Mad Hedge Biotech and Healthcare Letter
August 29, 2024
Fiat Lux
Featured Trade:
(ONE TEST TO RULE THEM ALL)
(ILMN), (BAYRY), (LLY), (MRK), (BMY), (AZN), (RHHBY), (NVS), (GH), (TEM), (TMO)
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“One test to rule them all, one test to find them, one test to bring them all, and in the lab bind them,” the scientists at Illumina (ILMN) whispered – probably.
Their latest creation just got the FDA nod, and it's set to turn the world of cancer diagnostics on its head. It's as if Gandalf himself handed oncologists a palantír that reveals tumors' deepest secrets.
For those less versed in Middle-earth lore, this is like inventing a universal remote for tumor profiling, and oncologists can't wait to start channel surfing.
Now, you might be thinking, "What's the big deal?" Well, let me break it down for you.
This test, called TruSight Oncology Comprehensive (TSO for short), is the first FDA-approved genomic in vitro diagnostic kit that can make pan-cancer companion diagnostic claims.
In plain English, that means it's a single test that can be used across multiple cancer types. We're talking about a game-changer in precision oncology here.
Let's get into the nitty-gritty. This TSO test is a beast. It screens for a whopping 517 genes and provides comprehensive information on tumor mutational burden (TMB) and microsatellite instability (MSI).
These are crucial biomarkers that help determine how a patient might respond to immunotherapies. The breadth of data this single FDA-approved test can collect is unprecedented.
Now, you might be wondering, "Haven't we had companion diagnostics before?" Sure, but they've typically been limited to specific drugs or cancer types.
This pan-cancer test from Illumina is different. It can be applied to a wider range of solid tumors, and let me tell you, oncologists are loving it.
In fact, about 39% of U.S. oncologists have already said they strongly prefer using multi-gene panels over single-gene tests for guiding treatment decisions. That's a clear signal that there's demand for comprehensive diagnostic solutions like TSO.
Illumina's been busy across the pond, too. A version of this test has been available in Europe since 2022. But the U.S. version's got some new tricks up its sleeve.
It can help identify patients who might benefit from specific immunotherapies, including Bayer's (BAYRY) Vitrakvi and Eli Lilly's (LLY) Retevmo. The latter is a new addition compared to the EU version of the test.
Let's talk about these therapies for a second. Vitrakvi is used for adult and pediatric patients with certain NTRK mutations, regardless of their type of cancer. That's pretty cool, right?
But here's the kicker - these NTRK gene fusions are only found in about 0.1% to 0.3% of solid tumors, and they're tough to detect.
TSO's ability to scan both RNA and DNA means it can find multiple forms of this biomarker. That's a big deal for companies like Bayer, who've sometimes struggled to find eligible patients for this targeted therapy.
But Illumina's not resting on its laurels. They've got a growing pipeline of companion diagnostic claims in development, working hand in hand with drugmakers. They're planning to seek these in future regulatory submissions.
You see, Illumina's been playing the long game, forging partnerships with big pharma to co-develop companion diagnostics that align with targeted therapies.
Take their 2019 partnership with Merck (MRK), for instance. They teamed up to develop and commercialize a companion diagnostic using Illumina's TruSight Oncology 500 assay.
The goal? To identify genetic mutations in cancer patients that would respond to Merck's cancer drugs like Keytruda. This partnership boosted the adoption of Illumina's NGS platform in clinical oncology settings, contributing to both companies' growth.
The market liked what it saw at the time. Illumina's stock got a nice bump following the partnership announcement. And why wouldn't it?
The deal strengthened Illumina's position in the oncology diagnostics market, which is projected to grow at a CAGR of 12.4% from 2023 to 2030.
But Merck's not the only dance partner Illumina's got. They've also teamed up with Bristol-Myers Squibb (BMY) to use their TSO 500 assay as a companion diagnostic for immuno-oncology therapies.
This collaboration expanded Illumina's reach into new oncology applications, allowing BMY to use the TSO platform to identify patients most likely to benefit from its immune checkpoint inhibitors.
And there's more - Illumina's also forged partnerships with AstraZeneca (AZN), Roche (RHHBY), and Novartis (NVS) to develop companion diagnostic tests.
Next, let's talk numbers. Each new FDA-approved indication could potentially add $100 million to $200 million annually to Illumina's revenue. That's no chump change.
Unsurprisingly, Illumina's not the only player in this game.
Companies like Foundation Medicine (a Roche subsidiary), Guardant Health (GH), Tempus (TEM), Caris Life Sciences, Thermo Fisher Scientific (TMO), and GRAIL (another Illumina subsidiary) are all working towards pan-cancer or multi-cancer diagnostics.
Still, Illumina's TSO test is the first to secure FDA approval for pan-cancer companion diagnostic claims. This lead could translate into a significant market advantage.
Actually, Illumina already holds more than 70% market share in the global NGS market as of 2022. This means it’s well-positioned to benefit from this growth, and this latest FDA approval could further consolidate its market dominance.
Speaking of the FDA, they’ve been busy too. They've ramped up their support for precision medicine in recent years, approving a growing number of companion diagnostics and genomic tests.
From 2017 to 2021, they approved over 25 new companion diagnostics, a significant increase from the 5-10 approvals per year in the early 2010s. And a substantial portion of these approvals has been for oncology-related tests.
In 2021 alone, 68% of the FDA's new drug approvals were for cancer treatments.
Now, let's zoom out and look at the bigger picture. According to the World Health Organization, there were an estimated 19.3 million new cancer cases and 10 million cancer deaths worldwide in 2020.
The global cancer burden is expected to rise to 28.4 million cases by 2040, a 47% increase from 2020.
In the U.S., about 1.9 million new cancer cases are expected to be diagnosed in 2023.
The economic impact is also staggering. The economic burden of cancer in the U.S. was estimated at $157 billion in 2020, and it's projected to increase to over $246 billion by 2030.
These numbers stress the growing need for early detection and personalized treatment solutions.
But, unlike other companies, here's where advanced diagnostics like Illumina's TSO can make a difference. By ensuring patients receive the most effective treatments based on their genetic profiles, these tests can reduce unnecessary treatments and improve outcomes.
Studies have shown that using precision diagnostics can lower overall healthcare costs by 15% to 20% by avoiding ineffective therapies and hospitalizations.
Essentially, what we're seeing here is more than just a new test. It's a glimpse into the future of cancer treatment - more precise, more personalized, and potentially more effective.
For patients, it could mean better outcomes. For healthcare systems, it could mean more efficient use of resources. And for us? Well, it could mean significant opportunities in a rapidly growing market.
As Gandalf might say, "All we have to decide is what to do with the time that is given us." Illumina's chosen to use their time crafting this powerful new tool.
The quest to conquer cancer continues, and Illumina’s TSO might just be the ring-bearer we've been waiting for.
Keep your eyes peeled, fellow adventurers. The journey into precision oncology is only just beginning, and it promises to be an epic saga indeed.
Mad Hedge Biotech and Healthcare Letter
August 22, 2024
Fiat Lux
Featured Trade:
(BITING OFF MORE THAN THEY CAN CHEW)
(LLY), (NVO), (CTLT), (ZLDPF), (RHHBY), (AMGN), (PFE), (LZAGY), (TMO)
"If you build it, they will come." But what happens when they come before you've finished building?
That's the billion-dollar question facing the makers of GLP-1 weight loss drugs.
GLP-1 drugs, the newest darlings of the pharmaceutical world, are selling like hotcakes. Eli Lilly (LLY) and Novo Nordisk (NVO), the current heavyweights in this arena, raked in a whopping $10.4 billion and $6.85 billion respectively last year.
Basically, the demand is there, but the supply? Well, that's another story.
So far, Lilly and Novo have been throwing money at the problem like it's going out of style. We're talking billions here. Novo's earmarked $6.5 billion for production this year alone, while Lilly's already shelled out $5.3 billion to beef up its manufacturing muscle. They're expanding facilities faster than you can say "miracle weight loss drug."
But even that's not enough. Lilly admits the industry needs at least 10 to 15 dedicated sites to even come close to meeting demand.
It's like trying to serve a five-course meal to a packed restaurant with just one chef and a microwave.
And let's not forget about the price tag on these manufacturing sites. Novo just dropped $11 billion to buy three fill-finish sites from Catalent (CTLT). Talk about paying a premium for prime real estate.
While Lilly and Novo scramble to ramp up production, their manufacturing woes have created a window of opportunity for competitors eyeing a slice of the GLP-1 pie.
Boehringer Ingelheim and Zealand Pharma (ZLDPF) are closest to market with their Phase 3 drug survodutide.
Meanwhile, Roche (RHHBY) and Amgen (AMGN) aren't far behind in Phase 2. Even Pfizer's (PFE) dipping its toes in the water with an early-stage drug.
But here's where it gets interesting for us who want a piece of the action. These newcomers are facing a manufacturing dilemma of their own.
Do they build their own facilities and risk being late to the party? Or do they outsource and potentially lose control over production?
Some, like Boehringer and Roche, are already talking about using third-party manufacturers. It's like hiring a catering company instead of building your own restaurant – less upfront cost, but you're at the mercy of someone else's kitchen.
Enter the contract manufacturing organizations (CMOs), the unsung heroes of the pharmaceutical world who might just hold the key to unlocking the full potential of the GLP-1 market.
Let’s take a look at the big players in this space.
Lonza Group (LZAGY), with its $6.6 billion in annual revenue and 10% market share in biologics contract manufacturing, is a force to be reckoned with. They're not just sitting on their laurels either – they're pumping $850 million into a new biologics facility in Switzerland.
Then there's Thermo Fisher Scientific (TMO), the 800-pound gorilla of the industry. With a cool $44.9 billion in revenue last year and an 8% to 10% market share in contract manufacturing, they're a go-to partner for big pharma.
They've been on a shopping spree too, scooping up Pharmaceutical Product Development (PPD) for $17.4 billion to boost their manufacturing capabilities.
And, of course, let's not forget about Catalent. They might have sold some facilities to Novo, but they're still a major player with $4.8 billion in revenue last year. They're betting big on biologics, with plans to increase capacity by 40% by 2025.
As for those looking for growth potential, keep an eye on Samsung Biologics. They're the new kid on the block, with a 30% compound annual growth rate over the past five years and the world's largest single-site biologics manufacturing facility.
So, there you have it. The obesity epidemic is a tragedy, but it's also a trillion-dollar opportunity.
With half the population projected to be obese by 2030, this isn't just a health crisis—it's a financial frontier.
The GLP-1 market is poised to balloon to $130 billion, creating a feeding frenzy for those ready to capitalize on the supply squeeze.
But here's the real meat of the matter: in this gold rush, it's not just the drug developers who are striking it rich. The real winners are the manufacturers—those with the capacity to meet the insatiable demand. They're the ones handing out the "shovels" in this weight loss bonanza.
So while everyone else is focused on the flashy GLP-1 drugs, I suggest you also keep a watchful eye on these behind-the-scenes players.
Now, if you'll excuse me, I'm off to patent my groundbreaking idea: GLP-1-infused kale chips. Who says you can't have your cake and eat it too?
Mad Hedge Biotech and Healthcare Letter
August 15, 2024
Fiat Lux
Featured Trade:
(THE INCREDIBLE BULK)
(LLY), (NVO), (RHHBY), (AMGN), (PFE), (VKTX)
Mad Hedge Biotech and Healthcare Letter
July 25, 2024
Fiat Lux
Featured Trade:
(REVERSING THE FOG)
(SAVA), (ESALF), (BIIB), (LLY), (RHHBY), (ACIU), (AVXL), (ATHA)
Close your eyes and think back to your favorite childhood memory. Maybe it's the smell of your grandma's apple pie wafting through the kitchen, or the sound of your grandpa's belly laugh as he tickled you mercilessly.
Now imagine those memories being ripped away, one by one, until all that's left is a hollow shell of the person you once knew and loved.
That's the heartbreaking reality of Alzheimer's disease, and it's a fate that Rick Barry, the newly minted executive chairman of Cassava Sciences (SAVA), is determined to change.
You see, Barry isn't just some suit looking to make a quick buck. No, sir. This man's got skin in the game, and a personal connection to the fight against Alzheimer's that'll tug at your heartstrings.
His decision to join Cassava's board back in June 2021 was driven by a gut-wrenching story about his buddy's father, Buddy. This once-vibrant Navy fighter pilot and commercial airline captain was reduced to a shell of his former self by the cruel hand of Alzheimer's.
And folks, this ain't an isolated case. We're talking about 6.9 million Americans aged 65 and older living with this wretched disease in 2024, with that number set to double in the next 30 years.
Globally, over 55 million people are grappling with dementia, and Alzheimer's is the big, bad culprit in 60-70% of those cases.
While the situation is admittedly grim, Cassava Sciences offers a glimmer of hope: simufilam.
This experimental drug is Cassava's secret weapon, designed to whip a rogue protein called filamin A back into shape.
When filamin A goes off the rails in Alzheimer's patients, it wreaks havoc on brain function. But simufilam, like a disciplined drill sergeant, could get this unruly protein back in line, normalize cellular processes, reduce inflammation, and give synaptic function a much-needed boost.
Now, I know you're probably skeptical, but the Phase 2 trial results were nothing to sneeze at. A whopping 47% of patients saw their cognitive function improve, and the biomarkers of neurodegeneration and inflammation took a nosedive.
But the real moment of truth lies ahead in the Phase 3 trials, RETHINK-ALZ and REFOCUS-ALZ. These trials are the big leagues, with nearly 2,000 participants and top-line results expected by the end of 2024.
If simufilam can prove its mettle, it could be a game-changer for millions of Alzheimer's patients who are desperate for a breakthrough.
Of course, Cassava Sciences isn't the only horse in this race. The heavyweight contenders like Eisai (ESALF), Biogen (BIIB), Eli Lilly (LLY), Roche (RHHBY), and AbbVie (ABBV) are all jockeying for position, while smaller outfits like AC Immune (ACIU), Anavex (AVXL), and Athira Pharma (ATHA) are making some intriguing moves of their own.
But what really sets Cassava apart is the fire in their belly. When Barry says, "If you create great benefit for your patients, you'll create great value for your shareholders," you can tell he means business. This isn't just about lining pockets – it's about making a real difference in people's lives.
And let me tell you, the impact of Alzheimer's is staggering. Over 11 million Americans are providing unpaid care for their loved ones with Alzheimer's or other forms of dementia.
In 2023 alone, these unsung heroes clocked in a mind-boggling 18.4 billion hours of care, valued at a cool $350 billion.
And to make things worse, 70% of these caregivers are stressed to the max trying to coordinate care, while 66% are struggling to find resources and support. On top of that, 74% are also worried sick about their own health.
Financially, Alzheimer's is a beast that just keeps growing. In 2023, it drained $345 billion from the nation's coffers.
Fast forward to 2024, and that price tag is expected to hit $360 billion. And brace yourselves, because by 2050, we could be staring down the barrel of a $1 trillion problem.
So, is Cassava Sciences stock a slam-dunk investment? Well, that depends on your appetite for risk.
In the biotech world, the stakes are high, and the outcomes are never guaranteed. Simufilam's fate rests squarely on the results of those pivotal Phase 3 trials.
But one thing I can say with certainty is that Cassava Sciences has got guts. They're the underdog taking on Alzheimer's, armed with a potentially groundbreaking treatment and a whole lot of heart.
In a world where roughly 1 in 9 people over 65 are living with Alzheimer's, the impact of a successful therapy would be nothing short of seismic.
As investors, it's easy to get caught up in the cold, hard numbers. But sometimes, it pays to step back and consider the human element.
Behind every stock symbol, there are countless families praying for a miracle, tireless researchers burning the midnight oil, and brave souls like Rick Barry putting their money where their mouth is.
So, while I can't tell you to go all-in on Cassava Sciences just yet, I can tell you this: they're fighting the good fight. And in a world that often seems like it's gone completely off the rails, that's something worth getting behind. I suggest you buy the dip.
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 20, 2024
Fiat Lux
Featured Trade:
(VAX TO THE FUTURE)
(AMGN), (RHHBY), (BNTX), (MRNA), (GNCA), (IOVA)
