Mad Hedge Biotech and Healthcare Letter
February 23, 2023
Fiat Lux
Featured Trade:
(BATTLE FOR GENE THERAPY SUPREMACY)
(CRSP), (NVS), (BIIB), (BLUE), (VYGR), (GBIO), (SIOX), (NTLA), (EDIT), (VRTX), (PRIME), (BEAM)
Tag Archive for: (NVS)
Gene therapy is arguably one of the most fascinating and revolutionary fields in the healthcare and biotechnology industry.
A significant reason for the excitement behind gene therapy is that it provides the possibility of “functional cures,” such as “one-and-done treatments,” for patients. It’s also why these therapies are some of the most costly on the market.
For example, Zolgensma from Novartis (NVS), which focuses on treating spinal muscular atrophy in infants, has a whopping $2 million-plus price tag. Despite that, it’s considered the best option.
For context, its counterpart, Spinraza from Biogen (BIIB), costs roughly $750,000 in the first year of treatment. Unlike Zolgensma, Spinraza needs to be administered four times each year. After the first treatment, patients would need to pay $350,000 per annum. By the fifth year, Spinraza has surpassed the treatment cost of Zolgensma.
Despite its incredible potential, gene therapy is one of the riskiest bets.
Take Bluebird Bio (BLUE) into consideration. This biotech has won not only one but two regulatory approvals for its innovative gene therapies. One is for Skysona, which targets a rare cerebral condition called adrenoleukodystrophy; the other, Zynteglo, is for the blood disorder beta-thalassemia. Unfortunately, this biotech’s price has slid by more than 90% in the past five years.
Working on gene therapies is filled with complicated and challenging obstacles. Most companies in this segment ended up burning through their cash without successfully launching a marketable product. Some examples of these are Voyager Therapeutics (VYGR), Generation Bio (GBIO), and Sio Gene Therapies (SIOX).
However, there is a field in the gene therapy world that has substantially rewarded investors: CRISPR gene editing.
CRISPR means Clustered, Regularly Interspaced Short Palindromic Repeats, which was discovered by Jenifer Doudna and Emannualle Charpentier. Their discovery won the Nobel Prize for Chemistry in 2020.
Basically, CRISPR is utilized by bacteria to recognize genetic sequences that belong to dangerous or harmful viruses and cleave them via specialized enzymes like CAS-9. Eventually, Doudna and Charpentier discovered that the system could be modified to target and remove, destroy, or even edit damaging genetic sequences in human beings.
This discovery gave birth to many biotech companies. Intellia Therapeutics (NTLA) was the brainchild of Doudna, while Charpentier co-founded CRISPR Therapeutics (CRSP).
Over the past five years, NTLA's share price has risen by 146% while CRISPR skyrocketed by 210%. In comparison, the S&P 500 recorded a 53% gain within the same timeframe.
Given the volatility of the field and market volatility, other CRISPR-centered companies failed to replicate this success.
The share price of Editas Medicine (EDIT) fell by 55% over the past five years. Caribou Biosciences (CRBU) also failed to ride the momentum and slid by 44%.
Still, there are positive updates amid the struggles of the sector.
The latest news is from CRISPR Therapeutics, which expects several catalysts in 2023 thanks to its promising pipeline of candidates and clinical trials. So far, one of the most anticipated catalysts is its biologics license application for its sickle cell disease candidate, which the company aims to file by March 2023.
CRISPR Therapeutics developed this candidate, called exa-cel, alongside Vertex Pharmaceuticals (VRTX). It would be the first-ever Crispr-based therapy to edit or rewrite faulty genes if approved. Based on the company’s data, patients who underwent this one-time treatment have continued to be free of sickle cell disease symptoms.
Every year, 100,000 patients in the US are reported to suffer from sickle cell disease. Many companies have offered treatments for this condition for years but no cure. Hence, CRISPR and Vertex’s one-and-done therapy has received a fast-tracked designation. Consequently, this would give the developers sought-after market exclusivity.
As anticipated, CRISPR Therapeutics’ competitors are hot on its heels with sickle cell disease treatments of their own. To date, Prime Medicine (PRME), Beam Therapeutics (BEAM), Editas, and Intellia have candidates queued for clinical trials.
Overall, the gene editing sector continues to be an exciting and interesting field. Investors looking to take part of the action in this segment should consider buying and holding CRISPR Therapeutics stock for at least five years because the company has a reasonable chance of becoming the most dominant name in the business soon.
Mad Hedge Biotech and Healthcare Letter
September 27, 2022
Fiat Lux
Featured Trade:
(LAST CHANCE AT SALVATION)
(BIIB), (ESALY), (RHHBY), (LLY), (NVS), (AMGN), (REGN), (BMY), (ABBV), (MRK), (PFE)
Biogen (BIIB) is taking another crack at Alzheimer’s. This is a crucial moment for the biotech following its move to abandon its plans to market Aduhelm, another Alzheimer’s treatment after healthcare insurers refused to pay for it despite gaining FDA approval.
The moment of truth will come this fall when Biogen and Eisai (ESALY) are anticipated to share the results of their massive trial created to determine whether lecanemab, their latest candidate for Alzheimer’s, can deliver its promise to decelerate the progression of the neurodegenerative condition in early-stage patients.
Needless to say, an effective Alzheimer’s drug would not only bring incredible development and hope for patients and their loved ones but also offer a much-needed reprieve for Biogen.
Success would push the biotech to pursue a quick turnabout, with Biogen and Eisai already planning to request an accelerated approval. If the Phase 3 data turns out promising, then the next move would be to clear the way to get Medicare coverage, ensuring that the Aduhelm debacle won’t happen again.
In terms of market opportunity, treatments like lecanemab can rake in over $20 billion in sales in the United States alone.
Still, investors remain cautious. After all, betting on a positive result of an Alzheimer’s trial has proven to be a wrong move in the past—a sentiment that’s apparent in Biogen’s beaten-down price these days.
When Aduhelm gained approval in June 2021, Biogen’s shares climbed almost 40%. Unfortunately, the price steadily fell as the biotech encountered roadblock after roadblock since the drug’s approval and commercialization.
Last year, Biogen shares rose from $270 to hit $400 following Aduhelm’s approval. These days, the biotech has been trading at roughly $205. That’s about 40% below its price in 2018.
By April 2022, Biogen threw in the towel when Medicare flat-out rejected any request to pay for Aduhelm.
More than that, though, Biogen’s results for its lecanemab trial could spell the difference for other Alzheimer’s drugs in late-stage development, including the candidates from Roche (RHHBY) and Eli Lilly (LLY).
What would happen if Biogen fails again?
A failure would make the beginning of a new period for the biotech. Looking at Biogen’s pipeline and portfolio, it’s clear that the next move would either be to sell off pieces of the company or become more aggressive in pursuing mergers.
With the primary business unable to deliver, the expectations shift to the pipeline to pick up some slack. Unfortunately, Biogen’s lineup looks underwhelming. Its disastrous Aduhelm project caused too much damage to the biotech’s finances, restricting its clinical trials.
While Biogen remains the biggest pure neurology biotech thus far, this position is under attack, and its pipeline seems too slow to react in the wake of back-to-back failures.
Reviewing Biogen’s pipeline in Phase 3 trials does not show any candidates that stand out as groundbreaking or transformative. None has the capacity to anchor the company anytime soon.
Apart from that, Biogen is facing fierce competition in its other treatments, including its MS portfolio from the likes of Novartis (NVS), Amgen (AMGN), and Regeneron (REGN).
Meanwhile, more and more pharma names are challenging its neurology drugs like Bristol Myers Squibb (BMY), AbbVie (ABBV), and Merck (MRK). Even Pfizer (PFE) is making a play in this sector with its plan to acquire neurology biotech pure-play Biohaven.
Given Biogen’s track record, the best thing to do right now is to sit and wait until the data are out. If the data turns out positive, then the opportunity would be massive enough for investors to buy in later.
Besides, Eli Lilly and Roche will also release their results in the following months. Those will offer a clearer path and better flesh out the picture of the future of this segment. Most importantly, these will provide investors with safer options to make their bets.
Mad Hedge Biotech and Healthcare Letter
August 30, 2022
Fiat Lux
Featured Trade:
(THE TIMES ARE A-CHANGING)
(NVS), (LLY), (ALC), (GSK), (PFE), (JNJ), (BMY)
With the US GDP sliding for another quarter, the economic projections are becoming increasingly hostile.
However, investors who have consistently been buying quality stocks could easily consider the gloomy economic conditions as a bump in the road.
One of the most resilient companies in the biotechnology and healthcare industry is Novartis (NVS).
The Swiss drugmaker, which has a massive market capitalization of $207 billion, is ranked as the sixth biggest pharma stock worldwide.
Over the past 12 months, Novartis has delivered better results than the overall pharmaceutical industry and the S&P 500. Its performance, albeit marginally better than the rest, proved its resilience amid such chaotic and complex situations.
Recently, Novartis announced that it would cut loose its Sandoz division, turning it into a standalone spinoff by the second half of 2022.
Basically, Novartis has two main segments: Innovative Medicine and Sandoz.
The company’s Innovative Medicine section comprises roughly 80% of its sales and centers on everything involving patented to prescription products.
Its Sandoz section, approximately 20% of the total sales, is further categorized into franchises: Biopharmaceuticals, Retail Generics, and Anti-Infectives.
The stay-behind business would be composed solely of the products in the Innovative Medicines segment, a combination of Novartis’ oncology and pharmaceuticals business divisions.
This makes Novartis the latest name to be added in the long line of Big Pharma players letting go of their generics division to strip away all but their core products in development.
The plan to spin off Sandoz, Novartis’ division concentrating on generics and biosimilars, has been in the works for quite some time now.
Prior to this announcement, there were even talks of a potential acquisition instead of creating a standalone company. However, no attractive enough offer was given, pushing Novartis to go ahead with its original plan.
Sloughing off the generics and biosimilars divisions could help solve some of the company’s issues.
The generic drug sector has been causing issues for drugmakers as of late, and sales of the Sandoz division have been notably stagnant compared to the steady growth of Novartis’ new drugs sector.
To put things in perspective, Sandoz’s net sales in 2021 was only $9.6 billion, while the company’s Innovative Medicine division raked in a whopping $42 billion.
Getting rid of Sandoz means Novartis could focus on more promising products in its portfolio and develop more blockbuster drugs in its pipeline.
For instance, the company can focus on expanding the treatments involving Cosentyx.
The top-selling drug in Novartis’ portfolio, making up 10% of total revenues, Cosentyx continues to rise rapidly, reporting double-digit growth.
This drug targets psoriatic arthritis and was valued at $7.15 billion in 2019. By 2027, this drug is expected to be worth $13.64 billion.
Most importantly, its patent will last longer as it will expire by 2028 in the US, 2029 in Japan, and 2030 in Europe.
Another blockbuster drug in Novartis portfolio is chronic heart failure treatment Entresto, which accounts for roughly 9% of the company’s total revenues. The growth of this product has been impressive thanks to the high demand in Europe, which means an increase in its sales is almost guaranteed.
Like Cosentyx, its patent will also last longer and is estimated to reach until 2036. This makes Entresto one of the most interesting—if not the most exciting—drug in Novartis’ pipeline.
Novartis is also becoming a significant player in the metastatic breast cancer market, estimated to grow from $15.52 billion in 2020 to $41.74 billion in 2030.
The company’s product in this segment, Kisqali, has been gradually taking up market share and is expected to gain more traction as it expands its indications.
In terms of growth, though, multiple sclerosis drug Kesimpta is the top performer in Novartis’ portfolio. In the second quarter of 2021, sales were at $22 million. In the same period in 2022, the number skyrocketed to $239 million.
Kesimpta is anticipated to become another blockbuster, especially with the projections in the multiple sclerosis market.
This segment is estimated to be worth $25.43 billion in 2022 and will grow to $33.17 billion by 2029. While the growth isn’t as massive as other segments, the exciting news is that Kesimpta has been outpacing the growth rate of the reference market thus far.
The move to eliminate Sandoz is in line with the ongoing aggressive slimming down of the company’s operations.
In 2014, Novartis sold its animal health segment to Eli Lilly (LLY). A few years after, it spun off its eye-care sector to become Alcon (ALC), then sold its consumer health segment to GlaxoSmithKline (GSK) for $13 billion.
Meanwhile, the decision to become a pure-play pharma has become a widespread trend among prominent names in the industry, with the likes of Pfizer (PFE), Johnson & Johnson (JNJ), and Bristol Myers Squibb (BMY) transforming into sleeker and slimmer businesses.
Ultimately, the goal is for these pharma giants to shed unwanted weight to compete in the faster-paced biotechnology world. The plan is to focus all their resources on advancing the science and developing the technology needed to come up with the next groundbreaking innovation.
With Novartis joining the bandwagon, we can expect its growth to accelerate over the long term as it focuses more on strengthening its already solid and impressive pipeline. I highly suggest that you buy the dip.
Mad Hedge Biotech and Healthcare Letter
June 7, 2022
Fiat Lux
Featured Trade:
(A LOW-KEY BIOTECH SET FOR A BULL RUN)
(REGN), (BAYG), (NVS), (RHHBY), (SNY), (ABBV), (PFE), (INCY), (MRK)
Biotechnology stocks have been sliding for months now, but scientific advancements are not slowing down.
The public’s focus on messenger RNA and gene editing may have dwindled, but the fact remains that more and more patients are benefiting from the discoveries.
More importantly, new treatments are well on their way to clinical trials.
That’s why I think Regeneron (REGN) could easily be one of the big winners in the coming years.
Despite the economic slowdown, Regeneron shares are doing okay. They have actually practically doubled since the start of 2020, when the biotech was thrust under the spotlight for its anti-COVID antibody cocktail, REGEN-COV.
Its popularity heightened when then-president Donald Trump used its treatment.
While the demand for REGEN-COV has since declined, the drug still raked in $7.5 billion in sales in 2021.
However, that would most likely not be the trend since it was proven to be not as effective against the newer strains. In addition, the FDA significantly limited the situations in which the antibody cocktail can be used.
For the foreseeable future, Regeneron shareholders’ earnings are primarily dependent on macular degeneration treatment Eylea and asthma and dermatitis drug Dupixent.
For Eylea, which Regeneron shares with Bayer (BAYG) outside the US, sales grew by 19% in 2021 to record $9.4 billion.
A vital issue Eylea faces is its expiring US patent by mid-2023, which will probably lead to more aggressive biosimilar competition as early as 2024.
Aside from that, more and more rivals are emerging, such as Beovu from Novartis (NVS) and Vabysmo from Roche (RHHBY).
Luckily for Regeneron, Beovu hasn’t gained traction due to safety issues, while Vabysmo is still struggling to establish itself as a viable alternative.
Thanks to its entrenched position as an undisputed market leader, Eylea sales will continue to be a top-selling treatment.
While things are still going well for Eylea, Regeneron has been proactive in establishing Dupixent as another key growth driver.
Dupixent, which was co-developed with Sanofi (SNY), showed off an impressive 51% jump in sales last year to rake in $6.2 billion—and this isn’t the peak yet.
Dupixent is estimated to reach over $14 billion in sales in the following years due to expanded markets.
Sales of this newer drug have caught up with Eylea’s in the past years.
In fact, Dupixent is projected to overtake Eylea sales by 2024, with the figure almost doubling by 2025 compared to the 2021 revenue.
In terms of competition in the atopic dermatitis sector, Dupixent is challenged by Rinvoq from AbbVie (ABBV), Cibinqo from Pfizer (PFE), and Opzelura from Incyte (INCY).
Nonetheless, Dupixent still looks well-positioned to expand into current and new indications in the following years and be able to fight off competitors.
It is critical for any biotechnology and healthcare business to maintain a solid pipeline to respond to upcoming patent losses and the rise of generic competition.
In this aspect, Regeneron has been performing excellently.
It has several treatments queued that complement the existing blockbusters, Eylea and Dupixent, and bolster the long-term growth prospects.
A good example is the company’s experimental treatment Aflibercept, which is slated to release Phase 3 results in the third or fourth quarter of 2022.
If this succeeds, it can enhance and strengthen Eylea’s efficacy, allowing Regeneron to retain its dominant position in the retinal market.
The company is also working on getting the green light for seven new indications on Dupixent-related treatments, which would be out by late 2022 and early 2023.
Another area under Regeneron’s radar is oncology.
While it’s cancer portfolio isn’t likely to become a significant growth driver anytime soon, there’s definitely potential here—and the potential comes in the form of in-house combos with Libtayo.
Libtayo, a cancer checkpoint inhibitor, is the most significant drug candidate in Regeneron’s oncology pipeline today.
Although it’s a latecomer to the field, Regeneron has become one of the frontrunners in the skin cancer segment with the approval of its cutaneous squamous cell carcinoma indication and the addition of the basal cell carcinoma label.
However, those are relatively minor markets. In terms of infiltrating a major market, Libtayo’s first venture is into the lung cancer sector.
But, this could be challenging since Merck’s (MRK) Keytruda has a firm hold of this market.
Still, Libtayo has the potential to achieve blockbuster status—a goal that Regeneron looks to be aggressively pursuing.
Aside from skin and lung cancer treatments, Regeneron has been developing Libtayo-based candidates for prostate cancer treatment REGN5678 and ovarian cancer therapy REGN4018. It is also working on another lung cancer treatment, REGN5093, to hopefully bolster its foothold in this lucrative market.
Needless to say, approval of these cancer treatments would be an incredible game-changer not only for cancer patients but also for Regeneron.
Overall, Regeneron is an outstanding biotechnology company and investment option. The success of its blockbuster treatments will offer a strong foundation for the company’s future growth.
If you add the more than 30 pipeline candidates of Regeneron in the mix, then it’s easy to see that a bull run might just be on the horizon for this stock.
While regulatory hurdles and emerging competitors would present challenges, it’s clear that Regeneron has these issues under control.
Moreover, the company’s pipeline has clearly shown that it’s ready to meet the challenges head-on. Hence, it would be advisable to buy the dip.
Mad Hedge Biotech and Healthcare Letter
April 21, 2022
Fiat Lux
Featured Trade:
LET’S GET READY TO RUMBLE)
(MRNA), (PFE), (BNTX), (AZN), (ABBV), (MRK), (BMY), (TAK), (GILD),
(SNY), (ALNY), (NVS), (REGN), (IONS), (GSK), (BIIB), (CRSP)
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.
