Remember when Muhammad Ali got knocked down by Joe Frazier? Well, Merck (MRK) just had its Ali moment, courtesy of a plucky little biotech named Summit Therapeutics (SMMT).

Ivonescimab, a cancer drug developed by this relatively under-the-radar biotech company, just gave Merck's golden goose, Keytruda, a serious run for its money—and not by a small margin.

In a recent announcement, Summit Therapeutics revealed that Ivonescimab reduced the risk of disease progression or death by a whopping 49% compared to Keytruda. Let that sink in for a moment

In the trial, aptly named HARMONi-2 (these folks love their capitalization), Ivonescimab held tumor progression at bay for a median of 11.1 months. Keytruda? A mere 5.8 months.

Needless to say, Summit just landed a haymaker that has Merck seeing stars.

Now, before you rush to dump your Merck stock faster than a hot potato, let's put this in perspective. The trial was conducted in China with Summit's collaboration partner, Akeso. It's a significant result, no doubt, but we're not talking FDA approval just yet.

Still, Wall Street took notice. Summit's stock shot up 61% in Monday's premarket while Merck's stock took a hit.

But here's where it gets interesting. Merck's been the undisputed heavyweight champ of pharma for years, with Keytruda as its championship belt. This wonder drug has been laying billion-dollar eggs for nearly a decade, and the nest keeps growing.

In 2022, the Keytruda market was valued at $20.8 billion, and by 2023, it raked in a staggering $25.01 billion.

With AbbVie’s (ABBV) Humira out of the running, projections for 2024 now peg Keytruda as the top-ranked drug worldwide, with sales expected to surpass $27 billion.

By 2032, it's expected to soar to $45.9 billion, with a compound annual growth rate (CAGR) of 9.20% from 2024 to 2032.

Just last quarter, Keytruda accounted for a whopping 45% of Merck’s $16.1 billion revenue—that’s $7.3 billion from a single drug. Talk about putting all your eggs in one basket.

And therein lies the rub. Keytruda's patent expires in 2028. That's not tomorrow, but in the pharma world, it's just around the corner.

It's like watching the countdown timer on a bomb in an action movie - you know it's coming, but you can't look away.

Merck's not blind to this. They've been diversifying as fast as they could.

Their next largest product, Gardasil, brought in $2.5 billion last quarter, growing at a modest 4%. Not Keytruda numbers, but nothing to sneeze at.

They're also betting big on new drugs. There's Winrevair, a treatment for pulmonary arterial hypertension that could bring in up to $11 billion by 2029.

Then there's Capvaxive, a pneumococcal vaccine that could hit $1 billion in sales by 2027. And let's not forget their $5.5 billion deal with Daiichi Sankyo for three antibody-drug conjugates.

So, what's the play here? Merck's trading at 15 times next year's earnings. That's like finding a designer suit at a thrift store price.

The stock's up 5.3% this year, lagging behind the S&P 500's 16% growth. Some might see a bargain, others a warning sign.

Here's my take: Merck's got challenges, no doubt. But they've also got a track record of success and a pipeline that could make a pharmacist drool.

If you've got the patience of Job and the stomach for biotech's wild rides, Merck could be a solid long-term play.

But don't take your eyes off Summit Therapeutics. They’ve just proved they can punch above their weight class.

Besides, in this high-stakes arena of biotech, where one breakthrough can knock the competition to the mat, it’s the unexpected contenders that often deliver the biggest surprises.  So, keep your eyes on the ring—the next round promises to be a thriller.

 

 

There’s nothing like a little competition to shake things up in the vaccine world, and it looks like Vaxcyte (PCVX) just lobbed a serious challenge at the reigning king of pneumococcal shots, Pfizer (PFE).

You know that satisfying smack when a basketball, held under water, bursts free and cracks you in the nose? That’s what’s happening in the vaccine market right now.

Vaxcyte just threw down the gauntlet with its experimental pneumococcal vaccine, VAX-31, going toe-to-toe with Pfizer’s Prevnar 20 in an early-stage trial. And let’s just say, the results are giving Pfizer’s brass plenty to worry about at their next earnings call.

VAX-31 didn’t just keep pace—it outperformed Prevnar 20, showing a stronger immune response against 18 out of 20 strains of those pesky streptococcus bacteria. This isn’t just a pat on the back; it’s a flashing neon sign that a market shake-up is on the horizon.

For those not yet familiar with Vaxcyte, let’s break it down. This biotech upstart is developing next-generation vaccines designed to do more than just fight infections—they’re engineered to outsmart them.

Vaxcyte’s secret weapon? That would be their XpressCF platform, a game-changing cell-free protein synthesis technology that’s rewriting the rules of vaccine development.

Unlike conventional methods that rely on live cells to produce proteins—a process that can be as slow and finicky as trying to bake a soufflé in a wind tunnel—XpressCF takes a completely different approach.

Essentially, XpressCF makes it possible to create complex proteins in a controlled environment without the need for live cells.

By extracting and using only the essential components from Escherichia coli bacteria, Vaxcyte can synthesize proteins with a level of precision that’s simply unattainable with traditional cell-based systems.

This not only speeds up the production process—cutting out the unpredictable nature of working with live cells—but also allows Vaxcyte to fine-tune the proteins to be more effective against the bacteria they’re targeting.

And as for the result? Vaccines that are not just produced faster, but are also more precisely engineered to take down the most stubborn pathogens. It’s like swapping out a sledgehammer for a scalpel—more targeted, more effective, and less room for error.

This leap forward in technology means Vaxcyte can potentially offer broader protection with fewer side effects, all while dodging the common production headaches that have plagued traditional vaccine development for decades.

And, as expected, Vaxcyte’s pipeline is packing some serious heat with VAX-31 and VAX-24, targeting 31 and 24 strains of IPD, respectively.

These vaccines are aimed squarely at protecting the most vulnerable—infants and adults over 50—from these dangerous infections.

While VAX-24 is leading the charge with Phase 2 trials already showing promising results, VAX-31 is closing in fast and could be the breakout star when it hits the market.

And here’s where it gets even more interesting. Vaxcyte has its sights set on a Phase 3 trial for VAX-31 in adults by mid-2025, with data expected to roll in by 2026.

If everything goes according to plan, Vaxcyte could have not one but two blockbuster vaccines ready to rock the market by 2027 — just as Pfizer and Merck (MRK) might be getting a little too comfortable in their respective corners.

Now, let’s pivot to the bigger picture. Pfizer’s Prevnar 20 and its predecessor, Prevnar 13, are nothing short of cash cows, raking in $6.4 billion in 2023—more than all but two other Pfizer products.

Merck isn’t just sitting on the sidelines, either. Their Vaxneuvance and Pneumovax 23 contributed a cool $1.1 billion to the bottom line last year.

With VAX-31 stepping into the ring, though, it’s like David just found a very large and very effective rock.

But before we get too far ahead of ourselves, let’s remember that biotech is a high-stakes game. The risks are real, and the path to FDA approval is littered with potential setbacks.

Still, Vaxcyte’s got a few things going for it that could make this a winning bet.

For starters, they’ve got $518.7 million in cash, $934 million in short-term investments, and zero debt. That’s a war chest of $1.5 billion to fund their march toward FDA approval without breaking a sweat.

From a valuation standpoint, Vaxcyte’s market cap is sitting pretty at $12.5 billion, and while some might balk at their price-to-book ratio of 6.3 compared to the sector’s median of 2.4, I’d argue that you get what you pay for.

After all, you’re not just buying into a company. If anything, you’re actually buying into a potential industry leader. And in a market where the reigning king is starting to sweat, that might be the most valuable investment of all.

 

 

I've been tracking the biotech sector for decades now, and let me tell you, we're on the cusp of something big. Single-cell and spatial genomics are shaking up cancer research like nothing I've seen before.

Remember when we used to look at tumors as one big blob of cells? Those days are gone.

Now, it's not just about understanding tumors anymore – it's about dissecting them cell by cell, mapping them out like uncharted territories.

Single-cell genomics is giving us a front-row seat to the cellular soap opera playing out in every cancer.

From where I'm sitting, this is the kind of revolution that separates the wheat from the chaff in my portfolio. We're not just identifying the players anymore. Instead, we're mapping out their positions and interactions with unprecedented precision.

Take what's happening at St. Jude Children's Research Hospital. They're using single-cell genomics to crack the code on why some stages of B-cell acute lymphoblastic leukemia thumb their noses at chemotherapy.

And this isn't just academic navel-gazing. It's actually paving the way for treatments that pack a real punch.

Or look at what Fynn Biotechnologies is doing with 10X Genomics' (TXG) Xenium In Situ platform.

They're peering into breast cancer tumors and finding that the neighborhood where immune cells hang out can make or break immunotherapy.

This is the kind of insight that turns the one-size-fits-all approach to cancer treatment on its head.

Now, let's talk turkey. Where's the money in all this? I've got my eye on a few players.

First up, 10X Genomics. These folks aren't just dipping their toes in the single-cell and spatial genomics pool; they're doing cannonballs.

Their Chromium and Xenium platforms are becoming the go-to tools for researchers and clinics alike.

And the numbers don't lie – they pulled in $156 million in Q2 2024, up 25% from the year before.

NanoString Technologies (NSTG) is a bit of a different story. They've been a big name in spatial biology with their GeoMx Digital Spatial Profiler, but they've hit some rough waters.

Filing for Chapter 11 in early 2024 wasn't on anyone's bingo card. Despite a solid Q4 2022 with $36.2 million in revenue (up 29% year-over-year), their legal tussle with 10x Genomics and other financial headaches have put them in a tight spot.

But don't count them out yet – Bruker Corporation (BRKR) swooping in to buy up their assets might just be the lifeline they need.

Illumina Inc. (ILMN) is another heavyweight worth watching. I’ve said it before, and I’ll say this again – this biotech is the reigning 800-pound gorilla in DNA sequencing. And now, they're muscling into single-cell genomics.

Their acquisition of GRAIL shows they're serious about early cancer detection. Sure, they've had some regulatory speed bumps, but with a market cap of about $33 billion in Q3 2024, they're not going anywhere.

Don't overlook the big pharma players either. Bristol-Myers Squibb (BMY) is betting big on precision medicine, teaming up with 10X Genomics to bring single-cell analysis into their drug development pipeline.

With BMY’s oncology portfolio raking in $17.3 billion in 2023, they've got the cash to make big moves.

Gilead Sciences (GILD) is another one to keep an eye on. Their purchase of Kite Pharma put them in the cell therapy game, and they're not shy about using genomic data to develop new cancer treatments. In fact, their cancer segment grew by 22% in 2023.

And let's not forget Bio-Rad Laboratories (BIO). They might have seen a slight dip in net sales from $2.9 billion in 2022 to $2.68 billion in 2023, but their Single-Cell ATAC-Seq Solution is still a key player in epigenomic analysis.

Now, let's zoom out and connect the dots. The genomics market is on a tear.

We're looking at a jump from $18.85 billion in 2020 to a projected $62.9 billion by 2028. That’s a massive growth, and it's directly impacting companies across the board.

Take 10X Genomics, for instance. Their Q2 2024 revenue hit $156 million, a 25% year-over-year increase that's directly tied to the surging demand for their single-cell and spatial genomics tools.

The single-cell genomics market alone was worth $2.4 billion in 2022 and is looking at a CAGR of 16.7% from 2023 to 2030.

Meanwhile, the precision medicine market, fueled by these genomic advancements, is projected to balloon from $66.1 billion in 2023 to $140.6 billion by 2030.

Let's not kid ourselves, though. Biotech investing is not for the faint of heart. You've got to have the stomach for high R&D costs, regulatory labyrinths, and cutthroat competition.

Just look at NanoString Technologies - one minute they're reporting a 29% revenue increase, the next they're filing for Chapter 11. It's a rollercoaster, but for those who can hang on, the potential payoff is enormous.

So, where does this leave us? Well, I didn't spend decades in this game to tell you to play it safe, but I'm not here to see you bet the farm either. Instead, I’m here to tell you to play it smart.

Add those nimble upstarts like 10x Genomics to your watchlist - they're the racehorses that could leave the pack in the dust.

And when the market gets jittery, that's your cue to swoop in on steady workhorses like BMY and Gilead. They might not be as sexy, but they’ve got the tried-and-tested staying power.

Remember, in biotech, today's underdog can become tomorrow's alpha faster than you can sequence a genome.

So stay alert, keep your powder dry, and for Pete's sake, don't wait for a gilded invitation to buy the dip.