(NTLA) Archives

A Crown Jewel Scores A Goal

A stock with high margins offers a better buffer to face adversity and increased expenses.

Suppose a business’s revenue cost is substantial and leaves minimal room for the top line to maneuver and cover overhead and other operating fees. In that case, it can be challenging to stay in the black.

A recent example is Amazon (AMZN), which reports that its cost of sales typically comprises 80% or more of its revenue. When it struggled with the rising expenses in the past quarter, this e-commerce giant posted its first-ever loss in years.

Only a handful of companies manage to stick with this principle. In the biotechnology and healthcare sector, one business that doesn’t have this issue and enjoys gross profit margins of at least 80% or better is Regeneron Pharmaceuticals (REGN).

Regeneron was recently spotlighted following a significant 19.2% jump in its price, translating to a more than $12 billion rise in market capitalization.

The catalyst for this double-digit climb is none other than Regeneron’s crown jewel: Eylea.

The anti-blindness treatment, jointly developed with Bayer (BAYRY), delivered excellent results in two late-stage trials.

This is a huge deal because it supports the application of Eylea at higher doses and longer-lasting intervals.

Previously, Eylea was only permitted to be administered in 2 mg every 8 weeks. The recent trial results proved that the medication can be given at a higher concentration of 8 mg in a more extended period of 16 weeks and can still be effective at battling the disease. Plus, it shows a similar safety profile as the currently approved dosage.

This is a timely development for Eylea, which is set to lose its patent exclusivity soon, bringing anxiety to shareholders.

For context, Eylea accounts for $3.13 billion of Regeneron’s sales in the first 6 months of 2022. In the year's second quarter alone, it generated $2.49 billion in sales, recording a 9% year-over-year increase in its global profits.

In 2021, this eye medication reported $9.4 billion in sales worldwide.

These recent developments are eyed as potential solutions to Eylea’s impending franchise exclusivity loss as it attempts to eliminate a key overhang.

This move could slam the door shut on any talks or fears of potential copycats for at least a few years. It could also make it more competitive against rising competitors in the same space like Roche’s (RHHBY) Vabysmo.

The new data is expected to be used to defend the franchise from biosimilars, generic, and branded competitors. This is because patients are now offered an option for a treatment that needs fewer injections.

Most importantly, this could establish a firmer competitive moat for Regeneron and Bayer. After all, Eylea is projected to rake in more than $6 billion in sales in the US annually in 2023 and 2024.

Looking at their timeline and progress, the new Eylea dosage should be submitted for approval by the end of 2022 and launched by early 2023.

Other than Eylea, Regeneron has also been active in the oncology space.

Leveraging its roughly $6.2 billion sales from its COVID-19 treatment, Regeneron acquired several assets to expand its oncology segment.

Recently reported deals are its $900 million payment to Sanofi (SNY) to acquire non-small lung cancer drug Libtayo and the purchase of Checkmate Pharmaceuticals, which granted it access to promising melanoma candidates.

While these deals may not be as massive as other acquisitions in the industry, adding Libtayo and Checkmate Pharmaceuticals represent critical steps toward the right direction.

On top of these, Regeneron has existing partnerships and collaborations that would last for years. One is with Alnylam (ALNY), which involves treating liver cancer, ocular conditions, and diseases targeting the central nervous system.

Meanwhile, Regeneron expanded its deal with Intellia Therapeutics (NTLA) to give more rights to their in vivo therapeutic candidate developed via CRISPR/Cas9 gene-editing technology and additional targets, particularly for hemophilia A and B.

Overall, Regeneron has been proving to be a noteworthy investment in biotechnology and healthcare. At this point, though, the recent clinical trial results have been added to its share price.

While it isn’t exactly cheap, it’s not an outlandish valuation either. In short, I suggest that you wait and buy the dip.

eylea

May 24, 2022

Biotech Letter

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

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From a Boring Biotech to a Trailblazing Pioneer

Biotech Letter

When will the turmoil in the stock market come to an end? Unfortunately, nobody can offer a definitive answer.

At this point, there’s still no end in sight to high inflation, climbing interest rates, and the continuing war in Ukraine.

Needless to say, all these issues are affecting the stock market. However, not all stocks are getting negatively affected by the turmoil.

There are still relatively safe bets to buy, with some crushing the market these days.

One of them is Vertex (VRTX).

Vertex stock soared by over 30% year-to-date by mid-April.

While it has given up some of that gain in the past weeks, this biotechnology and healthcare stock is comfortably outperforming the rest of the market, with its shares still up by around 15%.

One reason for Vertex’s good performance is its undisputed monopoly in the cystic fibrosis (CF) market. In fact, its closest potential competitor is AbbVie (ABBV), which recently announced disappointing results for its Phase 2 trials for a CF combo.

This means Vertex’s dominance in the CF space is set to go on for quite some time.

Here’s a bit of background. Vertex has 4 CF treatments.

Among these, the latest treatment, Trikafta, generates the lion’s share of the profits. It raked in $1.7 billion in the first quarter of 2022 alone, with the total revenue for the entire CF pipeline recording $2 billion.

Considering its approved indications and potential approvals, Trikafta is anticipated to treat 90% of the entire CF patient population.

Looking at its current performance and how strong its hold is in the CF market, it appears that Vertex’s prediction that it can sustain its dominance in this segment until at least the late 2030s will be proven right.

Moreover, it’s evident that Trikafta has yet to reach its peak revenue. However, Vertex isn’t depending on this particular treatment alone.

Rather, the company is working on developing a worthy competitor to this top-selling treatment.

That is, Vertex is working on a CF candidate that may potentially be even more effective than Trikafta.

So far, this new drug candidate not only has the capacity to beat Trikafta in terms of efficacy but also offers a more convenient option.

Trikafta is a twice-a-day oral drug that comes in the form of 3 tablets. Meanwhile, this potential competitor is a once-a-day alternative.

If everything goes according to plan, the Phase 3 trial for this Trikafta challenger could start by the end of 2022 or early 2023.

This means that the closest potential rival for the company’s top-selling treatment is its own candidate.

Apart from this, Vertex is working with Moderna (MRNA) to come up with an mRNA therapy for CF patients.

The goal is to offer an alternative option to patients who are not eligible for the current CF therapies.

Although this continued dominance in the CF sector is already a good enough reason to buy Vertex shares, they may be an even better one.

To date, Vertex has at least 6 programs queued in mid to late-stage clinical studies, all of which are projected to become multi-billion dollar revenue streams.

Outside its CF segment, Vertex could have another big winner in the form of gene-editing treatment CTX001.

This is a treatment for sickle cell disease and transfusion-dependent beta-thalassemia that the company has been working on with CRISPR Therapeutics (CRSP).

While CTX001 is promising, it won’t be entering the gene therapy market without any competition. It has to battle the likes of Editas (EDIT), Beam Therapeutics (BEAM), and Intellia (NTLA).

Nonetheless, CTX001, if approved, is a game-changer because it is developed as a one-time cure for genetic blood disorders.

So far, trial results have been positive, and the collaborating duo is expected to file for regulatory approval by the end of 2022 and possibly launch the product by the first half of 2023.

This gene-editing therapy is a significant milestone for Vertex, with CTX001 expected to become another blockbuster, raking in roughly $1 billion in annual sales for the company even after giving CRISPR its share of the profits.

Recently, Vertex added another $900 million to its collaboration with CRISPR to boost its share from 50% to 60%, indicating that it values CTX001 at roughly $10 billion.

Other critical treatments outside the CF space are VX548, an opioid alternative targeting acute pain, and VX800, a stem cell-derived therapy developed to treat Type 1 diabetes.

Vertex has been accused as a company scared of getting out of its comfort zone for quite some time.

With these new ventures, Vertex has become something of a pioneer—a strategy that is projected to open long-term and lucrative revenue streams for the company.

Overall, all these efforts paint an obvious picture. That is, Vertex is a well-balanced company with a main business that capably and reliably generates billions and is complemented by an exciting pipeline that holds the potential to replicate the success of its already established portfolio.

April 20, 2022

Diary, Newsletter, Summary

Global Market Comments
April 20, 2022
Fiat Lux

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February 15, 2022

Biotech Letter

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

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(AN EMERGING LEADER IN THE HEALTHCARE REVOLUTION)
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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

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A New Wave of Gene-Editing Experts

Biotech Letter

The gene-editing sector quietly achieved historical results in 2021. Last year, human trials of two in vivo CRISPR-centered treatments released promising data.

One study, conducted by Intellia Therapeutics (NTLA) and Regeneron Pharmaceuticals (REGN), worked on targeting the faulty gene responsible for transthyretin amyloidosis.

Using their new CRISPR-based therapy, they were able to record an impressive 96% decline in the transthyretin gene.

This is an impressive accomplishment not only for its high efficacy but also for the mere fact that no other work has managed to record any significant effect on the gene for almost a decade now.

The other study is by Vertex Pharmaceuticals (VRTX) and CRISPR Therapeutics (CRSP). Over the years, the two have been collaborating on coming up with treatments for various rare diseases.

In 2021, they recorded promising results in their clinical trials for sickle cell disease and beta-thalassemia. Aside from the potency of these treatments, there is a possibility that the effects would offer long-lasting improvements in the patients' lives.

While 2021 was clearly a remarkable year for the gene-editing sector, all signs indicate an even better 2022.

If the sector doesn’t deliver, there will be 2023 and the year after. After all, the gene-editing world is the kind of space that gets better with age.

More than that, this sector will keep evolving and attracting new players every year.

Hence, key players like Thermo Fisher Scientific (TMO), Sangamo Therapeutics (SGMO), Editas Medicine (EDIT), Merck (MRK), and Oxford Genetics cannot expect to be the top names in the industry forever.

Recently, some names have been making waves in the gene-editing industry.

One is Excision BioTherapeutics. Founded in 2015, this Philadelphia biotechnology company leverages its CRISPR-based platform to target viral infections.

Basically, they aim to snip the viral DNA out of the host genome.

To date, the company’s most advanced project is its HIV treatment: EBT-101. So far, Excision has managed to functionally cure its test animals of the infection by removing their HIV genomes.

Ultimately, Excision’s goal is to come up with a “one-and-done” therapy for viral diseases.

Apart from working on HIV treatments, the company is also looking into potential cures for herpes simplex, hepatitis B, and a rare brain infection called multifocal leukoencephalopathy.

If these treatments succeed, Excision’s therapies would be available in highly specialized treatment centers.

Another promising biotechnology company is California’s Scribe Therapeutics, which was founded in 2018.

Describing their approach to be guided with an “engineer first” philosophy, Scribe’s plans to use CRISPR-based gene-editing tools to achieve their goals.

Instead of using the conventional CRISPR-Cas9 methods, the company opts for modified versions of the RNA-guided genome editors or CasX enzymes.

Scribe has been developing these CasX enzymes to ensure that they acquire the qualities of the target for enhanced specificity.

That is, the company wants its “editor” to learn as much as possible about the characteristics of the system to deliver intentionally designed solutions.

Simply, Scribe aims to control all elements and eliminate the need to leave anything to chance or even nature.

Since its founding, Scribe has been actively developing solutions for unmet medical needs.

For instance, it has been working with Biogen (BIIB) to develop and eventually market CRISPR-based treatments that target an underlying genetic component of a nervous system disease called amyotrophic lateral sclerosis.

The agreement states that Scribe will get $15 million upfront and receive over $400 million in potential milestone payments.

The company has already started testing its technology in mouse models, focusing on neurological and neurodegenerative conditions.

Given their current trajectory, Scribe expects to release data by the third or fourth quarter of 2022 or early 2023.

All in all, gene-editing tools have evolved so much from the mid-twentieth century. Back in the 1970s and 1980s, the process of gene targeting was only possible in experiments on mice.

Since then, the ever-expanding world of science has pushed the sectors of gene analysis and manipulations to cover all kinds of cells and organisms.

Considering the increasing demand in this sector, it’s no wonder the gene-editing world has been growing at breakneck speed over the past years—a pace that won’t slow down anytime soon.

September 7, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
September 7, 2021
Fiat Lux

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A Long-Term Stock for Patient Investors

Biotech Letter

While August ushered in the end of the “dog days of summer,” with temperatures generally at their highest throughout the US, some stocks might be just starting to get warmed up this September.

This is particularly true in the biotechnology industry.

Considering that the broad market indices are reaching historic highs, the biotechnology sector, caused by its relatively low valuation, is deemed one of the appealing targets for investors who truly understand the essence of the industry and can manage the potential risks associated with it.

While not all biotechnology companies are attractive opportunities, some are great long-term investments.

One of them is Regeneron (REGN).

In fact, Regeneron is the manufacturer of a treatment projected to become the top-selling drug globally by 2030.

Annual sales of the moneymaking drug, autoimmune diseases’ medication Dupixent, could hit $21 billion by the start of the next decade—an almost fourfold jump from its current sales estimate of $5.6 billion per annum.

The projection came following Regeneron’s announcement that Dupixent can also be used to treat atopic dermatitis among children aged 6 months to 5 years old.

This makes Dupixent the first-ever biologic treatment to release positive results for that population.

Evidently, the breadth of Dupixent’s indications, complemented by the long-established safety profile of the drug, contribute to its long-term success—an achievement that’s expected to multiply and be carried over to the next decade.

While the next decade is clearly exciting for Regeneron, the company is actually performing well these days.

So far, Regeneron shares are up by roughly 40% year to date—a record-breaking rise not only for the company but also in the biotech sector.

Regeneron’s revenue skyrocketed by 163% year-over-year in the second quarter, pushing its earnings per share to leap 260% higher.

Apart from Dupixent, another catalyst for Regeneron’s impressive gains is its COVID-19 cocktail: REGEN-COV.

This treatment, albeit controversial, is anticipated to make Regeneron and its partner, Roche (RHHBY), a lot of money in the following months, especially with the delta variant wreaking havoc in the world.

Moreover, sales for all six of Regeneron’s highest-selling products, such as its eye disease drug Eylea, which it developed with Bayer (BAYN), immunology drug Kevzara, which is a product of its collaboration with Sanofi (SNY), lung cancer treatment Libtayo, and cholesterol drug Praluent, have been consistently growing by double-digit percentages.

Apart from these current treatments displaying solid sales momentum, the company also has a loaded pipeline that can easily boost Regeneron’s revenue streams in the future.

In terms of the new products under development, Regeneron has partnered with Intellia Therapeutics (NTLA), one of the leaders in the CRISPR-Cas9 gene-editing sector, to come up with next-generation treatments.

Aside from developing new products, Regeneron is expanding the indications of its top-selling drugs. Just like its efforts with Dupixent, the company is also working on expanding Libtayo’s indications.

So far, Regeneron has been working to turn Libtayo into a go-to treatment for skin cancer.

This effort could open up new avenues for Regeneron, as at least 9,000 cases of skin cancer are recorded in the US annually.

Of these, approximately 3,200 fall under the category that the company is targeting for Libtayo’s expansion.

This is a strategic move if Regeneron has any hope to dethrone the most dominant players in this competitive immunology market: Merck’s (MRK) Keytruda and Bristol-Myers Squibb’s (BMY) Opdivo.

Looking at the average net price of Libtayo, which is at $130,000 per year, the expected sales for this drug could grow to $400 million by 2026 in the US alone and roughly $700 million worldwide—and these are only for the approved indications of the drug.

In addition to its current applications, Regeneron is also working to gain approval for Libtayo to be used for cervical cancer.

Overall, Regeneron is an excellent investment for patient buy-and-hold investors. Its current portfolio of products is performing well, while its pipeline programs and partnerships offer promising growth potential.

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