Biotech Letter Archives

Novo Nordisk is Mining Gold With Diabetes

Diabetes is one of the fastest-growing and serious health conditions that affect the lives of over 50% of Americans, with 60 million more categorized as pre-diabetics. As expected, the market for diabetes treatments is saturated.

However, this biotechnology company has been hailed as one of the leaders in this sector: Novo Nordisk (NVO).

Novo Nordisk has long established itself as a major player in this lucrative market, with diabetes treatments in its portfolio primarily responsible for the 24% jump of the stock’s performance in 2019 -- an increase that has been sustained up until today.

The company’s lineup includes a number of insulin products such as Tresiba and NovoRapid, with Novo Nordisk supplying roughly 50% of the insulin distributed globally.

Meanwhile, its top-selling Type 2 diabetes drug Ozempic ranked first among all the drugs launched in 2018.

Capitalizing on the success of Ozempic as a blockbuster insulin injectable, Novo Nordisk has gained FDA approval to market this bestselling drug as a treatment to reduce the risk of major adverse cardiovascular (CV) condition among patients of Type 2 diabetes.

This is actually an impressive move since diabetics are more often than not also suffering from other comorbidities like kidney problems, obesity, and CV disease.

With this expanded indication involving CV risk reduction, Novo Nordisk’s cash cow will be on par with heavyweights like Bristol-Myers Squibb (BMY) and AstraZeneca’s (AZN) Farxiga as well as Boehringer Ingelheim Pharmaceuticals, Inc. (BIPI) and Eli Lilly’s (LLY) Jardiance.

Ozempic, which was first approved way back in December 2017 as a diabetes medication and launched in the market by 2018, has long been considered the company’s strongest moneymaker.

In fact, the first nine months of 2019 saw Ozempic bring in roughly $1 billion in sales worldwide.

Still riding the momentum of its diabetes treatments, Novo Nordisk also recently received another label upgrade that classifies its recently approved oral tablet Rybelsus as CV safe as well. Projected sales for this drug now lands somewhere between $2 billion and $5 billion.

In addition to CV diseases, Novo Nordisk has also enjoyed success on other fronts like obesity.

For instance, the company’s prescription weight loss shot Saxenda has been gaining sales momentum since its release in 2014.

The fact that Saxenda can also help improve blood sugar levels for pre-diabetic patients has made it the first of its kind across the globe.

Earning $540 million in 2018, which represented a 50% jump from its 2017 sales, Saxenda is estimated to own a 68% share of the obesity market.

Saxenda’s dominance was once again proven in its third-quarter earnings report in 2019 when the drug gained an impressive 56% increase compared to the same period in the previous year.

Novo Nordisk shares come with a bit of a steep price though, and investors are hesitant over the strong reliance of the company on its diabetes lineup. After all, 84% of its sales in the third quarter of 2019 came from this line of business alone.

However, the recent approval and expanded indication of Rybelsus as another groundbreaking Type 2 diabetes treatment both in the US and abroad makes Novo Nordisk a highly coveted investment.

Keep in mind that over 90% of diabetes cases fall under that type, so the company is poised to dominate not only a lucrative sector but also an addressable target market.

Apart from that, the early and mid-stage pipeline of Novo Nordisk offers a promising lineup.

The company has been consistent with its strategy, and that is focusing on its strengths then building on them. Right now, Novo Nordisk has a lot of up and coming candidates not only for its tried and tested diabetes market but for rare diseases as well.

Thus, Novo Nordisk sales are expected to continue its upward trajectory in 2020. If this trend continues, the company can double its earnings practically every five years.

February 6, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
February 6, 2020
Fiat Lux

Featured Trade:

(JOHNSON & JOHNSON JOINS THE CORONAVIRUS BATTLE)
(JNJ), (PRVB)

Johnson & Johnson Joins the Coronavirus Battle

Biotech Letter

It looks like Johnson & Johnson isn’t walking away from the biotechnology sector anytime soon.

News of a potential exit came following the company’s move to cut down on its investment on Proventio Bio (PRVB) from 6.4%, which is around 2.4 million shares, to a 2.4% stake or 1.2 million. Further reports revealed that JNJ might sell its remaining shares soon.

JNJ’s reemergence on the front page of the biotechnology sector comes in the wake of the overwhelming fear courtesy of the coronavirus, which has already taken the lives of nearly 500 people and placed more than 24,000 patients in hospitals worldwide.

In the company’s recent announcement, JNJ executives disclosed that they are also throwing their hat in the ring in the search for a speedy vaccine to combat the deadly coronavirus.

This means that JNJ is joining Gilead Sciences (GILD), AbbVie (ABBV), and Moderna (MRNA) in the very short list of companies aiming to achieve that.

Taking a page off its success in creating a vaccine for the Ebola outbreak, JNJ is confident that it can not only come up with a coronavirus vaccine but also be able to scale it up the moment they receive FDA approval.

For context, JNJ took roughly six months to come up with an Ebola vaccine, scale the treatment, and deliver it to the public. The company spent around the same time in its efforts to produce a Zika virus vaccine.

As for the coronavirus vaccine, JNJ expects to shave off two to three months from the Ebola and Zika timelines.

While no concrete report on the progress of this initiative has been released, reports point to JNJ working with Chinese researchers to use HIV drugs to treat the widely spreading respiratory disease.

How will this impact JNJ’s performance in 2020?

For one, success on this front would definitely increase the earnings estimate for this year especially since JNJ’s fourth-quarter results failed to meet expectations on the top line. Meanwhile, the company beat the bottom line by one penny, recording $1.88 per share.

As expected, the talcum powder lawsuits continued to exert pressure on the company’s consumer goods segment.

Sales of the baby care products amounted to $421 million, exhibiting an 11% decline compared to the previous performance during the same period in 2018.

Blockbuster prostate cancer drug Zytiga has been struggling with the rise of generic rivals since 2018, slashing 13.8% off its fourth-quarter sales to $677 million.

Meanwhile, the declining sales of psoriasis moneymaker Remicade didn’t cause any major decline in the total revenue of JNJ’s pharmaceutical segment. This comes as a surprise since biosimilar competition has been gaining on the drug, cutting its fourth-quarter sales by 16.4% year over year to record $1 billion.

Despite the so-so results, the report still provided glimmers of hope that all but guarantees that JNJ shares won’t plummet in the future.

In fact, JNJ’s total fourth-quarter revenue increased by 1.7% thanks to the new products released as precautionary measures to pick up the slack from the sales decline of both Zytiga and Remicade.

For instance, psoriasis treatment Stelara managed to impress with a 17.7% increase year over year to hit $1.7 billion.

Another recently launched psoriasis injection, Tremfya, demonstrated a whopping 53.9% jump to contribute $270 million in the total revenue in the fourth quarter.

Meanwhile, younger drugs like blood cancer treatments Darzalex and Imbruvica pitched in $1.7 billion, showing off a 32.5% improvement in sales.

So although it’s unlikely that the stock will be able to produce top-line growth in the double digits as often as we’d like, JNJ remains an attractive investment.

One of its most alluring features is its diversified portfolio, which reaches across numerous business lines in the healthcare and biotechnology sectors.

This diversification has become a pillar of the company, ensuring that it doesn’t topple even in times of economic downturns.

The fact that it offers a 2.6% dividend yield makes JNJ a dream come true among income-seeking investors. It also doesn’t hurt that JNJ has consistently raised its dividends annually for the past 57 years, making it the most stable and secure out there today.

Even its lawsuits don’t seem to have any severe impact on the company’s performance since JNJ managed scores of legal cases in the past and constantly managed to come out in one piece. Taking its history as an indication, JNJ should remain as one of the top stocks in the years to come.

February 4, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
February 4, 2020
Fiat Lux

Featured Trade:

(ABBVIE’S BIG CORONA VIRUS PLAY)
(ABBV), (RHHBY), (GILD)

AbbVie’s Big Coronavirus Play

Biotech Letter

Two major issues are in the root of the panic caused by every new infectious disease.

The first is because of the uncontrollable spread of the virus, affecting thousands of people in a short span of time. This consequently pushes the public to question the capacity of their government to provide the proper healthcare to every patient, causing further confusion, alarm, and eventually, economic upheaval.

The second is the overpowering uncertainty that looms over not only the people directly affected by the disease but also the rest of the world as we feel like sitting ducks, wondering who the virus will infect next.

Both effects have become apparent with the news of a new coronavirus, known as 2019-nCoV, which originated in Wuhan, China.

The public’s reaction has come so close to mass hysteria, especially since the virus has already taken over 400 lives and infected more than 20,000 people worldwide.

The speed by which the disease is spreading is also alarming. The 2019-nCoV getting transmitted from one person to another almost as fast as the highly transmissible flu, which was not the case for its slower-moving cousins Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS).

In response to this alarming situation, the Chinese government along with the medical community has turned to unconventional means to find a cure — and giant biotechnology company AbbVie (ABBV) is at the forefront of these efforts today.

One measure taken by the health experts is using AbbVie’s off-label HIV drug, called Kaletra (aka Aluvia), to treat 2019-nCoV patients.

Kaletra has two components valuable in battling the coronavirus: lopinavir and ritonavir. Both have the capacity to block HIV viral replication.

The twice-a-day Kaletra regimen comprises taking the HIV drug and undergoing infusions of interferon, a protein that triggers the immune system.

Although the AbbVie drug has yet to be officially declared as an approved cure for the 2019-nCoV, more and more health experts in China are already using it.

The belief on this treatment’s efficacy stemmed from the statement of the head at Peking University First Hospital, who shared that he contracted 2019-nCoV but cured himself by taking Kaletra.

This Chinese doctor is currently part of the national team of experts sent by the Chinese government to tend to those in Wuhan. Aside from him, Shanghai authorities disclosed that they have already adopted the HIV treatment in handling their own patients.

However, this isn’t the first time that Kaletra was deployed as a treatment against a coronavirus.

In 2004, Kaletra was used to cure the patients of SARS-CoV. This is promising since SARS, which is also caused by a coronavirus, bears a close resemblance to the 2019-nCoV. Experts tested the drug to help treat MERS patients as well.

A roadblock for the Kaletra cure is the scarcity of the drug in China.

A lot of health professionals disclosed that they have been struggling to get their hands on the AbbVie off-patent product. In response, AbbVie donated approximately $1.5 million worth of Kaletra to help contain the 2019-nCoV.

Other biotechnology behemoths have followed AbbVie’s lead of donating funds to help with the research in China. The list includes Roche Holding (RHHBY) and Gilead Sciences (GILD).

Meanwhile, this piece of promising news is not lost in the market. In fact, AbbVie shares pushed higher the moment Kaletra’s efficacy against the 2019-nCoV was revealed.

Apart from that, this development has reminded investors of AbbVie’s promising growth lately.

Unfortunately, most of the company’s growth came from acquisitions — a path where AbbVie has an abysmal track record. More often than not, investors fear that the company overpays in deals that fail to reap the promised rewards.

Case in point: AbbVie’s hefty $63 billion acquisition of Botox maker Allergan, which is due to be finalized early 2020.

In moving to acquire a company that only has one consistent blockbuster product, experts believe that AbbVie might have pulled the trigger too soon without considering other options.

While this high-profile agreement has been such a hot topic in the investing community, I think it’s a good move towards diversifying AbbVie’s sales and injecting additional growth.

Remember, AbbVie is in desperate need for a new outlet in light of the dwindling Humira sales. Adding a high-selling and established industry leader like Botox to the mix would make AbbVie more diversified than ever, making it safer.

More importantly, AbbVie ensured that the $63 billion acquisition doesn’t run the company to the ground — and its precautionary measures showed.

The company has been consistent in its net income, reporting over $5 billion annually in the past three years. It also raked in $12.8 billion in free cash flow in 2018, proving that AbbVie is well-positioned to acquire more companies and be more creative in looking for growth targets.

Hence, I view this biotechnology stock as an underrated buy that would appeal to bargain hunters willing to hang onto it for the years to come.

January 23, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
January 23, 2020
Fiat Lux

Featured Trade:

(BIOGEN’S BIG ALZHEIMER’S BET),
(BIIB), (BMY), (PFE), (IONS), (MYL)

Biogen’s Big Alzheimer’s Bet

Biotech Letter

Biotech giant Biogen (BIIB) failed to impress in 2019. Surprisingly, the company is sticking to its strategy this 2020.

Despite the majority of biotech companies posting market-beating gains last year, Biogen’s shares suffered a 1.4% loss to their value. Taking a look at its performance, there are three obvious reasons why Biogen stock lost ground in 2019.

For one, its revenue generation, particularly for the multiple sclerosis portfolio, flatlined last year. Another reason is the company’s move not to acquire another company the way Bristol-Myers Squibb (BMY) took over Celgene.

Biogen’s decision to not make any major acquisition in 2019 was deemed as an inability to achieve significant business development milestones, thereby failing to positively influence the company’s near-term outlook.

The third reason is Biogen’s decision to halt trials for its widely anticipated Alzheimer’s drug candidate, Aducanumab, in March 2019.

With so much invested in the development of this product, the investing community expected Biogen to completely drop the project altogether.

However, it seems that Biogen has found a way to resolve the issues it initially encountered in the Aducanumab study.

In October 2019, the company announced its plan to resurrect all its Aducanumab-related efforts. To show its commitment to the plan, Biogen kicked off 2020 with a massive purchase from Pfizer (PFE).

Since Biogen aims to apply for regulatory approval by early 2020, the company has been aggressively pursuing avenues to ensure that its Alzheimer’s drug candidate will get the green light as soon as possible.

One of its efforts is its $700 million deal to buy Pfizer’s castoff drug, PF-05251749.

The Pfizer drug was created to treat Irregular Sleep-Wake Rhythm Disorder suffered by Alzheimer’s and Parkinson’s disease patients. This condition, also known as Sundowning, affects 20% of those afflicted by these neurological diseases.

According to the terms of the deal, Biogen will shell out $75 million upfront to gain the rights to the Pfizer drug.

The company will also pay an additional $635 million in the form of milestone payments. Pfizer will receive tiered royalties as well.

On top of this $700 million deal with Pfizer, Biogen also added another $45 million to fund its Alzheimer’s research with Ionis Pharmaceuticals (IONS). Apart from these, the two companies have been working on ION859, which is a possible treatment for Parkinson’s disease.

As if all of these are not enough to show Biogen’s dedication to finding the cure for Alzheimer’s disease, the company has a similar drug in its pipeline: BAN2401. This new drug, which uses a similar approach to Aducanumab, is actually already in its late-stage testing phase.

However, Biogen’s deal with Pfizer is not the first of its kind.

Prior to this, the company paid a whopping $300 million upfront to Bristol-Myers Squibb to own the rights to neurological drug Gosuranemab. Unfortunately, that study failed to deliver the desired results.

Even though Biogen has yet to actually file for regulatory approval for Aducanumab, the company is already preparing for the treatment’s launch this year. This is a rather confident move especially in light of the niggling doubts on the drug’s approval.

Apart from working on Aducanumab, Biogen has been testing for a higher dosage for spinal muscular atrophy medication Spinranza. This is done as a precautionary measure against Novartis’ (NVS) blockbuster gene therapy Zolgensma.

Its exclusive rights on Tecfidera, which has been challenged by Mylan (MYL), is also anticipated to hold until 2028. This means Biogen can still expect to reign supreme in this niche, hanging on to its blockbuster drug that raked in $4.3 billion in 2018 alone and $2.15 billion in the first half of 2019.

In addition to Alzheimer’s and Parkinson’s disease, Biogen is active in searching for treatments for Lou Gehrig’s disease along with stroke and choroideremia as well.

Biogen has also set in motion its plan to venture into rare eye diseases via its $800 million acquisition of Nighstar Therapeutics back in June 2019.

Notably, though, Biogen has been steering away from any major acquisition in 2020.

This strategy could be a stroke of genius if the company’s bet on Aducanumab pays off.

January 21, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
January 21, 2020
Fiat Lux

Featured Trade:

(WHY THERE’S ANOTHER DOUBLE IN CRISPR THERAPEUTICS)
(CRSP), (BLUE), (EDIT), (NVS), (GILD)

Why There’s Another Double in CRISPR Therapeutics

Biotech Letter

Biotech investors, take note: 2019 was a great year for the industry, but the best is yet to come.

In the final three months of 2019, the biotech sector grew by 32% -- notably outpacing the pharmaceutical industry, which only recorded a 9.5% gain.

However, the biotechnology sector is estimated to grow substantially in 2020, and reach over $775 billion in revenue by 2024 as more and more treatments for previously incurable diseases get discovered.

Looking at all the progress in the biotechnology space, this could even be the year we’d finally discover the cure to many life-threatening and debilitating conditions like cancer and Alzheimer’s disease.

With all these technological advancements, two revolutionary tools have been overhauling the entire biotechnology and healthcare industry from the ground up: precision medicine and CRISPR. Actually, the impressive growth of the biotechnology industry has been largely attributed to the excitement generated by the gene-editing sector.

While the majority of companies concentrating on the human genome are still in the research phase, the growth of this industry is undeniable.

Here’s tangible proof.

Just 20 years ago, reading all the DNA of a single person cost approximately $3 billion. Now, this price is down to only $1,000. In the future, this number will go even lower at $100. There are now gigantic factories in China sequencing DNA for companies like Ancestry.com and 23andMe.

This is just one example of how the biotechnology industry has grown by leaps and bounds. It’s also the reason behind the surge of CRISPR shares.

In effect, the specialists in this niche, including Crispr Therapeutics (CRSP), Bluebird Bio (BLUE), and Editas Medicine (EDIT), are amplifying their efforts in 2020.

Among the specialist companies, CRISPR Therapeutics is considered as one of the frontrunners -- if not the top stock. This is because compared to its rivals, which are still in preclinical phases of development, CRISPR Therapeutics’ already has two drugs going through Phase 1 trials: CTX001 and CTX110.

The promising results of the company’s research resulted in a 113% rise in shares last year, with the bulk of the surge starting in October. In fact, CRISPR Therapeutics’ performance had been so impressive that its market cap reached $3.4 billion.

CTX001 is created to target patients suffering from genetic blood disorders, specifically sickle-cell disease and transfusion-dependent beta-thalassemia.

Meanwhile, CTX110 is a CAR-T treatment. The process involves the extraction of immune cells from the patient. These are then retrained and later re-introduced to the human body.

CRISPR Therapeutics’ CAR-T treatment is anticipated to be offered at a cheaper price compared to the other CAR-T therapies.

Both Novartis (NVS) and Gilead Sciences (GILD) are pursuing the same treatment. However, the cost of the therapy from the latter two is expected to reach as much as $475,000 for every patient annually.

Apart from CTX001 and CTX110, CRISPR Therapeutics has two more immunology candidates, currently dubbed CTX120 and CTX130.

If both phase trials succeed, these will bring massive home runs for CRISPR Therapeutics, especially since the cancer immunology market is expected to reach $127 billion by 2026. Over the next 10 years, this niche is estimated to reach $25 trillion in sales.

Among the gene-editing treatments under development today, CRISPR is projected to grow tenfold in the number of applications and potentially curing 89% of disease-causing genetic variations by 2026.

Taking this pace into consideration, the valuation for this market is expected to grow from $551 million in 2017 to reach roughly $3.1 billion by 2023 and $6 billion by 2025.

Meanwhile, precision medicine as a whole is estimated to show a significant jump from $48.6 billion in 2018 to $84.6 billion by 2024. In 2028, this market is expected to rake in $216 billion.

Hence, further success with CTX001 and CTX110 along with additional treatments in the drug pipeline would all but guarantee that Crispr Therapeutics could beat the market again in 2020.

January 16, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
January 16, 2020
Fiat Lux

Featured Trade:

(THE FUTURE OF PRECISION MEDICINE),
(ILMN), (PACB), (RHHBY), (TMO), (QGEN)