Biotech Letter Archives

Keep an Eye Out on the Slow Runners in the COVID-19 Vaccine Race

Under normal circumstances, it would be unheard of for a biotechnology or pharmaceutical company to begin the construction of manufacturing facilities for any drug that has not gained approval from the US Food and Drug Administration (FDA).

However, the year 2020 has been anything but “normal.”

In fact, the US government has already released billions of dollars to companies working to create a COVID-19 vaccine well ahead of their candidates’ approvals by the FDA.

While we have yet to determine which vaccine candidates would work, the amount of money pouring into these programs give us a very real sense of the size of the vaccine market.

Among the companies working on a vaccine, Sanofi (SNY) and GlaxoSmithKline (GSK) emerged as early favorites.

Even without any candidate in late-stage trials, the two drug makers landed a $2.1 billion deal with the US government for their COVID-19 vaccine candidate in July.

This will cover 100 million doses initially, which would put the vaccine cost at $21 per dose.

If all goes well, the US government has the option to buy an additional 500 million doses of the Sanofi-GSK vaccine. The two companies are also negotiating terms with other countries particularly in Europe and Asia.

Sanofi is the lead partner in this program, with the company producing the COVID-19 vaccine itself. As for GSK, it will be adding an adjuvant which would boost the immune response.

Initial data from this study is expected to be released by December 2020, with the duo hoping to receive regulatory approval not later than June 2021.

The goal is to manufacture up to 1 billion doses annually from the time of its approval in 2021.

One of the reasons Sanofi and GSK candidate attracted attention despite the companies’ less aggressive timeline compared to competitors, like Moderna (MRNA), Pfizer (PFE), and AstraZeneca (AZN), is that it uses a protein-based technique already used in their flu vaccine called Flublok.

Using a tried and tested technology affords COVID-19 vaccine investors a safety net in case the newer and untested technologies of Moderna and Pfizer stumbles. For context, Flublok was approved by the FDA in 2013.

Aside from its COVID-19 vaccine program with GSK, Sanofi is working on a separate candidate with Massachusetts-based company Translate Bio.

This candidate, which uses mRNA technology, is expected to start human trials by November.

If all works out, Sanofi and Translate Bio estimate that they can produce 90 million to 360 million doses of this two-dose COVID-19 candidate in 2021.

Sanofi is no stranger to the vaccine market. In 2019, the company enjoyed a 4.8% year-over-year jump in its net sales and over 9% increase in the sales of its vaccines.

While Sanofi’s net sales slid by 4.9% in the first six months of 2020, the company still reported a healthy 9.2% growth in its earnings per share in the same period.

Thanks to its top-selling eczema drug Dupixent, the company’s specialty care segment rose by more than 17%.

In fact, the drug generated over $1 billion in sales in the first half of the year—a stunning 70% jump from its 2019 performance.

Riding this momentum, Sanofi has been aggressively adding new approvals for Dupixent and expanding its reach not only in the US but also in China.

Speaking of expansion, Sanofi recently completed a $3.7 billion acquisition of Principia Biopharma (PRNB) in August. This deal is a strong indicator that the company aims to focus more on its cancer and autoimmune sectors.

This also marks the second major acquisition of Sanofi in less than a year, with the company striking a $2.5 billion deal to acquire another cancer-focused biotechnology company Synthorx last December 2019.

Looking at the timeline of Sanofi compared to its competitor reminds me of the classic Aesop story, “The Hare and the Tortoise.”

However, the race for a COVID-19 vaccine is definitely not a winner-take-all scenario.

Sanofi and its partner GSK may look far behind the frontrunners, but these mega-companies have such extensive experience in developing and testing vaccines that they could easily close the gap in the next few months.

A successful COVID-19 vaccine would definitely be a gamechanger for Sanofi’s pipeline. The competition is stacked – several other resource-rich companies are also working on similar programs – and Sanofi’s candidates are nowhere near the finish line.

If Sanofi’s COVID-19 vaccine candidate is effective, however, there is really no good reason why it cannot snatch a piece of the pie.

Sanofi stock has not experienced any massive gains or losses since the pandemic started, and it probably will not make any investor get rich quick. But even without its COVID-19 vaccine candidate, this company is a tried-and-tested, reasonably priced value stock that any investor could simply buy and hold for decades.

October 13, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
October 13, 2020
Fiat Lux

FEATURED TRADE:

(THE UNDERDOGS OF THE COVID-19 VACCINE RACE)
(BNTX), (PFE), (CVAC), (PFE), (RHHBY)

The Underdogs of the COVID-19 Vaccine Race

Biotech Letter

It’s about time we talk about the German reinforcements brought in to fight this war against COVID-19.

For all the horror that this health crisis brought us, it’s nearly impossible to believe that there could be an upside to all these.

However, there is a bit of good news here.

Since the pandemic started, efforts to determine its origin, understand how it works, and search for a cure and vaccine have kickstarted innovation across the entire healthcare spectrum – from the familiar pharmaceutical sector to the volatile oft-misunderstood biotechnology field.

In fact, the biotechnology industry has received more attention in the past 10 months than the combined coverage of this sector since it was first introduced in 1919.

Nowadays, companies like Moderna (MRNA) have enjoyed practically round the clock coverage for their work.

So let’s take a look at the other up-and-coming biotechnology companies that have not received enough air time but are just as impressive.

In particular, let’s check out two of the German companies leading the charge in the COVID-19 vaccine race.

One company that isn’t getting enough credit these days is BioNTech (BNTX).

Since this German company paired up with Pfizer (PFE) in its vaccine development program, it rarely gets mentioned in the news.

After all, Pfizer with its $204.99 billion market capitalization makes for a bigger story compared to BioNTech’s $20.95 billion.

Nonetheless, the duo’s COVID-19 vaccine candidate, BNT162b2, is arguably the leading candidate right now – just ask Bill Gates.

If BNT162b2 succeeds, BioNTech stands to enjoy a financial windfall in the coming years.

So far, its vaccine program with Pfizer has secured them deals with the US, Canada, and Japan.

The German biotechnology company has also sealed an agreement with Fosun Pharma to supply 10 million doses to Macau and Hong Kong.

By 2021, BioNTech is expected to produce 250 million doses of the vaccine every six months.

This is enough to cover roughly 125 million people.

At a price of $19.50 for every dose, the company is estimated to earn $9.75 billion in annual revenue—not bad for a biotechnology company of its size.

The success of BNT162b2 could also mean additional leverage to propel the pipeline candidates in BioNTech’snmessenger RNA (mRNA) platform.

BioNTech has been working with Roche (RHHBY) in developing an mRNA therapy, called BNT122, to offer as a first-line treatment for melanoma and other solid tumors.

Apart from that, the company also has six early-stage mRNA candidates that target various types of cancer.

Aside from its mRNA technology-based programs, BioNTech is working with Denmark’s Genmab (CPH: GMAB) on three antibody therapies in early-stage trials for solid tumors and pancreatic cancer.

Another German biotechnology company flying under the radar is CureVac (CVAC).

A possible reason why it has not been generating that much buzz in the US is because it only conducted its initial public offering on the Nasdaq stock exchange in August.

Ever since the pandemic began though, CureVac has been one of the most active vaccine developers.

CureVac’s COVID-19 vaccine candidate uses the same technology as Moderna, which utilizes mRNA to trigger the body’s immune system to generate antibodies.

While Moderna has a huge head start in terms of clinical trials, CureVac may still have an advantage over the more popular biotechnology company.

Based on recent data, CureVac’s vaccine candidate shows more promise because it can take effect at very low doses of 2 to 6 micrograms.

In comparison, Moderna’s mRNA-1273 COVID-19 vaccine candidate requires a 100-microgram dosage.

Like BioNTech, the success of CureVac’s vaccine candidate would also bode well for the rest of the company’s mRNA candidates in its pipeline.

Two of those candidates are for cancer immunotherapies; one targets non-small lung cancer and the other targets a rare kind of cancer called adenoid cystic carcinoma. These therapies are also being studied for advanced melanoma as well as cancers of the head and neck.

Neither BioNTech nor CureVac has been hailed a household name in the US, and they may never reach that status.

Regardless, both companies will become extremely important and relevant for so many American households in the not-too-distant-future.

Due to the money they received to fund their COVID-19 programs, neither are in danger of running out of capital sometime soon or even take dilutive financing options as an alternative recourse. This stability, albeit short term, makes both biotechnology companies worth checking out.

More importantly, the pipeline programs of BioNTech and CureVac look promising despite being in the early stages.

All things considered, BioNTech and CureVac look like risky bets. However, these are risks with the potential to transform into massive rewards.

So, what should you do?

It all boils down to your investing style.

If you are an aggressive investor with high-risk tolerance, buy shares from dynamic biotechnology players that offer promising gains in a relatively short period.

Companies like BioNTech and CureVac, if successful in their COVID-19 vaccine efforts, could extend those gains to the long term and even leverage them to eventually market new products.

If you have lower risk tolerance, you can still make a play on these biotechnology companies. The key is to take a small position. This will limit your losses if things go south, but would also offer you rewards if the candidates work out.

October 8, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
October 8, 2020
Fiat Lux

FEATURED TRADE:

(CAN REGENERON TRUMP OTHER COVID-19 RIVALS?)
(REGN), (GILD), (SNY), (JNJ), (MRK)

Can Regeneron Trump Other COVID-19 Rivals?

Biotech Letter

If the experimental COVID-19 treatment of Regeneron Pharmaceuticals (REGN) is good enough for the US president, then this stock should be given more attention not only by the media but also by investors.

One of the biggest stories this October is that President Donald Trump got infected with COVID.

The bigger story for the stock market though is his choice of treatment.

According to his medical team, Trump was given Regeneron’s antibody cocktail, called REGN-COV2, which was actually developed based on the same technology used in the company’s experimental Ebola treatment.

Although REGN-COV2 is still in the trial phase, reports that Trump already beat COVID just three days since his diagnosis are doing wonders for the stock.

Apart from REGN-COV2, Trump also received Gilead Sciences’ (GILD) Remdisivir as well as dexamethasone, a common generic steroid he once touted as a “miracle COVID-19 cure.”

The president was given aspirin and famotidine, which is more widely known as Johnson & Johnson (JNJ) and Merck’s (MRK) Pepcid.

On top of these, he took zinc, Vitamin D, and two immune-boosting supplements.

Compared to how far Gilead’s Remdesivir has gone in terms of offering treatment to COVID-19 patients with severe symptoms, Regeneron’s candidate is nowhere near the finish line.

Among all these drugs, however, Regeneron enjoyed the most advantage, with its stocks rising to roughly 5% since the announcement. Gilead also experienced a boost from the news, with a 3% jump.

What does this mean for investors?

Well, this news triggered aggressive buying of Regeneron shares. As expected, the unusually heavy volume pushed the stock price up.

While it would be tempting to join the market mob in buying a hot stock in the hopes of it getting even hotter, you might want to consider switching gears instead.

Hot stocks that dominate the news tend to cool and end up sliding at some point.

Rather than buying Regeneron stock right now, think about buying its bullish call options.

Options are always cheaper than their associated stock, which means you’ll be less at risk if something happens that lowers the stock price.

Even if the stock continues to advance, investing in options will still ensure that you get a nice return.

After all, each options contract represents 100 shares of stock.

To date, Regeneron’s stock is up 7.2% at $605.

That means you should buy bullish November $600 call options for roughly $40 with the expectation that REGN-COV2 gets approved—or at least stays as a strong contender until the next earnings report.

Since Regeneron released its 2019 third-quarter earnings report on November 5, it’s reasonable to assume that the company will follow the same timeline for 2020.

Therefore, setting the expiration to November ensures that you cover its third-quarter earnings report this year.

Aside from that, you’ll have enough time to gauge the success of REGN-COV2 and how the results will affect the stock price.

If the company’s share price reaches $665 at the expiration date, which is its peak price in the past 52 weeks, the call would be worth $65. If it hits $700, then the call will be worth $100.

For context, Regeneron stock has been anywhere between $279.22 and $664.64 in the past 52 weeks.

If REGN-COV2 gains approval, its projected 2021 sales could reach $1.8 billion. Meanwhile, its 2022 sales could hit $2.4 billion, with a decline to $1.7 billion by 2023.

Outside its COVID-19 efforts, the company has a promising portfolio to keep investors interested.

Regeneron’s annual revenue for its marketed drugs has been consistently climbing since 2012, with the biotechnology company’s earnings beating estimates in the last four quarters.

At the moment, the company has over 30 programs in its pipeline, 9 of which are in Phase 3, ensuring that its portfolio still has so much room for growth.

At the height of the pandemic, Regeneron maintained its stellar balance sheet in the second quarter.

One of its top-selling drugs is atopic dermatitis medication Dupixent, which it developed with Sanofi (SNY), with $770 million in sales for that period alone.

Looking at the drug’s track record, Dupixent is projected to rake in $6.3 billion in sales in 2021.

However, the top performer in the second quarter is eye injection Eylea, which contributed $1.1 billion in sales.

Meanwhile, skin cancer treatment Libtayo generated $63 million and cardiovascular disease drug Praluent raked in $47 million.

Regeneron also finished the second quarter with $943 million in net cash flow, which is a massive jump from the $188 million it reported in the same period in 2019.

On top of Regeneron raking in huge rewards for ’s COVID-19 treatment if approved, the company also has other promising products in its portfolio—ones that can still sway investors in their favor regardless of REGN-COV2’s future.

October 6, 2020

Biotech Letter

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

FEATURED TRADE:

(CAN THIS DIVIDEND KING BE THE NEXT VACCINE KING?)
(JNJ), (MRNA), (PFE), (BNTX), (AZN), (INO), (NVAX), (SNY)

Can this Dividend King Be the Next Vaccine King?

Biotech Letter

One area that Johnson & Johnson (JNJ) has not been a leader in for the past years is vaccine development.

That could change soon however.

Among the healthcare companies racing to develop a COVID-19 vaccine these days, JNJ has been a heavy favorite to come up with the most potent candidate.

Although the company started its clinical trials two months after Moderna (MRNA) and the partners Pfizer (PFE) and BioNTech (BNTX) started theirs, JNJ might release results even earlier than November.

This is because JNJ’s vaccine candidate, called Ad26.COV2.S, worked quickly on the patients after only a single dose.

In comparison, Moderna and Pfizer’s candidates need a first dose and then, after a month, a second dose or a booster shot.

While it could take a month or two for Moderna and Pfizer’s vaccines to take effect, those given Ad26.COV2.S could be protected after two weeks.

Moderna and Pfizer both use messenger-RNA technology for their vaccines, while JNJ utilizes a hollowed-out virus to deliver the DNA instructions to the relevant cells to trigger a protein spike and provoke an immune response.

This is the same method the company used in its Ebola vaccine, which has been instrumental in the immunization programs in Africa.

Inasmuch as Ad26.COV2.S offers incredible potency compared to other candidates, there is one potential trade-off: our immune system might later on start to resist the drug.

However, JNJ is attempting to resolve this issue by developing a booster shot for future use.

Meanwhile, Moderna and Pfizer’s vaccine candidates could be given as many times as possible without that risk.

JNJ’s vaccine can also be distributed and stored without any special handling unlike its rivals, which require lower temperatures. This means that the vaccine can be delivered to even the less-developed facilities.

Other than eliminating the logistical problem of people failing to get a second shot of the vaccine, JNJ’s one-shot regimen can guarantee that governments can vaccinate 1 billion people annually.

Only a handful of the manufacturers can match that claim, offering JNJ an edge regardless of the seven-month head start of the other developers.

Apart from JNJ, Pfizer, and Moderna, more companies have started their late-stage vaccine trials. The list includes AstraZeneca (AZN), Inovio Pharmaceuticals (INO), Novavax (NVAX), and Sanofi (SNY).

Outside its COVID-19 programs, JNJ has been delivering solid results despite the ongoing crisis.

The company’s pharmaceutical division showed notable growth in the second quarter, with its immunology drugs leading the charge.

In terms of sales in this quarter, rheumatoid arthritis and Crohn’s disease drug Remicade raked in $935 million while severe rheumatoid, psoriatic, and ankylosing spondylitis injection Simponi brought in $526 million.

Meanwhile, psoriasis medicines Stelara and Tremfya generated an impressive $1.7 billion and $342 million, respectively.

JNJ is also expanding its portfolio to cover the biotechnology market. So far, one of its most telling moves is its $6.5 billion all-cash acquisition of Momental Pharmaceuticals.

Buoyed by these promising results, JNJ boosted its full-year revenue guidance for 2020 with operational sales estimated to reach somewhere between $81 billion and $82.5 billion.

JNJ has been widely known for its consumer products, but the truth is that the company’s forte is actually healthcare.

In 2019, JNJ’s pharmaceutical sector comprised nearly 50% while medical devices generated roughly one-third of the company's total sales. These figures may very well be the reason why this stock is gaining traction among retirees.

After all, healthcare is where the money lies – and JNJ is now the biggest healthcare conglomerate in the world.

In fact, the company serves over 1 billion patients on a daily basis and 12 of the products in its portfolio can easily generate $2 billion in sales annually.

The company’s cash flows have also been steadily increasing, setting off an impressive 58-year streak of consistent and consecutive dividend boost every year.

Needless to say, JNJ has been hailed the “Dividend King” in the healthcare sector for decades now.

Simply looking at JNJ profile, track record, and pipeline, it’s clear to see that buying and holding JNJ shares and reinvesting the dividends you receive along the way could give your portfolio a substantial boost.

October 1, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
October 1, 2020
Fiat Lux

FEATURED TRADE:

(IS AMGEN THE NEW CHAMPION OF THE BIOTECH WORLD)
(AMGN), (ABBV), (JNJ), (BMY)

Is Amgen the New Champion in the Biotech World

Biotech Letter

Amgen (AMGN) grabbed headlines in August when it became the first biotechnology stock listed in the prestigious Dow Jones Industrial Average, offering mutual funds and exchange-traded funds that follow the index more access to the company’s shares.

With its share price worth $243.21, Amgen has been hailed responsible for roughly 1,600.20 Dow points – roughly 5.8% of its total.

Does this make Amgen the new champion of the biotechnology sector?

Although it has not explicitly declared that it is developing drugs mainly for older adults, Amgen’s pipeline notably focuses on the fast-rising senior population across the globe.

This is quite strategic considering that the world population of seniors is projected to double from the current number to reach more than 2 billion by 2050.

A noteworthy strategy it employed to expand its market share is cutting the prices of some of its most popular products.

For example, Amgen lowered the price of its heart disease treatment Repatha by as much as 60% in 2018. Since the drug has become one of the more affordable options in the market, making it more accessible to more users.

This led to a 20% rise in sales revenue by 2019, with Repatha expected to rake in a higher number in 2020 – a highly probable expectation considering the 32% climb it recorded in its second quarter earnings report this year. So far, Repatha has generated $200 million in sales in the second quarter.

Another notable drug that recorded a climb in sales is Evenity, which targets postmenopausal women with osteoporosis.

Evenity generated an impressive increase of $101 million compared to the $28 million it earned in the same period in 2019.

Despite its $142.08 billion market capitalization, Amgen is not immune to the effects of the pandemic.

For one, sales of arthritis drug Enbrel fell by 9% year over year to record only $1.2 billion while cancer therapy Neulasta showed a 28% decline to $593 million.

The drop in their performance was attributed to pricing pressure and biosimilar competition.

In addressing the issue, Amgen also ventured in creating a competitive and lucrative biosimilar portfolio.

So far, its biosimilar version of AbbVie’s (ABBV) best selling drug arthritis drug Humira has managed to rake in over $200 million in sales in 2019.

Two more oncology biosimilars, MVASI and KANJINTI, which were only launched in the US last year, generated $588 million in sales.

This year, Amgen will launch another potential biosimilar blockbuster called AVSOLA. This would be in direct competition with Johnson & Johnson’s (JNJ) antitumor treatment Revicade.

Outside these biosimilars, Amgen has over 50 clinical trials queued, which include more than 20 Phase 3 studies. Ultimately, the company’s goal is to displace all the deadweights in its current portfolio.

One of the most exciting products in Amgen’s pipeline right now is its heart failure drug Omecamtiv Mecarbil, which recently completed Phase 3 clinical trials.

With cardiovascular diseases identified as one of the leading causes of death worldwide, the success of Omecamtiv Mecarbil would translate into a strong foothold for Amgen in this huge market and a key growth driver in the long run.

Another blockbuster in Amgen’s portfolio is Otezla, which it acquired from its $13.4 billion deal with Celgene prior to its merger with Bristol Myers Squibb (BMY) in 2019.

Although Otezla has already been marketed as an adult arthritis and psoriasis treatment, Amgen has been working on expanding its indication to include Behcet's disease, pediatric psoriasis, and pediatric arthritis.

Even without the expanded indications, Otezla has been a hot seller for Amgen.

In fact, the pandemic did not stop it from reaching a 14% year over year revenue growth every quarter, with its second quarter earnings reaching $561 million.

Other than the expanded use to cover more age ranges in the arthritis and psoriasis sector, Amgen is also studying whether Otezla can be used as a COVID-19 treatment.

If these studies prove to be successful, then Amgen will easily make up the price of the Otezla purchase quicker than anticipated.

More importantly, it would be able to add another massive moneymaker in its already formidable anti-inflammation program. By the end of 2021, Amgen’s revenues would be considerably bigger.

Amgen’s second quarter earnings reports showed a respectable 6% rise in its year over year revenue, with the company generating $6.2 billion despite the ongoing health and financial crises.

Beyond its growth in the US market, Amgen has been busy with international expansion. To date, the company has established a key partnership with China’s BeiGene (BGNE).

It further strengthened its presence in Asia thanks to its acquisition of Japan’s Astellas Pharma earlier this year.

These moves are promising since China and Japan are the second and third biggest pharmaceutical markets in the world, and both countries are showing strong growth in their senior populations.

Needless to say, these partnerships would put Amgen in a strategic position to capture a share of that growth.

Investing in healthcare and biotechnology stocks has always been one of my go-to advice to people.

National healthcare spending is expected to increase at an average rate of 5.5% annually until 2027.

By then, the cost would reach a whopping $6 trillion, resulting in an estimated $1 in every $5 of the GDP getting allocated to healthcare spending within this decade.

Amgen is a blue chip biotechnology stock that has a presence in over 100 countries and develops groundbreaking treatments that can help people across the globe.

As a leading company in the healthcare and biotechnology industry, Amgen holds a strong position to leverage this growth to its advantage.

While the 2.48% trailing annual dividend yield is pretty average, Amgen also prides itself of consistently boosting its dividend every year since 2011.

It also engages in opportunistic share buybacks, so its investors have more ways to get rewarded.

Since Amgen stock shares are not exactly cheap right now, income-oriented investors should be on the lookout for a market crash and seize the opportunity to scoop up shares of this valuable biotechnology giant.

September 29, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
September 29, 2020
Fiat Lux

(WHY THE PANDEMIC ISN’T STOPPING ELI LILLY’S WINNING STREAK)
(LLY), (PFE), (MRNA), (AZN), (GILD), (INCY), (REGN), (NVO), (BIIB)