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What's New in Biotech

As the biotechnology world is ever-evolving, with several companies going public every few months, let me share some of the most promising names that recently emerged.

The first is Cognition Therapeutics (CGTX), a company working on treatments for Alzheimer’s disease and macular degeneration.

Its most promising candidate is an Alzheimer’s treatment called CT1812, which is currently under Phase 2 trials. Looking at the timeline, CGTX expects to release topline data by 2023.

With the expected growth of the aging population, focusing on treating various forms of Alzheimer’s is a promising direction for Cognition Therapeutics.

In fact, the global market for this neurodegenerative disease is projected to grow from $2.9 billion in 2018 to a whopping $10.5 billion by 2025.

So far, the major competitors of Cognition Therapeutics in this area include Biogen (BIIB), Eli Lilly (LLY), AbbVie (ABBV), Novartis (NVS), and Takeda (TAK).

The second promising biotech company is Pyxis Oncology (PYXS), which is a spinoff from Pfizer (PFE).

Pyxis is focused on developing next-generation treatments targeting difficult-to-treat types of cancer.

Basically, the company’s goal is to create therapies that can directly kill tumor cells. It also wants to get rid of the underlying problems that lead to the uncontrollable spread of tumors and the weakening of the immune system.

To do this, Pyxis has come up with novel antibody drug conjugate (ACT) candidates and other monoclonal antibody (mAb) pipelines.

Its lead candidate is called ADC PYX-201, a potential treatment for non-small cell lung cancer and breast cancer.

The goal of ADC PYX-201 is to target actively multiplying tumors while boosting the immune response of the patient’s body. Pyxis plans to submit it as a non-small cell lung cancer treatment candidate by mid-2022.

If approved, then ADC PYX-201 will be under patent protection until 2037.

This holds great potential for Pyxis’ cashflow, as the market for non-small cell lung cancer worldwide is anticipated to rise from $6.2 billion in 2016 to over $12 billion by 2025.

With this potential of ADC treatments, Pyxis can expect competition from the likes of AstraZeneca (AZN), Gilead Sciences (GILD), GlaxoSmithKline (GSK), and ImmunoGen (IMGN).

The last name on today’s list is IsoPlexis Corporation (ISO).

This company is the first to focus on dynamic proteomics and single-cell biology in an effort to develop “walk-away automation” products that aid in shortening the therapeutic development timelines by acquiring “multiplexed proteomics with very low sample volumes that reflect in vivo biology to clarify lead candidates.”

In layman’s terms, IsoPlexis is working on a technology that aims to identify every protein in the body to speed up the development of new therapies for rare diseases.

This is a lucrative business, with IsoPlexis targeting at least $34 billion in the total addressable market.

Considering that IsoPlexis is a pioneer in this field, it is possible for it to gain the lion’s share of the segment and position itself as an undisputed leader for years.

More importantly, IsoPlexis can use its patented technology, “Proteomic Barcoded,” to expand the use cases to cover other lucrative markets.

For example, IsoPlexis can apply its technology to cancer immunology and targeted oncology by predicting the progression of cancer cells in the body.

Adding cell therapies to the company’s pipeline is also a very realistic possibility since its technology can be utilized to create CAR-T cell therapies as well.

In fact, IsoPlexis’ approach is already being used in developing treatments for leukemia and melanoma.

Another profitable avenue for IsoPlexis’ technology is the vaccines sector.

Since the development of vaccines requires profiling the responses of the respiratory and immune systems, the company’s data would accelerate the entire process.

So far, the major rivals of IsoPlexis in this space include Thermo Fisher Scientific (TMO) and Bio Rad Laboratories (BIO).

While all these biotech companies offer promising products and technologies, they’re all still in the early stages of development.

This makes them high-risk investments and are likely suitable for those who are willing to invest in the long term.

For those who want to see movement faster and sooner, it might be best to watch these stocks from the sidelines.

August 31, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
August 31, 2021
Fiat Lux

FEATURED TRADE:

(A CANCER PIONEER FOR THE BOOKS)
(SEGN), (MRK), (BMY), (PFE), (GILD), (RHHBY), (TAK), (GMAB)

A Cancer Pioneer for the Books

Biotech Letter

When choosing a biotechnology company to invest in, a good sign to look out for is when management continuously looks for ways to expand its technology.

This means you’re looking at a stock that’s likely to appreciate multiple folds.

Seagen (SEGN) does this in spades.

Since it was founded in 1997, Seagen (SEGN) has reached almost $30.67 billion in market capitalization.

Reviewing its growth story, I think its powerful growth strategy is one of the key elements that help the company with its advancements.

That is, Seagen is aggressively developing and expanding its different labels for the approved drugs in its portfolio while also actively discovering innovative and new treatments and molecules.

Simply put, Seagen’s growth and expansion can be likened to a tree that keeps forming new additional branches.

Over the years, the company has experienced a remarkable transformation from a single-product firm to a diversified and ever-expanding player, particularly in the oncology medication market—a strategy that paid off.

After all, the market for cancer drugs isn’t the type to stand still.

This sector is renowned for its fast-paced demands and rapid growth. If you look at how much has been done, remember that several types of cancer that seemed incurable a mere 10 years ago are now no longer considered death sentences thanks to the innovative therapies discovered.

If roughly 15 years ago, the standard cancer treatment only involved chemotherapy and surgery, the recent years have granted us access to newer technologies like targeted therapy and immunotherapy.

Lately, CAR-T therapy has been hailed as the most effective means of treating blood cancer. Meanwhile, the likes of Merck’s (MRK) Keytruda and Bristol-Myers Squibb (BMY) Opdivo have made chemotherapy and surgery more effective as well.

So, it wouldn’t be a surprise anymore if the technology in the oncology sector advances further in the years to come.

Another relatively fresh innovation is the antibody-drug conjugate (ADC) technology.

This takes and combines all the positive effects of chemotherapy and targeted therapy while simultaneously eliminating the adverse effects of chemotherapy on the patient’s body.

Unlike chemotherapy, ADCs specifically target and eliminate tumor cells and works to spare the healthy ones. Once the tumor cells are detected, a toxic drug is released to kill them.

Basically, it works like a “smart bomb” in that it annihilates only the enemies and protects the allies.

The first drug to be approved based on ADCs is Mylotarg from Pfizer (PFE), which was 20 years ago.

However, it was only in recent years that this technology finally gained traction and attracted commercial success.

So far, roughly 56 pharmaceutical companies are working on developing ADCs.

Aside from Pfizer, another pioneer in ADCs is Seagen. Unlike Pfizer, this company has chosen to continue focusing on the development of the treatment.

Other companies working on ADC technology include Immunomedics, which Gilead Sciences (GILD) acquired, and Roche (RHHBY).

However, Seagen’s work looks to be the most promising in this segment.

Its first ADC drug is Adcetris, which was approved in 2011 for Hodgkin’s lymphoma and made in cooperation with Takeda Pharmaceutical (TAK).

Its indication was later expanded to cover another white blood cell disease, Peripheral T-cell lymphoma (PTCL).

Seagen already holds roughly 45% of the market share in the Hodgkin’s lymphoma segment alone, and this is expected to rise to 50% by 2026.

In terms of projected sales in the US, Adceris is estimated to generate about $1.7 billion by 2026.

On top of that, Seagen also rakes in royalties from Adceris sales outside the US thanks to its Takeda partnership.

Riding the momentum of Adceris, Seagen expanded its ADC pipeline and later gained approval for Padcev in 2019.

This drug received the go signal to treat a fairly common disease in the oncology space: metastatic bladder cancer.

In the US, the average number of new cases of metastatic bladder cancer is 83,000. Given its market size and potential to become part of a combination therapy with the ever-popular Keytruda, Padcev is expected to generate at least $2.6 billion in sales by 2026.

Gaining more confidence in its expertise in the oncology sector, Seagen continued its expansion and gained regulatory approval for breast cancer treatment Tukysa.

Tukysa is expected to bring roughly $1 billion in annual sales in the US and European markets. This figure is projected to rise when it eventually also gains approval for colorectal cancer.

Another notable drug in Seagen’s pipeline is Tisotumab Vedotin (TV), which is a collaboration with Genmab (GMAB). TV is a cervical cancer treatment and is expected to gain approval by the end of 2021.

Shifting gears, let’s take a look at the upcoming growth of Seagen. Initially, its 2021 guidance put its annual sales at $1.28 billion for all the products.

However, Seagen has already exceeded expectations, with Adceris reporting $700 million in sales for a single quarter this year. Actually, both Adceris and Padcev are well on their way into becoming blockbusters in a year or two, thanks to their continuously expanding applications.

Overall, Seagen is an excellent long-term investment.

Aside from its work with giant biopharmaceutical companies like Merck and BMY, its current portfolio of treatments and pipeline programs present a myriad of opportunities for Seagen.

Moreover, its ability to develop powerful treatments and leverage the science of ADCs make Seagen one of the most promising oncology stocks in the market today.

seagen

August 3, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
August 3, 2021
Fiat Lux

FEATURED TRADE:

(SHAKING UP THE BIOTECHNOLOGY AND HEALTHCARE INDUSTRY)
(PSTX), (PFE), (NVS), (GILD), (GSK), (BLUE), (CRSP), (EDIT)

Shaking Up the Biotechnology and Healthcare Industry

Biotech Letter

With the advancement of biotechnology and healthcare, it’s not hard to imagine a future where drugs and therapies will be tailored to every person’s unique genetic profile.

Thanks to the continuous work on mass customization in the world of pharmaceuticals and even in whole genome sequencing, it’s only a matter of time before we can come up with a personalized pill for each popper.

Nowadays, robotics and automation have started to become tightly integrated with the medical arena. In fact, robotics in the field of pharmaceuticals is no longer anything novel.

The majority of drug manufacturers across the globe are already utilizing robots to address their needs, such as packaging and warehouse storage.

What interests me most, though, is how automation plays an active role in developing actual therapies. After all, doing this entails so much more than simply feeding codes to robots to teach them how to move test tubes around a lab.

One company that has been gaining traction in this space is Multiply Labs. Established in 2016 with roughly $22 million in funding thus far, this San Francisco company aims to be a force multiplier not only in creating personalized pills but also cell therapies.

Run by mostly MIT graduates, Multiply Labs started out by letting their robots take 24-hour shifts to quickly deliver biologic drugs needed for clinical trials.

That offers tremendously faster turnaround times and shorter waiting periods for researchers and pharmaceutical companies.

Since virtually perfecting that process, the company has decided to expand its focus to handle more challenging and complex work.

Now, it has set its sights on using its robotics platform to ease bottlenecks in the development of cell therapies.

As we know, cell therapies are regarded as powerful tools in the battle against cancer. However, the production process is extremely labor-intensive. This makes their development incredibly expensive.

Let’s take CAR-T cell therapy, which boosts the body’s immune system to help it fight off cancer, as an example.

In CAR-T cell therapy, scientists need to extract blood from the patient. Then they’d have to isolate the immune cells, which they would need to genetically engineer.

After that, they have to carefully grow the new cells. Finally, they’d inject these genetically engineered new cells back into the patient.

In most cases, every step needs to be repeated for individual patients.

What Multiply Labs is trying to do is automate several stages, such as genetically altering the harvested cells, which can only be performed by highly trained professionals.

Not only will they be able to cut down on the time needed to complete the procedures, they would also be able to reduce—if not completely eliminate—human error.

Aside from working with the University of California San Francisco, Multiply Labs has been collaborating with Cytiva, a subsidiary of Dannaher (DHR), to move their services closer to commercialization.

Apart from Multiply Labs, another San Francisco company has been working on improving the expensive, logistically complicated, and oftentimes error-filled cell therapy space: Cellares.

Unlike Multiply Labs, which aims to ease the bottleneck in the cell therapy creation process, Cellares’ goal is to handle the entire procedure on its own.

Dubbing its work as the “Cell Shuttle,” what Cellares offers is basically a “factory in a box” solution to the creators of cell therapies.

Basically, the “Cell Shuttle” is an end-to-end solution that comes in the form of a box designed to deliver an automated cell therapy platform. Cellares’ product handles everything from beginning to end, starting from taking in the cells of the patient to injecting the genetically engineered versions back into the individual.

Raking in roughly $100 million in funding so far, Cellares’ plan is to allow the pharmaceutical companies to scale and deploy the “Cell Shuttle” based on their needs.

To date, Cellares’ latest collaborator in this venture is Poseida Therapeutics (PSTX).

However, there are thousands of cell-based and cell therapy clinical studies conducted across the globe. The cell and gene therapy (CGT) sector is projected to be one of the fastest-growing markets in the healthcare sector, with the segment estimated to reach $14 billion by 2025.

Moreover, CGT offers promising treatments for severe and chronic conditions like obesity, diabetes, and, of course, cancer. It can also be the answer to rare genetic conditions and their related complications.

That’s why it comes as no surprise that Big Pharma names like Pfizer (PFE), Novartis (NVS), Gilead Sciences (GILD), and GlaxoSmithKline (GSK) are taking interest in this niche.

However, the progress of smaller companies, such as bluebird Bio (BLUE), CRISPR Therapeutics (CRSP), and Editas Medicine (EDIT), also offers incredible potential in this space.

And while Poseida Therapeutics may be the first to collaborate with the likes of Cellares and Multiply Labs, the rest would undoubtedly follow suit in integrating robotics and healthcare in the near future.

July 29, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
July 29, 2021
Fiat Lux

FEATURED TRADE:

(A BIOTECH PREPARED FOR ANOTHER DOOMSDAY MARKET)
(BNTX), (PFE), (MRNA), (AZN), (JNJ), (GSK), (GILD)

A Biotech Prepared for Another Doomsday Market

Biotech Letter

If you’ve heard of Harry Dent Jr., then you know that he’s the economist who correctly and accurately forecasted the Japanese economic downturn back in 1989. He also hit the nail on the head when he predicted the collapse of the dot.com bubble in 2000.

Now, he’s saying that the stock market will crash in the next three months, describing it as “the biggest crash of our lifetime.”

There’s no precise method to determine if his pessimistic outlook is justified thus far.

Nonetheless, even if Dent turns out to be right, I don’t believe that all stocks will plummet. There are a handful of stocks that could soar if the stock market does crash this summer.

For instance, I think vaccine stocks would most likely take off if the new variants of COVID-19 triggered a market crash in the coming months.

After all, the best weapons we have in overcoming these issues are still vaccines.

I also think that one of the biggest—if not the biggest—winners in this segment is BioNTech (BNTX).

Let me share with you the reasons.

For one, BioNTech is actually the smallest of the biopharmaceutical companies in the vaccine market today.

Catalysts typically generate larger swings in stocks that hold smaller market capitalizations compared to those with bigger market caps.

It’s also telling that BioNTech and its co-vaccine developer, Pfizer (PFE), have started delving into tactics to handle the continuous rise of the Delta variant.

So far, what the partners have suggested includes adding a third dose to the COVID-19 vaccine to boost the immunity and protection of people against the new strain.

The two are also looking into beginning their clinical testing on a modified version of their vaccine, which would specifically target the Delta variant, by August.

BioNTech’s valuation also plays a key role. The company so far is the cheapest among the leading vaccine stocks, which include Moderna (MRNA) and AstraZeneca (AZN), based on its forward earnings multiples.

To date, BioNTech trades at roughly 6.3 times its expected earnings—a low valuation that wouldn’t last long, especially if fears about the new variants spark another massive downturn in the market.

Thus far, BioNTech and Pfizer have delivered roughly 392 million vaccine doses to the US alone.

However, the country is anticipating increasing demand for it, pushing it to sign up for an additional 200 million doses.

The duo plans to deliver 110 million doses to the US by the end of 2021 and the rest of the orders by April 2022.

In a separate agreement, the US also ordered 500 million doses as donations to developing countries across the globe.

In comparison, Moderna delivered 137.3 million, while Johnson and Johnson (JNJ) supplied 13.1 million.

On top of these, Pfizer and BioNTech are working to expand the reach of their vaccine.

The companies recently sealed an agreement with Biovac, a company in South Africa, to produce vaccine shots from a plant in Cape Town. Similar initiatives are under exploration in Latin America.

Riding the momentum of its COVID-19 vaccine, BioNTech is also working to develop a highly effective and widely tolerated malaria vaccine.

The malaria vaccine candidate is expected to build on two decades’ worth of mRNA research, which BioNTech used to co-develop the COVID-19 vaccine with Pfizer.

The clinical trial for this new project is planned to start by the end of 2022.

At this point, only one malaria vaccine is available on the market: GlaxoSmithKline’s (GSK) Mosquirix, which offers about 30% effectiveness in safeguarding kids from the mosquito-borne virus.

If successful, BioNTech will be easing a massive burden globally, as over 400,000 children die from malaria every year.

In addition to its malaria vaccine candidate, BioNTech is also looking into using its mRNA expertise to diversify its pipeline to include cancer treatments, including colorectal cancer, advanced melanoma, and other malignant solid tumors.

BioNTech’s move to attempt to conquer the oncology sector gained even more traction following its recent acquisition of Kite, a manufacturing plant under Gilead Sciences (GILD).

Kite primarily focuses on an experimental kind of cancer treatment relating to neoantigen T-cell receptor cell therapy.

In the first quarter of 2021, BioNTech was able to boost its sales by over 7,295%.

Its total revenues within that period reached $2.49 billion, which indicates a healthier revenue stream compared to its main competitor, Moderna, which raked in $1.9 billion.

In terms of sales outlook for the entire year, BioNTech also forges ahead with $26 billion, while Moderna anticipates $19.2 billion.

Needless to say, these numbers show how undervalued BioNTech has been lately.

Given the new developments concerning the new variants and the company’s expanded coverage of the market, it’s clear to see that the future looks bright for BioNTech regardless of Dent’s doomsday market predictions.

July 13, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
July 13, 2021
Fiat Lux

FEATURED TRADE:

(SPINOFF STOCKS POISED FOR LONG-TERM GROWTH)
(VTRS), (OGN), (PFE), (MRK), (JNJ), (LLY), (ABBV),
(AZN), (GSK), (BMY), (GILD), (REGN), (PYPL), (EBAY), (CARR), (UTC)

Spinoff Stocks Poised for Long-Term Growth

Biotech Letter

Spinoffs have historically been known to deliver healthy returns for their investors.

A good example is PayPal (PYPL), which grew sevenfold since 2015 following its spinoff from eBay (EBAY).

A more recent example is Carrier Global (CARR), which tripled its shares amid the pandemic after its spinoff from United Technologies (UTC) last year.

Basically, spinoffs allow smaller segments of companies to thrive on their own or push high-growth divisions to expand faster.

Over the past months, the cheapest stocks found in the S&P 500 have recently spun off pharmaceutical companies: Viatris (VTRS) and Organon (OGN).

Viatris is a spinoff of Pfizer (PFE), which merged with Mylan, while Merck (MRK) jettisoned Organon (OGN) just last month.

Both are brand new and still under the radar, particularly among investors who don’t follow healthcare updates.

While these two have yet to impress the market, both exhibit potential that could make them promising long-term prospects.

Viatris holds an extensive portfolio of drugs courtesy of Pfizer’s Upjohn unit and Mylan’s pipeline.

The list includes the previously top-selling Lipitor, Viagra, Lyrica, and even Norvasc from Pfizer. It also has Mylan’s income-generating EpiPen along with the company’s HIV/AIDS therapies and 7,500 marketed products across the globe.

To date, Viatris has fallen roughly 30% from its average price target. It’s not for the subpar performance of its products though. This is mostly attributed to the lack of attention from investors and possibly a bit of skepticism from some analysts.

However, Viatris has a really good value proposition.

The main goal of the biggest names in the biopharmaceutical sector, such as Johnson & Johnson (JNJ), Eli Lilly (LLY), AbbVie (ABBV), AstraZeneca (AZN), GlaxoSmithKline (GSK), Bristol-Myers Squibb (BMY), and Gilead Sciences (GILD), is to develop and launch the best-in-class treatments to market.

To achieve that, these industry giants are granted a set period to exclusively sell and market each new drug that gains approval.

This would allow them to command a premium price, which in turn would give them the money to fund the next round of research and development needed to come with the next generation of newer and improved versions of the treatment.

However, not everyone can afford those premium prices.

So when the periods of exclusivity end, there are companies like Mylan—now Viatris—that are allowed to manufacture generic versions of those branded drugs and sell them at lower prices.

The list of drugs with soon-to-expire patents for which Viatris has been working on creating biosimilars or generic versions include Humira from AbbVie, which recorded peak sales at $20 billion; Eylea from Regeneron (REGN), which peaked at $7.5 billion; and even Allergan’s Botox, which peaked at $5 billion.

Viatris is also working on biosimilars for Roche’s (RHHBY) cancer treatments Avastin, which had peak sales of $7 billion, and Perjeta, which peaked at $5 billion.

Obviously, Viatris will not reach the same height of success as the companies that created those branded drugs.

But, if it manages to achieve even only 10% of those numbers, then it can generate roughly $4 to $5 billion in sales—and that’s just the tip of the iceberg.

So far, Viatris owns at least 1,400 approved molecules applicable in roughly 10 therapeutic segments.

It has roughly 350 products in its pipeline at the moment, with each item estimated to generate approximately $100 million to $500 million in sales.

With its current performance and access to 165 countries and territories, Viatris is expected to generate roughly $224 billion in global sales annually.

With all these in mind, Viatris’ value proposition looks impressively strong to me.

More importantly, this Pfizer spinoff has the capacity to become the world’s first dominant generic and biosimilar drug manufacturer, with its revenues potentially becoming comparable to major pharmaceutical companies at some point.

The same value proposition could be behind Organon, as this newly spun-off company markets Merck’s off-patent drugs.

While the move to separate from its parent company has yet to show tangible results, Organon is projected to rake $6.1 billion to $6.4 billion in revenue for 2021, with annual sales expected to rise in mid-single digits and dividends anticipated to be about 3%.

The biosimilars market is still relatively young, with only 60 biosimilars approved in the EU and 29 in the US thus far. In total, those represent a market worth approximately $17 billion.

Conservative estimates project that the global biosimilars market will be worth $692 billion by 2027, considerably outpacing the mainstream pharmaceutical sector.

Given their potential and prospect for future gains, the low prices for companies like Viatris and Organon present rare opportunities to grab long-term investments.

viatris

June 15, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
June 15, 2021
Fiat Lux

FEATURED TRADE:

(A STOCK TO ADD TO YOUR RETIREMENT PORTFOLIO)
(MRK), (REGN), (GSK), (LLY), (GILD)

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