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Let's Get Ready to Rumble

As we gradually reach the pinnacle of biotechnology formation, a war is brewing in the life sciences world.

This can be one of the most exciting times for medical innovations for patients. Meanwhile, investors can be picky when picking where to put their money.

Even up-and-coming scientists can seize the opportunities to lay the groundwork for their own dream organizations.

At the same time, those aspiring to climb the corporate ladder have better chances at becoming CEO without the need to slog through the biopharma sector and scramble for whatever opening is available.

However, as more and more companies launch practically every day, claiming to offer groundbreaking and revolutionary breakthroughs, it’s critical to keep in mind that not all biotechs will succeed.

Actually, the number of biotech companies has been steadily rising since 2015.

In that year, 177 firms were formed, with biotech birth rates breaching the 200-per-annum mark by 2017 and 2018.

Seeing as many more have emerged even during the pandemic, it looks like the biotech world won’t be slowing down anytime soon.

Even funding hasn’t been deterred by economic downturns.

From 2015 to 2018, the total funding for biotech companies averaged between $68.6 million to roughly $90.2 million.

After a bustling, record-breaking 2020, the bar leading to 2021 was expectedly high.

Surprisingly, 2021 blew those figures out of the water as private investors opted to raise the bar even higher.

It’s the type of climb that’s truly hard to believe.

Biotechs raised over $22 billion in private funds in 2020 following a sluggish 2019. In 2021, that figure rose to $28.5 billion.

The top earner in these funding rounds last year was China’s Abogen, which took $1 billion in private investors’ money across two rounds.

Abogen is an mRNA-centered firm that’s currently working on a COVID-19 vaccine.

What makes its product different and possibly better than Moderna (MRNA), Pfizer (PFE), BioNTech (BNTX), and AstraZeneca (AZN) is that it would be thermostable. That is, it could be used in areas without access to refrigeration.

Another big winner in 2021 is Massachusetts-based biotech ElevateBio, which aims to be a one-stop shop for cell and gene therapies.

The idea is to develop a technology that fuses its gene-editing platform, cell engineering structure, and manufacturing warehouse into one system to ease and accelerate the drug development process.

Although not entirely the same, this plan has similarities with the strategies of Big Pharma names like AbbVie (ABBV) and Merck (MRK).

Amid the growing number of biotechs, a key challenge is how to stand out among companies that target the same disease areas. This kind of competition could hamper innovation.

The clearest indicator of success would be receiving approval and being able to launch the products commercially.

Ultimately, the goals are to offer safe and effective treatments and provide value to their shareholders.

Unfortunately, the reality is only a handful of startups do make it all the way to the top.

The more feasible scenario is that bigger businesses would acquire these companies—and that seems to be the case these days.

Alongside the booming biotech formation rate are the increasingly aggressive biotech buyout deals.

We’ve seen this before.

It started in 2019, with Bristol Myers Squibb (BMY) buying Celgene, followed by AbbVie splurging on Allergan and Takeda (TAK) merging with Shire.

In 2020, AstraZeneca bought biotech superstar Alexion Pharmaceuticals while Gilead Sciences (GILD) snapped up Immunomedics.

Meanwhile, Sanofi (SNY) stacked its deck with the $3.2 billion acquisition of Translate Bio. As for Merck, this biopharma sneaked in a massive win with an $11.5 billion buyout of Acceleron.

For this year, several names have already been eyed by Big Pharmas.

There’s Alynlam Pharmaceuticals (ALNY), an RNA-centered company, which seems to be the target of both Novartis (NVS) and Regeneron (REGN).

Another RNA-focused company, Ionis Pharmaceuticals (IONS), appears to be a key target as well, with the likes of GlaxoSmithKline (GSK), Bayer, and even Biogen (BIIB) waiting for an opportunity to pounce.

After all, acquisitions form an integral lifeline of the biotech world. Huge businesses with the resources swoop up promising buyout candidates to bolster their own pipelines.

However, M&A isn’t the only option for biotechs. There’s also the path where they can seek companies with similar focus and consolidate to become larger and more competitive entities.

This has been the expected plan for CRISPR Therapeutics (CRSP) for a long time. Hence, it is no surprise if other biotechs with their own groundbreaking technologies decide to follow the same route.

Overall, the biotech industry is booming amid its recent struggles with the market.

The faster growth rate of companies can be attributed to more investors seeing the industry's potential and, of course, better access to technology and scientific advancement.

Moreover, the world has become more interested in the biotech world and what the industry can offer due to the pandemic.

COVID-19 has shone a light on this sector following the quick and effective results of the vaccines and treatments.

That is, people have finally caught on to the idea that there is an incredible opportunity in biotech.

While a correction is to be expected at some point, the critical thing to bear in mind is that great ideas will always generate funding no matter what.

April 12, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
April 12, 2022
Fiat Lux

Featured Trade:

(CAN THIS BE THE NEXT 10-BAGGER BIOPHARMA STOCK?)
(PFE), (BNTX), (GSK), (SNY), (AZN)

Can This Be The Next 10-Bagger Biopharma Stock?

Biotech Letter

Being one of the most famous names in the biotechnology and healthcare industry, Pfizer (PFE) barely needs any introduction.

Thanks primarily to its COVID-19 vaccine, Comirnaty, Pfizer’s top line has skyrocketed, with its trailing 12-month revenue exploding by over 99% in the past three years and recording a total of a whopping $81.2 billion.

Realistically speaking, it’s best not to rate the chances of this happening again in the years to come.

Still, there are several factors that make Pfizer a convincing stock to hold even when the pandemic shifts to an endemic.

First, the COVID-19 program will most likely continue to rake in blockbuster revenues. Although it won’t be as high as the previous years, Comirnaty sales are projected to reach $39 billion this 2022 and $22 billion in 2023.

Apart from this vaccine, which was developed with BioNTech (BNTX), Pfizer also recently received approval for its own COVID-19 oral treatment called Paxlovid. The addition of this pill in its portfolio all but guarantees another high-growth revenue stream for the company.

Second, Pfizer holds eight blockbuster treatments focused on diverse sectors.

While these will eventually struggle with generic competition by 2030, the company has that issue covered. To date, Pfizer has roughly 89 candidates in its pipeline with 27 undergoing Phase 3 trials.

Pfizer’s plans to expand its pipeline became particularly evident in the past week as the company made some noise in the muted M&A scene.

Right on the heels of its successes in its lead RSV vaccine candidate, Pfizer bolstered this program through a $525 million biotechnology buyout.

The company that caught this Big Pharma’s attention is ReViral, which has been hard at work in developing Sisunatovir, an oral RSV drug.

While eyebrows may have raised over the price tag for a company with a single asset, it should be noted that Sisunatovir is estimated to rake in $1.5 billion in annual sales—and this pill isn’t the only candidate in ReViral’s pipeline.

All in all, that’s obviously not a bad payback for a contract this size.

The RSV space has always been a challenging and lucrative market for biopharmas, with the global costs linked to this disease reaching $5.45 billion in 2017.

Researchers have been working on a vaccine for decades, with some experiments dating as far back as the 1960s.

With the addition of ReViral to its portfolio, Pfizer has clearly positioned itself as the frontrunner in the RSV vaccine race.

This puts it firmly ahead of GlaxoSmithKline (GSK), which had to suspend its trials for safety reasons, and even the partnership between Sanofi (SNY) and AstraZeneca (AZN).

Evidently, Pfizer’s deep pockets could indicate additional acquisitions of smaller companies with promising candidates in their pipelines.

We’ve seen this happen with ReViral and, prior to this, Arena Pharmaceuticals to the tune of $6.7 billion primarily for the smaller biotech’s encouraging anti-inflammatory treatment Etrasimod.

Although that price tag initially raised doubts about Pfizer’s spending, a deeper analysis of Arena’s pipeline showed that it could bring $28 billion per annum by 2025.

Flush with the billions it earned from its COVID-19 program, the recent ReViral deal appears to be a relatively minor one for Pfizer.

This leads me to believe that this move marks the beginning of a fresh season of biotech buyouts—and Pfizer might very well be in the lead.

Overall, Pfizer presents a compelling investment case. It is remarkably diversified, which means it offers below-average risks.

Considering its trajectory and putting it against the backdrop of the fast-growing biotechnology industry, Pfizer has the potential to become a trillion-dollar company within 20 years.

March 24, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
March 24, 2022
Fiat Lux

Featured Trade:

(A BIOTECH STOCK POISED FOR A REBOUND)
(MRNA), (PFE), (BNTX), (AZN), (JNJ), (NVAX), (GSK), (SNY)

A Biotech Stock Poised for a Rebound

Biotech Letter

Healthcare stocks have experienced an unusual run over the past few years. The sector was nearing scorching hot levels when the pandemic started, only to go ice cold by the end of 2021.

Nonetheless, seasoned investors in the sector know that solid companies will continue to grow at a steady pace despite the decline in their stock prices.

This is where the fun starts for some investors.

After all, we all enjoy a good bargain, especially when it comes to promising stocks. What makes it even more enticing is if the stock has a proven track record and solid prospects in its pipeline.

Based on these criteria, one name that readily comes to mind is Moderna (MRNA).

Since it reached its peak in August 2021, Moderna shares have fallen by over 60%. Despite these losses, the business is still regarded as one of the most promising companies in the sector. This means that the stock can recover soon.

Moderna is a significant mover in one of the hottest markets today: the COVID-19 vaccine sector. Since the pandemic started, the company has been able to generate billions of dollars in profit from its only commercialized product: mRNA-1273.

While the demand has been divided now due to the entry of other vaccine developers, Moderna still expects to earn at least $19 billion from its COVID-19 vaccine.

Before becoming a household name, not many people knew of Moderna’s existence. At that time, most weren’t even confident that the messenger-RNA vaccines would actually work.

In the early stages, Moderna was only rivaled by Pfizer (PFE) and BioNTech (BNTX) in this particular field. Meanwhile, the rest of the world was betting on other companies like AstraZeneca (AZN), Johnson & Johnson (JNJ), and even Novavax (NVAX).

As soon as the results came out, Moderna shares skyrocketed to unprecedented heights. In 2020, the company recorded a 434% growth.

However, recent times have not been as kind to Moderna. Investors now worry that this might be the reality, a.k.a. the post-pandemic sales.

This is far from the truth.

Admittedly, sales from the vaccine would dwindle over time due to competition and possibly even herd immunity.

In preparation for this eventuality, Moderna has been stocking up its pipeline. Recently, the company announced pivotal Phase 3 trials for two of its vaccine candidates.

One is for cytomegalovirus (CMV) and the other is for the respiratory syncytial virus (RSV).

Both candidates hold the potential to become blockbusters.

The RSV market is projected to become larger than initially anticipated, reaching roughly $10 billion. Given the promise of this sector, it comes as no surprise that Moderna has competitors. Sanofi (SNY), GlaxoSmithKline (GSK), and Pfizer are some of the biggest players here.

As for the CMV vaccine, the product has the potential to reach $2 to $5 billion in annual sales. Moreover, this program can be linked to other sectors like oncology and autoimmune diseases.

Other than these, Moderna has been developing its HIV vaccine. It already started with trials, with its first participant queued to receive the first dose of the experimental candidate.

This could be another massive revenue stream for Moderna as the annual spending on HIV is estimated to reach $500 billion globally.

Another candidate is Moderna’s flu vaccination program. However, this might be a more difficult path as the company faces strong challengers, including Pfizer, Novavax, and GSK.

In addition to these, the company is also working on Nipah and Zika vaccines. There are also plans for herpes simplex virus (HSV) and varicella zoster virus to join the roster soon.

Cornering the vaccine market is a good approach since Moderna has a tested and proven product dominating the industry today.

That is, no one is doubting the power and efficacy of mRNA-based strategy in vaccines.

More importantly, there is no question that Moderna is performing well in this field. This is an unshakeable and established strength that Moderna investors should be focusing on.

A seemingly unstoppable stock in the past few years, this company suddenly fell out of favor. Nevertheless, its prospects remain the same and it can still deliver significant revenue—something that’s expected to go on well into the future.

March 3, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
March 3, 2022
Fiat Lux

Featured Trade:

CHEATING DEATH: ARE WE GETTING CLOSER TO IMMORTALITY?)
(AMZN), (FB), (GSK), (RHHBY), (GOOGL)

Cheating Death: Are We Getting Closer to Immortality?

Biotech Letter

“Staving off death is a thing that you have to work at…If living things don’t actively work to prevent it, they would eventually merge with their surroundings and cease to exist as autonomous beings. That is what happens when they die.”

This is a quote from Richard Dawkins, which Jeff Bezos wrote to Amazon (AMZN) shareholders in his farewell letter. Needless to say, death and decay seem to be at the forefront of his mind these days.

That’s why it comes as no surprise that the founder of Blue Origin and, of course, Amazon (as well as Elon Musk’s favorite punching bag) has launched a company comprising renowned scientists and globally respected executives to realize his dream of developing immortality technology.

The company, called Altos Labs, is basically an anti-aging venture. While many people would probably mock the idea, this seemingly impossible wild concept has notable names backing it.

Bezos is not the only investor putting his money on this project.

Russian billionaire Yuri Milner, whose wealth expanded thanks to his strategic funding of Facebook (FB), along with Russian email service Mail.ru (MLRYY) and Russian social networking site VK, is also part of the mission.

In fact, the company was officially conceived in Yuri’s house in Palo Alto in the Los Altos hills, leading to the name Altos Labs. (Given that “Los Altos” means “the heights” in Spanish, they probably used it as a double entendre for Altos Labs’ goals.)

In addition to Yuri and Bezos, there are several other backers of Altos Labs.

While they aren’t specifically named, the mere fact that the startup has generated the most funding of virtually any biotechnology business at $3 billion is quite telling of how much faith investors have on this project.

And they wouldn’t be wrong.

Its remarkable roster of executives includes experts from GlaxoSmithKline (GSK), Roche’s (RHHBY) Genentech, and the National Cancer Institute.

Altos Labs not only has wealthy backers and esteemed executives on its board, it also has Nobel Prize-winning scientists working on its goals.

The highest-profile scientist they have is Shinya Yamanaka, who received the Nobel Prize in 2012 for his stem cell research.

His work, which focuses on cell “reprogramming,” can reverse the development of cells towards that of stem cells. In a nutshell, Yamanaka is working on a “backward aging” technology.

Part of the board is Juan Carlos Izpisúa Belmonte, who specializes in developing techniques to switch cells from one type to another.

He gained notoriety when he experimented on creating hybridized human and monkey embryos using Yamanaka’s technology.

Another member of Altos’ board is Jennifer Doudna, who shared the 2015 Breakthrough Prize with Yamanaka and later won the 2020 Nobel Prize for her co-discovery of CRISPR genome editing.

Although it’s a startup, the company will have offices in the San Francisco Bay Area, San Diego, Cambridge in the UK, and even Japan.

However, Altos Labs insists that it’s not chasing some impossible vision worthy of sci-fi movies.

Admittedly, most of the details about the project are still under wraps. But insiders say that Bezos and his crew seek to become the “Bell Labs” of biology.

The oversimplified explanation of its goal is that Altos Labs plans to reverse diseases, effectively regenerating new cells to help the body perform optimally.

Basically, they seek to come up with a biological reprogramming technology that can rejuvenate the cells and eventually revitalize human beings.

They target cells under pressure, including those with genetic abnormalities, suffering from injuries, or aging.

Using their reprogramming technology, they aim to create medications that can deliver one-time treatments for these conditions. Ultimately, these efforts will lead to a prolonged human life.

Further clarifying their mission, Altos explained that their goal is to extend “health span” and that boosting any longevity initiative would simply be considered an “accidental consequence.”

Inasmuch as Alto Labs is an exciting venture, it isn’t the first in the field. This startup joins the ranks of Calico Labs, which was launched in 2013 and funded by one of Google’s (GOOGL) co-founders, Larry Page.

Other startups working on reprogramming technology are Life Biosciences, Turn Biotechnologies, AgeX Therapeutics, and Shift Bioscience.

The quest to defeat death is a mission as old as time.

In response to this challenge, Alto Labs has put together an impressively pedigreed bunch.

Moreover, a solid and established connection is seen between aging clocks and reprogramming technology—all of which Alto Labs already have access to due to its roster of executives and scientists.

While the technology feels so farfetched, industry experts believe it holds indisputable and repeatable results.

These were already seen in laboratory experiments. However, these have only succeeded so far when applied to individual cells.

The technology can gather a cell from an 80-year-old and, via in vitro, reverse this age by as much as 40 years.

If this succeeds, Altos is poised to lead and dominate the “immortality” industry — a sector projected to be worth $600 billion by 2025 — soon.

February 1, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 1, 2022
Fiat Lux

Featured Trade:

(A SHIFT IN NEUROSCIENCE BIOTECH)
(BIIB), (AXSM), (PFE), (BMY), (MRK), (NVS), (ABBV), (GSK), (JNJ), (LLY), (RHHBY), (TAK)

A Shift in Neuroscience Biotech

Biotech Letter

Industry experts typically describe mergers and acquisitions as the life force that propels the biotechnology and healthcare sector forward.

Based on that description, it’s safe to say that the segment’s health has plummeted, considering the sluggishness observed last year.

In 2021, the M&A of this industry had fallen to one of its lowest recorded levels in history.

During this period, the deals only amounted to $108 billion for the entire year. This number was approximately 40% of the total recorded in 2019.

Despite the sluggishness in 2021 and the relatively slow start in 2022, this year is still projected to push the would-be buyers into more aggressive action.

After all, several key products are facing patent expiration before this decade ends.

The list includes Big Pharma players like Pfizer (PFE), Bristol Myers Squibb (BMY), Merck (MRK), and Novartis (NVS).

This means that a massive deal might be on the horizon, pretty much when AbbVie (ABBV) executed its jaw-dropping $63 bill acquisition of Allergan in 2019 following its problems with generics competing against its blockbuster drug Humira.

Aside from patent protection concerns, another factor in play is the intense competition in lucrative research sectors such as immunology, neurology, rare diseases, and oncology.

Add to this the constant pressure of Congress to pull down drug prices, and it becomes apparent why companies—big or small—turn to mergers and acquisitions for survival.

Simply put, biotech and healthcare companies have no other choice but to be aggressive in looking for external innovation to secure the continuous transformation of their businesses.

On that note, I think there could be major acquisitions to be announced in 2022.

One deal I’m looking forward to is Biogen’s (BIIB) potential acquisition of Axsome Therapeutics (AXSM).

To remain competitive in the neuro stage, Biogen must keep up with the times—and a deal with Axsome might just be the solution.

Axsome’s size and price, with a market capitalization of $992 million, appear to be just the right fit for Biogen to gobble up.

More importantly, its portfolio is an excellent fit for Biogen. Both focus on neurological diseases, making their pipelines complementary to each other.

So far, Axsome has several leading candidates in the clinical stages.

One is AXS-05, which is a treatment for major depressive disorder (MDD).

Apart from MDD, this candidate is under late-stage review to target Alzheimer’s disease agitation.

In addition, Axsome is looking to advance AXS-05 in late-stage trials for smoking cessation therapy.

Needless to say, AXS-05 would go hand in hand with Biogen’s own approved, albeit controversial, Alzheimer’s drug Aduhelm.

Another promising candidate is AXS-07, a potential competitor of Pfizer and Novartis’ migraine medication. This drug has been submitted for FDA approval and might be launched by the second quarter of 2022.

There’s also AXS-12, which is a narcolepsy treatment candidate, and AXS-14, which is geared towards fibromyalgia. Both candidates are slated for FDA review by the third or fourth quarter of 2022.

For over 20 years, even the biggest and most powerful drug companies have stayed away from working on treatments specifically for the brain and central nervous system (CNS).

That’s not surprising considering the sheer number of failed programs in neuroscience, pushing drugmakers to believe that we still don’t have sufficient data on the subject, so the money might be better spent elsewhere.

Nowadays, though, the CNS landscape is starting to shift.

GlaxoSmithKline (GSK) recently embarked on reviving its CNS program by striking a $700 million deal with a smaller biotechnology company called Alector.

Meanwhile, Pfizer and Novartis reached an agreement with Biohaven Pharmaceuticals for the latter’s migraine treatment and Parkinson’s drug.

Aside from these, Johnson & Johnson (JNJ), Eli Lilly (LLY), Roche (RHHBY), and Takeda (TAK) are anticipated to secure CNS-centered deals soon.

Despite the lower number of M&A deals last year, the volume of strategic collaborations in the neuroscience sector climbed by about 50% in 2021 compared to its 2020 performance.

By 2022, this space is projected to become even more investable, considering the number of biotechnology companies focusing on CNS. Watch out for blockbuster deals in this sector.

December 16, 2021

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
December 16, 2021
Fiat Lux

Featured Trade:

(TIME TO LOOK AT ONE OF THE LEAST FAVORED BIOTECHS)
(AMGN), (RHHBY), (PFE), (MRK), (GSK), (JNJ), (AZN)

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