Mad Hedge Biotech & Healthcare Letter
February 2, 2021
Fiat Lux
FEATURED TRADE:
(2021: GILEAD SCIENCES’ YEAR OF MILESTONES)
(GILD), (NVAX), (JNJ), (MRK)
Posts
Stocks are tumbling on the back of substandard vaccine updates, with investors growing more wary of the whole COVID-19 vaccine narrative.
January ended with Novavax (NVAX) announcing that its COVID-19 vaccine candidate is roughly 90% effective, but doesn’t work as well against other more contagious strains in South Africa.
Johnson & Johnson (JNJ) reported that its candidate is only 66% effective at stopping moderate to severe strains of the coronavirus, but is 100% effective in preventing hospitalizations and even death 28 days after it gets administered.
However, the real kicker is Merck’s (MRK) decision to completely drop out of the COVID-19 vaccine race when both its candidates showed disappointing results in the early stages.
This is disappointing news considering that Merck is one of the biggest vaccine developers in the world today.
Nonetheless, Merck’s still not out of the COVID-19 race yet as it appears to be following the lead of Gilead Sciences (GILD) instead.
That is, it plans to focus on developing COVID-19 treatments in the hopes of benefiting from it the same way Gilead did in the past months.
Since the pandemic started, Gilead has been at the forefront of the fight – so much that its COVID-19 treatment, Remdesivir, is evidently having a major impact on the company’s top line.
In its third-quarter earnings report in 2020, Gilead reported $6.6 billion in total revenue, showing off a 17% jump from its performance during the same period last year.
If you exclude its COVID-19 sales, Gilead would have only earned $5.6 billion, with the increase in its year over year performance changing from 17% to just 2%.
As for its overall performance in 2020, Gilead announced that it’s raising its previous guidance from the $23 billion and $23.35 billion range to be somewhere between $24.3 billion and $24.35 billion.
This new guidance indicates a 10% year over year growth, but without Remdesivir, its product sales would actually show a slight decline compared to 2019.
Outside Remdesivir, Gilead has been active in searching for additional growth drivers.
So far, the most promising segment is its HIV lineup led by its top-selling product, Biktarvy, also known as "the gold standard in HIV treatment."
In the third quarter of 2020, sales of Gilead’s HIV line climbed by 8% to reach $4.5 billion.
While generic competition has entered the market, Biktarvy is expected to continue to gain steam in 2021.
Another catalyst in its HIV line is the drug Lenacapavir, which can either be developed as a twice-a-year injection or a weekly pill.
If successful, Lenacapavir can bring an additional $9 billion in revenue for Gilead.
Aside from HIV, Gilead has also been working toward becoming a leader in the oncology sector.
To achieve this, the company spent $21 billion for the acquisition of Immunomedics.
Specifically, Gilead bought the New Jersey-based company for its new breast cancer treatment, Trodelvy.
Gilead’s massive bet on Trodelvy raised a lot of eyebrows, but the product offers a very real chance for an enormous payoff for its shareholders.
Trodelvy lowers the risk of death among breast cancer patients by an impressive 52% when compared to those who receive standard care.
Annually, Trodelvy is estimated to rake in at least $1.8 billion in revenue for Gilead --- and that’s only for breast cancer application.
Gilead also intends to expand Trodelvy’s application to include more complex fields of oncology and even for some viral diseases.
Beyond its COVID-19 program, Gilead has an impressive portfolio of diverse assets that the company is focused on developing.
It currently has 42 clinical programs queued in its pipeline and at least a handful of these are anticipated to become steady sources of revenue.
As expected, it spent 2020 acquiring the necessary partners for its big picture plans, making 2021 a year of milestones for the company.
Mad Hedge Biotech & Healthcare Letter
January 26, 2021
Fiat Lux
FEATURED TRADE:
(EMERGING COVID-19 ALLIANCES)
(CVAC), (PFE), (MRNA), (TSLA), (NVAX), (JNJ), (SNY), (GSK), (BAYN)
Mad Hedge Biotech & Healthcare Letter
January 19, 2021
Fiat Lux
FEATURED TRADE:
(CAN NOVAVAX EXTEND ITS WINNING STREAK?)
(NVAX), (MRNA), (PFE), (AZN), (BNTX), (BTC)
Would you believe that there was a bigger winner than Bitcoin (BTC) in 2020?
Amid the fanfare generated by COVID-19 vaccine developers like Moderna (MRNA) and Pfizer (PFE), there’s one biotechnology company that has quietly boosted its humble $4 share price to an impressive $128: Novavax (NVAX).
As incredible as that sounds, this isn’t the most unbelievable prediction for Novavax.
Despite recording a jaw-dropping 2,600% increase last year, this Maryland-based biotechnology company is projected to sustain the momentum in 2021 and beyond.
Let me share how Novavax can achieve a long-lasting winning streak.
Unlike Moderna and Pfizer, Novavax did not utilize RNA technology to develop NVX-CoV2373. Instead, the company opted for a more established approach.
The decision to pursue a more established technology could be viewed as a cost-cutting strategy for Novavax.
Doing so means dramatically lowering supply chain pressures, such as storage issues.
In effect, the Novavax vaccine would be the more convenient option that offers an equally potent result.
At this point, Novavax has yet to reveal its Phase 3 trial results. The tests, which involve trials in the UK, would prove to be the turning point for the company’s future.
Here’s a rough estimate of how the results could affect Novavax shares.
If the results show that NVX-CoV2373 is 90% effective, this would put the vaccine in the same league as Pfizer and Moderna. Consequently, shares will go up by 30% with this news.
Meanwhile, an efficacy result clocking in at less than 80% would have the stock falling by up to 20% primarily due to the strong competition in the COVID-19 market.
Approximately $40 billion in COVID-19 revenue is at stake this year.
While competitors Pfizer, Moderna, and AstraZeneca (AZN) have already had their vaccines approved for emergency use, Novavax still has a strong chance of getting a piece of the action.
Despite these candidates getting rolled out in other countries, Novavax’s NVAX-CoV2373 remains a heavy favorite among experts and analysts alike.
At this rate, NVX-CoV2373 could generate at least $4 billion of the $40 billion COVID-19 market in 2021.
Considering that Novavax has an $8 billion market capitalization, this alone more than justifies the company’s valuation.
Admittedly, Pfizer and Moderna hold the competitive advantage in being the first to market. It wouldn’t be surprising if both would end up gobbling up market share while Novavax awaits regulatory approval.
More importantly, both have achieved the coveted name recognition when it comes to COVID-19 vaccine so that could offer them power in the soon-to-be-crowded marketplace down the road.
However, both vaccine leaders have a considerable drawback.
Their vaccines require extremely delicate storage and transportation.
In fact, Pfizer and BioNTech’s (BNTX) BNT162b2 must be stored at minus 94 degrees—a requirement that not all countries, much less commercial distributors could adhere to.
This is where Novavax’s vaccine comes in.
NVX-CoV2373 can be stored and transported at refrigerated temperatures. This means it would be easier to distribute particularly in remote areas.
Any hiccups with storage or transportation involving the Moderna or Pfizer vaccines could offer Novavax an opening to generate vaccine sales that would otherwise no longer be available.
This scenario would translate to a more dominant presence of Novavax in the second half of 2021 until the early part of 2022.
Pfizer and Moderna may have been the first to market, but Novavax’s vaccine holds the potential to generate a sizable impact on sales over the long term.
In terms of revenue, the vaccine would be a significant boost for Novavax. It would transform from a zero product revenue to billions in a short period.
While Novavax has yet to announce the official pricing for the product, we can use its US price of $16 per dose as a benchmark for the rest of the contracts.
So far, Novavax has secured roughly orders for 300 million doses in the US alone. This would amount to $4.8 billion in sales—and all signs point to the number climbing higher this year.
Novavax has been ramping up its capacity to produce as many as 2 billion doses by mid-2021.
In comparison, Pfizer has a maximum capacity of 1.3 billion doses this year while Moderna would peak at 1 billion.
Evidently, Novavax holds an edge over the two companies in terms of capacity to fill orders.
Outside its COVID-19 efforts, Novavax has another potential blockbuster in its pipeline.
Although data is sparse, the company is expected to file for regulatory approval for its experimental flu vaccine called NanoFlu.
Oddly enough, NanoFlu was the reason that Novavax trounced the cryptocurrency surges in 2020.
Investors got all fired up following the promising showing of the flu vaccine candidate, with the stock gaining unprecedented attention when it reported remarkable results in a head-to-head study against the leading flu vaccine in the market today, Sanofi’s (SNY) FluZone Quadrivalent.
With all these in mind, Novavax’s earnings outlook is showing strong signs of even more stellar and stronger performance than that of Moderna this year.
So far, earnings per share for Novavax this year is estimated at $21 while Moderna’s is $10.
Another possible game-changer for Novavax is its plan to combine a flu-coronavirus vaccine to be marketed post-pandemic.
Before making any moves though, it’s important to invest in Novavax with all the facts out in the open.
Inasmuch as it’s a promising stock, this is still a risky investment. This means that only aggressive investors should consider buying this biotechnology stock.
In a number of ways, Novavax and Bitcoin share some similarities.
Both are speculative assets that could either skyrocket or sink. They’re extremely attractive to aggressive investors on the lookout for big wins but also unafraid of massive risks.
The main difference is that with Novavax, it’s simpler to understand the reason for its rise or fall.
The potential drivers for its success or failure appear to be less cryptic than those behind the cryptocurrency.
Eighteen months ago, an unknown vaccine developer called Novavax (NVAX) confronted an existential terror: getting delisted by the NASDAQ stock index.
This threat came on the heels of the company’s second failed vaccine study in less than three years, plunging Novavax shares to less than $1 for 30 straight days and triggering a warning from NASDAQ.
Desperate to keep the company going, Novavax sold two of its manufacturing plants in Maryland, cutting the payroll by over 100 employees.
By January 2020, Novavax only had 166 employees in its roster and was priced at $4 per share.
By December of the same year, Novavax more than tripled its workforce and the stock has risen to $128 per share.
What a difference a year—and a global pandemic—could make.
To date, Novavax stock has already skyrocketed to over 3,000%—shattering even the wildest dreams of its early investors. And this isn’t the best news yet.
Like Moderna (MRNA), another small biotechnology that skyrocketed this year, Novavax is projected to enjoy more room for growth in the succeeding years.
Despite the similarities in their achievements, there has been a notably sizable gap between the valuations of these two biotechnology companies in the Operation Warp Speed list.
The valuation gap would probably make more sense now, especially since Moderna has the golden ticket when it comes to high efficacy results for the COVID-19 vaccine, while Novavax has yet to prove its candidate’s worth.
However, Novavax isn’t out of the race just yet. Novavax plans to end 2020 with a bang by launching pivotal COVID-19 vaccine trials for its candidate, NVX-CoV2373, in the US and Mexico.
While the old saying, “The early bird gets worm,” is frequently accurate and we’ve seen how first-movers generally attain the highest success, this may not be the case here.
In view of the COVID-19 vaccine race, there’s a realistic possibility that Novavax will come out as a bigger winner than Pfizer (PFE) or Moderna (MRNA) in the long run.
Admittedly, it’s encouraging for vaccine developers to know that RNA vaccines, such as Pfizer and BioNTech’s (BNTX) BNT162b2 and Moderna’s mRNA-1273, are effective.
It’s definitely even more encouraging to learn that the second type of vaccine, which is being developed by AstraZeneca (AZN) and Oxford, also offer successful trials.
However, the potential of Novavax’s vaccine candidate proves that there are many ways to skin the cat.
This protein-based vaccine, which also caught the attention of Microsoft (MSFT) co-founder Bill Gates, is expected to show the best results among all the developers.
Although its competitors are months ahead in their tests, NVX-CoV2373 actually outshone the rest of the developers on key metrics in the monkey and even human tests.
Moreover, Novavax’s technology offers versatility, which means it can be applied to other vaccines and treatments as well.
If NVX-CoV2373 gains approval, the company will easily continue this momentum in 2021 and in the next years.
The market opportunity presented by the demand for a COVID-19 vaccine is unbelievable.
Priced at $16 per dose, Operation Warp Speed shelled out $1.6 billion to buy 100 million doses of the Novavax vaccine.
Considering that this is a two-shot vaccine, this would only cover 50 million people.
Although the price may be higher or lower depending on various factors, $16 per dose is a good starting point for a back-of-the-envelope calculation.
What we know so far is that Novavax has already secured agreements to manufacture more than 2 billion doses.
Taking into consideration the price point of $16 for each dose, that easily gives the company a potential revenue of a whopping $32 billion in 2021.
The upside is surreal.
Plus, we still have no guarantee whether the need for a COVID-19 vaccine will be a one-time requirement or a yearly ritual like flu shots, which Novavax also has covered with the production of its new drug, Nanoflu.
As the market continues to swoon over the huge updates from Pfizer and Moderna, it no longer comes as a surprise when other candidates are glossed over.
Novavax isn’t about to start selling its COVID-19 vaccine tomorrow, but it’ll probably release critical data in the next months.
Assuming that it gets regulatory approval by the first half of 2021, it’ll begin to realize the upside almost instantaneously.
At $8 billion market capitalization, Novavax stock could easily triple to $24 billion by the time the vaccine is released.
I believe Novavax offers a potential long, and I find myself getting bullish on this stock.
Although it has a limited pipeline at the moment, I think positive data from its COVID-19 vaccine candidate will serve as a catalyst for this stock to trade much higher in the future.
While I can see that Novavax is widely considered as a dark horse in this race, I believe it’s going to be a dark horse that can lead us out of this darkness soon.
Credit where credit is due.
Tiny Moderna Inc (MRNA) has been at the forefront ever since this pandemic broke, with its vaccine program growing in leaps and bounds compared to competitors, like Novavax (NVAX), which has $3.02 billion in market capitalization, and Inovio (INO), which has $2.20 billion.
The latest report on Moderna’s progress pushes it much further ahead of its competitors.
Looking at its timeline, Moderna could have efficacy data on its COVID-19 vaccine, called mRNA-1273, by Thanksgiving.
Moderna’s vaccine, which is similar to the work of Pfizer’s German collaborator BioNTech (BNTX), utilizes a novel approach that inserts small doses of genetic instructions into the cells of humans.
These then trigger the production of harmless proteins, which mimic the SARS-CoV-2 virus. The proteins subsequently alert the body to produce antibodies, making the vaccine a proactive measure that protects people from infection by the actual virus.
Right now, Moderna is in the second stage of the trials. The final stage involving 30,000 people is expected to begin in July.
With the vaccine program well underway, Moderna secured manufacturing capabilities through a strategic collaboration with Swiss biotechnology company Lonza (LZAGF).
This partnership with a manufacturing site ensures that Moderna is on track to deliver approximately 500 million doses of the mRNA-1273 vaccine every year and could handle up to 1 billion doses annually starting from 2021.
With such massive competitors like Pfizer (PFE) and Johnson & Johnson (JNJ) but also other healthcare heavyweights, such as Regeneron (REGN), AstraZeneca (AZN), Eli Lilly (LLY), and Merck (MRK), the best-case scenario for Moderna is to launch its COVID-19 vaccine before its peers.
Considering the progress it has made so far and the 208% jump in Moderna’s shares this year, it looks like investors anticipate that the company can win the COVID-19 vaccine race and capitalize on its future cash-making machine.
After all, no other biotechnology stock has taken more advantage of this health crisis than Moderna. The company exploded from having the biggest IPO in biotechnology history to now being celebrated as the COVID-19 vaccine leader.
Moderna grew from being a biotechnology company worth roughly $4 billion to $5 billion to an impressive $25 billion frontrunner in a few months’ time.
This is especially impressive since Moderna commanded this kind of valuation without having any approved product in the market. In fact, this clinical stage biotechnology company is valued more than several companies with marketed treatments.
While it has no product in the market today, Moderna actually has a robust pipeline that boasts 22 mRNA candidates, with 12 of these already in clinical studies. The lineup includes potential vaccines for the Zika virus along with a promising oncology pipeline.
Prior to the COVID-19 pandemic, Moderna’s lead candidate was its cytomegalovirus (CMV) vaccine called mRNA-1647. CMV, which affects almost 80% of adults in the US alone, is caused by a virus related to those that cause chickenpox and mononucleosis.
Moderna expects the Phase 2 study analysis for mRNA-1647 to be completed by the third quarter of 2020, with Phase 3 set to start by early 2021.
The company is also working with fellow biotechnology companies on potential cancer vaccines.
So far, Moderna has been focusing on two candidates which are also currently undergoing Phase 2 testing.
The first candidate is called mRNA-4157, which is a personalized cancer vaccine developed for melanoma patients.
Moderna is evaluating the combination of this vaccine with Merck’s top-selling cancer treatment Keytruda. This could turn out to be a potent combination considering Keytruda’s track record.
The second candidate is a collaboration with AstraZeneca. The latter licensed the rights to one of Moderna’s heart disease drug candidate called AZD8601. If successful, this drug will be marketed to patients in need of coronary artery bypass grafting (CABG) surgery.
Riding the momentum of its COVID-19 vaccine program, Moderna conducted a secondary stock offering last May. With $1.34 billion in gross proceeds from that sale alone, the company ensured that it’s well-capitalized to fund its development programs.
While its $25 billion market capitalization is pennies compared to fellow COVID-19 vaccine leaders JNJ and Pfizer, the smaller biotechnology company is definitely giving these behemoths a run for their money.
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)
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.
