Biotech Letter Archives

Cells Of The Century

If you'd told me a decade ago that I'd be writing about hundred-year-olds' blood cells holding the secret to eternal youth, I would've thought you'd been reading too much science fiction.

Yet here I am, staring at data from a revolutionary new stem cell bank that's making immortality hunters drool and investors' wallets itch.

But let’s ground this exciting idea in the real world for a moment.

Let me back up a bit. Last week, while having dinner with a biotech analyst friend – let's call her Sarah – she couldn't stop talking about a groundbreaking new collection of stem cells derived from centenarians.

These remarkable individuals have done more than just reach triple digits – they've managed to dodge the usual buffet of age-related diseases that claim most of us long before we hit 100. But what makes this discovery particularly intriguing for us is how it bridges cutting-edge science with immediate market potential.

"These people aren't just old," Sarah explained, jabbing her fork at me for emphasis, "they're biologically younger than their birth certificates suggest." The data backs her up – these super-agers are clocking in at an average of 6.55 years younger than their chronological age. It's like finding a 1960 Corvette with the engine of a 2017 model.

And this biological time warp isn't just a scientific curiosity – it's becoming a goldmine for biotechnology companies looking to unlock the secrets of healthy aging.

Scientists can now take these centenarians' blood cells and reprogram them into induced pluripotent stem cells (iPSCs), creating a renewable source of cellular youth. Think of it as cellular time travel – these cells can become virtually any type of cell in the body, from heart muscle to brain neurons.

This versatility is precisely why the global stem cell therapy market has swelled to $11.8 billion and is projected to reach $31 billion by 2032.

Still, the field isn't without its volatility – funding swings from $1.2 billion in late 2022 to $233 million in early 2023 show just how quickly investor sentiment can shift in this space.

The investment landscape here is particularly fascinating because it spans both established players and innovative upstarts. Lineage Cell Therapeutics (LCTX) is targeting neurodegenerative diseases with cell-based therapies, while Athersys (ATHXQ) pushes forward with its MultiStem technology.

These companies are betting big on cellular solutions to age-related diseases, though we should watch trial results as carefully as they monitor their retirement accounts.

What sets these centenarian-derived cells apart is their unique genetic profile. Their immune cells show shifts and genetic variants that seem to protect against diseases that usually send most of us to the great beyond decades earlier.

Some male centenarians even show mosaic loss of the Y chromosome – a genetic quirk that might contribute to their longevity. This isn't just fascinating biology. It's practically a roadmap for developing new therapeutics.

The real game-changer is how these cells can serve as "disease-in-a-dish" models. Want to study Alzheimer's? Transform these cells into neurons. Curious about heart disease? Make some cardiac cells.

This capability is revolutionizing drug development, allowing companies to test new treatments more efficiently and potentially reduce the astronomical costs of bringing new drugs to market.

For those eyeing this space, the demographic trends are compelling. The world's population isn't getting any younger, and healthcare systems are groaning under the weight of age-related diseases.

That means companies that can leverage these iPSC lines for drug screening or biomarker development might strike it rich before anyone finds the fountain of youth.

The open-source nature of this iPSC resource is accelerating progress across the entire field. Like the early days of Linux, it's not about one company holding all the cards, but rather a collaborative rush toward breakthroughs.

This shared knowledge base is already helping researchers validate findings and refine therapeutic strategies, potentially shortening the timeline from discovery to approved treatment.

Looking ahead, we're set to watch as cellular biology and big data converge in ways we never imagined. So, the question now isn't if this field will transform medicine, but when – and more importantly for us, who will lead the charge.

Just remember, in biotech as in life, patience isn't just a virtue – it's a necessity. These breakthroughs move at their own pace, usually somewhere between "glacial" and "watched pot never boils." But when they hit? Well, that's when fortunes are made and medical textbooks are rewritten.

Now, if you'll excuse me, I need to check on my portfolio of longevity stocks. After all, I'm planning to live long enough to see how this all plays out – and maybe even long enough to benefit from these breakthrough treatments myself.

January 2, 2025

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 2, 2025
Fiat Lux

Featured Trade:

(YOUR NEXT MIRACLE DRUG WAS WRITTEN IN PYTHON)

(IQV), (EXAI), (CRL), (ICLR), (PRXL)

Your Next Miracle Drug Was Written In Python

Biotech Letter

I had an interesting conversation with my daughter last week during one of her rare appearances from her computer science lab. She was telling me about her latest project - using artificial intelligence to predict protein folding, something that used to take months and now happens in hours.

"Dad," she said, looking up from a bowl of ramen that probably cost me 50 cents, "this is going to change everything about how we make medicine."

She's right, and it got me thinking about the transformation happening in clinical trials - a market currently valued at $57.76 billion that's expected to more than double by 2032.

We're looking at a 7.1% compound annual growth rate, but these numbers only tell part of the story.

I spent some time digging through the data and talking to folks at companies like IQVIA (IQV), where they're using AI to match patients to trials 40% faster than traditional methods.

Think about that for a second - we’re looking at a process that used to take months now happening in weeks, while managing to maintain the kind of accuracy that makes FDA regulators sleep well at night.

Speaking of the FDA, they're cooking up new diversity action plans that aim to make clinical trials look more like actual America. It's definitely the right thing to do, but like most regulatory shifts, it's moving at the speed of government bureaucracy.

This is keeping Contract Research Organizations (CROs) on their toes, though the smart ones are already adapting.

Take Exscientia (EXAI), for example. They're not just using artificial intelligence - they are letting this technology design drug candidates that are already in clinical trials. It's like having a thousand researchers working 24/7 without coffee or bathroom breaks.

But before you rush to buy companies in this sector, it pays to remember that not everyone in this space is thriving.

Charles River Laboratories (CRL) and Icon (ICLR) have been dealing with declining revenues faster than a tech startup burning through venture capital.

The global biotechnology market itself tells an interesting story. Currently valued at $1.55 trillion, it's expected to grow at nearly 14% annually through 2030.

Meanwhile, AI is estimated to generate up to $110 billion in annual economic value for the pharmaceutical industry. That's not pocket change, even by Silicon Valley standards.

Last weekend, while refinishing an antique desk I picked up at an estate sale (turns out it's worth more than my first car), I got a call from a biotech analyst friend. He was worried about the shift in clinical trial geography.

Europe's share of global trials has dropped from 22% to 12% over the past decade, while Asia-Pacific is becoming the new hotspot.

Companies like Parexel (PRXL) and Headlands Research are capitalizing on this trend, particularly in China and India, where regulatory frameworks are streamlining faster than a Formula 1 pit crew.

The traditional factors that used to drive this industry - pure research horsepower and deep pockets - are being replaced by computational efficiency and AI-driven insights.

It's similar to what happened in the financial markets when algorithmic trading took over from floor traders. The winners will be those who adapt fastest to this new reality.

Looking ahead to 2025 and beyond, I'm watching two potential party crashers: a return of regulatory uncertainty and the ever-present possibility of a new pandemic.

But barring these black swan events, we're looking at a sector that's transforming faster than my daughter's college curriculum.

Speaking of which, she just texted me about her latest assignment - using machine learning to optimize clinical trial protocols. Maybe I should start asking her for stock picks.

December 31, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
December 31, 2024
Fiat Lux

Featured Trade:

(SOMETIMES WALL STREET GETS IT WRONG)

(BMY), (AAPL), (MRK)

Sometimes Wall Street Gets It Wrong

Biotech Letter

Sitting in my stateroom aboard the Coral Princess, about 200 miles off Mexico's west coast, I found myself chuckling at the market's reaction to Bristol-Myers Squibb’s (BMY) latest developments. Sometimes Wall Street reminds me of my old physics professor - brilliant but occasionally missing the forest for the quantum trees.

Here's what caught my attention: BMY's stock has outperformed the broader market by +15% since July, yet still trades at a measly 7.91x forward P/E while its sector peers strut around at 20.53x. It's like finding a Ferrari in a used car lot, priced like a Corolla.

The cynics, of course, point to the patent cliff. "What about Eliquis in 2026? Opdivo in 2028?" they ask, wringing their hands. But that's exactly where it gets interesting.

Just earlier this month, BMY announced FDA approval for Opdivo Qvantig - their new subcutaneous version that cuts treatment time from 30 minutes to 5 minutes. If you've ever spent time in cancer treatment centers like I have, you know those 25 minutes make a world of difference.

BMY's commercial team expects this version to capture 75% of Opdivo's business, with 30-40% of patients switching from IV. That's not just convenience - it's strategic patent life extension.

Speaking of strategy, let's talk about their growth portfolio, which has quietly expanded 20% year-over-year and now represents 48.7% of their business.

Remember when Apple (AAPL) transformed from computers to mobile devices? BMY is pulling a similar pivot, just without the flashy keynotes.

Take their $14 billion Karuna acquisition. Their newly approved schizophrenia treatment, Cobenfy, targets a market projected to hit $15.23 billion by 2034. The timing here is masterful - monetization starts in early 2025, well before the patent cliffs hit.

Meanwhile, they're cleaning up their balance sheet faster than a neat freak with a new vacuum. They've already slashed $4.31 billion in debt this year, with plans to cut $10 billion by 2026.

Their free cash flow has grown to $13.8B, up 18.1% sequentially. At this rate, they'll have plenty of dry powder for more strategic moves.

But here's what really makes me scratch my head: while everyone's fixated on the patent cliff, BMY has quietly added 8 new oncology registrational trials in the past year. Their oncology trio - Opdivo, Yervoy, and Opdualag - is growing at 7.6% year-over-year.

Sure, Merck's (MRK) Keytruda is the 800-pound gorilla with $25 billion in sales, but BMY's playing a different game - diversification with shots on goal across multiple therapeutic areas.

Now, I'm not suggesting you back up the truck tomorrow morning. The stock might see some pressure after the January 3, 2025 ex-dividend date, possibly testing support at $51 or even $48. But with a 4.45% dividend yield and a valuation at half its historical average, patient investors might find this an interesting entry point.

Speaking of timing - Wall Street's greatest fortunes were made by investors who saw value where others saw problems. Right now, most analysts are staring at BMY's patent cliff like deer in headlights.

Meanwhile, I'm seeing a company with a 4.45% dividend yield, a growth portfolio expanding at 20% annually, and a valuation that's practically begging to double.

As I wrap this up from somewhere off the Mexican coast (where I'm supposedly on vacation but can't help analyzing stocks between rounds of Monopoly), I'm reminded of something I learned in my decades of trading: The crowd is usually looking through the wrong end of the telescope.

While they're zoomed in on 2026's patent expirations, they're missing the transformation happening right now in front of their eyes.

Maybe that's why I've averaged +50% returns for over a decade - I tend to look where others don't. BMY just might be one of those opportunities that makes next year's Christmas gift to my subscribers an even bigger winner than this year's +75.25% return.

Now, if you'll excuse me, my banjo needs tuning, and I have a Monopoly empire to build. But remember - in both board games and markets, the best players are always thinking three moves ahead. BMY's management certainly is.

December 26, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
December 26, 2024
Fiat Lux

Featured Trade:

(PHASE 2 OR NOT PHASE 2: THAT'S NOT EVEN A QUESTION IN 2025)

(LLY), (NVO)

Phase 2 Or Not Phase 2: That's Not Even A Question In 2025

Biotech Letter

I had dinner with a veteran biotech investor at San Francisco's Waterbar earlier this month, watching the Bay Bridge lights while discussing what's coming for biotech in 2025.

"The game is changing," he said, picking at his salmon. "It's not about platform promises anymore. Show me the Phase 2 data, or don't show up at all."

He's nailed what I've been seeing in my recent travels through the biotech corridors of Boston, San Diego, and Basel. The days of throwing money at shiny new platforms are ending.

That means that by 2025, we'll see venture capital concentrate in fewer but larger deals, especially in companies with solid Phase 2 data.

Let me break down what this means for our portfolio next year. First, North America will dominate in advanced biologics and AI-driven drug discovery. I've toured enough labs recently to see that our capabilities in these areas are leaving others in the dust.

Europe's doubling down on sustainable manufacturing and rare diseases - smart move given their regulatory environment. Asia? They're positioning to own generics and biologics manufacturing, with India making particularly interesting moves in antibody-drug conjugates.

The money's following these regional specialties. If you're investing in biotech companies that don't align with their region's strengths, you might find yourself waiting longer for returns than a Red Sox fan waiting for another World Series.

My contacts in several major VC firms confirm they're already adjusting their 2025 strategies around these regional strengths.

Here's what's really interesting: obesity and GLP-1 drugs are the exception to every rule. After watching Eli Lilly (LLY) and Novo Nordisk's (NVO) recent success, everyone wants a piece of this action.

Even early-stage obesity plays are attracting serious capital, bucking the trend toward late-stage investments.

But remember this about 2025 - being picky about Phase 2 data isn't just smart, it's survival. We're heading into a market where strong clinical validation will matter more than ever.

I've seen enough biotech cycles to know that when the market gets selective, you want to be where the data is solid.

The numbers back this up. Looking at the trends, Phase 2 companies have consistently captured the highest deal sizes, except for that brief period in 2023 when obesity deals sent Phase 1 valuations through the roof.

By 2025, expect this preference for Phase 2 assets to become even more pronounced. Phase 3 investments have been declining - dropping from $4.2 billion in 2021 to $1.7 billion in 2024 - partly because companies with strong Phase 2 data are getting snatched up through partnerships or acquisitions before they even get to Phase 3.

Speaking of partnerships, watch Big Pharma's moves carefully in 2025. They're increasingly hungry for de-risked assets, and strong Phase 2 data is their favorite meal.

I had lunch with a Big Pharma exec last week who told me they've completely restructured their BD team to focus on Phase 2 assets in their regional sweet spots.

As for AI platforms? They'll still get funded - companies like Xaira and Generate:Biomedicines are proving that. But by 2025, they'll need to show more than just fancy algorithms. The market's going to demand real clinical validation.

I recently visited an AI-driven drug discovery company where the CEO proudly showed me their latest neural network. "That's great," I told him, "but show me your clinical data." The silence was deafening.

So, what’s the play here? Well, I'm keeping my own biotech portfolio focused on companies with strong Phase 2 assets heading into 2025, especially in regional sweet spots.

And yes, I've got a position in the obesity space - sometimes a trend is too strong to ignore, even for an old contrarian like me.

One final thought: keep an eye on those time gaps between funding rounds. They're getting longer, and by 2025, companies that don't fit neatly into regional specialties or lack solid clinical data might find themselves in the financial equivalent of a Phase 2 trial that never ends.

Now, if you'll excuse me, I've got a call with a German biotech CEO about their sustainable manufacturing process. These regional specialties aren't going to research themselves.

December 24, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
December 24, 2024
Fiat Lux

Featured Trade:

(THE LAB RESULTS ARE IN)

(GILD), (TSLA), (WVE), (EDIT), (CRSP), (LLY), (NVO), (WMT), (CVS), (CCCC), (RHHBY)

The Lab Results Are In

Biotech Letter

I found myself gridlocked in Bay Area traffic a few days ago, inching past Gilead's (GILD) sprawling Foster City headquarters, when my phone lit up with a call from an old friend at Goldman.

“Alright, tell me—what’s the real story with biotech this year?” she asked, her tone hovering somewhere between curiosity and exasperation. “Half my portfolio feels like a masterstroke, the other half... well, let’s just say it’s testing my patience.”

As I watched a Tesla (TSLA) weave through traffic like it was auditioning for a Fast & Furious reboot, I smiled.

Biotech has always been a bit of a high-stakes chess game—brilliance in one corner, chaos in another, and always a few surprises lurking behind the next move.

“Let me break it down for you,” I said, steering the conversation as carefully as I did my car through the bumper-to-bumper maze.

First, the winners are crushing it, and I mean crushing it. Gilead (GILD) finally cracked the code on HIV treatment, developing what's essentially a vaccine that doesn't require popping pills like they're Tic Tacs.

My contacts in clinical development tell me the Phase 3 data in cisgender women is nothing short of spectacular. With a $6 billion annual market potential by 2028, this isn't just another incremental advance - it's the kind of breakthrough that makes everyone in biotech salivate.

Then there's Wave Life Sciences (WVE) and their RNA editing technology. Remember when we thought CRISPR was the only game in town? Well, Wave just showed us there's more than one way to edit a gene.

Their liver-targeting therapy is the first successful RNA editing in humans - think of it as spell-check for your DNA, but reversible. The market's currently at $1.1 billion, but with 35% CAGR through 2030, this train is just leaving the station.

Speaking of trains leaving stations, molecular glue developers like C4 Therapeutics (CCCC) are watching Big Pharma back up the Brink's truck.

We're talking $8 billion in licensing deals this year alone. After all, when Roche (RHHBY) drops $300 million upfront - not milestone payments, mind you, but cold hard cash - you know they've seen something special in the data room.

But here's where it gets interesting, and I had to pull over at this point in the conversation because my friend wasn't going to like what came next.

CRISPR stocks? Down 20%. Editas (EDIT) and CRISPR Therapeutics (CRSP) are learning that revolutionary science doesn't always translate to revolutionary returns.

My friend Janet at the Fed might be talking about higher rates, but these companies are bleeding cash faster than a Silicon Valley startup's WeWork budget.

The obesity market? Unless your name is Eli Lilly (LLY) or Novo Nordisk (NVO), you're probably not having a great time.

Only three startups cleared $100 million in funding this year. In biotech terms, that's like trying to build a house with pocket change.

The global market's sitting at $4.1 billion, but it's more crowded than a San Francisco coffee shop during a tech conference.

And don't get me started on Walmart (WMT) and CVS (CVS) trying to play doctor. They thought they could disrupt traditional healthcare with their “get your physical next to the garden tools” model.

The result? A combined loss of $250 million and a wave of clinic closures.

The lesson here is clear: just because you can sell lightbulbs and Band-Aids in the same aisle doesn’t mean you should try to diagnose strep throat next to the automotive department.

A kid in a modded Subaru WRX cut me off as I wrapped up the call, but I left my friend with this: In biotech, timing is everything.

Gilead and Wave are showing us that patience pays off when the science is solid. Meanwhile, CRISPR stocks remind us that even the most promising technology needs good timing and deep pockets.

So, watch those clinical trial results like a hawk, and keep an eye on where the venture money's flowing.

But most importantly, remember what my old mentor used to say: "In biotech, you're not just betting on the science - you're betting on the scientist, the CFO, and sometimes, just sometimes, on whether people are ready to get their flu shot next to the garden center."

Now, where's that highway patrol when you need them?