Mad Hedge Biotech and Healthcare Letter
March 24, 2022
Fiat Lux
Featured Trade:
(A BIOTECH STOCK POISED FOR A REBOUND)
(MRNA), (PFE), (BNTX), (AZN), (JNJ), (NVAX), (GSK), (SNY)
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Healthcare stocks have experienced an unusual run over the past few years. The sector was nearing scorching hot levels when the pandemic started, only to go ice cold by the end of 2021.
Nonetheless, seasoned investors in the sector know that solid companies will continue to grow at a steady pace despite the decline in their stock prices.
This is where the fun starts for some investors.
After all, we all enjoy a good bargain, especially when it comes to promising stocks. What makes it even more enticing is if the stock has a proven track record and solid prospects in its pipeline.
Based on these criteria, one name that readily comes to mind is Moderna (MRNA).
Since it reached its peak in August 2021, Moderna shares have fallen by over 60%. Despite these losses, the business is still regarded as one of the most promising companies in the sector. This means that the stock can recover soon.
Moderna is a significant mover in one of the hottest markets today: the COVID-19 vaccine sector. Since the pandemic started, the company has been able to generate billions of dollars in profit from its only commercialized product: mRNA-1273.
While the demand has been divided now due to the entry of other vaccine developers, Moderna still expects to earn at least $19 billion from its COVID-19 vaccine.
Before becoming a household name, not many people knew of Moderna’s existence. At that time, most weren’t even confident that the messenger-RNA vaccines would actually work.
In the early stages, Moderna was only rivaled by Pfizer (PFE) and BioNTech (BNTX) in this particular field. Meanwhile, the rest of the world was betting on other companies like AstraZeneca (AZN), Johnson & Johnson (JNJ), and even Novavax (NVAX).
As soon as the results came out, Moderna shares skyrocketed to unprecedented heights. In 2020, the company recorded a 434% growth.
However, recent times have not been as kind to Moderna. Investors now worry that this might be the reality, a.k.a. the post-pandemic sales.
This is far from the truth.
Admittedly, sales from the vaccine would dwindle over time due to competition and possibly even herd immunity.
In preparation for this eventuality, Moderna has been stocking up its pipeline. Recently, the company announced pivotal Phase 3 trials for two of its vaccine candidates.
One is for cytomegalovirus (CMV) and the other is for the respiratory syncytial virus (RSV).
Both candidates hold the potential to become blockbusters.
The RSV market is projected to become larger than initially anticipated, reaching roughly $10 billion. Given the promise of this sector, it comes as no surprise that Moderna has competitors. Sanofi (SNY), GlaxoSmithKline (GSK), and Pfizer are some of the biggest players here.
As for the CMV vaccine, the product has the potential to reach $2 to $5 billion in annual sales. Moreover, this program can be linked to other sectors like oncology and autoimmune diseases.
Other than these, Moderna has been developing its HIV vaccine. It already started with trials, with its first participant queued to receive the first dose of the experimental candidate.
This could be another massive revenue stream for Moderna as the annual spending on HIV is estimated to reach $500 billion globally.
Another candidate is Moderna’s flu vaccination program. However, this might be a more difficult path as the company faces strong challengers, including Pfizer, Novavax, and GSK.
In addition to these, the company is also working on Nipah and Zika vaccines. There are also plans for herpes simplex virus (HSV) and varicella zoster virus to join the roster soon.
Cornering the vaccine market is a good approach since Moderna has a tested and proven product dominating the industry today.
That is, no one is doubting the power and efficacy of mRNA-based strategy in vaccines.
More importantly, there is no question that Moderna is performing well in this field. This is an unshakeable and established strength that Moderna investors should be focusing on.
A seemingly unstoppable stock in the past few years, this company suddenly fell out of favor. Nevertheless, its prospects remain the same and it can still deliver significant revenue—something that’s expected to go on well into the future.
Mad Hedge Biotech and Healthcare Letter
February 17, 2022
Fiat Lux
Featured Trade:
(IS THIS THE SOLUTION TO ANTI-VAXXERS?)
(NVAX), (MRNA), (PFE), (BNTX), (SNY)
One of my old friends, a 45-year-old teacher, has long held the belief that getting vaccinated against COVID-19 is a terrible idea.
Despite the growing number of people getting jabbed, he still felt uneasy over the new mRNA technology applied in the two most widely used shots, Moderna (MRNA) and Pfizer (PFE) / BioNTech (BNTX).
His anxiety worsened when his neighbor was sent to the hospital following his second shot, especially after the doctors said that the official cause of the heart muscle inflammation was the vaccine.
No amount of convincing could change his mind regardless of how many times I explained that the condition was a rare and relatively mild side effect.
However, things seemed to have changed when he heard about the Novavax (NVAX) vaccine, Nuxavoxid.
Since Nuxavoxid uses a decades-long pre-existing protein-based platform instead of a novel approach, more and more people like my friend are starting to take interest and considering signing up for the vaccine.
Actually, this reaction can be observed not only in the US but also across the globe. Data suggest that previously wary individuals now feel more confident over a more established technology.
Novavax’s vaccine uses a recombinant protein technology, which has been around since the mid-1980s.
In fact, this has become the go-to or standard platform used in developing vaccines against Hepatitis B, cervical cancer, and even meningitis.
What does this mean for Novavax?
Considering that over half of the global population has already been inoculated, it’s safe to say that Novavax is late to the party.
However, recent reports showed that a fourth vaccine does not show any significant antibody increase. This isn’t particularly promising especially in light of the Omicron variant.
Moreover, the EMA warned that "repeat boosters every four months might actually weaken people's immune systems. Boosters can be done once, or maybe twice, but it's not something that we can think should be repeated constantly.”
This can be good news for the newcomer Novavax.
Since Novavax uses a recombinant nanoparticle technology, this approach might be considered more effective as a booster shot instead of using the same mRNA technology for a fourth jab.
So far, this is presumed as one of the major reasons for Israel’s—one of the leading countries in vaccine administration—decision to place an order for an alternative COVID-19 vaccine last January.
Instead of reordering from Pfizer or Moderna, Israel opted to get 5 million doses, with an option to add 5 million more, of Novavax vaccine to serve as the fourth booster for its population.
Given that Israel is ordering for its 9.4 million citizens, this deal would serve as an excellent source of real-life data for Novavax’s candidate and whether it can become the go-to choice for booster shots across the globe.
Before this development, Novavax’s projected 2022 revenue was at $4.94 billion. However, the recent regulatory approvals from various nations and advanced orders have the company adjusting this projection.
Needless to say, the possibility of Nuxavoxid practically monopolizing the booster shot market has dramatically bolstered expectations.
On top of these, Novavax has been simultaneously working on a flu vaccine, Nanoflu, that can rival Sanofi’s (SNY) FluZone.
Given that the market size for influenza is expected to grow from $6.5 billion in 2022 to $10.73 billion by 2028, and the fact that Nanoflu easily outperformed the leading product by 40% in clinical trials, it’s safe to say that this is yet another promising revenue stream for Novavax.
Overall, I think Novavax is a good long-term play. It’s important to remember, though, that Novavax’s profile is very close to Moderna and BioNTech.
That means investors interested in this stock must have boundless patience and a strong stomach for the volatility in the following months.
Looking at its excellent potential, it’s clear that the stock is undervalued. Hence, it would be wise for interested investors to buy the dip.
Mad Hedge Biotech and Healthcare Letter
December 14, 2021
Fiat Lux
Featured Trade:
(FROM AN UNKNOWN mRNA PIONEER TO BIG PHARMA PLAYER)
(BNTX), (PFE), (MRNA), (AZN), (JNJ), (SNY), (CVAC), (REGN), (MRK), (BMY)
Almost everything that could go right has gone right for BioNTech so far.
Its COVID-19 vaccine with Pfizer (PFE), Comirnaty, has been breaking records left and right, and more and more approvals in other countries are piling up.
Needless to say, BioNTech has transformed into one of the most profitable biotechnology companies with a rapidly growing cash stockpile.
Now, the company is up for another challenge: the Omicron variant.
Although BioNTech and even Moderna (MRNA) insist that they offer more than COVID vaccines, the reality is that their pipelines still have not reached the stage where they can generate as much revenue.
Hence, it is no surprise that their share prices have climbed since discovering the Omicron strain.
The emergence of this new mutation sparked another competition among COVID-19 vaccine developers, specifically in the mRNA segment dominated by BioNTech and Moderna.
Since news broke about the Omicron variant, these companies have been racing to come up with the most effective vaccine against it.
BioNTech holds a competitive advantage between the two since the company reportedly has been working with Pfizer on a vaccine candidate for this type of situation months before the discovery.
In comparison, Moderna has yet to determine where their candidate stands in terms of fighting off the new variant.
The same can be said about other vaccine developers like AstraZeneca (AZN) and Johnson & Johnson (JNJ).
What happens to their efforts if the Omicron variant turns out to be less dangerous and possibly closer to the common flu?
In this case, the vaccine developers would most likely boost the prices of their products 10-fold because then they’d end up with fewer orders to private customers instead of sealing agreements with governments.
The flu vaccine market is worth roughly $8 billion annually, while the COVID vaccination market is projected to bring in approximately $25 billion each year in the post-pandemic period.
Either way, this situation could offer speculative investors a solid stream of price catalysts.
The uncertainty will result in a higher valuation for BioNTech in the short term because the company has already proven its ability to deliver an effective vaccine within a short period.
Prior to its COVID work, BioNTech was actually known as one of the “Big 3” and a pioneer in the mRNA world. At that time, it shared this title with Moderna and CureVac (CVAC).
Since then, the segment has grown, and new challengers have joined the mRNA industry.
Some of the promising ones include China’s Abogen Biosciences, which managed to raise over $700 million in funding for its own mRNA COVID vaccine, and of course, Sanofi (SNY), which splurged in a $3.2 billion acquisition of Translate Bio to access the latter’s mRNA pipeline for cystic fibrosis and several genetic conditions.
Meanwhile, BioNTech has retained its focus on cancer, with 16 of the 18 programs targeting oncology in its Phase 1 pipeline.
If BioNTech successfully develops an mRNA treatment for cancer, they’ll be breaking into a massive and lucrative market.
By 2024, the market for cancer treatments is projected to grow and reach over $200 billion.
Apart from its work on oncology therapies, BioNTech is also known for its infectious disease pipeline, including vaccines for HIV, malaria, and tuberculosis. It’s also collaborating with Pfizer on 2 influenza vaccines.
By the end of 2021, BioNTech is anticipated to release 5 updates on its vaccine trials involving solid tumors that target head and neck cancer, melanoma, and colorectal cancer.
Other than Pfizer, the company has been working with Regeneron (REGN), Genentech, Merck (MRK), Bristol Myers Squibb (BMY), and Sanofi.
In terms of performance so far, BioNTech has raked in $15.2 billion in revenues for the first three quarters of 2021, with full-year earnings expected to reach $18.1 to $19.2 billion.
Overall, I view BioNTech as a long-term investment.
While many still see it as a pure COVID play, this German company is increasingly starting to act more and more like the Big Pharma organizations.
It’s realistically expecting that its profit-generating asset, Comirnaty, may not have a very long shelf life. Therefore, it understands the necessity to come up with new products to sustain its current valuation over the longer term.
Mad Hedge Biotech and Healthcare Letter
December 7, 2021
Fiat Lux
Featured Trade:
(GET READY FOR THE SECOND WAVE OF COVID-19 VACCINES)
(NVAX), (MRNA), (PFE), (BNTX), (JNJ), (AZN), (SNY)
Moderna (MRNA) and Pfizer (PFE) / BioNTech (BNTX) unquestionably rule the COVID-19 vaccine market these days.
These companies have amassed billions in quarterly revenue from their vaccine candidates, with Moderna expecting $18 billion and Pfizer/BioNTech anticipating $36 billion in annual sales this year.
Other than these two, Johnson & Johnson (JNJ) and AstraZeneca (AZN) offer COVID-19 vaccines, but these appear to be distant rivals to the mRNA contenders.
However, it looks like the COVID-19 vaccine market will soon get another competitor—one that has a solid potential to truly carve out a considerable share: Novavax (NVAX).
At this point, Novavax’s vaccine candidate has yet to gain authorization in major markets.
Its shares have also fallen by over 30% since it started in January this year. Nonetheless, the company is projected to turn things around starting this December.
For one, it has already started filing for regulatory approval in various countries and recently gained authorization in Indonesia and the Philippines. Meanwhile, it plans to file for approval in the US before 2021 ends.
To date, Novavax has secured $7 billion worth of advance purchase agreements for its vaccine by 2022.
But a more promising catalyst for Novavax lies in its proven technology.
This makes it notably distinct from Moderna and Pfizer’s vaccines. Simply put, Novavax isn’t offering new technology like the mRNA vaccine.
Rather, Novavax uses a tried and tested approach in the form of protein subunit vaccines. These constitute the very same technology used in vaccines that have been long available in markets, such as the Hepatitis B vaccine.
Considering the pushback in using new technology like mRNA, which comes from healthcare professionals and patients, the entry of a long-established vaccine technology would encourage more people to get the coronavirus jab.
Moreover, Novavax’s candidate can be stored at refrigerator temperatures. This is more convenient compared to the vaccines of Moderna and Pfizer, which require freezer temperatures.
The latest coronavirus variant, Omicron, brings about another catalyst.
Since the WHO announced Omicron’s presence last month, the entire world, including the stock market, has been rattled.
However, this announcement also served to light a fire under COVID-19 vaccine stocks.
After all, every problem can offer an opportunity. Omicron’s emergence has boosted the demand for COVID-19 vaccines.
While it’s never advisable to get the cart ahead of the horse, especially since the worries over the Omicron might be premature, it’s still reasonable to assume that the anxiety triggered by the news will most likely increase the popularity of vaccine stocks.
In the case of Novavax, the company is taking advantage of this exposure to announce that it is currently working on a candidate that’s potent against the new variant.
Beyond Novavax’s COVID-19 vaccine, the company has 8 more programs queued in its pipeline. Of these, 3 are in Phase 2/3 clinical trials.
These include ResVax and RSV F, which are vaccines against the respiratory syncytial virus (RSV). While adults can recover from RSV within weeks, this virus can be fatal to infants and children.
The most promising candidate is NanoFlu, which received a Fast Track Designation from the US FDA in early 2020. It also recorded top-line data against Fluzone from Sanofi (SNY), the leading flu vaccine today.
To give an idea of NanoFlu’s potential, Fluzone raked in $2.9 billion in sales in 2020—and it hasn’t even covered most of the market yet.
Considering NanoFlu’s Phase 3 clinical trials results, the product is estimated to generate more than $9.5 billion in global revenue by 2027.
Admittedly, Novavax investors have experienced a bumpy ride throughout 2021. However, it appears that the biotechnology company is on its way up, thanks to a couple of catalysts that lie ahead.
While I still think that Moderna and Pfizer are great stocks for long-term investments, these companies have already reaped the benefits of share performance. It may very well be Novavax’s turn to impress the market in the next few weeks.
Mad Hedge Biotech and Healthcare Letter
November 9, 2021
Fiat Lux
Featured Trade:
(A SAFE BET FOR MRNA TECHNOLOGY ENTHUSIASTS)
(BNTX), (PFE), (MRNA), (REGN), (SNY), (NVAX)
It was a case of being in the right place at the right time.
BioNTech (BNTX) has always been focused on mRNA technology, so when Big Pharma player Pfizer (PFE) knocked on its doors for a collaboration, this up-and-coming biotech company was more than ready to go.
We all know what happened after that. BioNTech and Pfizer became the first to bring a COVID-19 vaccine to the public.
And just like how the pandemic changed the fortune of Moderna (MRNA), the COVID-19 situation also served as proof of concept of BioNTech’s technology.
Looking at BioNTech’s history and recent performance, I can see several reasons to buy the stock.
Short term, one of the primary reasons to buy BioNTech is obvious: its overwhelming success in creating a COVID-19 vaccine.
BioNTech expects approximately $18.4 billion in revenue from its COVID-19 vaccine in 2021.
In its second-quarter earnings report, BioNTech and Pfizer disclosed that they already crossed the 1 billion mark in terms of the vaccine doses delivered globally.
In fact, BioNTech’s revenues beat the projected $2.35 billion, with the company generating $6.4 billion in sales for the second quarter of 2021 alone.
This is an impressive jump from the $47.54 million it recorded during the same period in 2020.
Considering the consistently high demand for the BioNTech-Pfizer vaccine, it’s reasonable to expect that the momentum will be sustained.
To date, an additional 200 million doses have been ordered by the US government. This is on top of the 500 million doses it initially bought under the current supply agreement.
Meanwhile, the EU’s orders for 2021 reached 660 million doses plus 900 million more for 2022 to 2023.
Depending on the situation, another 900 million doses might be added to these initial agreements.
Just between the US and the EU, BioNTech has already received orders for over 1 billion doses of COVID-19 vaccines for 2022 onward—a number that’s widely expected to go up when other nations place their orders as well.
So far, the two companies have sealed an agreement with a South African biopharmaceutical company, Biovac, to collaborate on the manufacture and distribution of the vaccine across the 55 member states of the African Union.
As for the South American area, the partners have recently signed a deal with a Brazilian biopharma company, Eurofarma Laboratorios, to cover the Latin American regions.
Moving with the long-term reasons to invest in BioNTech, one of the most convincing aspects is the company’s promising pipeline.
BioNTech is realistic enough that the demand for its COVID-19 vaccine will eventually plateau. That has been the expectation since the beginning, which is why the company has been leveraging the incredible cash flow through expanding its pipeline.
Actually, BioNTech is allocating roughly $1.05 billion for R&D expenses in 2021.
Some of the segments that BioNTech has been working on are regenerative treatments and products for infectious diseases, inflammatory conditions, and allergies.
The company is also developing potential cancer therapies. After all, curing cancer is considered the Holy Grail of mRNA-centered companies—an achievement that would undoubtedly catapult BioNTech’s stock to the top of the Big Pharma list.
One of the telltale indicators of BioNTech’s plan to focus on oncology treatments is its July 2021 acquisition of Kite’s R&D platform on TCR Cell solid tumor neoantigen T-cell receptor (TCR) along with its manufacturing plant in Maryland.
The driving force behind that deal is BioNTech’s desire to become a first-mover in the cell therapy space.
Basically, the company added ammunition to its pipeline to come up with individualized cancer therapies.
BioNTech also has a couple of mRNA-based solutions queued for Phase 2 trials this year.
One is FixVac BNT111, which is developed for melanoma and a collaborative effort with Regeneron (REGN). This candidate has shown promising results, with the possibility of being available for use to over 90% of melanoma patients.
Others include FixVac BNT113, which targets head and neck cancer, and FixVac BNT112 for prostate cancer.
Another promising candidate is its cancer vaccine, INeST BNT122, which BioNTech is working on with Genentech.
Apart from these, BioNTech is also looking at developing treatments for infectious diseases as another potential long-term growth pillar—a direction taken by its biggest competitor in mRNA-based solutions, Moderna.
Checking its pipeline, it looks like BioNTech plans to target malaria as its first project. It also has candidates for HIV, tuberculosis, and influenza.
BioNTech’s goal is to launch the first-ever mRNA vaccine against malaria. If all goes according to plan, the company plans to conduct clinical trials by 2022.
Meanwhile, its influenza vaccine program, which faces serious competition against Sanofi (SNY) and Novavax (NVAX), will be another collaborative work with Pfizer. The two companies plan to initiate human trials before the end of 2021.
Pretty much like Moderna, I look at BioNTech as a long-term play. Investing in this company requires patience and belief in the burgeoning mRNA space.
Overall, I think BioNTech is a safe bet for investors looking to dip their toes in the rapidly expanding mRNA world.
