug as sales are estimated to reach between $650 million and $700 million.
Another example is synthetic protein maker Synthorx (THOR), which was initially tagged as an ominous stock.
The company proved detractors wrong when it went on to fetch huge offers from giant biotech firms, with Sanofi SA (SAN) winning the bidding war over Synthorx to the tune of $2.5 billion.
This new year, though, promises to offer more predictability, especially on the merger and acquisition front.
Several blue-chip biotechs are on the verge of key patent expirations in the next decade. On top of that, these companies are facing tremendous pressure from US politicians to cut down on the prices of their brand name drugs. Today, the State of California announced that it was going into the generic drug industry to undercut the majors.
These dual headwinds are expected to fuel an uptick in the demand for bolt-on acquisitions, which can provide the giant biotechs with healthy levels of profit via large sales volumes as they attempt to slash their slashes to acceptable levels.
With this in mind, big biopharmas will be willing to shell out top dollar to acquire promising companies this 2020.
Which biotechs have the goods to take full advantage of this acquisition demand?
One up and coming company tagged as a red-hot acquisition candidate is NeuBase Therapeutics (NBSE).
Founded in 2018, this Pittsburgh company has raked in $9 million in funding so far to develop treatments that target rare, genetic neurological disorders. Neubase’s platform called peptide-nucleic acid antisense oligonucleotide or PATrOL technology was developed at Carnegie Melon University.
Basically, this technology offers gene-silencing therapies for its patients suffering from rare genetic disorders.
In July 2019, NeuBase engaged in a reverse merger with fellow biotech innovator Ohr Pharmaceuticals (OHRP). This partnership is expected to rake in massive rewards since both companies greatly complement each other’s work.
NeuBase’s work zeroes in on curing rare genetic diseases via gene-silencing treatments while Ohr’s research is geared towards helping patients suffering from cancer cachexia and macular degeneration.
The combined efforts of these two should result in a wider reach as they offer cutting edge treatments to highly lucrative and specialized markets.
As of December 2019, NeuBase has a recorded market cap of $114.38 million. Considering all its assets and the way its pipeline is shaping up, NeuBase could easily be your best sleeper stock in 2020.
Another biotech company to watch out for this year is Moderna Inc (MRNA), which has raised a whopping $1.8 billion in funding over 10 rounds.
So far, this company has attracted blue-chip companies in the form of Merck and Co (MRK), which invested $125 million, and AstraZeneca (AZN) with $474 million so far.
In terms of stability, Moderna has been doing quite well for itself with $68.2 million in estimated annual revenue.
In 2019, Moderna shared that it has at least 11 programs set for clinical trials along with 20 development candidates. Its research leans towards producing cancer vaccines and localized regenerative therapeutics.
Its strategic alliances not only with AstraZeneca and Merck but also with Vertex Pharmaceuticals (VRTX), Biomedical Advanced Research and Development Authority, and even the Bill & Melinda Gates Foundation equip Moderna with a remarkable competitive edge against rivals Regulus Therapeutics (RGLS), Arrowhead Pharmaceuticals (ARWR), and CureVac.
I’m expecting huge movements in the biotech market in 2020 as the curtain rises on all these promising technologies and the rise of this industry becomes impossible to ignore.
The Buyers are Lining Up
Mad Hedge Biotech & Healthcare Letter
May 19, 2020
Fiat Lux
Featured Trade:
(PFIZER’S LATEST COVID-19 VACCINE ENTRY)
(PFE), (BNTX), (MRNA), (INO), (CTLT), (SVA), (EBS), (MYL)
Clearly, the long-term solution to this health crisis, and possibly the only hope we have to returning to “normal,” is a safe and effective vaccine.
Companies and health experts around the world have stepped up to that challenge, with investors eagerly anticipating the stocks of the businesses to successfully deliver a vaccine to catapult in value overnight.
This is one of the driving forces behind Pfizer’s (PFE) relentless pursuit of a coronavirus vaccine.
Here’s a quick recap of where Pfizer was before this major announcement.
Pfizer was first recognized as an aggressive player in the vaccine race when the healthcare giant partnered with German biotechnology company BioNtech (BNTX).
After months of working together, Pfizer announced that it aims to produce 10 million to 20 million doses of COVID-19 vaccine by the end of 2020.
So far, Pfizer is testing at least four distinct variations of its vaccine called BNT162. The trials will test roughly 360 individuals, with the study expanding to involve thousands of volunteers if one or two variations of the vaccine indicate progress.
Conclusive data will be available in June or July this year. Meanwhile, Pfizer’s coronavirus vaccine candidate, co-created with BioNtech, is projected to be ready for launch by October.
In an effort to make room for the production of BNT162, Pfizer decided to outsource the production of some of its own branded products to various manufacturers such as Catalent (CTLT).
This move means that instead of paying contract manufacturers to produce millions of doses of a vaccine that might fail to even leave the warehouse, Pfizer has taken it upon itself to produce BNT162 in its own facilities.
According to the company’s estimates, it will cost approximately $150 million to produce BNT162. Since Pfizer is using its own facilities, it could jumpstart the distribution of up to 20 million doses of COVID-19 vaccine even before 2020 ends.
This move to ramp up the manufacture of an experimental drug candidate is a surprising gamble for Pfizer. However, the possibility of having millions of doses of this potential vaccine ready to ship at a moment’s notice could make it a worthwhile risk.
In terms of competition, Pfizer is racing against several biotechnology companies searching for a COVID-19 vaccine in the US and abroad.
One of them is Moderna (MRNA), which has a $19 billion market cap and funding access worth $2.4 billion including government endowment.
Moderna collaborated with Lona (OTC: LZAGY), which is an international chemical manufacturer, to scale up its production power.
Apart from this, smaller biotechnology companies like Inovio Pharmaceuticals (INO) and Novavax (NVAX) are involved in the COVID-19 vaccine race as well.
Inovio is backed by its history of vaccine research on the swine flu outbreak in 2009 and the 2013 avian flu.
Novavax, which has a modest market cap of $82.2 million, received government funding worth $4 million to help the company move forward with clinical trials.
Additional financial support was also sent by the Coalition for Epidemic Preparedness Innovations. In terms of manufacturing, Novavax has been working with Emergent BioSolutions (EBS) to meet production demands.
Outside the US, two of the frontrunners are Chinese companies CanSino Biologics and Sinovac Biotech (SVA).
The stocks of various micro-cap companies have been on the news since the COVID-19 vaccine race started. Several of these smaller firms used their newfound popularity to boost their stock price and generate additional capital to fund their operations.
I think there are several biotechnology and healthcare companies that warrant following. However, there remains a dearth of data on these companies working on the COVID-19 vaccine. Choosing the best stock from these names at this point demands too much guesswork, an investment strategy I have never endorsed.
The harsh reality is that most of these smaller companies will most probably never manage to get a program off the ground and into a conclusive efficacy trial. The main reasons are limited capital, restricted bandwidth, and lack of will to move forward.
Small companies, particularly in the biotechnology and healthcare sectors, typically lack the money and manpower to efficiently run a program without sacrificing the rest of their R&D efforts. For those companies that manage though, the pace will likely be too slow to actually merit a meaningful place in the market.
Investors looking to invest in the surging COVID-19 vaccine space should turn to companies that hold the greatest odds of success. That means larger and more established companies with global testing, regulatory, and manufacturing capacities.
This is not to dissuade anyone from taking a dip into the small-cap companies pool though.
Rather, I would recommend to simply keep these biotechnology companies on your watch list and see how the situation develops. After all, these are decent stocks on their own right.
Nonetheless, it’s still too early to tell how their long-term business models look like outside the search for a coronavirus vaccine.
In comparison, Pfizer has a proven track record of being a great investment. The company has been showing off a decent dividend growth for 10 consecutive years, reporting an annualized dividend worth $1.52 per share.
More importantly, this biotechnology and healthcare company is showing no signs of slowing down anytime soon. In 2019 alone, Pfizer introduced six new drugs on the market and shared that it has 95 more in its pipeline.
Keep in mind as well that Pfizer’s current price of roughly $37 per share -- a far cry from its 52-week high that reached $44.56 -- is significantly lower than the industry average at the moment. For a stock that presents such a wealth of opportunities, Pfizer offers significant value to its investors.
Mad Hedge Biotech & Healthcare Letter
May 14, 2020
Fiat Lux
Featured Trade:
(JOHNSON & JOHNSON’S BIG CORONA PLAY)
(JNJ), (MRNA)
One of the world’s biggest biotechnology and healthcare companies did not reach this status by betting on unproven strategies, but Johnson & Johnson (JNJ) recently made a huge gamble on an experimental vaccine for the deadly coronavirus disease (COVID-19).
Going all-in on this bet, JNJ committed to co-fund with Biomedical Advanced Research and Development Authority (BARDA) the development of a coronavirus vaccine. The two companies pledged over $1 billion for the manufacture of this experimental treatment.
Why is this a big deal?
Drugmakers typically wait to receive positive results before they even consider breaking ground on facilities designed to mass-produce any potential drug.
JNJ and BARDA’s move means there will be warehouses full of this coronavirus vaccine candidate even before we find out whether or not it can successfully prevent COVID-19.
Simply put, Johnson & Johnson decided to mass-produce a vaccine without any proof that it could even be effective.
The company is so confident about this that it believes it could hit the market by 2021 -- a stunning claim considering that it generally takes three to seven years, and at times even longer, to push a vaccine from the initial stage to market launch.
Although claiming such an incredibly short timeline is generally laughable, the FDA has been quite flexible when it comes to efforts to fight the pandemic.
Realistically speaking though, JNJ is unlikely to win this race.
While the giant drugmaker is obviously one of the most promising companies to join this fight, several companies are already further along in their efforts to find a COVID-19 vaccine.
A good example is Moderna (MRNA), which recently started Phase 1 of its clinical trials for a potential COVID-19 vaccine.
The company, which is working with the National Institutes of Health, will determine the safety and ability of its vaccine to trigger an immune response in the patient’s body. To date, there are 45 volunteers involved in this trial. Each of them will receive two doses of Moderna’s experimental vaccine.
Even if JNJ fails to make a fortune from its COVID-19 vaccine candidate, the company still has what it takes to ride out the pandemic and subsequent economic crisis. Actually, it has the ability to come out practically unscathed.
Throughout its 133-year history, (JNJ) has been a steady company that managed to survive six significant recessions so far.
A good example of its resilience was demonstrated during the Great Recession in 2008 up to 2009.
While the S&P 500 Index dropped by as much as 57%, (JNJ)’s shares fell by a maximum of 35%. With firm leaders and adjusted operational earnings growth, the company actually recorded an average earning-per-share growth of 7% from 2007 to 2009.
The company has also consistently paid and even continuously raised its dividend for the past 57 consecutive years -- a track record that can reassure even the most skittish investor.
A huge part of its success is the diversity of its portfolio, with several segments ready to pick up the slack if one sector begins to falter. (JNJ) has its hands on various segments including pharmaceuticals, medical equipment, and of course, consumer goods.
(JNJ) staples like Tylenol, Visine, Band-Aid, Neutrogena, and its line of baby products are the types of purchases that people need in good and bad times. These company brands offer a strong foundation for JNJ even in a recession. If you think about it, consumers rarely go about their days without using at least one JNJ product.
A review of (JNJ)’s performance in the rough years in the past paints a picture of a company strong enough to overcome this looming recession. In fact, it’s easy to believe the company’s fiscal guidance for 2020 which projects a 5.5% growth in sales and expanding margins.
Only a handful of companies can be considered “recession-proof,” and (JNJ) is definitely a part of that select few. Investing in this dependable business is a solid choice.
For more about (JNJ), please visit their website at https://www.jnj.com. For more about Corona vaccine winners, please click here.
Global Market Comments
March 31, 2020
Fiat Lux
Featured Trade:
(MORE PLAYERS ENTER THE RACE FOR A CORONA CURE)
(MRNA), (ARCT), (JNJ), (SNY), (GOVX), (ALT), (NVAX), (GSK), (GNBT), (VXL.V), (INO), (APDN), (CADILAHC)
Mad Hedge Biotech & Healthcare Letter
March 31, 2020
Fiat Lux
Featured Trade:
(MORE PLAYERS ENTER THE RACE FOR A CORONA CURE)
(MRNA), (ARCT), (JNJ), (SNY), (GOVX), (ALT), (NVAX), (GSK), (GNBT), (VXL.V), (INO), (APDN), (CADILAHC)
Special issue on COVID-19 vaccines: Moderna Inc (MRNA), Arcturus (ARCT), Johnson & Johnson (JNJ), Sanofi (SNY), GeoVax (GOVX), Altimmune (ALT), Novavax (NVAX), GlaxoSmithKline (GSK), Generex (GNBT), Vaxil Bio (VXL.V), Inovio Pharmaceuticals (INO), Applied DNA Sciences (APDN), Zydus Cadila (CADILAHC)
The hunt is definitely underway for potential treatments to fight COVID-19 but coming up with vaccines will take a much longer time.
Since we already have the genetic code of the novel coronavirus (click here for the link), researchers can now use the complete blueprint to come up with ways to defeat this disease.
With code in hand, it takes a supercomputer just three hours to create model vaccines. Then it is just a question of how fast you can make them, if at all. Many proposed models are far beyond our existing technology.
To date, there are roughly 35 companies and academic organizations actively seeking ways to come up with a COVID-19 vaccine. While the process will still take time, there are several promising prospects.
Among the companies working on this, Moderna Inc (MRNA) has been recognized as the first biotechnology company to conduct human trials to test its COVID-19 vaccine in March. The trial includes 45 males and non-pregnant females aged 18 to 55.
Moderna’s vaccine utilizes the genetic sequence of the novel coronavirus. Basically, the goal is to build a vaccine out of messenger RNA.
Aside from Moderna, another biotech company called Curevac has been at the forefront of this cutting-edge technology.
In China, RNACure Biopharma has been working with Fudan University and Shanghai JiaoTong University on using the same technique to come up with a vaccine as well.
China’s CDC along with Tongji University and Stermina as well as Duke-NUS in partnership with Arcturus (ARCT) are also using a similar approach.
Although Moderna’s vaccine reached Phase 1 in record time, authorities cautioned that the development time frame is somewhere between 12 and 18 months — and this is even dubbed as an “overly optimistic” timeline.
Meanwhile, there are companies like Sanofi Pasteur (SNY) elected to use previously deployed vaccine platforms in earlier epidemics like SARS.
Johnson & Johnson (JNJ) also decided to employ the same strategy using its Ebola vaccine platform. In fact, JNJ shared that it’ll be ready to conduct human testing of its non-replicating viral vector by November.
Aside from JNJ, another biotechnology company in China called CanSino Biologics (HKG: 6185) in collaboration with the Academy of Military Medical Sciences is utilizing the same technology.
Just last week, Chinese authorities approved CanSino’s Phase 1 clinical trials.
Apart from JNJ and CanSino, other biotechnology companies are also working on a vaccine using the same non-replicating viral vector technology.
The list includes Wuhan’s BravoVax along with GeoVax (GOVX), Altimmune (ALT), Vaxart (VXRT), Greffex, and the University of Oxford.
Another strategy is employed by Novavax (NVAX), which is to construct a “recombinant” vaccine.
In a nutshell, this strategy entails extraction of the genetic code for the protein found on the Sars-CoV-2. This is a part of the virus that can trigger the immune system. This will then be pasted into the genome of a bacterium or yeast.
In effect, this vaccine will force the microorganisms to produce huge quantities of the protein to be able to fight off the virus.
Big biotechnology companies like Sanofi and GlaxoSmithKline (GSK) are following the same technique.
Smaller firms are also in on the action including Generex Biotechnology Corporation (GNBT), Vaxil Bio (VXL.V), EpiVax, and Clover Biopharmaceuticals.
The University of Georgia, Baylor College of Medicine, and the University of Miami are pursuing the same lead as well.
On top of these, several biotechnology companies use a DNA-based approach to come up with a vaccine.
Last March 12, the Bill & Melinda Gates Foundation provided a $5 million grant to Pennsylvania-based biotech firm Inovio Pharmaceuticals (INO) to help the company speed up the tests needed for its DNA vaccine called INO-4800.
This is on top of the roughly $9 million in funding it received from the Coalition for Epidemic Preparedness Innovations earlier.
At the moment, INO-4800 is in preclinical studies with plans to push it to Phase 1 clinical trials by April.
Aside from Inovio, Applied DNA Sciences (APDN), Zydus Cadila (CADILAHC), Takis, and Evivax are also pursuing the same strategy.
Despite implementing the most effective and even draconian measures to contain COVID-19, these tactics only managed to slow down the spread of the virus.
With the World Health Organization tagging this situation as a pandemic, everyone has become more desperate in the search for a vaccine because only a vaccine can stop people from getting sick.
However, even the unprecedented speeds afforded, the biotechnology companies couldn’t change the fact that developing a vaccine requires at least a year. It’s crucial to not make mistakes along the way especially since the product could potentially be injected into most of the world’s population.
After all, there’s only a single thing that can be considered worse than a bad virus — and that is a bad vaccine.
Mad Hedge Biotech & Healthcare Letter
March 10, 2020
Fiat Lux
Featured Trade:
(A NEW TECHNOLOGY TO EDIT GENES HITS THE MARKET)
(MRNA), (GILD)
