Biotech Letter - John Thomas - Mad Hedge Fund Trader

A Weighty Impact

Today, let's talk about something that's stirring up quite the buzz in the investment community, something that's not just about numbers and charts, but about potentially changing lives.

Now, I'm sure you've heard of Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), Meta Platforms (META), and Nvidia (NVDA). These tech titans aren't just playing around with gadgets and gizmos; they're digging deep into the world of knowledge to uncover stuff we didn't even know was missing. And let's be clear, this isn't just some fancy artificial intelligence show-off; it's bigger, much bigger.

But, recently, other industries aren’t letting tech have all the fun.

The pharma industry, led by stars like Moderna (MRNA), Eli Lilly (LLY), and Novo Nordisk (NVO), is on the brink of what I'd call medical miracles.

We're looking at treatments that might kick some serious diseases to the curb – illnesses that we thought were just part of the unlucky draw in the genetic lottery.

Admittedly, figuring out the real worth of these innovations is a bit like trying to nail jelly to the wall – traditional financial analysis scratches its head at this sort of thing.

But for those of you who don't mind a bit of a rollercoaster ride, investing in these themes could be as rewarding as finding a forgotten winning lottery ticket in your old jeans.

Let's chew on obesity for a second. It's a big deal, literally and figuratively. It's the root of all sorts of nasty stuff like heart disease and diabetes.

Here's where Lilly and Novo Nordisk come in, swinging like heroes with their weight-loss drugs. These aren't just your average diet pills; we're talking about drugs that could turn the tables on major illnesses and even some curveballs like Alzheimer’s and sleep apnea.

Lilly's stock has been on a joyride, up 77% in the past year. Sure, by the bookworms' metrics, it's overvalued, but if you ask me, those numbers are playing catch-up to what these drugs could really do.

For context, imagine if you had bought Amazon or Apple back when they were just a bookstore and a computer company. Looking at their history and trajectory, Lilly and Novo Nordisk could be cooking up something similar.

And with over 20 studies lined up in the next five years, Lilly's stock, hanging around $625, could jump to a cool $840 by 2028 if things go well.

Keep in mind that the obesity treatment market is huge, and I mean, really huge. We're talking over 100 million potential customers in the U.S. alone.

And get this: insurance companies, those penny pinchers, are likely to cover these drugs because they're cheaper than surgeries.

Getting down to the specifics with Lilly, they've been making waves in the weight loss market with Mounjaro, raking in a sweet $2.9 billion in just nine months. And with Zepbound, it's like they've hit the jackpot twice.

Still, it's not a solo race; Novo Nordisk is right there with Wegovy and Ozempic. The demand is so hot that there were shortages last year. Talk about being in high demand!

But here's where Lilly might just have the upper hand. Their molecule, tirzepatide, is like the Usain Bolt of weight loss drugs – up to three times more effective than Novo Nordisk’s semaglutide.

And with the market expected to balloon to $100 billion by 2030, we're just seeing the opening act of what could be a blockbuster show.

With all this obesity talk, it’s important to understand that Lilly is no one-trick pony. They've got a whole stable of drugs treating everything from lymphoma to ulcerative colitis. And with over 20 programs in phase 3 studies, they're not running out of steam anytime soon.

Plus, here's the cherry on top: Lilly isn't just about making money; they're sharing the love with a 15% hike in their dividend.

That means if you jump on the Lilly train by Feb. 15, you're in for a treat in early March.

So, is Lilly a solid bet for the long haul? It sure looks like it. The excitement around their weight loss treatments is just one piece of the puzzle.

With a variety of drugs in their arsenal and an impressive pipeline, Lilly isn't just a flash in the pan. Sure, there are the usual hiccups like patent expiries and pipeline flops, but with their portfolio, they look set to weather any storms and keep the growth party going. I suggest you buy the dip.

January 16, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 16, 2024
Fiat Lux

Featured Trade:

(PHARMA GIANTS HUNTING FOR THE NEXT BIG THING)

(IMCR), (SNDX), (BPMC), (MRK), (JNJ), (HARP), (AMAM), (MDGL), (VKTX)

Pharma Giants Hunting For The Next Big Thing

Biotech Letter

Alright, let's dive back into the biotech pool – and no, it's not the kind where you just dip your toes. We're talking about a full-blown belly flop into the deep end of the stock market.

Since October 2023, biotech stocks have been playing a game of limbo, asking themselves, "How low can you go?" But just when they hit two-thirds below their Covid pandemic peak, Big Pharma came to the rescue like knights in shining armor (or should I say, lab coats?).

In an earlier letter, I talked about J.P. Morgan’s annual healthcare conference, essentially the Super Bowl for healthcare geeks. The buzz? Merck (MRK) grabs Harpoon Therapeutics (HARP) for $680 million – a move as sharp as, well, a harpoon.

Not to be outdone, Johnson & Johnson (JNJ) scoops up Ambrx Biopharma (AMAM) for a cool $2 billion. Talk about shopping sprees!

But wait, there’s more. Looking into the rest of the biotech companies in the market today, I can spot a few potential biotech Cinderellas, waiting for their Big Pharma prince. And no, I don't have a crystal ball, but I do have some educated guesses.

First up, let’s chat about Immunocore Holdings (IMCR). These British wizards have been turning heads since Kimmtrak, their first drug for a rare eye cancer, got the green light in 2022.

This biotech is a $1.9 billion David amidst the Goliaths, with a therapy that’s like whispering secret orders to the patient's immune system – "Psst, go beat up that tumor, will you?" And guess what? It listens. This approach isn’t just for show; it’s bumping up survival rates, and that’s a big deal.

Impressively, Immunocore isn't just a one-hit wonder. Kimmtrak, their star player, is not your average Joe of the T-cell receptor (TCR) immunotherapy world. It's more like the valedictorian – first of its kind to get the thumbs up in a who’s who of countries, including the United States, Canada, the E.U., the U.K., and Australia.

For a small-cap player, that’s like winning the World Cup in its rookie year. And with no rivals for Kimmtrak’s indication, it’s like they’ve got the whole playground to themselves.

Next, let’s take a trip to Boston’s backyard – Syndax Pharmaceuticals (SNDX). They’re nearly doubling their value faster than you can say “biotech boom,” thanks to some promising drugs for leukemia and transplant complications.

With a market cap near $1.7 billion and potential FDA nods on the horizon, they're like the biotech version of a sleeper hit.

Checking out the long-term plans of Syndax, they've got a lineup of compounds that are like a biotech fan's dream team, eyeing not one, but two FDA green lights in 2024. They're buddying up with Incyte (INCY) on these compounds, and let me tell you, the scientific world is giving them the thumbs up. And to keep the lights on and the science humming, they've tucked away a cool $200 million from a recent capital raise.

But that’s not all. Since the market hit rock bottom in late October, Syndax's stock has been shooting up like a rocket, a whopping 75% jump. It’s like they've been hitting the gym hard. Bank of America's bullish call on the stock? That was the protein shake.

Now, I'm all for a good success story, but let’s not get ahead of ourselves. I'm keeping an eagle eye on this one, waiting for the perfect moment when the shares might take a little breather, maybe dip into the mid-teens. That's when I’ll swoop in, snagging a slice of SNDX, especially with those FDA approvals on the horizon. After all, these deals are all about timing.

And who could ignore Blueprint Medicines (BPMC)? Straight out of Cambridge, Massachusetts, these folks have a drug targeting certain white blood cell cancers.

These folks aren't your average biopharma company; they're more like the MIT of medicine, crafting precision treatments that home in on the genetic bad guys causing cancer and blood disorders. Their lineup? A dynamic duo of Ayvakit for systemic mastocytosis and Gavreto for those tricky RET-cancers, plus four more contenders in clinical trials, all ready to rumble in the biotech arena.

Blueprint's story started in 2011. They then hit the public scene in 2015, where they raised a whopping $154.8 million at their IPO - talk about making an entrance.

Fast forward to today, and their stock is hovering around $85.00 a pop, boasting a market cap of $5.4 billion – that's billion with a “B.”

What’s their secret sauce, you ask? These geniuses have a discovery platform that's like a GPS for kinases, the sneaky culprits behind many diseases. Their method? Create compounds that are like guided missiles, targeting these kinases with precision. The result? Two FDA approvals, and probably a few high fives in the lab.

But hey, it’s not all about cancer. The weight-loss drug arena is heating up, too. Madrigal Pharmaceuticals (MDGL) and Viking Therapeutics (VKTX) are the names to drop here. Madrigal’s eyeing FDA approval for a liver treatment, while Viking’s showing some early promise in the weight-loss game.

So, there you have it – the biotech scene is sizzling, and these companies are the ones turning up the heat. My two cents? Keep these companies under your watchful eye. You never know, one of them might just be the golden ticket in this dazzling biotech arena.

January 11, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 11, 2024
Fiat Lux

Featured Trade:

(HEALTHCARE GIANTS GO SHOPPING)

(JNJ), (MRK), (AMAM), (PFE), (HARP), (NVS), (CYTK)

Healthcare Giants Go Shopping

Biotech Letter

Ah, San Francisco, the city of fog and fabulous biotech and healthcare feasts. In case you missed it, the J.P. Morgan annual healthcare conference, the biotech Super Bowl, just kicked off this January.

Imagine a bustling downtown San Francisco, where hotels are as jam-packed as a can of sardines, but instead of fish, they're brimming with investors and healthcare execs.

Let's focus on the biotech sector, which, let's be honest, has seen its fair share of ups and downs. The past three years? More like watching paint dry.

But, as if by magic, we've seen a recent upturn. A two-month price surge that’s as unexpected as it is welcome.

The SPDR S&P Biotech ETF (XBI), our financial barometer here, has gone from a nosedive (down over 60% since February 2021) to a rocket ship (up nearly 40%). Interest rate cuts and M&A buzz are like the Red Bull in this energy drink mix.

Now, to the heart of the story: big pharma's shopping spree.

The day of surprise comes when Merck & Co. (MRK) and Johnson & Johnson (JNJ) strut in with deals that leave us wide-eyed.

And these are not just any deals, but the kind where these healthcare giants are practically throwing money like it's going out of style – over 100% premiums over the last prices. It's like offering to pay double for a house just because you love the wallpaper.

Johnson & Johnson swoops in on Ambrx Biopharma (AMAM) for a cool $2 billion. At $28 per share, they're paying a 105.4% premium.

For context, this isn't your run-of-the-mill biopharmaceutical company. Oh no, Ambrx is more like the Elon Musk of the biotech world, innovating like there's no tomorrow.

This biotech is all about cooking up some of the most cutting-edge therapies out there – think antibody-drug conjugates (ADCs) and other engineered marvels that give the immune system a superhero makeover.

On top of that, Ambrx actually has a secret weapon – their expanded genetic code technology platform called Engineered Precision Biologics (EPBs).

This technology isn't just smart; it's Einstein-level genius. It brings together site-specific conjugation with proprietary linkers and payloads. It's like building a custom-made luxury car, except this one's designed to obliterate cancer.

Researchers are raving about Ambrx's ADCs, calling them “guided missiles.” And they're not exaggerating.

These bad boys zero in on cancer cells with the precision of a sniper, taking them out without wreaking havoc on the innocent bystanders – the healthy tissue. It's pretty much like having a Swiss watch in your medical arsenal, sleek, sophisticated, and super effective.

Impressively, Ambrx isn't stopping at just being a one-hit wonder. They're pushing the envelope with enhanced antibody-drug conjugate, immuno-oncology conjugate, and bispecific candidates. These aren't just treatments; they're potential game-changers in the war against cancer.

So, when Johnson & Johnson ponied up $2 billion for Ambrx, they weren't just buying a company; they were investing in a future where cancer might just meet its match.

In fact, Pfizer (PFE) recently grabbed Seagen for $43 billion in 2023, just to get a slice of this ADC pie. It's the latest fashion in cancer treatment, and everyone wants in.

Meanwhile, Merck, not to be outdone, grabs Harpoon Therapeutics (HARP) for $680 million, a 118% premium at $23 per share. It's a biotech-feeding frenzy, and Merck's got its teeth out.

Harpoon is a clinical-stage immunotherapy company that's not just playing in the big leagues, but changing the game. They're all about developing a novel class of T-cell engagers, and let me tell you, this stuff is like the Navy SEALs of cancer treatment.

Imagine these T-cell engagers as tiny, engineered proteins. They're like undercover agents directing a patient’s own T-cells (the body's immune commandos) to seek and destroy cells waving the bad guy flag – specific proteins or antigens carried by those nasty cancer cells.

Basically, it's like having a GPS-guided missile system in your body, targeting only the rogue cells.

And Harpoon isn't just dabbling here, but also innovating with their proprietary Tri-specific T cell Activating Construct (TriTAC) platform.

Picture a pipeline, but instead of oil, it's flowing with novel TriTACs focusing on laying siege to solid tumors and blood malignancies. If successful, they plan to arm the immune system with a whole new arsenal.

Aside from these, Harpoon also whipped up something they call the ProTriTAC platform. Think of it as the James Bond of T-cell engagers – it stays under the radar (inactive) until it gets to the tumor. Once there, it's “license to kill” mode on. This prodrug concept is slick, ensuring that the therapeutic action happens right where the trouble is, and not anywhere else.

And for their third act, Harpoon presents the TriTAC-XR platform. This one's a bit of a tightrope walker, designed to dodge a potential pitfall known as cytokine release syndrome – a sort of overreaction from the immune system. It’s like having a safety net under your high-wire act.

Now, these premiums are not just showing off. They're a sign of desperate love from big pharma for these biotech beauties, a stark contrast to the recent cold shoulder of stock market blues.

Recently, there have also been whispers of Novartis (NVS) eyeing Cytokinetics (CYTK), a biotech belle with a $9.2 billion price tag. It's like the gossip at a high school prom, only with more zeros.

So, what's the takeaway from this biotech bazaar? It's simple: after a snooze-fest of a bear market, biotech's back, and it's hotter than a stolen Ferrari.

For investors, it's like watching a new season of your favorite show, only this time, the plot twists involve billion-dollar deals and cutting-edge cancer drugs. I suggest you buy the dip.

January 9, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 9, 2024
Fiat Lux

Featured Trade:

(HATCHING THE GOLDEN EGG IN YOUR BIOTECH PORTFOLIO)

(CRSP), (VRTX), (BAYRY)

Hatching The Golden Egg In Your Biotech Portfolio

Biotech Letter

In the words of Louis Pasteur, “Chance favors the prepared mind.” This axiom holds especially true in the world of biotechnology, where preparation meets opportunity at the cutting edge of innovation.

It's in this dynamic arena that CRISPR Therapeutics (CRSP) stands out, exemplifying Pasteur's vision. Remember how we talked about finding that golden egg in your investment portfolio? Well, pay attention, because this biotech might just be it.

Let's rewind to 2023. That year was like a warm-up lap for CRISPR, with its shares jumping a whopping 54%.

Now, as we leap into 2024, CRISPR isn't just riding a wave; it's creating a tsunami of momentum. Picture a baseball pro stepping up in a World Series game. That’s CRISPR, swinging its groundbreaking gene-editing tech, starring their brainchild, Casgevy.

But let's not get lost in the jargon. We're talking about a field where diseases get a one-way ticket out of your system, thanks to advanced gene therapies.

Sure, we haven't seen everyone jumping on this bandwagon yet, but with the gene therapy market set to balloon to a cool $80 billion by 2029, it's like sitting on a biotech gold mine. And who's leading the charge? You guessed it - CRISPR Therapeutics.

Diving into their treasure chest, we find a cushy $1.75 billion in cash and a debt profile so lean, it could give fitness models a run for their money. In the world of biotech, CRISPR isn't just fit; it's doing financial gymnastics.

Now, let's gab about Casgevy. This isn't your everyday biotech gizmo. It's like finding a diamond in a sea of rhinestones.

Developed with Vertex Pharmaceuticals (VRTX), it's the first FDA and UK-approved bigwig using CRISPR-CAS9 tech. Designed as a once-in-a-lifetime fix for sickle-cell disease (SCD), it's also eyeing a spot in treating transfusion-dependent beta-thalassemia.

On top of that, the financial side of this story is as juicy as a ripe peach. Casgevy's price tag is a cool $2.2 million per treatment. Yes, you read that right. It's an exclusive club, with a reach estimated at 25,000-30,000 patients globally, mainly in the U.S.

The big question is: How many can actually afford this golden ticket? Considering the lifetime tab for SCD treatment hovers around $1.7 million, insurance companies might just get on board. The whole shebang – from prep to recovery – is a marathon, not a sprint.

But even with a modest guess of 10,000 patients getting treated, we're talking a revenue of $22 billion and a sweet $8.8 billion of that could waltz right into CRISPR's pockets.

But there's more to CRISPR than just Casgevy. They're playing 3D chess in a world where most are stuck playing checkers. Their lineup? It's like the Avengers of biotech – tackling everything from cancer with their “super soldier” CAR T-cells to diabetes and heart disease.

In the immuno-oncology corner, they're busy cooking up CTX112 and CTX131. These aren’t your average T-cells; they’re like tiny superheroes, souped up to target the baddies while giving your good cells a friendly nod. And the best part? CRISPR Therapeutics has the whole shebang under its wing.

Switching gears to Regenerative Medicine, imagine kicking those insulin shots to the curb. CRISPR's working on treatments that could reset your body’s natural functions. They've got VCTX210 and its beefier sibling VCTX211, both aiming to turn stem cells into insulin-producing champs.

Teaming up with ViaCyte, they've pocketed a nifty $100 million upfront, and there’s potentially more where that came from.

And then there's the In-Vivo stuff. This isn't your typical lab concoction; it's more like an internal bodyguard against heart diseases. With CTX310 and CTX320, CRISPR’s targeting pesky proteins that mess with your heart, proving they're not just a one-trick pony.

Oh, and let's not forget the buzz about their team-up with Bayer (BAYRY) on a hemophilia treatment. It's still cooking in the lab, but it's got the makings of something big.

For the investors rubbing their hands, wondering if CRISPR's stock is a wise pick – here’s my two cents. There’s still plenty of room for growth. It’s like uncovering an undervalued masterpiece at an art auction. The potential of CRISPR’s tech is just beginning to show its true colors.

So, what's my verdict? CRISPR Therapeutics isn't just a stock to buy; it's a golden ticket to the future of healthcare.

After all, in the end, it’s about betting on those who are not just playing the game but changing it entirely. And CRISPR? They're in a league of their own.

January 4, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 4, 2024
Fiat Lux

Featured Trade:

(A TURNAROUND TALE WORTH WATCHING)

(MRNA), (PFE)

A Turnaround Tale Worth Watching

Biotech Letter

Let's take a step back and get a bird's-eye view of what's shaking up in the biotech world.

Remember Moderna (MRNA)? The big shot of the Covid-19 vaccine saga? It’s suddenly back in the spotlight.

After a year that saw its shares nosedive by 45% — landing it in the not-so-coveted spot of one of 2023's worst S&P 500 performers — things are looking up. And, boy, are they looking up!

Moderna's woes weren't just about falling vaccine sales. Oh no, it was more than that. They had to scale back their manufacturing footprint, trimming costs left and right. The company doesn't see itself breaking even until 2026, but who's rushing?

Now, here's where it gets interesting. Moderna's not just sitting around licking its wounds. They've been busy bees, pouring money into their mRNA-based product pipeline. And guess what? It's starting to look like money well spent.

December brought some news that made investors sit up straight. In partnership with Merck (MRK), Moderna's cooking up a cancer treatment that's looking pretty darn promising. And it's not just any partnership.

We're talking about combining forces with Merck's Keytruda, the oncology heavyweight, raking in a cool $20.9 billion in 2022.

Moderna's mRNA-4157, however, is the new kid on the block. It's a custom-tailored cancer vaccine, shaping up to be a real game-changer. The idea? Target each patient's cancer uniquely, making it a one-two punch with treatments like Keytruda.

The latest data? It's the stuff of dreams. High-risk melanoma patients showed a 49% drop in cancer recurrence or death risk and a 62% plunge in distant metastasis or death risk. All this without ramping up severe side effects. The phase 3 trial is already on the drawing board and the scope? It's widening.

And, let's not forget the big picture. In 2020, around 325,000 cases of malignant melanoma were diagnosed.

If Moderna and Merck hit the bullseye with their candidate, they're looking at a vast market to tap into. And if this duo outperforms Keytruda alone for certain conditions, we're talking serious revenue potential.

Needless to say, these developments hint at a future where Moderna's not just about Covid-19 jabs. By 2026, this biotech company is projected to have a lineup of at least five products.

But why this sudden investor love? Part of it is the resurgence of COVID-19 cases and a new variant, JN.1, causing a stir. Adding to these are clearer visibility on vaccine sales and a more structured expense outlook.

On the back of these developments, Moderna's shares leaped 13% to $112.57. That's their best day since December 13, 2022, when they soared 20%. Meanwhile, Pfizer (PFE), their vaccine rival, saw a modest 3.8% bump in roughly the same period.

The broader Wall Street narrative? It's echoing optimism for Moderna. The average price target sits at $126.72, with shares currently hovering around $100. It's a glimpse of potential gains for the vaccine maker.

Clearly, Moderna is no longer just a one-trick pony. More importantly, their shares are currently a bargain, sporting a P/E ratio of just 7 against the market average of 26. This might be riskier than your usual index fund investment, but the growth potential? It's likely being underestimated.

Short-term, Moderna might see more dips as its Covid-19 vaccine windfall wanes. But long-term, their collaboration with Merck, along with other pipeline projects, spells growth.

Come 2025, Moderna's management is betting on a growth rebound, eyeing break-even by 2026. By 2028, they're aiming to add 15 more medicines to their arsenal. And with $7.6 billion in cash and equivalents, they're set to weather the storm without diluting shareholder value.

So, should you buy into Moderna now? It's not a half-bad idea.

If you're the patient type, ready to ride out some short-term turbulence for potential long-term gains, then Moderna's current narrative might just be your kind of investment story.

January 2, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 2, 2024
Fiat Lux

Featured Trade:

(FROM LIMPING TO LEAPING)

(LLY), (NVO), (PFE), (AMGN), (VRTX), (BMY), (CRSP), (NTLA)