Mad Hedge Biotech & Healthcare Letter
March 23, 2021
Fiat Lux
FEATURED TRADE:
(THIS ISN’T THE TIME TO HIT THE PANIC BUTTON)
(AZN), (PFE), (BNTX), (ALXN), (MRK), (RHHBY)
Posts
Everybody will have heard about the issue in Europe these days, with more countries suspending dosing of the COVID-19 vaccine from AstraZeneca (AZN) and Oxford.
However, I think gaining clarity over the situation is important.
I haven’t been the greatest advocate of the AstraZeneca vaccine because its initial rollout was, to put it mildly, botched.
At the time, it was difficult to determine just how efficacious the vaccine, AZD1222, really was, and the latest figure I heard is that it’s 60% effective.
While the European Medicines Agency declared AZD1222 as safe, many member states of the EU seem to disagree, pointing out the reports of blood clotting issues after dosing.
I can see several apparent levels of this concern, but the most pressing, clearly, is medical.
The main problem that the experts are figuring out isn’t about the fairly common blood clots, which actually occurred at background levels and can generally be observed among elderly folks.
Their focus is the extremely rare autoimmune disorder that’s triggered when the body starts aggressively destroying the platelets needed for clotting.
That particular condition is hard to treat and can even be fatal.
Although they haven’t zeroed in on the specifics of the problem just yet, the experts agree that the blood clot issue is caused by some sort of overreaction in the immune system.
The stimulus for this reaction is still under review, but there’s a growing consensus that it could be genetic predisposition in a rare group of people.
This could be the same case as the doctor in Florida who died because of his immune system’s overreaction, which was triggered by the vaccine from Pfizer (PFE) and BioNTech (BNTX).
That’s not conclusive though, since it’s the only case cited in the United States.
The experts also pointed out that the condition is extremely rare, which was why it was not observed even in the Phase 3 trial of AZD1222.
While this is clearly a medical issue, there’s also an image issue for AstraZeneca to think about. How does this negative news on AZD1222 affect the stock?
Here’s a key point to keep in mind when analyzing AstraZeneca’s potential: The company is not selling AZD1222 for a profit while we’re going through the pandemic.
That means that suspending the dosing of AZD1222 won’t hurt AstraZeneca’s profit for 2021.
However, that doesn’t mean that AZD1222 has absolutely no effect on the company’s standing.
If anything, AZD1222 is an earnings opportunity for AstraZeneca in the future because the company’s expected to raise prices and generate a profit after the pandemic.
To underscore this goal, AstraZeneca has actually been ramping up capacity to manufacture at least 3 billion doses every year.
Considering this target, AstraZeneca is clearly signaling that it has the infrastructure to become a dominant player—if not the ultimate market leader—in the coronavirus vaccine sector.
If the issues with AZD1222 are resolved, then AstraZeneca holds a product that could rake in billions in revenue in the years to come.
Notably, AstraZeneca’s shares haven’t budged much regardless of the vaccine news released.
Since April 30, which was the day that the company announced its plans to join the COVID-19 vaccine race, AstraZeneca stock has fallen by roughly 6%.
In the past 11 months, which was filled with ups and downs for AZD1222, and up until the European countries suspended dosing in March 2021, the shares barely changed.
On the whole, AstraZeneca isn’t exactly known for massive one-year gains.
Rather, investors enjoy long-term wins, as seen in the company’s impressive 75% climb in over the past five years.
So far, AstraZeneca has 38 candidates in its pipeline queued for Phase 1 trials, 54 are slated for Phase 2, and 41 are lined up to go through Phase 3.
To fight off stagnation, AstraZeneca acquired biotechnology company Alexion Pharmaceuticals (ALXN) for a whopping $39 billion last December.
This deal offers a major expansion in AstraZeneca’s portfolio because Alexion brings with it its famed rare disease drug Soliris, which generates approximately $1 billion in revenue every quarter.
For 2020 alone, Alexion was estimated to add up to $5.95 billion in sales.
By 2025, AstraZeneca projects that Alexion will be on track to consistently contribute double-digit growth in its annual revenue.
It’s reasonable to say that AstraZeneca is one of the frontrunners in the COVID-19 race.
However, the past weeks have seen the company’s woes multiply due to questions on AZD1222’s side effects.
It’s worth reminding ourselves though why huge biopharmaceutical companies like AstraZeneca, Pfizer, Merck (MRK), and Roche (RHHBY) are not sensitive to these vaccine updates: They do not rely on their vaccine revenue alone for growth.
AstraZeneca markets an extensive array of products, which include eight blockbuster drugs.
In 2020, the company’s sales climbed by 10% to reach over $25 billion year-over-year.
Therefore, the reports on AstraZeneca’s AZD1222 isn’t a cause for alarm. The company’s overall portfolio is well-positioned to drive profit higher in the next several years.
More importantly, if AstraZeneca’s track record serves as any indication, then long-term shareholders should remain optimistic about the company’s growth trajectory.
Mad Hedge Biotech & Healthcare Letter
March 16, 2021
Fiat Lux
FEATURED TRADE:
(A BARGAIN BUY STOCK)
(NVAX), (PFE), (MRNA), (JNJ), (SNY)
Biotechnology stocks have been going through a rough patch in the past weeks.
These previously unstoppable stocks have trailed the same path as the market in a sell-off, which has some of their investors fighting to keep calm.
In fact, the iShares Biotech Nasdaq ETF slid over 9% in the past month—a fall that affected some players who experienced all-time highs or enjoyed four-digit gains in 2020.
Inasmuch as all these sound discouraging, the decline might actually offer an opportunity.
Now, investors can snatch up some excellent stocks at pre-pandemic prices.
Among the biotechnology stocks that have dropped more than 28% to date from their latest high points, I find Novavax (NVAX) to be one of the most promising.
Novavax rose to over 2,700% in 2020, with the stock extending its gains well into 2021.
In the first five weeks of the year, Novavax jumped 186% following positive data from the Phase 3 trial of its COVID-19 vaccine, NVX-CoV2373, in the UK.
NVX-CoV2373 is widely anticipated to be the next COVID-19 vaccine candidate to win major regulatory approval.
Its Phase 3 study in the UK showed that NVX-CoV2373 was 96.4% effective against mild, moderate, and even severe cases of COVID-19 caused by the original strain of the coronavirus.
When tested against the “UK variant,” NVX-CoV2373 showed 86.3% efficacy.
Meanwhile, NVX-CoV2373 was found to be 55.4% efficacious against the “South African” variant.
Overall, NVX-CoV2373 proved to be 100% effective in protecting patients from hospitalization and death. More importantly, the vaccine didn’t cause severe side effects.
Despite the promising results released, the biotech stock has slipped 46% since early February.
While some investors fret over the fact that rivals like Pfizer (PFE), Moderna (MRNA), and Johnson & Johnson (JNJ) have already started production and shipment of their vaccines, the developers of NVX-CoV2373 say there’s nothing to worry about.
NVX-CoV2373 doses are readily available and can be shipped as soon as Novavax gains regulatory approval.
More reassuringly, this vaccine candidate can be stored for months without any special handling.
While it hasn’t landed as many orders in the United States as its counterparts, Novavax has been securing its spot in the international markets.
The company has landed orders for roughly 200 million doses of NVX-CoV2373 for Canada, Australia, Switzerland, New Zealand, and the UK. It also has an agreement to supply 1.1 billion doses to the Serum Institute of India.
On top of these, Novavax has signed a deal to supply over 1 billion doses to COVAX, which is a global project initiated to secure fair access to vaccines for all countries.
Novavax has been boosting its manufacturing capacity as well, with the company ramping to produce over 2 billion doses of NVX-CoV2373 every year by mid-2021.
By comparison, Moderna is estimated to produce about 700 million to 1 billion doses this year.
In terms of revenue, Novavax hasn’t definitely discussed its pricing. What we know so far is the price paid by the US, which is $16 per dose.
Back of the napkin math says that brings the total to $4.8 billion for the orders from the US and the other countries so far this year and excluding the COVAX deal since the pricing might be substantially lower.
This is a massive revenue for a biotech company that doesn’t even have a product revenue yet.
Another exciting prospect is Novavax’s pipeline.
Right now, the company has another vaccine that can become a great revenue source: NanoFlu.
Before the pandemic broke, NanoFlu was actually the major reason investors flocked towards Novavax.
With its overwhelming performance against Sanofi’s (SNY) own FluZone Quadrivalent, NanoFlu has been slated for a myriad of commercial possibilities.
These include developing it as a combination vaccine with NVX-CoV2373 as well as with Novavax’s other vaccine candidate, with its experimental respiratory syncytial virus (RSV) vaccine.
Another program is looking into combining all three vaccines together.
Riding the momentum of its success with NVX-CoV2373, Novavax is also planning to develop vaccines for other coronavirus variants.
This could include a bivalent vaccine program, which is expected to commence by June 2021.
All these programs are positioning Novavax as a dominant leader in the vaccine market.
If you haven’t considered Novavax before, then now is a good time to look into the stock. This is a company that has billions in locked-in revenues coming in this year alone.
Basically, buying Novavax stock would get you revenue in the near future, new products that will generate additional sales, and pipelines that offer growth—and if you buy the stock on the dip, you’re getting all these at a bargain.
Mad Hedge Biotech & Healthcare Letter
March 9, 2021
Fiat Lux
FEATURED TRADE:
(AN MRNA STOCK TO CONSIDER)
(BNTX), (MRNA), (PFE), (NVS), (SNY), (AZN), (JNJ), (NVAX), (MRK), (BMY), (REGN), (DNA), (CVAC), (FB), (TSLA), (GOOG)
Mad Hedge Biotech & Healthcare Letter
March 4, 2021
Fiat Lux
FEATURED TRADE:
ARE WE THERE YET: HOW THE JNJ VACCINE COULD BE THE ANSWER
(JNJ), (MRNA), (PFE), (BNTX), (MRK), (SNY)
Since the pandemic started, we’ve had two extremely similar COVID-19 vaccines approved: the mRNA vaccines created by Moderna (MRNA) and Pfizer (PFE) / BioNTech (BNTX).
Now, there’s another coronavirus shot that gained FDA approval: Johnson & Johnson’s (JNJ) adenovirus jab.
In fact, JNJ’s candidate received a unanimous approval from the FDA—a first among the COVID-19 vaccine developers.
Results showed that JNJ’s shot has 66% effectivity at preventing coronavirus infections and 85% effective at blocking severe COVID-19 cases when allowed at least four weeks to take effect.
Taken at face value, the numbers from JNJ’s trials may not seem as impressive as the two-shot vaccines of Moderna or Pfizer, which both demonstrated efficacy results of over 94% in their 2020 reports.
However, it’s important to not make any conclusions based on incomplete data.
After all, drawing comparisons among different vaccine studies performed at different periods is practically comparing apples to oranges.
That’s why Dr. Anthony Fauci and other experts declared that they’ll just take whichever vaccine shot they could avail of.
Actually, the JNJ vaccine may be the ideal option for some people.
Since the JNJ vaccine shows less severe reactions compared to Pfizer and Moderna’s vaccines, this could be preferable for people who couldn’t tolerate the side effects.
Although the side effects of Pfizer and Moderna are temporary, some people need to take days off to recover. Sadly, not everyone has the luxury to do that.
The fact that it’s a single jab vaccine makes it an attractive option for young and healthy individuals, who can’t afford to go back to get a second shot.
It’s also less fragile and can be stored in a regular fridge for three months without the need for any hyper-cold storage system like the mRNA vaccines require. This would make it an attractive option for rural areas.
Plus, JNJ tested its candidate at the height of the pandemic. That means the numbers the company released could have been affected by the situation at the time.
Although JNJ’s vaccine does not completely get rid of the disease, it delivers on the promise of protecting the patients from the worst possible scenarios of COVID-19: hospitalization and death.
Basically, the JNJ vaccine is cheap to manufacture as well as pretty simple to administer and get.
People can get some dependable viral protection within a span of four weeks, without the need to return for a second jab.
As a bonus, the JNJ vaccine could even protect you better from the new variants that are starting to spread fast.
Despite the $410 billion market capitalization of JNJ though, it looks like the New-Jersey-based giant isn’t up for the massive rollout the world expects from its vaccine.
This is where Joe Biden steps in.
With the goal of having every American vaccinated by the end of May, Biden tapped Merck—a fierce rival of JNJ—to help out with the production.
While Merck’s own COVID-19 vaccine program was shut down, this company remains the leading vaccine developer across the globe.
This means it knows a thing or two about fast-moving mass production during outbreaks—and this is exactly the kind of expertise JNJ needs.
If things work out, JNJ should be able to produce 94 million doses by the end of May—roughly 7 million doses ahead of what’s stipulated in its contract—and the full 100 million by June.
This arrangement isn’t anything new. Since the COVID-19 pandemic, competitors have been joining forces to find ways to put an end to the crisis.
In January this year, Sanofi (SNY) announced that it would be collaborating with BioNTech to help manufacture additional doses of the COVID-19 vaccine it developed with Pfizer.
When JNJ receives authorization from the EU as well, Sanofi would also be there to help with the production.
The JNJ vaccine could just be the escape hatch we’ve all been waiting for since the pandemic started.
With this FDA authorization, we’d be able to vaccinate millions more at a breakneck speed.
Mad Hedge Biotech & Healthcare Letter
March 2, 2021
Fiat Lux
FEATURED TRADE:
(ANOTHER PLAYER JOINS THE ALZHEIMER’S DISEASE DRUG RACE)
(SAVA), (PFE), (HLUYY), (LLY), (AVXL), (CRTX), (BIIB), (GILD)
Over 5.8 million people in the United States live with Alzheimer’s disease, and there are at least 487,000 new cases recorded every year.
Sadly, there has been no new treatment approved for this condition since 2003.
It isn’t for the lack of trying though.
In fact, large-cap biotechnology companies like Pfizer (PFE), H Lundbeck A/S (HLUYY), and Eli Lilly (LLY) have tried their hands at coming up with a drug to treat Alzheimer’s disease.
Unfortunately, none of them succeeded.
Amid the failure of these industry giants to develop a cure, a small-cap biotechnology company based in Austin, Texas has emerged with a potential answer to the problem.
Cassava Sciences (SAVA), which has a market capitalization of $2 billion, is offering investors a different direction—and its efforts haven’t gone unnoticed.
Over the past 12 months, Cassava stock rose by a whopping 668%.
The overwhelming interest in the stock is understandable.
In February, Cassava released promising reports about its own Alzheimer’s drug candidate, Simufilam.
Patients who took Simufilam for six months showed 10% improvement on their cognition tests, while their dementia-related behavior improved by 29%.
The next stage would be for Cassava to go through Phase 3 of the study for Simufilam.
Interestingly, the success of Simufilam’s trials has not only benefited Cassava but also several smaller biotechnology companies working on Alzheimer’s disease treatments.
Specifically, Anavex Life Sciences (AVXL), which only has a market capitalization of almost $900 million, gained an impressive 129.4% boost.
Meanwhile, Cortexyme (CRTX), which has a market capitalization of $1.07 billion, rose by 57.8% this year following the positive data release.
While Cassava’s results are definitely worth looking into, it’s critical to understand the limits of the data the company has provided the public thus far.
My caution against Cassava at this point is not based on the belief that its Alzheimer’s disease program will fail.
Rather, I’m wary of the stock because its value right now is heavily based on the misunderstood perception that Simufilam has already succeeded.
Looking at the current data from the company, I believe that the skyrocketing price at this point remains unjustified.
It’s important to keep in mind that the FDA will not grant approval to a drug unless it shows satisfactory effectiveness in Phase 3 clinical trial.
A fairly recent example of a cautionary tale is the fanfare generated by Biogen (BIIB) when it released promising data for its own Alzheimer’s drug, Aducanumab.
However, this isn’t to say that Simufilam won’t make it, or that it will experience the same issues faced by Biogen.
This simply means that valuing this stock requires a more sober assessment. It’s challenging to determine its actual value right now with all the speculative fever surrounding it.
Remember, clinical trials for Alzheimer’s disease would set a company back roughly $1.8 billion on average.
It also typically takes more than four years to complete. At this point, Cassava only has approximately $94.3 million in cash.
This means it would need to either land a development partner to help shoulder the expenses or sell additional stock to come up with additional funds.
The Alzheimer’s drug market is massive, which is a clear indicator of the dire need in this space because there remain no reliable drugs available.
On the low end of the estimate, the global Alzheimer’s drug sales is projected to be $3.5 billion back in 2018.
On the high end, the number could reach $4.9 billion in 2013 to over $13.3 billion by 2023.
What are the prospects of an effective Alzheimer’s disease drug? Let’s go back to Biogen.
Its Aducanumab, which never managed to release impressive data, still estimated peak sales of roughly $4.2 billion.
Back of the envelope math says that an approved, safe, and effective treatment would undoubtedly generate blockbuster multi-billion dollar sales.
After all, large-cap companies pay a premium for exclusive rights to promising drugs.
To use an approved exclusive drug as an example, let’s take a look at the September 2020 deal between Immunomedics and Gilead Sciences (GILD).
Prior to the deal, Immunomedics developed an exclusive and promising chemotherapy drug called Trodelvy.
Like Aducanumab, that treatment was valued to rake in $4 to $5 billion in peak sales.
Seeing the potential, Gilead Sciences bought out Immunomedics to get Trodelvy.
The deal? It was worth $21 billion, or approximately 100x where Cassava trades when 2021 started.
Although it’s difficult to determine how much Cassava would eventually be valued, the sales for its Alzheimer’s drug should project better numbers than the regularly doubted Aducanumab.
The bottomline is this: Cassava is a promising stock that offers an Alzheimer’s disease drug candidate that reported better results than what the big players in the industry achieved so far.
Investors should expect volatility from this company in the next few months or even years as it enters a crucial stage: the Phase 3 trials, otherwise known as the drug development graveyard.
Mad Hedge Biotech & Healthcare Letter
February 25, 2021
Fiat Lux
FEATURED TRADE:
(AN UNDER THE RADAR BIOPHARMA PLAY)
(ALNY), (PFE), (BNTX), (MRNA), (NVS), (GME), (BX)
