Biotech Letter Archives

Turning the Biohackers’ Dream to Reality

There is a huge possibility that the first person to ever live to a thousand years old has been born in our lifetime.

That’s according to experts on life longevity. They also say that sooner rather than later, we’ll simply be checking ourselves into hospitals or clinics once every decade.

Pretty much how you’d bring your car in for a service, that’s how we’ll keep our bodies working at peak condition for centuries.

As far-fetched as it sounds, it’s undeniable that dreams of achieving immortality are as old as mankind itself.

One of the leading experts on this is the Human Longevity, Inc., which has leading genomics expert J. Craig Venter and billionaire Peter Diamandis as its founders.

Although it’s still not yet a publicly-traded company, Human Longevity, Inc. has been collaborating with cancer diagnostics firm Neogenomics (NEO).

Admittedly, NEO’s $5.32 billion market capitalization doesn’t really boost that much confidence in this company.

However, Human Longevity’s work with a Big Pharma company like AstraZeneca (AZN), which holds a market cap of $158.14 billion, definitely backs up its claims.

Moreover, AstraZeneca and Human Longevity are already halfway through their 10-year agreement that dates back to 2016.

Basically, what Human Longevity does is sequence an individual’s DNA and combine the information with an extensive list of tests to figure out how long that person will live and what steps can be taken to extend his or her life.

More impressively, the company can use the data to predict a budding disease, such as cancer, even before it exhibits symptoms.

And how much will that cost you?

Right now, the company is charging $25,000 for a comprehensive set of tests and a full profile.

In the end, you’d be given medical information about yourself that amounts to roughly 1 petabyte. For context, that’s 1,000 terabytes or 1 million GB worth of data.

While the cost is definitely high, it’s a good preventive measure to consider if you can spare the cash.

This is because the company can detect the slightest hint of diseases, which are typically at their most treatable phase.

Since the company is founded on the belief that we are all “DNA software-driven species,” it can also determine the disease-producing genes in our systems and use them as “pharmaceutical targets, so that people with those genetic changes don’t die.”

Aside from Human Longevity, another company working on this nice is called Life Biosciences, which was founded in 2017.

Since its launch, Life Biosciences has been acquiring companies left and right to boost its pipelines.

So far, it has at least 6 subsidiaries focused on developing treatments to fight the human aging process.

What makes Life Biosciences different is that it doesn’t focus on the leading causes of death, such as cardiovascular diseases or cancer.

Instead, it tries to figure out what are the underlying causes of the body’s aging. This includes stem cell exhaustion, cellular senescence, chromosomal instability, and even our metabolism.

At their core, Life Biosciences’ belief is that aging itself should not be considered a natural biological result of the passage of time.

Rather, it should be understood as a medical condition—the kind that can be treated in the same way we’d try to find medications or cures for diseases.

While Life Biosciences’ work has yet to earn any FDA approval, the involvement of GlaxoSmithKline (GSK) in its aging research seems to boost confidence in the company’s work.

Apart from GSK, a number of tech billionaires have expressly backed these efforts in the anti-aging field.

The most visible ones include Calico, which is backed by Google and AbbVie (ABBV), and Unity Biotechnology, supported by Jeff Bezos.

While Human Longevity and Life Biosciences have yet to go on IPO, there are already companies working on fields related to life longevity.

The first names that come to mind are the frontrunners of the genome sequencing market, such as Illumina (ILMN), Thermo Fisher Scientific (TMO), and 10x Genomics (TXG).

Smaller companies in this field include bluebird Bio (BLUE), CRISPR Therapeutics (CRSP), and Editas Medicine (EDIT).

Inasmuch as this is difficult to grasp at this stage, there is a massive market for this industry. In fact, the global longevity segment is projected to reach $27 trillion in 2026, which accounts for roughly 20% of the global GDP.

Meanwhile, the global market for human aging is estimated to reach at least $55 billion by 2023.

And those are just conservative estimates.

Making the public accept the idea behind longevity science has not been easy. Even with Big Pharma names backing these innovative companies, people are still wary of the concept.

After all, surveys show that most people would refuse medical treatments to slow their aging and allow them to live up to 120 or older. It’s not surprising why.

Those respondents probably witnessed how their older grandparents and parents spent their final years in pain and were subjected to invasive medical procedures. That makes the entire idea of living so long horrific to them.

However, the future imagined by these companies is different. Through their research, people can live long and still enjoy active and healthy lifestyles.

At this point, the longevity science space remains a playground dominated by a handful of transhumanists and even biohackers.

Nonetheless, the entry of the most respected researchers and the support from the biggest biopharmaceutical companies across the globe give hope that the promises the industry holds will become a reality soon.

July 8, 2021/by Mad Hedge Fund Trader

Value Creator Stock Operating Under the Radar

Biotech Letter

There’s a wildly underrated and undercovered biotechnology stock despite its track record of creating long-term value and ability to outstrip its projected operational performance in the past years.

This stock is Bio-Techne (TECH).

Historically, Bio-Techne has reported impressively good margins, which could partly be attributed to the company’s incredibly strong intellectual property position.

While Bio-Techne originally concentrated on offering biotechnology solutions, it eventually embraced a diversification strategy thanks to all the dealmaking it has been doing over the years.

Back in the 1990s, Bio-Techne struck deals with promising biotechnology companies like Amgen (AMGN) and even Genzyme to acquire sections of their research departments.

Borrowing Warren Buffett’s expression, Bio-Techne’s value can be seen on the “owner earnings” it has been reporting. Thanks to a change in management in 2013, this sleepy high-margin company has been reinvigorated through various strategic acquisitions.

So far, Bio-Techne has three very active divisions.

It has its biotechnology division, which comprises 65% of its revenue and sells proteins, reagents, and antibodies right out of the freezer.

It has its protein platforms, which market instruments that push the use of the products sold by its biotechnology sector.

Lastly, it has its diagnostics sector that supplies equipment, such as those used for protein analysis, to other companies, including Thermo Fisher Scientific (TMO) and Abbott Laboratories (ABT).

Meanwhile, Bio-Techne has been making progress in stem cell research and Car-T immunotherapy, along with other kinds of cancer research.

Sales have been climbing steadily, increasing by an average of 15.7% over the last five years, with room for margins to pick up as Bio-Techne continues to integrate acquisitions.

To continue expanding its business, Bio-Techne recently shared its decision to buy diagnostics company Asuragen for $215 million.

Founded in 2006, Texas-based Asuragen develops and produces test kits for cancer and genetic carrier testing.

Estimated to contribute $30 million in revenue, Bio-Techne is actually paying only a mere 7 times its sales multiple—with the potential to jump to about 10 times as future contingent payments could boost the purchase price by an additional $105 million.

Even if that happens though, Bio-Techne will still be pumping sales at an extremely favorable multiple compared to its current multiple.

Another major acquisition of Bio-Techne is its 2018 deal with Advanced Cellular Diagnostics, which was executed to boost its diagnostics portfolio.

At the time, Advanced Cellular Diagnostics’ top line was already growing by 40% to 50%.

One of the most exciting products this acquisition added to Bio-Techne’s lineup is a tumor diagnostic test.

For context, current diagnostic tests are only 75% accurate. In comparison, Advanced Cellular Diagnostics’ test is 95% accurate. This makes the latter an extremely attractive product in the industry.

The company also has solid patent protection for new products focusing on gene and gene fragment probes.

Overall, the lineup from Advanced Cellular Diagnostics is estimated to bring in at least $50 million in additional yearly revenue for Bio-Techne.

The fact that it’s growing by 50% annually makes the acquisition one of the best buys of this biotechnology company.

Since being founded back in 1976, Bio-Techne has established itself as a steady value creator.

Needless to say, Bio-Techne is a highly profitable business, with earnings anticipated to increase by 15% annually.

Looking at the recurring nature of the company’s revenue, its consistent earnings, the potential of its Advanced Cellular Diagnostics purchase, and its prospects for more accretive acquisitions, Bio-Techne should be able to hold its mid-30s multiple to owner earnings.

Despite the pandemic’s effect on the biotechnology and healthcare sector in 2020, Bio-Techne still reported a 45% growth in its annual sales to reach $739 million last year.

So far, Bio-Techne is on track for its goal to become an over $30 million type portfolio. In terms of its five-year outlook, the company is targeting to reach $1.5 billion in the next few years.

Surprisingly, it’s still operating under the radar of the majority of investors, even in the biotechnology sector.

For biotechnology investors on the lookout for a value creator stock, it’s wise to keep an eye on Bio-Techne. Simply checking its bolt-on M&A strategy combined with its steady organic growth rate, this company has the potential to provide long-term returns.

June 17, 2021/by Mad Hedge Fund Trader

A Blue Chip Stock Selling at a Discount

Biotech Letter

It’s not unheard of in the biotechnology industry to watch the stock prices of small or even mid-cap drug developers rise and fall by 30% following trial results or new drug approval.

However, when the company is Eli Lilly (LLY), which holds a $179 billion market capitalization, then biotech investors need to pay attention.

After all, the only plausible conclusion to draw from this is that there have been some seismic advancements done by the company.

Two potentially breakthrough treatments are the culprit behind the volatility in Eli Lilly stock these days.

The first is Eli Lilly’s COVID-19 program, in which the company is looking into using Bamlanivimab (LY-CoV555) solo or combining it with Etesevimab (LY-CoV016).

What we know so far is that the combo drug can lower the risk of death and hospitalization among high-risk COVID-19 patients by as high as 87%.

In November 2020, the FDA granted Eli Lilly’s Bamlanivimab Emergency Use Authorization.

The solo treatment was also authorized for the same usage in Morocco, Europe, Canada, Rwanda, and some regions of the Middle East, where Eli Lilly is collaborating with the Bill and Melinda Gates Foundation for distribution.

Last February 2021, its combo treatment received the same approval.

To date, Eli Lilly has shipped roughly 1 million doses of Bamlanivimab and is committed to supplying an additional 1 million this quarter.

To meet the demand for the Bamlanivimab-Etesevimab combo, Eli Lilly will be working with pharmaceutical titan Amgen (AMGN).

In the company’s 2020 earnings report, Eli Lilly disclosed that Bamlanivimab accounted for $871 million of their sales.

For 2021, the market for COVID-19 treatments is valued at $27.25 billion.

Taking into consideration the competitors coming up with similar medications, such as Gilead Sciences (GILD), Regeneron (REGN), and Sanofi (SNY), the conservative estimate for the sales for Bamlanivimab alone is estimated to reach roughly $1 billion to $2 billion this year.

The second potential breakthrough that’s affecting Eli Lilly’s prices is its Alzheimer’s disease treatment, Donanemab.

Eli Lilly recently released positive data from the Phase 2 trial of Donanemab, with the treatment slowing down cognitive decline by 32% after 76 weeks.

In fact, a notable decline was already observed among the patients as early as 36 weeks.

This is an impressive result, and there’s talk that Eli Lilly’s plan of possible commercialization of Donanemab by 2024 could be fast-tracked to as early as the first half of 2023.

Interestingly, the positive news was met with negative reactions by the investors.

Eli Lilly fell by 9% following the Donanemab update, sending shares tumbling from $208.18 to $189.16.

This reaction effectively erased almost $20 billion in the company’s market value.

The negative reaction to Eli Lilly’s news may be stemming from the pending application of Biogen’s (BIIB) own Alzheimer’s drug, Aducanumab, which is expected to receive word from the FDA by June.

Investors anticipate that Aducanumab’s performance would be indicative of Donanemab’s future.

Looking at the trial results though, I can say that this shouldn’t be the case. Since the beginning, Donanemab has outperformed Aducanumab in practically every aspect.

Either way, what cannot be denied here is the market opportunity.

When the market thought that Aducanumab would get FDA approval in November 2020, the share price of Biogen saw a whopping 44% jump from $246 to $354 overnight.

Meanwhile, Donanemab’s potential sales volumes have been estimated to reach over $10 billion annually.

Other than Donanemab, Eli Lilly has been developing more contenders to boost its neuroscience division. Right now, this segment generates 6.3% of the company’s total revenues.

One of the promising drugs in the portfolio is migraine treatment Emgality, which recorded a 123% increase in sales last year to hit $362 million.

Thus far, Emgality holds at least 31% of the migraine market and still has room for growth and expansion.

This is a remarkable performance considering that its competitors include Amgen’s Aimovig and Teva’s (TEVA) Ajovy.

Another solid earner is antidepressant treatment Cymbalta, which generated over $768 million in sales last year, up by 5% year-on-year.

Outside its neuroscience efforts, one of Eli Lilly’s strongest growth drivers is its diabetes franchise.

This segment accounts for roughly 47% of its revenues and is led by Trulicity with $5 billion in sales last year, up 23% year-over-year.

Eli Lilly’s diabetes program has grown so much in the past years that it now aggressively competes against Novo Nordisk (NVO), a monopoly-like presence in this space.

In fact, Trulicity has been able to successfully protect its own market share against Novo’s heavily marketed Rybelsus, with data showing that users of Eli Lilly’s diabetes injectable recorded 60% adherence levels compared to Novo’s 43%.

In terms of expansion, Eli Lilly also won a new approval for Trulicity to be used to treat cardiovascular conditions as well.

This additional indication puts Trulicity’s peak sales at roughly $7.43 billion.

In an effort to corner the diabetes market, Eli Lilly also developed Tirzepatide.

Basically, this treatment is a long-term hedge against the pending loss of Trulicity’s patent exclusivity by 2027.

However, Tirzepatide is projected to surpass its predecessor in sales and reach double-digit billions.

Overall, Eli Lilly has positioned itself well in the diabetes market.

While it’s engaged in an aggressive battle for dominance against Novo Nordisk, there’s a lot of room for both.

The diabetes treatment segment is a continuously expanding market, with its value doubling in size from 2015 to 2015. Within this period, this market is projected to grow from $31 billion to $59 billion.

Aside from its diabetes and neuroscience programs, Eli Lilly has also been active in developing its immunology and oncology segments.

This is an ambitious plan, considering that practically all pharmaceutical companies are working on treatments in this space.

After all, the auto-immune market is massive as it’s worth well over $50 billion.

One of the bestsellers in Eli Lilly’s portfolio is plaque psoriasis treatment Taltz, which grew its sales by 31% year-over-year to reach $1.8 billion last year.

Some of the major competitors in this space are Bristol Myers Squibb (BMY) with Zeposia, Sanofi’s Dupixent, and AbbVie’s (ABBV) Skyrizi.

What could be promising news for Eli Lilly is the fact that AbbVie’s ultra-bestseller Humira is going off-patent by 2023.

This means that it could open up the market to allow both Taltz and Olumiant, another top-selling Eli Lilly treatment, to grab part of the lucrative market share.

Ultimately, Eli Lilly is a business that offers a promising commercialized portfolio and a remarkable near-term pipeline, which can reasonably support an annual revenue growth rate of roughly 10% even if we don’t factor in the effects of Donanemab.

Apart from the potential aftermath of the pending Biogen news, the fall in Eli Lilly’s shares could also be attributed to the extremely high expectation of investors.

Alzheimer’s has no approved cure, and there are only a handful of treatments developed from this neurological disease—none of which are even marginally effective.

It’s normal for investors to be wary of positive data results since they’ve been down this road before and are merely attempting to temper their excitement.

Amid the selloff, I believe that Donanemab is far from a lost cause. More importantly, I think the drop in Eli Lilly’s share price presents a rare buying opportunity for investors.

Therefore, I advise buying the dip.

March 18, 2021/by Mad Hedge Fund Trader

March 11, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
March 11, 2021
Fiat Lux

FEATURED TRADE:

(THE TESLA STOCK OF GENETIC TESTING)
(NVTA), (CRSP), (TDOC), (RHHBY), (ILMN), (ABT), (DGX), (ROKU), (SQ), (SHOP), (TSLA)

March 11, 2021/by Mad Hedge Fund Trader

February 2, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
February 2, 2021
Fiat Lux

FEATURED TRADE:

(2021: GILEAD SCIENCES’ YEAR OF MILESTONES)
(GILD), (NVAX), (JNJ), (MRK)

February 2, 2021/by Mad Hedge Fund Trader

2021: Gilead Sciences’ Year of Milestones

Biotech Letter

Stocks are tumbling on the back of substandard vaccine updates, with investors growing more wary of the whole COVID-19 vaccine narrative.

January ended with Novavax (NVAX) announcing that its COVID-19 vaccine candidate is roughly 90% effective, but doesn’t work as well against other more contagious strains in South Africa.

Johnson & Johnson (JNJ) reported that its candidate is only 66% effective at stopping moderate to severe strains of the coronavirus, but is 100% effective in preventing hospitalizations and even death 28 days after it gets administered.

However, the real kicker is Merck’s (MRK) decision to completely drop out of the COVID-19 vaccine race when both its candidates showed disappointing results in the early stages.

This is disappointing news considering that Merck is one of the biggest vaccine developers in the world today.

Nonetheless, Merck’s still not out of the COVID-19 race yet as it appears to be following the lead of Gilead Sciences (GILD) instead.

That is, it plans to focus on developing COVID-19 treatments in the hopes of benefiting from it the same way Gilead did in the past months.

Since the pandemic started, Gilead has been at the forefront of the fight – so much that its COVID-19 treatment, Remdesivir, is evidently having a major impact on the company’s top line.

In its third-quarter earnings report in 2020, Gilead reported $6.6 billion in total revenue, showing off a 17% jump from its performance during the same period last year.

If you exclude its COVID-19 sales, Gilead would have only earned $5.6 billion, with the increase in its year over year performance changing from 17% to just 2%.

As for its overall performance in 2020, Gilead announced that it’s raising its previous guidance from the $23 billion and $23.35 billion range to be somewhere between $24.3 billion and $24.35 billion.

This new guidance indicates a 10% year over year growth, but without Remdesivir, its product sales would actually show a slight decline compared to 2019.

Outside Remdesivir, Gilead has been active in searching for additional growth drivers.

So far, the most promising segment is its HIV lineup led by its top-selling product, Biktarvy, also known as “the gold standard in HIV treatment.”

In the third quarter of 2020, sales of Gilead’s HIV line climbed by 8% to reach $4.5 billion.

While generic competition has entered the market, Biktarvy is expected to continue to gain steam in 2021.

Another catalyst in its HIV line is the drug Lenacapavir, which can either be developed as a twice-a-year injection or a weekly pill.

If successful, Lenacapavir can bring an additional $9 billion in revenue for Gilead.

Aside from HIV, Gilead has also been working toward becoming a leader in the oncology sector.

To achieve this, the company spent $21 billion for the acquisition of Immunomedics.

Specifically, Gilead bought the New Jersey-based company for its new breast cancer treatment, Trodelvy.

Gilead’s massive bet on Trodelvy raised a lot of eyebrows, but the product offers a very real chance for an enormous payoff for its shareholders.

Trodelvy lowers the risk of death among breast cancer patients by an impressive 52% when compared to those who receive standard care.

Annually, Trodelvy is estimated to rake in at least $1.8 billion in revenue for Gilead — and that’s only for breast cancer application.

Gilead also intends to expand Trodelvy’s application to include more complex fields of oncology and even for some viral diseases.

Beyond its COVID-19 program, Gilead has an impressive portfolio of diverse assets that the company is focused on developing.

It currently has 42 clinical programs queued in its pipeline and at least a handful of these are anticipated to become steady sources of revenue.

As expected, it spent 2020 acquiring the necessary partners for its big picture plans, making 2021 a year of milestones for the company.

gilead

February 2, 2021/by Mad Hedge Fund Trader

January 28, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
January 28, 2021
Fiat Lux

FEATURED TRADE:

(WATCH OUT FOR THESE BUYOUT STOCKS)
(TBIO), (MRNA), (PFE), (BNTX), (SNY), (BLUE), (BMY)

January 28, 2021/by Mad Hedge Fund Trader

Watch Out for These Buyout Stocks

Biotech Letter

Many predictions this 2021 probably won’t pan out. However, here’s a pretty safe bet: we will see a number of biotechnology company acquisitions this year.

Although it’s not easy to accurately forecast which biotechnology companies will be involved in these deals, there is a handful that qualifies as prime acquisition targets.

One of the top biotech buyout candidates in my radar this year is Translate Bio (TBIO).

Thanks to the massive success of the COVID-19 programs of Moderna (MRNA), Pfizer (PFE), and BioNTech (BNTX), a spotlight has been cast on the benefits of the messenger RNA (mRNA) technology.

That’s why I wouldn’t be surprised if bigger players in the healthcare industry decide to scoop up smaller players to stake a claim in this quickly growing space.

Among all the small-cap biotechs in play, Translate Bio is easily one of the top prospects.

Before Moderna and BioNTech hogged the spotlight with their mRNA-based COVID-19 vaccines, Translate Bio was actually one of the strong contenders in the race. Unfortunately, it failed to keep up with its peers and is now lagging well behind the leaders.

On the flip side, the attention that mRNA technology has been getting these days seemed to have strengthened the confidence of investors in the technology – an effect that Translate Bio greatly benefited from in the past months.

Despite its lagging performance in the COVID-19 race, Translate Bio has been making significant progress with its work with partner Sanofi (SNY) on their own candidate, MRT5500. If all goes well, then the product should be out by the first quarter of 2021.

Apart from that, the two have been focusing on different vaccine candidates for other viral and bacterial diseases.

Translate Bio’s pipeline also includes treatments targeting another lucrative market using the same MRT platform technology as MRT5500: cystic fibrosis (CF).

The company’s CF treatment has been causing excitement among investors because instead of offering invasive therapy, this option offers patients an inhaled version of the mRNA drug as treatment.

Moreover, the MRT platform technology of Translate Bio could be expanded to cover more than just CF – a promising diversification that encouraged big investors like Sanofi to continuously pour money into collaborations with this Massachusetts-based biotech.

As mRNA technology gains more traction, Sanofi might even reevaluate its relationship with Translate Bio and decide that it wants more than just a collaboration.

With the smaller biotech company’s modest market capitalization of only a little over $1.7 billion, an acquisition could be on the table sooner rather than later.

Another potential buyout candidate is Bluebird bio (BLUE).

Unlike its contemporaries in the biotech space, Bluebird shares plunged by nearly 50% in 2020.

Although the company offers a promising upside potential, it can’t seem to generate sufficient enthusiasm to take part in the biotech sector’s rally last year.

In fact, Blue stock continued to hover near its 52-week low despite several gene and cell therapy tickers reaching all-time highs.

While that’s obviously bad news for Bluebird shareholders, I think this makes the company an even more attractive acquisition candidate.

I think it’s important to determine the reasons behind Bluebird’s abysmal 2020 performance.

The stock had a rocky start last year, with the COVID-19 pandemic exacerbating its overall meltdown.

One of Blue’s major roadblock was its failure to secure approval from the FDA for its multiple myeloma treatment, which it has been working on with Bristol Myers Squibb (BMY).

Then, it delayed its submission for approval of its sickle cell disease treatment LentiGlobin. This was initially set for the second half of 2021 but was pushed to late 2022.

The main takeaway from this streak of negative updates is that Blue still doesn’t have its act together when it comes to dealing with regulatory approval processes.

Regardless, the potential of this biotech’s pipeline remains impressive.

Apart from its work with Bristol and LentiGlobin, Bluebird has been working on a late-stage candidate for treatment of a rare metabolic disorder called cerebral adrenoleukodystrophy with Lenti-D.

Prior to its partnership with Bristol, Bluebird was actually partnered with Celgene.

When Celgene was bought by Bristol in 2019, the bigger company continued the collaboration with Blue and expanded the partnership to cover more genetic disorders and extend to oncology treatments.

Due to the setbacks, Bluebird’s market capitalization now hovers somewhere near $3 billion.

Given all these pipeline candidates and its future plans, I suspect it wouldn’t take long before a major player takes notice of this attractive valuation and puts this bird in a cage.

Overall, both Translate Bio and Bluebird are solid companies in the biotechnology space.

While the COVID-19 pandemic slowed down some of their progress, the products in their pipelines could yield substantial value to interested acquisition partners.