Mad Hedge Biotech and Healthcare Letter
July 25, 2024
Fiat Lux
Featured Trade:
(REVERSING THE FOG)
(SAVA), (ESALF), (BIIB), (LLY), (RHHBY), (ACIU), (AVXL), (ATHA)
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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
April 19, 2022
Fiat Lux
Featured Trade:
(A BUDDING UNDERDOG TO DOMINATE THE ALZHEIMER’S BATTLE)
(SAVA), (BIIB), (LLY), (RHHBY), (ABBV), (AMGN)
One of the most significant unmet medical needs worldwide is the treatment of Alzheimer’s Disease (AD).
With over 6 million people affected in the US alone and roughly 40 million globally, this number is projected to double by 2050 as the population ages and more individuals live longer lives.
That’s why it comes as no surprise that even though the Centers for Medicare & Medicaid Services decided to limit the coverage of Biogen’s (BIIB) AD drug, Aduhelm, more and more drugmakers continue to move forward with their own candidates.
Eli Lilly (LLY) continues to work on Donanemab, which could be available for review by mid-2023. Meanwhile, Roche (RHHBY) is anticipated to release data on Gantenerumab by the end of 2022.
Among the drugmakers pursuing this field, one name continues to rake in positive reports: Cassava Sciences (SAVA).
Cassava’s lead AD drug candidate is Simufilam, a small oral pill. Thus far, this has shown no safety issues and even released the best clinical AD data.
Notably, this is the only treatment that demonstrated tangible cognitive improvement for longer than 6 months in the clinical studies for AD.
The fact that Cassava’s candidate bested Donanemab and Gantenerumab, which both received breakthrough designations, and Aduhelm, which got an accelerated approval, indicates its candidate’s strong potential.
Between their promising results, convenient storage of the pill, easy dosing method, impressive safety data, and the vast unmet medical market, Simufilam could very well be hailed as the best-selling AD treatment the moment it gains approval.
Another indicator of Simufilam’s promise is the lack—or even absence—of insider trading within Cassava in the past years.
Typically, company insiders know more about the projects than anyone else. Strong insider selling is generally followed by a fall in a company’s stock price.
This has not been spotted anywhere in Cassava, with multiple insiders taking on very big stakes in the company.
However, the strongest indicator for Cassava’s impending win is Simufilam being in clinical progression. In fact, it’s already dosing in Phase 3 trials.
While other drugmakers working on an AD treatment may have promising options, the earlier a candidate is in the clinical trials, the higher the risk of failure and the longer it’ll take to be commercialized.
Each step forward in clinical trials is basically a way to “de-risk” the candidates, which leads to an increased value of the company.
Naturally, one of the questions raised when dealing with a biotech not as large as AbbVie (ABBV) or even Amgen (AMGN) concerns financial health.
Cassava’s recent financial filings showed that the company has roughly $240 million in cash and $0 debt.
Looking at their workflow, Cassava typically burns about $9 million every quarter.
As they ramp up their Simufilam trials, this is obviously expected to change.
After all, Phase 3 trials tend to cost more. So, the company anticipates a bump in spending to reach $12.5 million to $15 million per quarter this 2022.
While this is a substantial increase in capital expenditure, the jump remains within reasonable projections of the price of Phase 3 trials.
Taking into consideration the higher burn rate of roughly $15 million every quarter, Cassava would still have sufficient cash to operate for 16 quarters or 4 years without the need to resort to any additional financing rounds—at least for Simufilam.
If it fails, investors would already know whether Simufilam was a success.
That means if Cassava does pursue financing efforts, it would be for new projects and not for this particular AD treatment.
The market has not been kind to the biotechnology sector lately. It’s because the market tends to overreact to negative news.
Farsighted investors who recognize the enduring potential of a company—even at its vulnerable periods—can sometimes reap outsized returns if they turn out correct.
However, a successful strategy for some investors is to bet on companies that other investors are afraid to touch.
Nevertheless, it’s still prudent to keep in mind that investing in a roller coaster like Cassava means preparing yourself for an unexpected and possibly wild ride.
Mad Hedge Biotech and Healthcare Letter
January 11, 2022
Fiat Lux
Featured Trade:
(A GOOD STOCK TAINTED WITH CYNICISM)
(BIIB), (LLY), (RHHBY), (SAVA), (PRTA), (SAGE)
Last year, talks that Samsung was in the process of making a $42 billion buyout bid for Biogen (BIIB) brought about a mixture of cynicism, hope, intrigue, and excitement over a potential agreement.
It was especially intriguing since the reported offer was roughly 20% more than Biogen's expected $35 billion projected value.
Eventually, this report was proven to be false.
But the mere fact that it garnered such traction and interest only highlighted Biogen’s seemingly debilitated state following their failure to deliver on a promised unprecedented motherlode following the controversial Alzheimer’s drug approval and lukewarm reception.
If you recall, experts expected Biogen’s Alzheimer’s drug, Aduhelm, to generate double-digit billions in sales considering its list price of approximately $50,000 annually and the roughly 5.8 million individuals diagnosed with the condition in the US alone.
Theoretically, Aduhelm’s addressable market was projected at $325 billion.
At that time, Aduhelm was anticipated to rake in at least $50 billion per annum—a projection that was reflected in the 55% increase in the company’s share price.
However, things didn’t go according to plan. Aduhelm’s accelerated FDA approval caused so much uproar that it eventually affected the drug’s marketability as well.
In an attempt to temper the protests, Biogen cut the cost of Aduhelm to almost half, with the drug priced at $28,000 annually instead of its original $50,000.
Despite this, the projected mega-blockbuster’s sales continued to disappoint, with its third-quarter earnings in 2021 only reaching a measly $300,000.
This January, though, Aduhelm might have a shot at saving redemption courtesy of a potential Medicare reimbursement scheme.
Ultimately, however, the decision to offer any form of reimbursement scheme will not only affect Biogen but all the Alzheimer’s disease treatments in the future.
This is actually one of the critical points that many people missed when Aduhelm gained approval.
In focusing too much on the share price of Biogen, they appeared to have misinterpreted the true purpose of the FDA’s decision.
Granting an accelerated approval for Aduhelm did not mean that the FDA was handing the company a chance to generate double-digit billions in sales.
What the agency intended was to demonstrate support for Biogen's thesis regarding a potential Alzheimer’s therapy.
That is, you can slow down the patients’ cognitive decline by aiming to reduce the amyloid-beta levels in their brains.
The FDA’s decision has, in effect, opened the floodgates not only for Biogen’s Aduhelm, but for all the other biotechnology companies working on the same idea.
To date, the companies developing their own Alzheimer’s disease treatment include Eli Lilly (LLY) with Donanemab and Roche (RHHBY) with Gantenerumab.
Both are expected to release results within the year or early 2023.
Other names are Anavex Life Sciences (SAVA) and Prothena (PRTA).
Outside its Aduhelm efforts, Biogen has also been developing new treatments, as demonstrated by the $4 billion investment it made on its R&D last year.
One promising candidate that can deliver blockbuster sales is its major depressive disorder treatment Zuranolone, which is a collaboration with Sage Therapeutics (SAGE).
Meanwhile, Biogen is also working with Ionis (IONS) to develop a successor for its spinal muscular atrophy treatment Spinraza.
Since this top-selling drug is expected to lose patent protection in 2023, the company has spent $60 million to come up with a new and more potent version: BIIB115.
For context, Spinraza recorded more than $2 billion in sales in 2021.
At this point, investor sentiment on the company has stooped at an incredibly low level. Unfortunately, the weak rollout of its Alzheimer’s treatment has planted suspicions regarding Biogen’s entire pipeline.
However, I think this kind of pessimism is quite misguided.
While the reality is that Aduhelm may never achieve the mega-blockbuster status it was once believed to reach, the situation shouldn’t necessarily diminish the truth that Biogen is actually performing quite well—and it will continue to do just fine.
Mad Hedge Biotech and Healthcare Letter
November 23, 2021
Fiat Lux
Featured Trade:
(ALTERNATIVE ALZHEIMER’S DISEASE STOCKS FOR RISK TAKERS)
(BIIB), (SAVA), (AVXL), (BCRX)
Alzheimer’s disease is one of the most debilitating conditions not only for the patients, but also for their families.
This disease also comes with high costs at $290 billion in annual spending.
More alarmingly, over 6 million people are suffering from Alzheimer’s disease in the United States alone — and this number is expected to keep rising in the coming years.
The growing number of Alzheimer’s patients has resulted in an unmet need in the medical sector.
This demand was estimated to be worth $159 billion to $215 billion in 2010 and is expected to reach $379 billion to $500 billion by 2040.
Considering the burgeoning demand and the lucrative market, it comes as no surprise that several biotechnology and healthcare companies are focusing on coming up with treatments for Alzheimer’s disease.
So far, the most notable names on the list are Biogen (BIIB), Cassava Sciences (SAVA), and Anavex Life Sciences (AVXL).
In terms of market capitalization, Biogen is leaps and bounds away from the two with $37.78 billion. In comparison, Cassava Sciences has $2.13 billion while Anavex has $1.53 billion.
Hence, it’s incredibly tempting to simply declare Biogen as the runaway frontrunner in this contest.
The fact that the company’s Alzheimer’s disease treatment, Aduhelm, received an FDA approval obviously pushes it further ahead as well.
Meanwhile, its closest competitor Cassava Sciences’ Simufilam has yet to commence with its Phase 3 clinical trial.
However, it’s too soon to discount the competition.
Aside from Cassava Sciences’ work on an Alzheimer’s disease treatment, this smaller biotechnology company is also working on another potential blockbuster product that goes hand in hand with Simufilam: SavaDx.
Basically, SavaDx is developed as a blood-based diagnostic test targeting Alzheimer’s disease.
The goal of this product is pretty straightforward: to detect the disease long before its symptoms manifest.
This is a remarkable idea since it could offer potential patients the opportunity to aggressively seek treatment early on when the odds of achieving a successful intervention against Alzheimer’s disease are at their peak.
Long term, SavaDx could be instrumental in segmenting the patient population, which means medical professionals can develop more target-specific treatments to address the needs of every subpopulation more effectively.
Apart from Cassava Sciences, the emergence of Anavex Life Sciences in the neurological disorder space has been embraced by investors as well.
Anavex’s candidate, ANAVEX 2-73, doesn’t concentrate solely on Alzheimer’s disease.
It’s also developed as a potential treatment for Rett syndrome and Parkinson’s Disease Dementia (PDD).
While ANAVEX 2-73 has yet to gain regulatory approval, the positive results from the trials have boosted the company’s share price by 4-fold since 2020.
Considering the slowly crowding space of Alzheimer’s disease, Anavex’s move to pursue Rett Syndrome is an excellent strategy.
Rett Syndrome is a severe neurological condition that typically affects girls. Most cases are triggered by a gene mutation necessary for the development of brain nerves.
Thus far, the FDA has granted ANAVEX 2-73 with the fast track and orphan drug designation, particularly for its Rett Syndrome indication.
In terms of the market opportunity for Rett Syndrome, ANAVEX 2-73 could rake in $1 billion annually for this indication alone.
At the moment, there are roughly 11,000 Rett Syndrome patients in the US.
Given its status, ANAVEX 2-73’s pricing is expected to follow the same trend as the other rare disease drugs, like BioCryst Pharmaceuticals’ (BCRX) angioedema treatment Orladeyo which is priced at roughly $495,000 annually.
This puts ANAVEX 2-73 in the $500,000 range each year.
Overall, both Cassava Sciences and Anavex offer compelling cases that make them attractive alternatives for speculative investors looking elsewhere for an Alzheimer’s disease stock.
Meanwhile, buy-and-hold investors might still find Biogen more appealing long term because it has a more diverse pipeline and an approved (albeit controversial) product in Aduhelm.
Mad Hedge Biotech & Healthcare Letter
June 8, 2021
Fiat Lux
FEATURED TRADE:
(THE BIGGEST NEWS IN BIOTECH TODAY)
(BIIB), (ESALY), (LLY), (RHHBY), (DNLI), (SRPT), (IONS), (ICPT), (SAVA), (ANVS), (CI), (CVS)
It’s not typical for stock market news to alter the lives of millions of people across the globe, but this is what Biogen (BIIB) managed to accomplish this week.
The company received accelerated approval from the US Food and Drug Administration (FDA) for its controversial Alzheimer’s disease treatment, Aducanumab.
The drug, which is now marketed as Aduhelm, marks a potential breakthrough medication for over 6 million Americans suffering from the debilitating illness and to possibly billions all worldwide.
Basically, Aduhelm targets what Biogen calls “a defining pathology of the disease” by decreasing the amyloid beta plaque levels in the brains of patients suffering from Alzheimer’s disease.
Biogen shares spiked by roughly 60% following the Aduhelm news, with the pop in the biotechnology stock even more impressive than what was initially predicted.
This latest FDA approval also brings a ray of hope for the biotechnology industry.
Biotech shares have been in a slump this year, with the SPDR S&P Biotech ETF (XBI) falling by 9.2% thus far.
Potential second-order effects of the Biogen win can easily be seen in other developers of Alzheimer’s disease treatments.
Although the moves may not be as dramatic as Biogen’s, several biotech companies benefited from the good news.
Directly benefiting from it is Japanese drugmaker Eisai (ESALY), which has been working with Biogen on Alzheimer’s disease treatment. This company’s American depository receipts climbed by 48.2% after the news broke.
Eli Lilly (LLY), which is also working on its own Alzheimer’s therapy, saw its shares go up 9.3%.
Even Roche (RHHBY), which is still in the early stages of its development of a similar treatment, enjoyed a 1.6% increase, while an under-the-radar biotech company, Denali Therapeutics (DNLI), experienced a 7.8% increase.
Other smaller companies that benefited from Biogen’s news include Sarepta Therapeutics (SRPT), Ionis Pharmaceuticals (IONS), Intercept Pharmaceuticals (ICPT), Cassava Sciences (SAVA), and Annovis Bio (ANVS).
In terms of pricing, Aduhelm is estimated to cost $56,000 per year.
Although there is still no definite number in terms of how much Aduhelm could generate in sales for the company, there have been early estimates prior to this news.
Before this accelerated approval, Aduhelm was projected to add at least $16 billion in market capitalization to Biogen.
If successful, the drug can contribute a minimum of $10 billion in sales annually—a performance that would make Aduhelm one of the best-selling drugs of all time.
At this price point as well, the drug could peak at $5.7 billion by 2027.
Understanding that the cost is too high for some, Biogen has been working on establishing partnerships with healthcare and insurance companies to help patients cover the expenses.
So far, Biogen has been negotiating with Cigna (CI) to come up with terms to make Aduhelm available to Alzheimer’s patients via a value-based contract.
That is, the pricing will be assessed based on how responsive the patient will be to the treatment.
Biogen has also been working on collaborating with CVS Health (CVS) to develop more efficient ways to implement cognitive screenings in urban markets.
The two companies have been looking into boosting testing within underserved communities to improve early diagnosis, with the project commencing by September.
Some cities included in this initiative are Washington, D.C., Los Angeles, Dallas, Chicago, South Carolina, Atlanta, New York, Detroit, and Philadelphia.
Biogen has finally regained its momentum thanks to this accelerated and unprecedented approval.
That means we can expect Biogen to leverage this massive revenue stream to round out the rest of its programs and boost its R&D, as well as possibly compensating its shareholders with share buybacks and even dividends in the second half of this decade.
