Biotech Letter Archives

Taking a Second Look at Sanofi

Investors on the lookout for a large-cap biotech investment have several options, with Sanofi SA (SNY) being one of the most interesting companies to consider. The French multinational pharma giant has a diverse drug portfolio which has been attracting attention recently thanks to its focus on the lucrative market of diabetes treatments.

Unfortunately, the diabetes project hasn’t been working as well as Sanofi hoped this year. Earlier in 2019, FDA rejected the company’s new diabetes candidate Zynquista. Despite this setback, the company announced more promising Phase 3 results from another diabetes treatment, Toujeo, which is aimed at children and adolescents with Type 1 diabetes.

Regardless of the roadblocks encountered by Sanofi in its bid to dominate this lucrative market, the company has been insistent in this endeavor -- a determination that’s actually pretty understandable given that the diabetes market covers over 425 million people worldwide.

So far, Sanofi has managed to be one of the leaders in this sector, with insulin injection pen Lantus working as a stable revenue driver for the biopharma for years now.

To offer a clearer perspective on the promising diabetes sector, Lantus raked in $3.95 billion in sales for 2018 alone -- an impressive growth that has been attracting competitors left and right.

In fact, this Sanofi diabetes moneymaker has been experiencing steep competition with sales slipping by over $1.17 billion largely due to the emergence of cheaper and stronger rivals in the market.

Nonetheless, Sanofi wants to maintain its stronghold so new deals are expected to crop up soon in an effort to shore up its declining Lantus revenue. Among the drugs in its portfolio, Toujeo has actually been doing quite well, raking in $930 million in sales in 2018. While this doesn’t really cover the $1.17 billion slip from Lantus sales over the same period, the figure is close enough to bring hope to investors and keep competitors at bay.

Sanofi’s strongest competitor, particularly in the diabetes market, is Novo Nordisk (NVO). The latter’s diabetes drug Tresiba has actually accounted for 84.2% of its overall sales.

While this is definitely daunting for Sanofi, the sales performance of Tresiba can also highlight a key differentiator between the two. That is, Sanofi offers a more diversified portfolio especially in terms of revenue sources. Meanwhile, Novo Nordisk is focused on the diabetes market alone.

Although both Toujeo and Lantus have been remarkable in sales thus far, Sanofi has a number of other top-performing drugs in its portfolio. After all, Sanofi isn’t just about diabetes treatments.

In terms of growth, eczema treatment Dupixent has shown a remarkable 142% jump in sales over the past year. Its revenues rose to $628 million for the third quarter in 2019. In comparison, the overall sales for Sanofi’s diabetes treatments declined by 18% since the third quarter of 2018.

While it’s easy to get distracted by the allure of the lucrative diabetes market, these treatments actually comprise a small portion of the French biopharma’s drug portfolio.

To date, Sanofi has 85 up-and-coming drugs, with 51 of these already sent to early clinical tests and the remaining 34 either in Phase 3 trials or sent for approvals. To provide a more direct comparison, reports show that only two drugs in the pipeline are aimed towards the diabetes market. The rest of Sanofi’s portfolio has 28 oncology candidates and 18 immuno-inflammation drug prospects.

Overall, Sanofi has a stable, well-rounded portfolio to offer its investors. However, stiff competition can prove to be a huge obstacle especially in the high-growth diabetes space. Its revenue growth in this sector isn’t also as remarkable as its competitors.

This doesn’t take away from Sanofi’s other products though. What it means is that it would be a better call to buy Sanofi stock once prices fall at a cheaper valuation.

December 19, 2019

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
December 19, 2019
Fiat Lux

Featured Trade:

(PLAY GUARDANT HEALTH FOR THE LONG TERM), (GH)

Play Guardant Health for the Long Term

Biotech Letter

The company that cures cancer will be the next Apple (AAPL). That is the consensus of most scientists and investors out there. The question is: which of the hundreds of players out there should one be picking up today?

Guardant Health employs a unique approach.

The company believes the key to conquering cancer is unprecedented access to its molecular information throughout all stages of the disease. It is developing a solution through tests that require only a blood sample.

Guardant’s blood tests are enabling timely therapy selection for patients with cancer while we also advance programs for recurrence detection and early cancer detection. In addition, it is working together with pharmaceutical companies to discover and understand new treatment approaches that lead to better outcomes for patients.

So far, GH has exhibited a great health rating. Unfortunately, there remains anxiety over its profitability. In particular, some investors look at its medium growth rate and feel that this biotech stock is valued expensive.

On the other hand, GH has shown a remarkable growth rate in the previous year. In fact, this oncology-focused company has achieved an impressive revenue growth of 81.85% in 2018.

Looking at the company’s performance and the estimates in the next two years, GH is projected to report a strong growth in its earnings per share. To be specific, its EPS is estimated to jump by 17.24% on average annually.

Meanwhile, the sales of its breakthrough treatments are anticipated to break above $200 million in 2019 alone -- showing off over 125% in annual growth.

To provide more tangible results to support these predictions, here are the highlights from the company’s third-quarter earnings report released in November:

GH raked in $60.8 million in revenue, indicating a 181% jump from the value recorded in 2018. (Roughly $5.5 million of this revenue was from the sample GH processed last year. No reimbursements were granted to payers for those samples, and GH succeeded in its appeal. The said revenue was added to the 2019 third-quarter report.)

GH increased its full-year revenue prediction from $180 million to $190 million to reach $207 million instead, showing an increase of over 125% year-over-year.

GH performed 13,259 tests with clinical customers, indicating an 89% jump from the number recorded during the same period in 2018 when the company only had 7,027 tests.

Meanwhile, GH’s biopharmaceutical clients performed 5,280 tests. This shows a whopping 111% increase year-over-year as well.

Apart from increasing the number of tests performed, the average revenue for every biopharmaceutical test actually jumped by 16% to be priced at $4,052. This is a result of more OMNI tests performed, which is priced higher than the Guardant360 tests previously favored by the clients.

GH has finally hit its stride this year. Its gross margins have improved to 70% compared to the 54% it recorded in 2018. The company also managed to lower its operating losses. A year ago, GH’s third-quarter operating loss amounted to $24.2 million. In the same period in 2019, the company decreased it to $17.5 million, indicating a 28% improvement.

To date, Guardant Health has reported an estimated annual revenue of $170.8 million. Its main competitors are Biocept, Epic Sciences, and Pathway Genomics.

December 17, 2019

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
December 17, 2019
Fiat Lux

Featured Trade:

(WHY THE M&A BOOM WILL SPILL INTO 2020),
(BMY), (CELG), (NOVN), (LOXO), (ROG), (ONCE), (MRK), (SAN), (ARQL), (THOR), (AMRN), (GSK), (AMGN), (GILD)

Why the M&A Boom Will Spill Into 2020

Biotech Letter

The biotech industry is breaking out, with the sector witnessing tremendous growth in the later part of 2019. With the stocks surging, it looks like the new year is setting up to a strong start that could continue well up into 2020.

Despite the anxiety over the feared government price controls in the drug sector, the early thinking in the biotech world remains optimistic. In fact, the stage seems to be set for even bigger news come 2020. This prediction comes on the heels of the over $7 billion deals closed just this summer alone.

To date, approximately $100 billion total potential value of research and development have been spent by biotech companies since June 2019, with $11 billion paid upfront in cash.

Among those deals, the biggest so far is Bristol-Myers Squibb’s (BMY) $74 billion acquisition of Celgene (CELG). Another massive agreement is Novartis AG’s (NOVN) $9.7 billion acquisition of The Medicines Company (MDCO).

Eli Lilly and Co’s (LLY) $8 billion takeover of rare genetic mutation drug Vitakvi creator, Loxo Oncology (LOXO), also signified notable movements in the industry along with Johnson and Johnson’s (JNJ) $5.8 billion buyout of robotic surgery company Auris Health. Even Roche Holding AG (ROG) is expected to complete its $4.3 billion merger with gene therapy company Spark Therapeutics (ONCE) before the year ends.

Not far behind are Merck and Co’s (MRK) $2.7 billion acquisition of ArQule (ARQL) as well as Sanofi SA’s (SAN) $2.5 billion buyout of clinical-stage DNA base pair treatment company Synthorx Inc (THOR).

The majority of the deals were in the oncology space, with three times as many oncology deals made compared to the number two sector, the neurology sector. To put things in perspective, seven of the top 10 deals made in 2019 involved oncology treatments.

What can we expect in 2020?

A number of drug candidates remain in the pipeline, but one mid-cap biotech company is anticipated to make big bucks next year. The catch? It’ll need the help of a bigger and more established company to make it happen. That is, this promising company has become the most eligible buyout candidate for 2020.

Amarin Corporation (AMRN) has taken center stage when it became the first-ever company to hit positive results for its prescription omega-3 treatment, Vascepa -- a feat that none of the other biotech giants managed to accomplish. Actually, competitor GlaxoSmithKline (GSK) created its own omega-3 treatment, Lovaza, only to have it fail to reach its goal.

Barring any major setback, Vascepa is slated as the next blockbuster treatment in the cardiovascular disease space -- possibly even displacing Pfizer’s (PFE) Lipitor as the king of this segment. In fact, several major healthcare groups like the American Heart Association, American Diabetes Association, the European Society of Cardiology have already endorsed Vascepa as an effective treatment for LDL cholesterol.

The Amarin medication is projected to peak at $4 billion in annual revenues by 2028. Considering that its manufacturer’s reported third-quarter earnings this 2019 is only at $112.4 million, the approval of Vascepa will undoubtedly be a game-changer for its investors.

However, Vascepa’s incredible potential along with the fact that Amarin has no other drug candidate in its pipeline makes the company ripe for a takeover. For one, it’s not financially capable of juggling both the marketing of Vascepa and developing or building a solid pipeline to support its growth. With the omega-3 treatment’s projected blockbuster status, a bigger and more established company could undoubtedly be more fit to help it reach its potential.

Who are the potential suitors?

Three heavyweights have been repeatedly linked to Amarin: Pfizer, Novartis, and Amgen (AMGN). Since all three have a budding cardiovascular unit, it could be anyone’s game.

However, Novartis’ recent acquisition of The Medicines Company makes it the least likely candidate in the list right now. After all, the latter already has a potential blockbuster cholesterol-lowering drug in Inclisiran.

That paves the way for a new suitor in the form of Gilead Sciences (GILD). Just a few weeks ago, Gilead added Vascepa to one of its ongoing trials involving nonalcoholic steatohepatitis. Whether or not this signifies interest in buying out Amarin is anybody’s guess.

Heading into the next year, the biotech sector is expected to welcome the new year with strong fundamentals and great opportunities for outperformance. While the election may bring changes to policies, the ongoing growth and innovation in this industry make it impossible to be excited for what’s in store for the future.

After all, more and more life-extending and even life-saving treatments are getting discovered by the day. Aside from following the developments in the industry, why not use your knowledge to fatten your pocketbook along the way?

December 12, 2019

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
December 12, 2019
Fiat Lux

Featured Trade:

(THE STAMPEDE INTO BIOSIMILAR DRUGS),
(BIIB), (NOVN), (REGN), (ALXN), (NITE), (PFE), (AMGN), (MRK)

The Stampede Into Biosimilar Drugs

Biotech Letter

It’s been roughly a year since Biogen (BIIB) tightened its partnership with Samsung Bioepis and the Massachusetts-based biotech giant handed over an additional $100 million to funnel new programs to its own growing biosimilars pipeline.

On top of the upfront payment, the South Korean company is also eligible to gain up to $210 million depending on milestones achieved plus a $60 million fee if Biogen chooses to exercise its option in Europe. This comes in the heels of the $700 million it paid Bioepis in 2018 in an effort to boost its stake to 49.9% in their joint venture in the biosimilar space.

How has that gone?

In return, Biogen brought home two new ophthalmology biosimilars. One is a knockoff of Novartis AG’s (NOVN) prized Lucentis and the other is Regeneron Pharmaceuticals’ (REGN) top-selling Eylea. The terms of the recent deal give Biogen the exclusive commercialization rights worldwide.

Here’s a quick summary of the differences between biosimilars and generics.

Generics are identical versions of brand name products that lose patent protection. Biosimilars are considered as brand name products. However, these are highly similar to those existing branded drugs available in the market. The competitive edge of biosimilars against the “original” brand name products is the fact that they can deliver equivalent results at cheaper alternatives.

This latest update on Biogen’s partnership with Bioepis is dubbed as the “second wave” of biosimilar candidates joining the Biogen lineup. Aside from the Lucentis and Eylea biosimilars, Alexion Pharmaceuticals (ALXN) red blood cell treatment Soliris is also expected to join this batch.

Apart from that, the company can also commercialize a number of anti-tumor necrosis factor drugs in China with the list including plaque psoriasis drug Imraldi, rheumatoid arthritis treatment Benepali, and Crohn's disease medication Flicabi. Both companies have left their options open to potentially expand their current agreement in Europe for an additional five years.

Biogen’s first aggressive foray in the eye diseases sector was signified by its acquisition of clinical-stage gene therapy company Nightstar Therapeutics (NITE) earlier this year. At the time, the smaller company has already attracted attention for their research on rare retinal disorders.

Despite the promising announcements though, some investors remain wary of this growth direction Biogen has decided to pursue.

A commonly voiced concern is the issue of the production timeline, especially since neither biosimilar drug from the new deal has actually completed clinical trials to prove their efficacy compared to the reference drugs. At this point, the Lucentis biosimilar is in Phase 3 testing while the Eylea copycat is still in the preclinical phase. Patent issues are notable roadblocks as well.

Regardless of the issues, Biogen appears to be set on this track. Even before the “second wave” was implemented, the company has already presented a convincing lineup of biosimilars. A look at its third quarter earnings report showed that the biosimilars lineup managed to generate almost $184 million during that period alone, with copycat versions of Enbrel, Remicade, and Humira taking the lead in sales.

The biosimilars movement remains strong among biotech and pharmaceutical companies. Unlike in the generic drug sector, the leaders of the biosimilar movement are also the big names in the “branded” products market.

In fact, biotech heavyweights eagerly jumped at the opportunity to become frontrunners in the move to cut down on the staggering costs of branded medicine. Novartis has quickly developed its biosimilars arm, with Sandoz AG quickly taking over the European market.

Pfizer’s (PFE) partnership with South Korean biosimilar developer Celltrion Healthcare as well as its $17 billion acquisition of generic injectable pharmaceuticals producer Hospira in 2015 signify its plans to emerge as a strong contender in this sector. Even Amgen (AMGN) and Merck & Co. (MRK) have cranked up notable biosimilar development programs to join the race.

Needless to say, the biosimilar rush is all the rage right now. Big biotech companies have already learned their lesson on how the generic drugs business practically took over the pharmaceutical market, growing to almost 90% of overall prescriptions filled but only accounting for less than 30% of the total expenses. Plus, it’s also clear that big money is being made from blockbuster biologics.

December 10, 2019

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
December 10, 2019
Fiat Lux

Featured Trade:

(SANOFI’S RETREAT FROM THE DIABETES MARKET),
(SNY), (NVO)

Sanofi’s Retreat from the Diabetes Market

Biotech Letter

Investors on the lookout for a large-cap biotech investment have several options, with Sanofi SA (SNY) being one of the most captivating companies to consider.

The French multinational pharma giant has a diverse drug portfolio which has been attracting attention recently thanks to its focus on the lucrative market of diabetes treatments.

Unfortunately, the diabetes project hasn’t been working as well as Sanofi had hoped this year. Earlier in 2019, the FDA rejected the company’s new diabetes candidate Zynquista. Despite this setback, the company announced more promising Phase 3 results from another diabetes treatment, Toujeo, which is aimed at children and adolescents with Type 1 diabetes.

Regardless of the roadblocks encountered by Sanofi in its bid to dominate this lucrative market, the company has been insistent in this endeavor -- a determination that’s actually understandable given that the diabetes market covers over 425 million people worldwide.

So far, Sanofi has managed to be one of the leaders in this sector, with insulin injection pen Lantus working as a stable revenue driver for the biopharma for years now.

To offer a clearer perspective on the promising diabetes sector, Lantus raked in $3.95 billion in sales for 2018 alone -- impressive growth that has been attracting competitors left and right.

In fact, this Sanofi diabetes moneymaker has been experiencing steep competition with sales slipping by over $1.17 billion largely due to the emergence of cheaper and stronger rivals in the market.

Nonetheless, Sanofi wants to maintain its stronghold so new deals are expected to crop up soon in an effort to shore up its declining Lantus revenue.

Among the drugs in its portfolio, Toujeo has actually been doing quite well, raking in $930 million in sales in 2018. While this doesn’t really cover the $1.17 billion slip from Lantus sales over the same period, the figure is close enough to bring hope to investors and keep competitors at bay.

Sanofi’s strongest competitor, particularly in the diabetes market, is Novo Nordisk (NVO). The latter’s diabetes drug, Tresiba, has actually accounted for 84.2% of its overall sales.

While this is daunting for Sanofi, the sales performance of Tresiba can also highlight a key differentiator between the two. That is, Sanofi offers a more diversified portfolio especially in terms of revenue sources. Meanwhile, Novo Nordisk is focused on the diabetes market alone.

Although both Toujeo and Lantus have been remarkable in sales thus far, Sanofi has a number of other top-performing drugs in its portfolio. After all, Sanofi isn’t just about diabetes treatments.

In terms of growth, eczema treatment Dupixent has shown a remarkable 142% jump in sales over the past year. Its revenues rose to $628 million for the third quarter in 2019. In comparison, the overall sales for Sanofi’s diabetes treatments declined by 18% since the third quarter of 2018.

While it’s easy to get distracted by the allure of the lucrative diabetes market, these treatments actually comprise a small portion of the French biopharma’s drug portfolio.

To date, Sanofi has 85 up-and-coming drugs, with 51 of these already sent to early clinical tests and the remaining 34 either in Phase 3 trials or sent for approvals.

To provide a more direct comparison, reports show that only two drugs in the pipeline are aimed towards the diabetes market. The rest of Sanofi’s portfolio has 28 oncology candidates and 18 immuno-inflammation drug prospects.

Overall, Sanofi has a stable, well-rounded portfolio to offer its investors. However, stiff competition can prove to be a huge obstacle, especially in the high-growth diabetes space. Its revenue growth in this sector isn’t also as remarkable as its competitors.

This doesn’t take away from Sanofi’s other products though. What it means is that it would be a better call to buy Sanofi stock once prices fall at a cheaper valuation.

December 5, 2019

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
December 5, 2019
Fiat Lux

Featured Trade:

(WHY 1 + 1 = 4 WITH THE BRISTOL MYERS/CELGENE MERGER),
(BMY), (CELG), (AMGN)