Mad Hedge Biotech & Healthcare Letter
July 28, 2020
Fiat Lux
Featured Trade:
(EARLY WINNERS ARE TURNING UP IN THE COVID-19 VACCINE RACE)
(MRNA), (AZN), (PFE), (JNJ), (MRK), (BNTX)
Tag Archive for: (MRK)
In less than six months since the pandemic broke, the world has come up with 140 vaccine candidates in pre-clinical trial phase and 23 undergoing the clinical evaluation stage.
However, the race to produce a COVID-19 vaccine recently intensified after three of the leading laboratories shared promising progress from their early human trials.
Among the frontrunners, AstraZeneca (AZN), Pfizer (PFE), and Moderna (MRNA) are dubbed as the “most ambitious” primarily due to their tight timelines for approval and their seemingly unreachable goals in terms of the total doses they could produce this year.
All the vaccine developers that released their results claimed that their candidates triggered strong immune responses with patients experiencing only minor side effects.
According to their data, their vaccines elicited similar responses as those observed from the individuals who recovered from COVID-19.
Moderna, which was the first developer to test its mRNA-1273 vaccine in humans, announced that Phase 3 of its human trials would start on July 27. This will involve 30,000 volunteers.
Moderna’s vaccine makes use of a genetic material, called mRNA, from the SARS-CoV-2 to trigger the body’s immune system to fight off the virus.
Meanwhile, AstraZeneca’s partnership with Oxford University produced what could be the most closely followed COVID-19 vaccine thus far. The candidate is tentatively known as AZD1222.
Even before the vaccine’s efficacy gets proven, the company already received a total order of 2 billion doses worldwide. Early estimates indicate that AstraZeneca can produce a million doses of its COVID-19 vaccine by September.
This partnership’s project is so sought after that rumors keep persisting that Russian spies are out to steal the research.
AstraZeneca’s approach is similar to the technique used by another vaccine maker outside the US, China’s own Cansino Biologics.
Both developers altered the genes of the adenovirus, which is another common virus, modifying it to harmlessly mimic the SARS-CoV-2. This will then induce an immune response from the body.
While Moderna was the first to enter human trials, AstraZeneca and Oxford’s candidate was the first to start the Phase 3 tests.
The reason that AZD1222 is gaining more traction than Moderna’s vaccine is because one dose of AstraZeneca’s candidate elicited an antibody response in more than 90% of the participants and a second dose managed to hit 100% -- the same level found among convalescent COVID-19 patients.
Among the three, though, Pfizer and BioNTech (BNTX) stand out because this is the only collaboration that refused government funding from the US.
This partnership uses the same approach as Moderna, with its early results also showing off promising immune responses from the participants.
Although the details have yet to be officially released, Pfizer landed its first government contract. The deal is with the UK and the New York-based biopharmaceutical company is expected to deliver 30 million vaccine doses between 2020 and 2021.
Aside from Moderna, AstraZeneca, and Pfizer, two more companies were included in Donald Trump’s Operation Warp Speed.
The fourth company is Johnson & Johnson (JNJ). The biotechnology and healthcare titan has yet to release results, with its first human trials scheduled this July and late-stage tests expected to start as soon as September. JNJ’s goal is to produce a vaccine by early 2021.
The fifth contender in the COVID-19 vaccine race is Merck (MRK).
While the rest of the developers are focusing on speed, Merck insists on taking its time before releasing their results. The company has made no announcement on its plans for human studies, with its leaders warning against accelerating the safety protocols.
At this point, there’s still no accurate way to determine the price of the COVID-19 vaccine. Nonetheless, investors are already smelling big money for this program.
A glaring example of how the COVID-19 crisis has pumped funds into biotechnology and healthcare companies is Moderna’s trajectory this year.
Prior to this pandemic, Moderna had a market capitalization of roughly $7 billion. Since February, though, this number has more than tripled its value at $23 billion.
While it is not the case for all the companies in the vaccine race, the excitement over it is understandable.
Let’s indulge in a bit of a back-of-the-envelope calculation.
If we base the estimates on the recent vaccines for diseases like meningitis B and the shingles, which cost somewhere between $300 and $400 for an entire course, then we can assume that the COVID-19 vaccine could fall near $500 per course.
That means vaccinating the entire population would rake in more than $150 billion to the company --- virtually all of its profit.
Inasmuch as that presents a lucrative opportunity, most of the leading companies already announced that they do not intend to make a profit off their COVID-19 programs.
These include Moderna, JNJ, and AstraZeneca. Meanwhile, Pfizer has yet to make that announcement.
Mad Hedge Biotech & Healthcare Letter
June 30, 2020
Fiat Lux
Featured Trade:
(MODERNA’S BIG CORONA PLAY FOR A SMALL COMPANY)
(MRNA), (INO), (NVAX), (JNJ), (PFE), (BNTX), (LZAGF), (REGN), (AZN), (LLY), (MRK)
Credit where credit is due.
Tiny Moderna Inc (MRNA) has been at the forefront ever since this pandemic broke, with its vaccine program growing in leaps and bounds compared to competitors, like Novavax (NVAX), which has $3.02 billion in market capitalization, and Inovio (INO), which has $2.20 billion.
The latest report on Moderna’s progress pushes it much further ahead of its competitors.
Looking at its timeline, Moderna could have efficacy data on its COVID-19 vaccine, called mRNA-1273, by Thanksgiving.
Moderna’s vaccine, which is similar to the work of Pfizer’s German collaborator BioNTech (BNTX), utilizes a novel approach that inserts small doses of genetic instructions into the cells of humans.
These then trigger the production of harmless proteins, which mimic the SARS-CoV-2 virus. The proteins subsequently alert the body to produce antibodies, making the vaccine a proactive measure that protects people from infection by the actual virus.
Right now, Moderna is in the second stage of the trials. The final stage involving 30,000 people is expected to begin in July.
With the vaccine program well underway, Moderna secured manufacturing capabilities through a strategic collaboration with Swiss biotechnology company Lonza (LZAGF).
This partnership with a manufacturing site ensures that Moderna is on track to deliver approximately 500 million doses of the mRNA-1273 vaccine every year and could handle up to 1 billion doses annually starting from 2021.
With such massive competitors like Pfizer (PFE) and Johnson & Johnson (JNJ) but also other healthcare heavyweights, such as Regeneron (REGN), AstraZeneca (AZN), Eli Lilly (LLY), and Merck (MRK), the best-case scenario for Moderna is to launch its COVID-19 vaccine before its peers.
Considering the progress it has made so far and the 208% jump in Moderna’s shares this year, it looks like investors anticipate that the company can win the COVID-19 vaccine race and capitalize on its future cash-making machine.
After all, no other biotechnology stock has taken more advantage of this health crisis than Moderna. The company exploded from having the biggest IPO in biotechnology history to now being celebrated as the COVID-19 vaccine leader.
Moderna grew from being a biotechnology company worth roughly $4 billion to $5 billion to an impressive $25 billion frontrunner in a few months’ time.
This is especially impressive since Moderna commanded this kind of valuation without having any approved product in the market. In fact, this clinical stage biotechnology company is valued more than several companies with marketed treatments.
While it has no product in the market today, Moderna actually has a robust pipeline that boasts 22 mRNA candidates, with 12 of these already in clinical studies. The lineup includes potential vaccines for the Zika virus along with a promising oncology pipeline.
Prior to the COVID-19 pandemic, Moderna’s lead candidate was its cytomegalovirus (CMV) vaccine called mRNA-1647. CMV, which affects almost 80% of adults in the US alone, is caused by a virus related to those that cause chickenpox and mononucleosis.
Moderna expects the Phase 2 study analysis for mRNA-1647 to be completed by the third quarter of 2020, with Phase 3 set to start by early 2021.
The company is also working with fellow biotechnology companies on potential cancer vaccines.
So far, Moderna has been focusing on two candidates which are also currently undergoing Phase 2 testing.
The first candidate is called mRNA-4157, which is a personalized cancer vaccine developed for melanoma patients.
Moderna is evaluating the combination of this vaccine with Merck’s top-selling cancer treatment Keytruda. This could turn out to be a potent combination considering Keytruda’s track record.
The second candidate is a collaboration with AstraZeneca. The latter licensed the rights to one of Moderna’s heart disease drug candidate called AZD8601. If successful, this drug will be marketed to patients in need of coronary artery bypass grafting (CABG) surgery.
Riding the momentum of its COVID-19 vaccine program, Moderna conducted a secondary stock offering last May. With $1.34 billion in gross proceeds from that sale alone, the company ensured that it’s well-capitalized to fund its development programs.
While its $25 billion market capitalization is pennies compared to fellow COVID-19 vaccine leaders JNJ and Pfizer, the smaller biotechnology company is definitely giving these behemoths a run for their money.
Mad Hedge Biotech & Healthcare Letter
June 25, 2020
Fiat Lux
Featured Trade:
(COVID-19’s STEROID ROADBLOCK)
GILD), (MRNA), (INO), (SVA), (AZN), (MRK), (SNY), (GSK), (NVAX), (JNJ), (PFE), (LLY), (REGN)
Science rarely gets communicated accurately.
Earlier this month, UK health experts said that an existing drug called dexamethasone can cut the risk of death among patients suffering from severe COVID-19.
According to the Oxford University researchers, dexamethasone lowered the COVID-19 deaths by roughly 35% among patients in ventilators and 20% among those who required oxygen.
The experts clarified that this means for every 8 patients on ventilators treated with dexamethasone, they were able to save 1 life.
In response to this study, here’s the gist of what most news outlets reported: “Miracle COVID-19 cure discovered!”
Now, health experts are scrambling to get their voices heard over the loud pronouncements of opportunistic businesses heralding the sale of this life-saving drug.
Days after the UK experts released this information, government authorities have issued warning after warning against stockpiling this drug for personal consumption.
Up until today, they’re still convincing people that dexamethasone is not a community drug and should only be used if prescribed by a medical professional.
That is, dexamethasone is a treatment for the sickest of the sick and should not be used as a preventive treatment.
Here’s how it works, and why it can only be used in severe cases.
The dexamethasone dampens the immune system for patients in ventilators or oxygen. This is effective because in severe cases, the immune system turns against the body, specifically the lungs, causing deaths. That’s what dexamethasone addresses.
This means that dexamethasone cannot be used on mild COVID-19 cases. Patients classified under this category still have relatively healthy immune systems, which would of course be more preferable tools to fight the disease.
Although there has been a misconception about this treatment, this drug is definitely a breakthrough that the world badly needs at the moment. The positive results of its efficacy make it a first-line therapy until a vaccine gets approved.
So far, the leaders in the vaccine race include Moderna (MRNA), Inovio (INO), Sinovac Biotech (SVA), AstraZeneca (AZN)/Oxford, Merck (MRK), Sanofi (SNY), GlaxoSmithKline (GSK), Novavax (NVAX), Johnson & Johnson (JNJ), and Pfizer (PFE).
Dexamethasone has been around for almost 60 years, making the drug available practically everywhere.
It’s also safe since dexamethasone is included in the WHO’s list of essential drugs.
What we know is that this drug has been approved by the UK government to be used on COVID-19 patients in ventilators and oxygen.
Before being identified as a potential COVID-19 cure, dexamethasone has been widely used as a steroid treatment for rheumatoid arthritis, asthma, bowel disorders, skin disease, and some cancers.
The average retail cost of this drug is around $50 per 10mg. Since the treatment only requires a low dosage, the price would fall somewhere between $6 to $8 per patient.
Needless to say, this cheap treatment could hurt the sales of competing drugmakers aiming to come up with their own COVID-19 cure.
To date, the leaders in this field include Eli Lilly (LLY), Regeneron (REGN), and of course, Gilead Sciences (GILD).
Among those, the only treatment to show a noticeable effect in treating severe COVID-19 patients is Gilead’s Remdesivir.
Although Remdesivir has not been hailed as a miracle cure, this Gilead product managed to offer sufficient benefits to fuel demand.
According to its Phase 3 trial data, 65% of patients dosed with Remdesivir for five days showed better clinical improvement compared to a standard-of-care group.
When the pandemic broke out, Gilead announced that it’s giving away its remaining supply of Remdesivir, which amounts to roughly 1.5 million doses.
Nonetheless, the company disclosed that it plans to invest up to $1 billion on the development of the drug for COVID-19 patients.
Since government funding also comprises a portion of Remdesivir’s development, the arrangement inevitably raises the question of how much revenue the drug can generate.
After all, pricing will definitely be crucial because the company will have to strike a balance between making an acceptable profit and offering an affordable cure to patients.
Financial analysts estimate that Remdesivir’s potential profit could reach $7.7 billion by 2022.
If these estimates turn out right, then Gilead investors are sitting on a veritable gold mine.
Regardless of Remdesivir’s sales, Gilead remains a giant biotechnology and pharmaceutical company with a market capitalization of $97.18 billion.
In fact, it’s considered as one of the recession-resistant companies today thanks to its diversified portfolio and strategic acquisitions.
One of the main reasons for its stature in the industry is the fact that Gilead continues to be the definitive leader in the HIV market today.
Its top-selling drug Biktarvy recorded an impressive $4.1 billion in sales for the first quarter of 2020 alone, a substantial increase from its $3.6 billion earnings during the same period in 2019.
On top of that, Gilead secured patent exclusivity for Biktarvy until the early 2030s. This all but guarantees that the company’s cash cow remains safe from competition for many years.
The expansion of gene therapy Yescarta to cover the European market also proved to be effective. Sales of this lymphoma treatment jumped from $96 million in the first quarter of 2019 to $140 million in the same period this year.
Meanwhile, Gilead’s $4.9 billion acquisition of Forty Seven in April this year indicated the company’s move to expand its oncology sector. Specifically, blood cancer therapy Magrolimab is projected as the next blockbuster.
All these demonstrate that Gilead is well-positioned to handle major financial and even health crises.
More importantly, Gilead’s position as a leader in the search for a COVID-19 cure indicates its capacity to withstand a possible second wave of this pandemic as well as the potential to boost its sales in the process.
Mad Hedge Biotech & Healthcare Letter
June 23, 2020
Fiat Lux
Featured Trade:
(WHY SEATTLE GENETICS IS ON FIRE)
(SEGN), (MRK), (TAK), (GSK), (BGNE), (RHHBY), (NVS), (PFE), (IMG)
It’s not all about the Coronavirus
Though the COVID-19 pandemic has claimed the lives of over 120,000 people and is causing the suffering of almost 1.3 million patients in the United States alone, cancer and heart disease remain the leading causes of death in the country.
The American Cancer Society journal estimates that there will be around 1.8 million cancer cases this year, with 606,520 of those resulting in deaths.
Needless to say, the continuously increasing incidence of this deadly disease has prompted a number of companies in the biotechnology and healthcare sectors to invest substantially in creating and developing drugs for cancer treatment.
Buoyed by this demand, biotechnology company Seattle Genetics (SEGN) has gained 40.1% in 2020 so far primarily thanks to its cancer drugs.
In fact, Seattle Genetics welcomed 2020 with a newly approved drug called Padcev, which the company developed alongside Tokyo-based Astellas Pharma to treat the most common type of bladder cancer.
Despite the pandemic, Padcev sales have been exceeding expectations and analysts are jacking up the sales estimates for this potent bladder cancer product.
Initially pegged to rake in roughly $10 million in quarterly sales, Padcev managed to beat the estimates by four- to fivefold with $34.5 million in the first quarter of 2020.
Since then, peak sales prediction for this drug has been increased to a whopping $2 billion, with its 2020 sales target to be around $221 million.
Approximately 80,000 new bladder cancer cases are diagnosed every year in the United States. Among these patients, 90% suffer from the urothelial type -- the kind that Padcev is formulated to address.
Adding to that, Padcev’s success can also be attributed to the fact that it’s the only FDA-approved product for this particular patient set.
Riding on the momentum of Padcev’s unchallenged success in the bladder cancer field, Seattle Genetics and Astellas are now looking to expand the drug’s indication to cover an even larger patient set.
If this works out, then Padcev opens a whole new slew of possibilities to the tune of an additional $5.8 billion to its revenue.
At the moment, Padcev is also not prescribed to patients in the earlier stages of the disease - a demand that Seattle Genetics aims to address with its collaboration with Merck (MRK) via the immuno-oncology’s powerhouse drug Keytruda.
Aside from its bladder cancer drug, Seattle Genetics is also actively making a name for itself in another field.
In April 2020, Seattle Genetics received another positive news from the FDA.
The company’s breast cancer drug Tukysa, which was expected to gain approval by August this year, received the green light four months earlier instead.
Tukysa is another potential blockbuster drug for Seattle Genetics, with the product’s peak sales estimated to reach $1.2 billion by 2030.
All these are actually pretty impressive considering that Seattle Genetics was a one-product biotechnology company just a year ago.
Its single product, Hodgkin lymphoma drug Adcetris, had a specially impressive 2019 because of label expansions.
The drug posted a 32% jump in net sales to reach $627.7 million in the US and Canada. For 2020, Adcetris’ sales is expected to grow somewhere between 8% and 12%.
Apart from expanding the use of both Adcetris and Padciv, Seattle Genetics is also looking into developing new antibody treatments specifically for patients with solid tumors and lymphomas.
It currently has several candidates undergoing clinical trials, with some of these potential treatments expected to go head-to-head against active competitors in the space, including Roche (RHHBY), Novartis (NVS), Takeda Pharmaceutical (TAK), Pfizer (PFE), and Immunogen (IMG).
Prior to the approval of Padcev and Tukysa, the major growth driver that augmented Adcetris’ earnings was the company’s royalty revenue.
In the fourth quarter of 2019, the biotechnology company raked in $72.3 million in royalty revenue. This is actually triple the amount it earned in the same period in 2018.
The main source of its royalty revenue at the time is the $40 million in milestone payment it received from Takeda.
The payment was triggered by the annual net sales of Adcetris that went beyond $400 million in Takeda’s territory.
The total royalty revenue was also supplemented by a milestone payment from GlaxoSmithKline (GSK) and an upfront payment from Seattle Genetics’ work with Beijing-based company BeiGene (BGNE).
In the first quarter of 2020, royalty revenues jumped to $20 million compared to the $16 million the company earned during the same period in 2019.
Once again, this growth was attributed to Adcetris’ sales and boosted by royalties from the company’s collaboration with Roche (RHHBY) on the latter’s lymphoma drug Polivy.
Seattle Genetics has consistently grown its revenue since 2011 when its first-ever drug Adcetris received approval. With the recent additions of potential blockbusters Padcev and Tukysa, the company’s financial picture looks brighter than ever.
One of the key factors in its success is that the company addresses significant patient sets, providing its investors with the confidence that it can attract physicians and patients on board.
The Hodgkin lymphoma drug market, which Adcetris has covered, is anticipated to grow by roughly $1.24 billion from 2019 through 2023.
The urothelial cancer drug market, where Padciv is currently king, is estimated to hit $3.6 billion by 2023, with a 23% compound annual growth rate.
Tukysa addresses another patient set with high demand as well, with reports showing that the spending on HER2-positive cancer is anticipated to jump by 54% to hit $9.89 billion by 2025.
Mad Hedge Biotech & Healthcare Letter
June 18, 2020
Fiat Lux
Featured Trade:
(ABBVIE JOINS THE CORONA FRAY),
(ABBV), (REGN), (LLY), (GMAB), (RHHBY), (AMGN), (JNJ), (NVS), (GSK), (MRK), (AZN), (SNY), (AGN), (PFE)
Mad Hedge Biotech & Healthcare Letter
June 9, 2020
Fiat Lux
Featured Trade:
(HERE ARE FIVE VACCINE FRONTRUNNERS TO BUY NOW)
(MRNA), (AZN), (JNJ), (MRK), (PFE), (GSK), (SNY), (NVAX), (INO), (MYL)
