(CRSP) Archives

Ten Tech Trends Defining Your Future

Not a day goes by without a reader asking me what is the next stock ten, hundred, or thousand bagger. After all, I nailed the 295X move in Tesla (TSLA) starting in 2010.

Can’t I do better?

Well actually, I can, which is the purpose of the Diary of a Mad Hedge Fund Trader. There are many potentially Google (GOOG), Amazon (AMZN) and Apple (AAPL) sized opportunities out there today. It’s just a matter of time they become public and investable.

One thing I will tell you today is that they will have some or all of the following gale force tailwinds below. These will turbocharge the value of everything you own now, as well as anything new you might pick up going forward.

The future is happening fast!

1) People are Getting Richer, as the middle-income population continues to rise worldwide. That means more customers for everything, and astronomically greater earnings for the companies inventing and selling them. Every day goods and services (finance, insurance, education, and entertainment) are being digitized and becoming fully demonetized, available to the rising billion on mobile devices. Thank the convergence of high-bandwidth and low-cost communication, ubiquitous AI on the cloud, growing access to AI-aided education, and AI-driven healthcare.

2) And they are Communicating with Each Other More. The deployment of both licensed and unlicensed 5G, plus the launch of a multitude of global satellite networks (Starlink, OneWeb, Viasat, etc.), allow for ubiquitous, low-cost communications for everyone, everywhere, all the time––not to mention the connection of trillions of devices. And today’s skyrocketing connectivity is bringing online an additional 3 billion individuals, driving tens of trillions of dollars into the global economy and into the pockets of shareholders. Thank the convergence of low-cost space launches (Space-X), hardware advancements, 5G networks, artificial intelligence, a new generation of materials science, and exponentially surging computing power.

3) Your Lifespan Will Increase by at Least Ten Years. A dozen game-changing biotech and pharmaceutical solutions (currently in Phase 1, 2, or 3 clinical trials) will reach consumers this decade as covered by the Mad Hedge Biotech & Healthcare Letter (click here for the link). Technologies include stem cell supply restoration, senolytic or age-related medicines, a new generation of Endo-Vaccines, GDF-11, and supplementation of NMD/NAD+, among several others. And as machine learning continues to mature, AI is set to unleash countless new drug candidates, ready for clinical trials. Thank the convergence of genome sequencing, CRISPR technologies (CRSP), AI, quantum computing, and cellular medicine.

4) More Capital for Everything Will Become Abundant. Over the past few years, humanity hit all-time highs in the global flow of seed capital, venture capital, and sovereign wealth fund investments. It is expected to continue its overall upward trajectory. Capital abundance leads to the funding and testing of "crazy" entrepreneurial ideas, which in turn accelerate innovation. Already, $300B in crowdfunding is anticipated by 2025, democratizing capital access for entrepreneurs worldwide. And even during a pandemic (2020), the world deployed more venture capital than ever before, handily beating out the last high-water mark in 2019. Thank global connectivity, dematerialization, demonetization, and democratization.

5) Distribution is Becoming Vastly Easier. The combination of Augmented Reality (yielding Web 3.0, or the Spatial Web) and 5G networks (offering lighting fast 100Mb/s - 10Gb/s connection speeds) will transform how we live our everyday lives, impacting every industry from retail and advertising, to education and entertainment. Consumers will play, learn and shop throughout the day in a newly intelligent, virtually overlaid world. This is where technologies like SpatialWeb.net, Vatoms (new digital connections between products and customers), and Apple’s (AAPL) next-generation AR & VR headsets will shine. Thank hardware advancements, 5G networks, AI, materials science, and surging computing power.

(6) Everything is Getting Smarter: The price of specialized machine learning chips is dropping rapidly with a rise in global demand. Imagine a specialized $5 chip that enables AI for a toy, a shoe, a kitchen cabinet? Combined with the explosion of low-cost microscopic sensors and the deployment of high-bandwidth networks, we’re heading into a decade wherein every device becomes intelligent. Your child’s toy remembers her face and name. Your kid's drone safely and diligently follows and videos all the children at the birthday party. Appliances respond to voice commands and anticipate your needs. Thank AI, 5G networks, and more advanced sensors.

(7) Artificial Intelligence is Getting Smarter than We are. Artificial intelligence will reach human-level performance this decade (by 2030). Through the 2020s, AI algorithms and machine learning tools will be increasingly made open source, available on the cloud, allowing any individual with an internet connection to supplement their cognitive ability, augment their problem-solving capacity, and build new ventures at a fraction of the current cost. Thank global high-bandwidth connectivity, neural networks, and cloud computing. Every industry, spanning industrial design, healthcare, education, and entertainment, will be impacted.

(8) AI is Becoming a Service: The rise of “AI as a Service” (AIaaS) platforms will enable humans to partner with AI in every aspect of their work, at every level, in every industry. AI’s will become entrenched in everyday business operations, serving as cognitive collaborators to employees—supporting creative tasks, generating new ideas, and tackling previously unattainable innovations. In some fields, partnership with AI will even become a requirement. For example: in the future, making certain diagnoses without the consultation of AI may be deemed malpractice. And try trading stocks today without AI behind you. Thank increasingly intelligent AI, global high-bandwidth connectivity, neural networks, and cloud computing.

(9) Software Will Become an Integrated Part of Our Lives. As services like Alexa, Google Home, and Apple Homepod expand in functionality, such services will eventually travel beyond the home and become your cognitive prosthetic 24/7. Imagine a secure software shell that you give permission to listen to all your conversations, read your email, monitor your blood chemistry, etc. With access to such data, these AI-enabled software shells will learn your preferences, anticipate your needs and behavior, shop for you, monitor your health, and help you problem-solve in support of your mid- and long-term goals. Thank increasingly intelligent AI, neural networks, and cloud computing.

(10) Energy Will Become Effectively Free when compared to today’s all-in costs. Continued advancements in solar, wind, geothermal, hydroelectric, small nuclear, and localized grids will drive humanity towards cheap, abundant, and ubiquitous renewable energy. The price per kilowatt-hour will drop below 1 cent per kilowatt-hour for renewables, just as storage drops below a mere 3 cents per kilowatt-hour, resulting in the elimination of fossil fuels globally. And as the world’s poorest countries are also the world’s sunniest, the democratization of both new and traditional storage technologies will grant energy abundance to those already bathed in sunlight. We are also on the cusp of many breakthroughs in fusion power at nearby Lawrence Livermore Labs as capital, new materials, and entrepreneurs pour in this arena. Thank materials science, hardware advancements, AI/algorithms, and improved battery technologies.

I just thought you’d like to know.

March 15, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
March 15, 2022
Fiat Lux

Featured Trade:

(AN UNDER-APPRECIATED STOCK WITH A BOATLOAD OF CASH)
(BMY), (CRSP), (VRTX), (BLUE), (GILD), (NVS)

An Underappreciated Stock with a Boatload of Cash

Biotech Letter

Warren Buffett is nothing but a dyed-in-the-wool type of investor. A key strategy in his success is to target companies with notably solid fundamental businesses but with shares trading at a bargain or at least a discount in relation to their intrinsic value.

Needless to say, this value-oriented tactic has worked well for roughly six decades, with Berkshire’s stock delivering total returns of 6,450% on its capital.

Taking a cue from the Oracle of Omaha’s playbook, let’s take a look at one of the cheapest biotechnology and healthcare stocks in Berkshire’s portfolio to date and see how it has been performing.

At a hair below eight times its forward earnings, Bristol Myers Squibb (BMY) comes out as Berkshire’s third-cheapest stock holding overall.

This pharmaceutical giant, which has a market capitalization of $144 billion, is the sixth-biggest in the list of what is informally called the “Big 8” US pharma firms.

However, BMY’s stock had fallen by -2% in the past 12 months after experiencing some genuine momentum in 2021 when it reached $69 in August. The share price fell to $54 in December. It has since recovered and is now at $65.

A primary reason for investors snubbing this pharmaceutical giant is the impending loss of market exclusivity of three of its best-selling treatments, Revlimid, Opdivo, and Eliquis.

Although it’s reasonable to be anxious over these patent expirations, BMY has developed a great plan to not simply offset the future decline in sales but also to sustain the momentum of its top line all the way until 2030.

Basically, BMY has lined up multiple new drug launches spaced in the following years, with a number of these candidates expected to become potential blockbusters.

Another key part of the company’s growth strategy is acquisitions.

One of the significant moves BMY executed in recent years is its whopping $74 billion acquisition of Celgene in 2019, which is expected to bolster its immunology and oncology sectors. This was immediately followed by a $13 billion buyout of MyoKardia in 2020, which would expand its cardiovascular roster.

Celgene's deal granted BMY a valuable collection of pipeline assets, which the company has been leveraging in preparation for the patent cliffs.

Aside from the added $15 billion in annual revenue stream from Revlimid, which BMY used to boost its cash flow and pay off some debts, the company also inherited Reblozyl.

Since the acquisition, Reblozyl has gained approval for beta-thalassemia and anemia patients.

While this is not as groundbreaking as the gene therapies offered by CRISPR Therapeutics (CRSP), Vertex (VRTX), and even bluebird bio (BLUE), this treatment can still reach peak sales of $2 to $4 billion annually.

Another Celgene candidate poised to become an additional revenue stream for BMY is Inrebic, a JAK2 inhibitor created for myelofibrosis and polycythemia vera. This is projected to rake in $400 million in peak sales.

Zeposia, a treatment for autoimmune conditions, has already gained approval for multiple sclerosis and is queued for clinical trials for Crohn’s disease and ulcerative colitis.

If it receives the green light for all three, this is another $3 billion opportunity for BMY.

The inherited assets from Celgene are Breyanzi, a CAR-T therapy approved for large B-cell lymphoma, and Abecma, which is also an approved treatment for multiple myeloma.

These last two treatments are potential blockbusters as well.

Breyanzi’s list price is $410,000, with the therapy estimated to reach $3 billion in peak sales. Meanwhile, Abecma is listed at $491,500 and is projected to peak at $1 billion.

By 2029, BMY expects to develop new revenue streams worth $25 billion from its current portfolio and growing assets.

Looking at the above assets, BMY’s strategy becomes evident.

When BMY acquired Celgene for an exorbitant amount three years ago, the bigger company’s management team showed just how prepared they were to take the hit in the form of substantial debts in exchange for massive steps forward.

Adding to its expansion efforts, BMY has recently completed a deal with Century Therapeutics.

This marks BMY’s major foray into the promising cell therapy space.

While BMY has not concentrated on this sector before, it already has promising candidates in the form of its Celgene assets, Breyanzi and Abecma.

So far, Century and BMY have agreed to develop four different CAR-T cancer therapies on top of expanding the indications for Breyanzi and Abecma.

At the moment, the big pharma names focusing on this sector include Gilead Sciences (GILD) and Novartis (NVS).

This means BMY has a fighting chance to dominate in this market following its strategic collaboration with Century.

If all goes according to plan, BMY’s work with this cell therapy company might even turn out to be as lucrative as its deal with Celgene acquisition.

Overall, BMY has proven itself to be a reliable money-making titan in the biotechnology and healthcare industry.

BMY is a growth machine that consistently comes up with ingenious plans to grow over the years.

From $20.8 billion in 2017, its profits skyrocketed to an impressive $46.4 billion in 2021, indicating a remarkable 123% increase.

Moreover, the company anticipates that its free cash flow will surpass $50 billion by 2024, implying that it’s not worried over the impending loss of patent exclusivities and flexing its ability to generate a boatload of cash to complete even more collaborations and acquisitions.

March 10, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
March 10, 2022
Fiat Lux

Featured Trade:

(COULD THIS BE THE NEXT BIOTECH BUYOUT CANDIDATE?)
(BLUE), (AZN), (ABBV), (BMY), (VRTX), (CRSP)

Could This Be the Next Biotech Buyout Candidate?

Biotech Letter

What is the common denominator of giant drugmakers AstraZeneca (AZN), AbbVie (ABBV), and Bristol Myers Squibb (BMY)?

Aside from being three of the biggest healthcare companies across the globe, all three have also completed high-profile acquisitions amid the pandemic.

AstraZeneca acquired Alexion Pharmaceuticals for $39 billion in December 2020.

Meanwhile, AbbVie wrapped up its whopping $63 billion acquisition of Allergan in May 2020.

As for BMY, this biopharma titan followed its jaw-dropping $74 billion acquisition of Celgene with a $13 billion merger with MyoKordia.

Since then, these deals have bolstered the lineups and deepened the pipelines of all three drugmakers, helping them secure their dominance in the healthcare space.

As for the acquirees, they also benefited from the transactions, particularly those struggling to get through tough situations prior to getting bought out.

With that in mind, it looks like the biotechnology and healthcare sector has another potential high-profile acquisition candidate: Bluebird Bio (BLUE).

Bluebird Bio has recently fallen from investors’ grace following multiple setbacks.

The biotechnology company, once considered a trail-blazer in the gene therapy space, now finds itself without a CFO and left behind by competitors.

Its peers, who were initially eons away in terms of pipeline development, have figured out ways to work around Bluebird’s patents and even managed to outpace the company in launching new gene therapies to market.

Given all these factors, it is no surprise that investing in Bluebird bio has become synonymous with a recycler searching for value in random scraps and parts.

Over the last three years, Bluebird Bio’s shares have plummeted by more than 90%. From a $1.39 billion market capitalization, it is now at roughly $330 million.

That is a horrible performance based on any metric.

Bluebird bio has faced several headwinds that caused its stocks to fall apart.

One problem is the delay in the company’s Biologics License Application in the US for its transfusion-dependent beta-thalassemia treatment, LentiGlobin.

Bluebird Bio initially planned to complete this rare blood disorder therapy’s application by the second half of 2020. However, the company failed to submit some information requested by the FDA.

Another LentiGlobin-related issue is the temporary pause on the clinical trial for sickle cell disease treatment. Eventually, the suspension was lifted, but not before investors scurried away from the stock, following back-to-back concerns over the same treatment.

Other aggravating factors include Bluebird’s move to exit the European market following disagreements over the pricing of some of its gene therapies.

These issues saw Bluebird’s market cap sink, positioning it lower than rival gene-editing companies today.

Needless to say, this deeply discounted value could attract a bigger and expanding biopharma seeking to dip its toes in the gene-editing space.

While Bluebird might be struggling these days, it remains a promising company thanks to its candidates.

This becomes even more exciting since the company announced its plans to concentrate on severe genetic diseases. Although this is a small niche, there’s massive potential in this market.

A strong candidate in its roster is Zynteglo, which gained regulatory approval in 2019 and has yet to reach blockbuster status.

Patients with beta-thalassaemia normally have no other choice but to get blood transfusions regularly. Zynteglo drastically challenges this standard by offering a one-time curative treatment. In fact, saying that this is a life-changing breakthrough is an understatement.

Another potential blockbuster is Skysona, a treatment for a pediatric neurodegenerative disorder called cerebral adrenoleukodystrophy. This neurological disease is extremely rare, affecting only 50 patients in the US annually.

As for its pipeline, Bluebird has three major candidates nearing FDA approval in the US. This means 2022 and 2023 will be critical years for the company.

The first product is Lenti-D, which is similar to Skysona. If things go according to plan, then this treatment might receive the green light by August 2022.

Another product is Beti-cel, which was initially launched as Zynteglo. When this successfully penetrates the US market, this first-ever gene therapy option for beta-thalassemia will rake in roughly $1.87 billion by 2024.

Considering the potential of this market, Beti-cel inevitably finds itself facing off strong competitors in the space.

Thus far, the strongest is Vertex Pharmaceuticals (VRTX), which recently announced an additional $900 million investment in its collaboration with CRISPR Therapeutics (CRSP).

The third candidate is Lovo-cel, which is a sickle cell disease treatment.

This could be a major product for Bluebird, given the over 100,000 patients in the US alone that the company can target.

The goal is to finish the validation process by 2022 and submit Lovo-cel for approval by the first quarter of 2023.

Outside its pipeline candidates and approved products, Bluebird's manageable debt is another thing that makes it attractive for a potential buyout.

After all, cash is king, especially when it comes to biotechnology companies.

At the moment, Bluebird still holds roughly $442 million in the bank, and $46 million of this is restricted.

This indicates unrestricted liquid assets of approximately $396 million—an amount higher than its current market cap.

Consequently, this will allow Bluebird to comfortably weather at least the rest of the year until 2023.

It possesses a relatively solid secure position to hold itself together until its pending candidates start raking in revenues on their own.

Admittedly, Bluebird Bio has had several challenging years. There will still be uncertainties ahead, but it’s undeniable just how promising the company is at this point.

Overall, this stock is worth serious consideration, particularly for companies looking to get a head start in the gene-editing sector.

February 22, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 22, 2022
Fiat Lux

Featured Trade:

(AN ATTRACTIVELY VALUED BIOTECH ON THE VERGE OF BREAKTHROUGHS)
(VRTX), (IBB), (ABBV), (CRSP)

An Attractively Valued Biotech on the Verge of Breakthroughs

Biotech Letter

Some stocks bring quick and easy gains, and those are thrilling. However, a key strategy behind a successful portfolio is always including solid players that deliver excellent returns in the long run.

One of the things I appreciate about investing in the healthcare sector is that this industry is primed to perform well no matter what happens to the market.

After all, people will continue to depend on their products and services regardless of the situation in the financial and economic world.

In the biotechnology and healthcare sector, an excellent way to ensure this is to evaluate a company’s pipeline.

This serves as a good indicator of whether the business has the capacity and potential to generate revenue in the years to come. It’s also advisable to check out a company’s general financial picture and, of course, its strategy. Those elements play critical roles in tomorrow’s performance.

With these criteria in mind, one of the biotechnology names that stand out in the field is Vertex Pharmaceuticals (VRTX).

With a market capitalization of $58.45 billion, Vertex is considered one of the biggest biotechnology companies in the world.

To date, it is included in the Top 5 list of iShares Nasdaq Biotechnology ETF (IBB). Over the years, the company has primarily concentrated on the cystic fibrosis (CF) field.

With its leading CF treatment, Trikafta, gaining approval for a triple combination back in 2019, Vertex has cornered practically 90% of the market.

Unfortunately, Vertex’s share price has remained relatively unchanged for the past two years.

This stagnant performance could be attributed to the disappointing Phase 2 results of its rare liver disease treatment VX-814 in October 2020 and respiratory medication VX-864 in June 2021.

Due to the setbacks from these studies, investors have started to question Vertex’s ability to come up with a marketable treatment outside its CF portfolio.

Vertex posted revenue increases in its recent reports despite these disappointing results.

In the fourth quarter of 2021, the company reported $2.073 billion in revenues, indicating a 27% increase year-over-year, along with an impressive 31% profit growth.

As expected, the revenue boost was courtesy of Trikafta, which recorded a 55% increase in its annual sales.

For the entire 2021 fiscal year, Vertex raked in $7.57 billion in revenues and $3.38 billion in profits, showing off a notable 45% net margin.

Prior to this report, Vertex’s initial guidance for its 2021 revenues was at $6.8 billion.

At that time, experts already believed that the company might be overestimating its capacity, especially considering the setbacks of the trials.

However, it managed to exceed expectations.

Surprisingly, Vertex disclosed an even higher fiscal outlook for 2022 at $8.5 billion. Considering that the company tends to be conservative in its estimates, the following months would definitely bring exciting breakthroughs for Vertex.

In fact, if we look at its track record, there’s a very good chance that the $8.5 billion annual revenue estimate would reach $8.8 billion or even hit $9 billion by the end of 2022.

In terms of its pipeline, Vertex has been working on strengthening its hold in the CF market. This becomes even more necessary with AbbVie (ABBV) hot on its heels with its own version of a triple combination CF therapy expected to rival Trikafta.

Outside its CF program, there are roughly 10 assets queued in various stages of clinical trials.

So far, the most advanced is its mRNA-based cell therapy collaboration with CRISPR Therapeutics (CRSP). The treatment, called CTX001, is being developed to target sickle cell disease and beta-thalassemia.

To date, CTX001 is already in Phase 3. It’s slated for regulatory submission to the FDA sometime in the third or fourth quarter of 2022. In terms of profits, CTX001’s peak sales is projected at $1.3 billion.

Another promising candidate is kidney disease treatment VX-147, which is in Phase 2.

Two more candidates are in Phase 2, diabetes cell therapy VX-880 and potential opioid substitute VX-548. While additional trials are still needed, both are anticipated to become blockbuster treatments and game-changers when they enter the market.

Looking at Vertex’s pipeline and the progress of its candidates, it’s safe to say that the company has the capacity to come up with blockbusters outside its CF program.

Moreover, Vertex has an outstanding investment ability due to its high cash balance worth more than $7.5 billion and an impressive balance sheet.

This means that Vertex has the capability to participate in a significant acquisition in the following years in an effort to bolster its pipeline. In this vein, an obvious and alluring candidate would be CRISPR Therapeutics, which is currently valued at $4.49 billion.

Overall, Vertex is a remarkable biotechnology company that has specialized in a lucrative niche for several years, equipping it with the ability to successfully monopolize the sector.

Although market volatility has recently affected it, Vertex still managed to report revenue growth and promising data from its trials. With its relative financial strength and excellent pipeline, I believe this makes the stock a good investment in the long term.

February 15, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 15, 2022
Fiat Lux

Featured Trade:

(AN EMERGING LEADER IN THE HEALTHCARE REVOLUTION)
(CRSP), (VRTX), (EDIT), (NTLA), (PFE), (NVS), (GILD), (RHHBY), (BMRN), (QURE), (SGMO), (CLLS), (ALLO), (BEAM)

An Emerging Leader in the Healthcare Revolution

Biotech Letter

Mankind has always imagined a future filled to the brim with technological advancements serving as the panacea to all our ills.

One of the prevailing ideas focuses on the developments found in the healthcare sector.

Movies, television shows, graphic novels, and books have all pictured a world with such revolutionary technologies capable of not only diagnosing but also curing any and all types of diseases.

Since the introduction of these ideas, many have believed that these would remain in the fictional universe. However, these “ideas” have slowly transformed into reality.

One of the biggest indicators that we’re heading in that direction is the 2020 Nobel Prize in Chemistry by Jennifer Doudna and Emmanuelle Charpentier. The two were recognized for their pioneering work in CRISPR-Cas9.

Basically, Crispr-Cas9 functions like molecular scissors.

What makes this technology incredible is that Crispr-Cas9 can classify a single address out of 3 billion letters within the genome by using only a particular sequence. With this, we can repair thousands of genetic conditions and even offer more potent ways to battle cancer.

This Nobel Prize led to commercializing the 2012 discovery, Crispr-Cas9, at breakneck speed, with gene-editing companies like CRISPR Therapeutics (CRSP), Editas Medicine (EDIT), and Intellia Therapeutics (NTLA) gaining a considerable boost in their values.

Surprisingly, the trajectory of these gene-editing stocks took a tragic turn in 2021.

In fact, the once-upon-a-time-market-darling CRISPR Therapeutics saw its market capitalization brutally shaved off from $8.7 billion to $4.55 billion in the past months.

No matter how we look at it, there’s genuinely no way to sugarcoat the reality: the market has been second-guessing CRISPR Therapeutics’ ability to truly deliver on its promise.

That is, investors have started to wonder whether the company’s early stage success would amount to anything commercially.

CRISPR Therapeutics is currently working on a treatment that would implant tumor-targeting immune cells on cancer patients. The company is also prioritizing therapies that could edit cells to treat diabetes.

So far, it has made significant progress in developing treatments for a genetic disorder called sickle cell.

In the US alone, at least 100,000 people suffer from sickle cell disease, with 4,000 more born every year. Conservatively, we can estimate at least 3,000 patients availing of this one-time treatment at over $1.6 million a pop.

To date, CRISPR Therapeutics has five candidates under clinical trials for diseases like B-thalassemia, sickle cell disease, and other regenerative conditions.

It has four more queued, which target diabetes, cystic fibrosis, and Duchenne muscular dystrophy.

Compared to its rivals in the space, it’s clear that CRISPR Therapeutics is ahead when it comes to product development and trials.

Two of its candidates, transfusion-dependent beta thalassemia treatment CTX001 and sickle cell disease therapy CTX110, have already been submitted for clinical tests for safety and efficacy.

Recently, Vertex (VRTX) boosted its 2015 agreement with CRISPR Therapeutics by 10%, with the deal reaching $900 million upfront to push for quicker results in developing CTX001.

This is a crucial move for Vertex, but more so for CRISPR Therapeutics as CTX001 holds a highly lucrative addressable market.

The additional funding significantly widened the gap between the Vertex-CRISPR team and bluebird bio (BLUE) in the race to launch a new gene-editing therapy targeting sickle cell disease and beta thalassemia.

To sustain its growth, CRISPR Therapeutics’ strategy is to develop drugs that only require mid-level complexity but can rake in generous financial rewards.

This is a similar tactic used by bigger and more established biotechnology companies like Pfizer (PFE), Novartis (NVS), and Gilead Sciences (GILD).

Evidently, this strategy is a great way to ensure cash flow.

Aside from its earnings from the commercialization of these products, CRISPR Therapeutics can also attract larger companies to buy the intellectual property of their breakthrough treatments.

After all, startups generally get 100% premiums in contracts with Big Pharma.

Good examples of this are Novartis that bought AveXis and Roche’s (RHHBY) purchase of Spark Therapeutics.

The Roche-Spark agreement led to the first ever FDA-approved treatment since gene therapy trials started in the 1990s. It was for the genetic blindness therapy Luxturna, which received the green light in 2017.

The second approved treatment was a muscle-wasting disease therapy Zolgensma, which was the fruit of the Novartis-Avexis acquisition.

Both conditions are rare, but the financial rewards are impressive.

At $2 million for each treatment, Zolgensma sales reached $1.2 billion annually. At the rate the therapy is selling, Novartis estimates that Zolgensma will surpass the $2 billion mark in 2021.

Novartis and Roche aren’t the only ones partnering with smaller gene editing companies.

Pfizer has been working with biotechnology companies BioMarin Pharmaceutics (BMRN) and UniQure (QURE) to develop a treatment for blood-clotting disorder hemophilia.

The COVID-19 frontrunner is also collaborating with Sarepta Therapeutics (SRPT) to come up with a treatment for Duchenne muscular dystrophy.

Gene editing has also served as the foundation for several biotechnology companies out there today like Sangamo Therapeutics (SGMO), Cellectis (CLLS), and Allogene Therapeutics (ALLO).

The market size for gene editing treatments is estimated to be worth $11.2 billion by 2025, with the number rising between $15.79 billion to $18.1 billion by 2027.

This puts the compounded annual growth rate of this sector to be at least roughly 17%.

While this is already groundbreaking with only a handful of companies knowing how to utilize the technology, the gene-editing world has come up with a more advanced technique than Crispr-Cas9.

The technology is founded on the “base editing” or “prime editing” technique, which is the simplest type of gene editing that alters only one DNA letter.

So far, one company holds exclusive rights to this technology: Beam Therapeutics (BEAM).

When the technology became public, Beam stock has increased sixfold since its IPO in February 2020.

This latest development can resolve thousands of genetic diseases. However, it still requires further trials since “base editing” can also trigger damaging responses from the body.

Overall, I think CRISPR Therapeutics is the most promising among these high-risk stocks.

The data from two of its candidates, CTX001 and CTX110, are promising. The added funding from Vertex boosts the confidence of investors that a regulatory approval is well on its way.

The company is also sitting on a massive cash pile and investing aggressively across different rare disease programs.

While the company has yet to be considered a major force in the biotechnology world, the potential multiple successes of its products could generate a company worth hundreds of billions.

This potential alone offers an investing opportunity with a substantial asymmetric advantage for its current share price.

However, bear in mind that the stock is not for conservative investors considering risks.

More importantly, its pipeline requires patience. Hence, CRISPR Therapeutics should be played as a long-term investment.

February 8, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 8, 2022
Fiat Lux

Featured Trade:

(A NEW WAVE OF GENE-EDITING EXPERTS)
(NTLA), (REGN), (VRTX), (CRSP), (TMO), (SGMO), (EDIT), (MRK), (BIIB)

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