Mad Hedge Biotech & Healthcare Letter
September 7, 2021
Fiat Lux
FEATURED TRADE:
(A LONG-TERM STOCK FOR PATIENT INVESTORS)
(REGN), (RHHBY), (BAYN), (SNY), (MRK), (BMY), (NTLA)
Mad Hedge Biotech & Healthcare Letter
September 7, 2021
Fiat Lux
FEATURED TRADE:
(A LONG-TERM STOCK FOR PATIENT INVESTORS)
(REGN), (RHHBY), (BAYN), (SNY), (MRK), (BMY), (NTLA)
While August ushered in the end of the “dog days of summer,” with temperatures generally at their highest throughout the US, some stocks might be just starting to get warmed up this September.
This is particularly true in the biotechnology industry.
Considering that the broad market indices are reaching historic highs, the biotechnology sector, caused by its relatively low valuation, is deemed one of the appealing targets for investors who truly understand the essence of the industry and can manage the potential risks associated with it.
While not all biotechnology companies are attractive opportunities, some are great long-term investments.
One of them is Regeneron (REGN).
In fact, Regeneron is the manufacturer of a treatment projected to become the top-selling drug globally by 2030.
Annual sales of the moneymaking drug, autoimmune diseases’ medication Dupixent, could hit $21 billion by the start of the next decade—an almost fourfold jump from its current sales estimate of $5.6 billion per annum.
The projection came following Regeneron’s announcement that Dupixent can also be used to treat atopic dermatitis among children aged 6 months to 5 years old.
This makes Dupixent the first-ever biologic treatment to release positive results for that population.
Evidently, the breadth of Dupixent’s indications, complemented by the long-established safety profile of the drug, contribute to its long-term success—an achievement that’s expected to multiply and be carried over to the next decade.
While the next decade is clearly exciting for Regeneron, the company is actually performing well these days.
So far, Regeneron shares are up by roughly 40% year to date—a record-breaking rise not only for the company but also in the biotech sector.
Regeneron’s revenue skyrocketed by 163% year-over-year in the second quarter, pushing its earnings per share to leap 260% higher.
Apart from Dupixent, another catalyst for Regeneron’s impressive gains is its COVID-19 cocktail: REGEN-COV.
This treatment, albeit controversial, is anticipated to make Regeneron and its partner, Roche (RHHBY), a lot of money in the following months, especially with the delta variant wreaking havoc in the world.
Moreover, sales for all six of Regeneron’s highest-selling products, such as its eye disease drug Eylea, which it developed with Bayer (BAYN), immunology drug Kevzara, which is a product of its collaboration with Sanofi (SNY), lung cancer treatment Libtayo, and cholesterol drug Praluent, have been consistently growing by double-digit percentages.
Apart from these current treatments displaying solid sales momentum, the company also has a loaded pipeline that can easily boost Regeneron’s revenue streams in the future.
In terms of the new products under development, Regeneron has partnered with Intellia Therapeutics (NTLA), one of the leaders in the CRISPR-Cas9 gene-editing sector, to come up with next-generation treatments.
Aside from developing new products, Regeneron is expanding the indications of its top-selling drugs. Just like its efforts with Dupixent, the company is also working on expanding Libtayo’s indications.
So far, Regeneron has been working to turn Libtayo into a go-to treatment for skin cancer.
This effort could open up new avenues for Regeneron, as at least 9,000 cases of skin cancer are recorded in the US annually.
Of these, approximately 3,200 fall under the category that the company is targeting for Libtayo’s expansion.
This is a strategic move if Regeneron has any hope to dethrone the most dominant players in this competitive immunology market: Merck’s (MRK) Keytruda and Bristol-Myers Squibb’s (BMY) Opdivo.
Looking at the average net price of Libtayo, which is at $130,000 per year, the expected sales for this drug could grow to $400 million by 2026 in the US alone and roughly $700 million worldwide—and these are only for the approved indications of the drug.
In addition to its current applications, Regeneron is also working to gain approval for Libtayo to be used for cervical cancer.
Overall, Regeneron is an excellent investment for patient buy-and-hold investors. Its current portfolio of products is performing well, while its pipeline programs and partnerships offer promising growth potential.
Mad Hedge Biotech & Healthcare Letter
September 2, 2021
Fiat Lux
FEATURED TRADE:
(BIOTECHS ARE OUT FOR BLOOD)
(BIIB), (LLY), (BAYRY), (NVS), (SNY)
Tracing its origins in Greek mythology to the infamous Dracula tales, stories centered on the restorative powers of blood have captivated our imagination for millennia.
In the past two decades, however, the concept of hailing blood as the elixir of youth has come a long way from ancient folklore.
These days, this idea has reached the medical world with highly renowned researchers throwing their names behind the study of the regenerative ability of young blood.
From mere storybook fantasies, this concept has become one of the serious contenders alongside the likes of Biogen (BIIB), Eli Lilly (LLY), and Bayer (BAYRY) in the fight against Alzheimer’s, Parkinson’s, and even stroke.
Here’s a quick explanation for this change.
At its core, one of the major causes of aging is when our systems go on overdrive in the performance of usual bodily functions.
That is, the body shifts away from the “regular” state or homeostasis and instead is forced to constantly be in alert mode.
This causes us to end up with a hyper pro-inflammatory immune system, which then malfunctions and results in damaged tissues and organs over time, exposing the body to diseases and conditions like neurodegeneration and heart attacks.
The solution is quite simple. Let’s just flush out those pro-inflammatory aging compounds—aka the overworked system. That way, we can delay (or probably even prevent) the aging process.
This can be done through a process called “parabiosis,” which has only been experimented on mice.
Basically, this works by connecting the circulatory system of an older mouse to a younger one. Then, the older mouse starts to get younger as well.
In 2005, researchers published a paper that studied two identical mice (one old and one young) to demonstrate the veracity of the concept.
To test the idea, they connected the circulatory systems of both mice. This means that the two lived off the same general blood pool, which comprises young and old blood.
In just 5 weeks, the older mouse’s stem cells started to divide again. Its muscles and liver cells also began to repair themselves.
Essentially, from a cellular viewpoint, the older mouse transformed into a younger version of itself.
Given the medical, moral, and ethical issues that come with the traditional “parabiosis,” biotechnology companies have searched for more efficient and effective ways to achieve these age-defying results other than the vampiric blood swap.
But, how can these results be replicated?
This is where “Total Plasma Exchange” (TPE) comes in.
TPE is done using an apheresis machine. The patient’s blood runs through this device, which then removes and discards filtered plasma via the reinfusion of red blood cells as well as other replacement fluids, including plasma or albumin.
Without going through the technical nitty-gritty, TPE involves the extraction of a large volume of blood from a patient, taking it apart into its individual components, then returning it to the same patient’s body sans the filtered-out components courtesy of the machine.
Recently, clinical trials on humans showed that TPE managed to slow disease progression among patients suffering from age-related disorders, like Alzheimer’s, by more than 66%.
While there’s no uniform cost for this treatment, the average estimate for every TPE session is roughly $101,140. Just how much this would cost in the long run heavily depends on the person’s condition and desired outcome.
At this point, the research is still in its early stages.
However, this hasn’t prevented rogue biohackers from testing out their own theories—and come up with surprisingly workable results.
In 2020, two 50-year-old self-confessed “biohackers” based in Russia hooked themselves up to blood collection machines. They then proceeded to replace practically half of the plasma coursing through their own veins with salty water.
After 3 days, their blood tests showed an improvement in their general well-being, as seen in their hormones, fats, and other indicators.
In particular, their immunity, cholesterol metabolism, and even liver function showed better performance.
So far, this concept has been explored by other researchers who are now replacing plasma with saline and adding other components like albumin.
These experiments are still being conducted on animals, but they have to date proven to be promising in terms of reducing inflammation in the brain and improving cognitive functions.
Primarily, the Russian biohackers and these experts are diluting the anti-aging factors to slow down or even eventually prevent aging.
Among the probable applications of plasma in the anti-aging movement, the dilution process seems to be the easiest and most convenient track to pursue—so much so that a company, called IMYu, was founded by top UC Berkley researchers to develop this strategy further.
Thus far, only a handful of biotechs have focused on this concept.
Some of the frontrunners are Massachusetts-based Elevian, which was founded in 2017, and Alkahest, which was acquired by Spanish pharmaceutical giant Grifols (GRF) for $146 million.
Meanwhile, a company called Nugenics Research has actually patented the name “Elixir” for its plasma-derived product under development.
There are also clinics like the Atlantis Anti-Aging Institute based in Florida and companies such as Ambrosia, which market plasma gathered from donors ages 16 to 25 and sell them for several thousand dollars for every transfusion.
Thus far, big pharma has yet to get its hands on this technology.
Only a handful of major companies, including Novartis (NVS) and Sanofi (SNY), have expressed interest in exploring these possibilities.
However, these innovations are only a glimpse of the incredible momentum driving the anti-aging industry these days.
It’s only a matter of time until we achieve a spectacularly extended lifespan with an impressively high quality of health and wellbeing.
Mad Hedge Biotech & Healthcare Letter
August 5, 2021
Fiat Lux
FEATURED TRADE:
(LET THE BIOTECH BUYOUTS BEGIN)
(TBIO), (SNY), (MRNA), (PFE), (BNTX), (ARCT), (GSK), (JNJ), (MRK), (BLUE), (CVAC)
One of my predictions for this year just came true: the biotechnology buyouts have begun.
In my letter last January, I forecasted that the growing popularity of the mRNA technology courtesy of the COVID-19 vaccines from Moderna (MRNA) and Pfizer (PFE / BioNTech (BNTX) would trigger acquisitions of smaller biotechnology companies this year.
I predicted that bigger players in the healthcare industry would scoop up smaller players to stake a claim in this quickly growing space.
Topping our list of buyout candidates is Translate Bio (TBIO)—the very same company hogging headlines in the past days following its $3.2 billion acquisition by Sanofi (SNY).
The all-cash deal values each TBIO share at $38, representing a premium of over 30% above the stock’s price. If all goes well, the deal should be completed by the third quarter of 2021.
This is one of the first major moves by Sanofi following the healthcare giant’s recent pivot into vaccines.
However, this isn’t the first time Sanofi and TBIO worked together.
The two companies have actually started collaborating back in 2018, working on a potential mRNA-based flu vaccine—a project that has Sanofi and TBIO ahead of the pack, with BioNTech and Arcturus Therapeutics Inc. (ARCT) trailing behind.
Sanofi and TBIO’s mRNA seasonal flu vaccine candidate is expected to commence with Phase 1 results expected to be out by the fourth quarter of this year.
Considering that Sanofi is one of the leading vaccine makers in the world with roughly $3 billion in sales in flu vaccines alone in 2020, it won’t come as a surprise if their candidate breezes through the trials.
Even prior to this acquisition, Translate Bio has been working on using its mRNA platform to develop vaccines and treatments for a broad range of diseases like liver and pulmonary ailments.
So far, its novel pipeline has 2 clinical-stage programs along with 7 pre-clinical work covering direct therapeutics and vaccines.
One of its lead candidates is MRT5005, which is an mRNA-based therapy for cystic fibrosis (CF).
This is a groundbreaking treatment because it takes advantage of mRNA’s capability to deliver proteins to lung cells. It’s also extremely non-invasive, as patients can simply inhale the mRNA drug into their bodies.
Other than helping with the treatment of CF, this inhalation delivery system can also open avenues for other pulmonary targets.
Most importantly, TBIO’s MRT5005 doesn’t only offer treatments. It actually is a cure for CF.
TBIO’s work on CF treatment is extremely important. This disease is terrible, recording a median age of death among patients in the US as 30.6 years old. In this country alone, over 30,000 people suffer from the condition, and more than 70,000 are recorded worldwide—and the numbers continue to climb each year.
In terms of the CF market, the global demand for treatments for this disease is expected to reach $16.3 billion by 2026, hitting roughly 16.8% in CAGR over the years.
With the acquisition of Translate Bio, Sanofi plows ahead of its competitors in the space, including Pfizer, GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), and Merck (MRK), as the sole Big Pharma company with a wholly-owned in-house mRNA platform.
This is on top of Sanofi’s recent $470 buyout of another mRNA company, Tidal Therapeutics, to bolster its immuno-oncology and inflammatory diseases segments.
Apart from its aggressive buyout strategy, Sanofi also announced its plan to allocate roughly $476 million annually to a “vaccines mRNA Center of Excellence” with the goal of queuing at least six mRNA-based candidates in clinical trials by 2025.
Allotting $476 million to this plan is a telling move on the company’s future direction, as it comprises a substantial fraction of Sanofi’s $6.5 billion overall R&D budget.
These moves strongly signal that Sanofi’s going all-in on the mRNA platform, which could obviously pose a challenge to the likes of Moderna and, of course, BioNTech.
With smaller cap companies like bluebird Bio (BLUE) and CureVac (CVAC) still up for grabs, it’s only a matter of time before another big company decides to follow suit.
Mad Hedge Biotech & Healthcare Letter
June 10, 2021
Fiat Lux
FEATURED TRADE:
(IN THE RIGHT PLACE AT THE RIGHT TIME)
(MRNA), (PFE), (BNTX), (NVAX), (CVAC), (SNY), (TMO), (CTLT), (BAX), (INO)
Before the COVID-19 pandemic, only a handful of people had actually heard of messenger RNA (mRNA).
Now, this technology has become a household term thanks to the success of the COVID-19 vaccine programs of Pfizer (PFE), BioNTech (BNTX), and Moderna (MRNA).
Aside from these three names, other players in the mRNA arena include Novavax (NVAX) and an under-the-radar stock called CureVac (CVAC), which has been collaborating with Bayer (BAYRY).
Even Sanofi joined the list recently with its acquisition of mRNA-focused biotechnology company Tidal Therapeutics.
Amid the growing number of mRNA-focused companies, however, the world has come to associate the technology most with Moderna.
This is apparent in the increasing demand for Moderna’s COVID-19 vaccine, which has been pushing the biotech company to quickly expand its manufacturing capacity.
One of the steps it took to meet the supply expectations is to partner with Thermo Fisher (TMO), specifically for fill-finish, labeling, and packaging.
For orders outside the United States, Moderna established a partnership with South Korea’s renowned Samsung Biologics (KRX: 207940) to keep up with the demand.
While TMO and Samsung Biologics are the two major forces helping Moderna in its manufacturing concerns, other companies are also pitching in, including Catalent (CTLT), Sanofi, and Baxter BioPharma Solutions (BAX).
With the assistance of these companies, along with the major expansion of its own manufacturing site, Moderna anticipates that it can supply at least 3 billion doses of its COVID-19 vaccine annually by 2022.
This is promising news, particularly in light of another massive market that Moderna can conquer next: India.
While the United States has managed to turn the corner in the COVID-19 battle, India has been struggling to fight back against the virus. To this day, the country continues to grapple with the increasing number of COVID-19 cases.
Low and sluggish vaccination rates are considered the major contributing factor to this problem, with a measly 3.3% of India’s citizens getting fully vaccinated so far.
With a population of approximately 1.39 billion, this offers a massive opportunity for vaccine developers.
Thus far, only 228 million doses of the COVID-19 vaccines have been shipped to India. That leaves about 1.16 billion people in this huge country to receive a vaccine.
Since India is a developing nation, vaccine makers are expected to charge the low end of their range.
For Moderna, that would be roughly $25 per dose, while Pfizer would probably charge $19.50 per dose.
However, these prices could still go lower depending on the contract negotiated by the Indian government.
Even at the low end of the price point though, the Indian market represents approximately $28 billion in revenue for COVID-19 vaccine developers.
Taking advantage of this momentum, Moderna has been working on booster candidates for its COVID-19 vaccine. In fact, one candidate may be ready by fall.
Of course, competitors are looking into the new variants as well. Aside from Pfizer, smaller companies like Inovio Pharmaceuticals (INO) have started with clinical trials this year.
Moderna is also investing heavily in artificial intelligence (AI) in an effort to become a step ahead of future diseases.
Through AI and machine learning, Moderna aims to predict strains that evade protection provided by their roster of vaccines.
Based on the data, the company will be able to develop next-generation vaccines and boosters before the situation becomes as critical as what happened in 2020.
These efforts are essential for Moderna to sustain its position as the leader in mRNA technology.
Despite its earlier issues with production, Moderna is still set to generate roughly $19.2 billion in revenue for its COVID-19 vaccine thanks to advance purchase agreements.
The potential availability of a booster this year would definitely get the ball rolling in terms of handling newer variants.
The biotechnology industry is favored among investors on the lookout for companies with incredibly strong growth potential.
While it’s a risky environment filled with businesses flaming out practically year after year, winners in this field can come out with extremely impressive results.
In recent months, Moderna has become one of the most successful examples that demonstrated the potential of a biotech when it finds itself with cutting-edge technology at an ideal time.
Mad Hedge Biotech & Healthcare Letter
June 1, 2021
Fiat Lux
FEATURED TRADE:
ANOTHER BUY-THE-DIP OPPORTUNITY DROPPED IN OUR LAPS
(AMGN), (QGEN), (GH), (AZN), (MRTX), (LLY), (JNJ), (SNY), (JNJ)
The ideal stocks are those you can just buy and hold for a long time. A healthcare and biotechnology company that perfectly fits the bill is Amgen (AMGN).
Amgen wasn’t an active participant in the COVID-19 race.
Instead, the biotechnology giant chose to stick with its circle of competence and focused on delivering remarkable results to its shareholders through boosting its revenue and increasing dividends.
Recently, this hyper-focus has paid off.
Amgen received FDA approval to market a drug that targets cancer cells in an area that researchers have been attempting to hit for decades.
The new treatment, Lumakras, will be the first of its kind to target a tumor growth process commonly known as KRAS for non-small cell lung cancer (NSCLC).
To understand the extent of Amgen’s breakthrough, scientists and researchers have been working on developing a KRAS blocker for over 40 years.
Prior to this, KRAS had been known as an “undruggable” target.
Basically, Amgen came up with a drug that can target the notorious and illusive cancer-causing protein—something that was previously considered the “Achilles heel” of lung cancer tumors.
More impressively, Lumakras was approved three months ahead of its schedule.
Based on the results of its Phase 2 trials, Lumakras can stall the progress of lung cancer in roughly 81% of the patients for a median time of 10 months.
In the Phase 3 trials, Amgen is looking into testing the drug in combination with other medications to hit the tumors that developed resistance to the pill.
A key factor in Lumakras’ launch is determining the types of patients who’d benefit most from the drug.
So far, Amgen has been collaborating with diagnostic partners, particularly Qiagen (QGEN) and Guardant Health (GH), for biomarker testing.
In terms of pricing, Amgen estimates monthly spending on Lumakras to be $17,900.
In the United States, roughly 30,000 patients of KRAS-mutated lung cancers are reported annually.
That puts Lumakras sales to at least $100 million for 2021 alone.
By 2025, the drug is expected to rake in roughly $1 billion annually, with sales growing to $1.51 billion in 2026.
These are actually conservative estimates that assume only a 50% success rate from Lumakras in the next few years.
Given the provisional and accelerated approval the drug has already received from the FDA though, it is safe to say that it can achieve at least 75% success rate, which means it can generate higher revenue.
The KRAS target is not limited to lung cancer. It also appears in other solid tumors, which Amgen continues to test Lumakras in a dozen other types, including colorectal cancer.
Depending on expansion plans, Lumakras sales can reach $3.2 billion by 2030.
Again, this expansion is a conservative estimate.
If the expansion for Amgen’s drug would be anything like AstraZeneca’s (AZN) blockbuster Tagrisso, which eventually became a recommended first-line therapy option for NSCLC, then Lumakras sales can peak at $4 to $5 billion.
Considering the potential of this market, it no longer comes as a surprise that competitors are hot on Amgen’s heels just days after Lumakras’ approval was announced.
The closest rival so far is Mirati Therapeutics (MRTX), which also has KRAS-inhibitor candidates in Phase 1 and Phase 2 trials.
Prior to that, Eli Lilly (LLY) and Johnson & Johnson (JNJ) tried their hands at KRAS mutation but failed.
Aside from Lumakras, Amgen has another blockbuster candidate in store for its shareholders: asthma drug Tezepelumab.
Developed in collaboration with AstraZeneca, this drug is already in the second late-stage pipeline and has been showing promising results so far.
Globally, there are about 2.5 million patients with severe asthma, with 1 million suffering from eosinophilic asthma in the United States. Amgen is hoping to target the latter population.
If Tezepelumab gets approved, it would be in direct competition against Sanofi (SNY) and Regeneron’s (REGN) asthma drug Dupixent. Peak sales for this asthma drug is estimated at roughly $3.5 billion.
Over the past 12 months, Amgen’s stock performance has been rangebound.
Although this is obviously frustrating for growth-oriented shareholders, I think the short-term volatility of the stock may present good opportunities for value-conscious investors.
That is, I view the drop in Amgen’s share price as another favorable buying opportunity.
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