Mad Hedge Biotech & Healthcare Letter
March 9, 2021
Fiat Lux
FEATURED TRADE:
(AN MRNA STOCK TO CONSIDER)
(BNTX), (MRNA), (PFE), (NVS), (SNY), (AZN), (JNJ), (NVAX), (MRK), (BMY), (REGN), (DNA), (CVAC), (FB), (TSLA), (GOOG)
Tag Archive for: (NVS)
Mad Hedge Biotech & Healthcare Letter
February 25, 2021
Fiat Lux
FEATURED TRADE:
(AN UNDER THE RADAR BIOPHARMA PLAY)
(ALNY), (PFE), (BNTX), (MRNA), (NVS), (GME), (BX)
Financial markets have been incredibly volatile in the past months primarily due to the COVID-19 pandemic.
The situation was made even more unpredictable by the GameStop (GME) and bitcoin drama.
So it’s expected that investors are looking for guidance in this time of instability, and a good place to start is the Blackstone Group (BX).
Considering that the basic philosophy of this company is to “buy, fix, and sell,” it’s safe to say that Blackstone only puts its money, time, and effort in promising investments.
Around the time of the pandemic outbreak last year, Blackstone poured in roughly $2 billion investment in a biopharmaceutical company, Alnylam Pharmaceuticals (ALNY).
While Alnylam may be virtually unknown to the public, this is actually a promising company with an impressive backstory.
Founded in 2002, Alnylam is mainly known for its technology, RNAi or RNA interference.
This is a gene-silencing technique, which was discovered by Andrew Fire and Craig Mello back in 1998. The two won the Nobel Prize for it in 2006.
Even before the Nobel, Alnylam has already seen the potential of this technology and started developing it in the early 2000s.
For decades, this work had been underappreciated—up until the COVID-19 pandemic.
This is because the leading vaccine candidates right now, developed by Pfizer (PFE)-BioNTech (BNTX) and Moderna (MRNA), are both mRNA-based drugs.
Although the vaccine developers customized the technology, they still used the same delivery technique that Alnylam developed.
Clearly, there has been a lot of piggybacking on this discovery.
While Moderna, Pfizer, and BioNTech used the technology to create RNA-based drugs for the COVID-19 vaccines, Alnylam decided to utilize it to develop treatments for other diseases.
The first approval was hereditary transthyretin-mediated amyloidosis drug Onpattro, launched in 2018.
As of 2020, sales of this high-priced therapy reached roughly $300 million, ensuring that it was on pace with the company’s target.
Alnylam’s second approved treatment is ultra-rare genetic disease drug Givlaari, which hit the market early last year.
By the third quarter of 2020, sales of this acute hepatic porphyria drug climbed by $67 million despite the effects of the pandemic.
In the next decade, Givlaari is estimated to peak at $550 million annually.
By 2025, yearly sales for Givlaari and Onpattro are projected to hit roughly $1.5 billion in total.
Riding this momentum, Alnylam has been collaborating with Sanofi (SNY) to develop another rare disease drug, Vutrisiran. This could rival the company’s own Onpattro.
Aside from Vutsiriran, Alnylam and Sanofi are also working on a potential novel hemophilia treatment, Fitusiran.
The latest treatment to gain approval is rare kidney disorder drug Oxlumo, which is estimated to net Alnylam roughly $380,000 per patient annually.
While this may be a hefty price tag, it’s expected that insurance companies and governments will be the ones to ultimately shell out the money for these rare disease drugs.
Before 2021 ends, Alnylam is expected to gain FDA approval for another potential blockbuster drug, Inclisiran. This is a cholesterol-fighting treatment, which is a work in progress with Novartis (NVS).
Over the past decade, Blackstone has been quietly stashing multi-billion-dollar stakes in the life sciences.
In 2020 alone, the company poured roughly $16 billion into the industry. This is its largest investment theme for the entire year.
While this business has yet to make a dent on Blackstone’s $600 billion assets, the attention that the companies have been getting is worth noting—and a good place to start is Alnylam.
For a better context of its potential, Blackstone invested $3 billion in a dating app called Bumble (BMBL) back in 2018.
Fast forward to 2021, this company is now worth approximately $14 billion following its recent IPO.
With a market capitalization of roughly $15 billion and for a company that’s not anticipated to generate over $1 billion in annual revenue until 2022, Alnylam’s current price might be considered high by some investors.
Looking at its pipeline though, which is filled with potential blockbusters, and its track record that shows that the company definitely knows how to launch new drugs to the market, I believe Alnylam stock is worth considering right now.
Global Market Comments
January 19, 2021
Fiat LuxFeatured Trade:
(WHY THERE’S ANOTHER DOUBLE IN CRISPR THERAPEUTICS)
(CRSP), (BLUE), (EDIT), (NVS), (GILD)
Occasionally, I discover a piece of research from one of my other Mad Hedge publications that is so important that I send it out to everyone immediately.
Recently, a piece from the Mad Hedge Biotech & Healthcare Letter is one of the instances. It makes the case and provides the numbers as to why Biotech & Healthcare will be one of two dominant sectors to follow for the next decade. It also is a key plank in my argument for a return of a new Golden Age and a second “Roaring Twenties.”
Here it is.
Biotech investors, take note: 2019 was a great year for the industry, but the best is yet to come.
In the final three months of 2019, the biotech sector grew by 32% -- notably outpacing the pharmaceutical industry, which only recorded a 9.5% gain.
However, the biotechnology sector is estimated to grow substantially in 2021 and reach over $775 billion in revenue by 2024 as more and more treatments for previously incurable diseases get discovered.
Looking at all the progress in the biotechnology space, this could even be the year we’d finally discover the cure to many life-threatening and debilitating conditions like cancer and Alzheimer’s disease.
With all these technological advancements, two revolutionary tools have been overhauling the entire biotechnology and healthcare industry from the ground up: precision medicine and CRISPR. Actually, the impressive growth of the biotechnology industry has been largely attributed to the excitement generated by the gene-editing sector.
While the majority of companies concentrating on the human genome are still in the research phase, the growth of this industry is undeniable.
Here’s tangible proof.
Just 20 years ago, reading all the DNA of a single person cost approximately $3 billion. Now, this price is down to only $1,000. In the future, this number will go even lower at $100. There are now gigantic factories in China sequencing DNA for companies like Ancestry.com and 23andMe.
This is just one example of how the biotechnology industry has grown by leaps and bounds. It’s also the reason behind the surge of CRISPR shares.
In effect, the specialists in this niche, including Crispr Therapeutics (CRSP), Bluebird Bio (BLUE), and Editas Medicine (EDIT), are amplifying their efforts.
Among the specialist companies, CRISPR Therapeutics is considered as one of the frontrunners -- if not the top stock. This is because compared to its rivals, which are still in preclinical phases of development, CRISPR Therapeutics already has two drugs going through Phase 1 trials: CTX001 and CTX110.
The promising results of the company’s research resulted in a 113% rise in shares last year, with the bulk of the surge starting in October. In fact, CRISPR Therapeutics’ performance had been so impressive that its market cap reached $3.4 billion.
CTX001 is created to target patients suffering from genetic blood disorders, specifically sickle-cell disease and transfusion-dependent beta-thalassemia.
Meanwhile, CTX110 is a CAR-T treatment. The process involves the extraction of immune cells from the patient. These are then retrained and later re-introduced to the human body.
CRISPR Therapeutics’ CAR-T treatment is anticipated to be offered at a cheaper price compared to the other CAR-T therapies.
Both Novartis (NVS) and Gilead Sciences (GILD) are pursuing the same treatment. However, the cost of the therapy from the latter two is expected to reach as much as $475,000 for every patient annually.
Apart from CTX001 and CTX110, CRISPR Therapeutics has two more immunology candidates, currently dubbed CTX120 and CTX130.
If both phase trials succeed, these will bring massive home runs for CRISPR Therapeutics, especially since the cancer immunology market is expected to reach $127 billion by 2026. Over the next 10 years, this niche is estimated to reach $25 trillion in sales.
Among the gene-editing treatments under development today, CRISPR is projected to grow tenfold in the number of applications and potentially curing 89% of disease-causing genetic variations by 2026.
Taking this pace into consideration, the valuation for this market is expected to grow from $551 million in 2017 to reach roughly $3.1 billion by 2023 and $6 billion by 2025.
Meanwhile, precision medicine as a whole is estimated to show a significant jump from $48.6 billion in 2018 to $84.6 billion by 2024. In 2028, this market is expected to rake in $216 billion.
Hence, further success with CTX001 and CTX110 along with additional treatments in the drug pipeline would all but guarantee that Crispr Therapeutics could beat the market again in 2021.
To subscribe to the Mad Hedge Biotech & Healthcare Letter for a bargain $1,500 a year, please click here.
Mad Hedge Biotech & Healthcare Letter
September 3, 2020
Fiat Lux
Featured Trade:
(BRACE YOURSELF FOR ANOTHER PANDEMIC)
(AMGN), (NVS), (CYTK), (GILD), (RHHBY), (LLY), (SNY), (REGN)
“Anything that can go wrong will go wrong.”
It looks like Murphy’s law is about to strike again this year. The number of COVID-19 cases has reached almost 15 million worldwide, with about 4 million found in the US alone. However, the pandemic isn’t showing signs of slowing down.
Now, another deadly virus described to manifest “all the essential hallmarks of a candidate pandemic virus” has been found.
Earlier this month, a team of scientists revealed that there’s a newly discovered influenza strain, which could be a variation of the H1N1 swine flu—the same virus that triggered a global pandemic back in 2009.
That health crisis infected roughly 61 million Americans and more than 700 million people across the globe.
Although there’s still no conclusive evidence, this H1N1 influenza strain also traces its origins in China.
We witnessed how the stock market plummeted as the COVID-19 pandemic broke out. It eventually bounced back, which provided us with insights on how to deal with this potential second deadly virus.
Taking into consideration the uncertainty caused by these health and financial crises, I no longer put all my energy on near-term investments.
Instead, I train my eyes on stable and strong stocks with attractive revenue potential.
One of the companies that meet my criteria is Amgen (AMGN).
Amid the coronavirus pandemonium, Amgen has been aggressive in keeping its stronghold, particularly in its key moneymakers.
The latest win for the company is against Novartis (NVS), which challenged Amgen’s patent rights on the blockbuster anti-inflammatory treatment Enbrel.
This patent victory secured exclusivity for the top-selling rheumatoid arthritis injection, which generated $5.1 billion in sales in 2019 and could rake in at least $4.5 billion in 2020, against low-priced copycats until 2029.
Although Amgen has been struggling with biosimilar competition in the past years, the company’s first quarter earnings reports indicate that things are turning around for them.
Amgen reported an 11% year-over-year increase in revenue for the first quarter of 2020 to reach $6.2 billion, with global product sales jumping by 12%, boosted by a remarkable 15% in volume growth.
The company’s free cash flow for the first quarter also went up to $2 billion compared to the $1.7 billion it recorded in the same period in 2019.
The spike in Amgen’s numbers could be attributed to the new products in its pipeline. Apart from Enbrel, there are several other moneymakers generating solid growth for the company.
An obvious game-changer is severe plaque psoriasis medication Otezla, which Amgen acquired from Celgene for $13.4 billion in November 2019.
In the first 3 months of 2020 alone, Otezla has already raked in $479 million in sales for Amgen.
Sales of high cholesterol drug Repatha jumped by 62%, hitting $229 million.
Meanwhile, osteoporosis treatment Evenity contributed $100 million thanks to its expansion in the US and Japanese markets.
With the improvement in its performance, Amgen reiterated its revenue forecast for 2020 of $25 billion to $25.6 billion, showing off a 9.4% gain compared to 2019.
Aside from its current roster, Amgen is also waiting for regulatory approvals on some of its products this year.
The company is hoping for good news from the FDA on its multiple myeloma drug Kyprolis in November and its Rituxan biosimilar candidate in December.
Its pipeline also features 20 late-stage studies, 15 of which are for expanded indications of the company’s already-approved products.
Next to Otezla, Amgen is eyeing another blockbuster following the Fast Track designation granted to heart failure drug Omecamtiv mecarbil.
The drug, which the company is working in collaboration with Cytokinetics (CYTK), is projected to reach a jaw-dropping valuation of roughly $16 billion by 2026.
If successful, Omecamtiv mecarbil could become a close competitor of Entresto, which raked in $569 million for Novartis in the first quarter of 2020 alone.
Meanwhile, Amgen is not only focused on harnessing its growth drivers. The biotechnology giant has been active in searching for COVID-19 treatment as well.
Following the lead of Gilead Sciences (GILD), which used an already approved drug Remdesivir to come up with a treatment, Amgen is also testing its newly acquired blockbuster Otezla.
In using an anti-inflammatory drug to treat COVID-19 patients, Amgen is taking a similar approach as other biotechnology giants like Roche (RHHBY) with Actemra, Eli Lilly (LLY) with Baricitinib, and Sanofi (SNY) and Regeneron (REGN) with Kevzara.
Amgen investors currently get $1.60 in quarterly dividend payments, receiving $6.40 annually. In comparison, shareholders received $1.45 in 2019, showing off a healthy 10% hike.
With a stock price of roughly $235, this puts the company’s dividend yield to somewhere above 2.7%.
This is better than the 2% of investors earn on average from the S&P 500, indicating that Amgen pays investors with an above-average yield. Over the past 5 years, Amgen has boosted its annual dividend by nearly 103%.
Overall, Amgen is a solid long-term investment with promising growth drivers out in the market and in its pipeline.
Mad Hedge Biotech & Healthcare Letter
August 27, 2020
Fiat Lux
Featured Trade:
(THE FUTURE OF GENE-EDITING TECHNOLOGY)
(CRSP), (VRTX), (BAYRY), (NTLA), (NVS), (EDIT), (BMY)
There are wise investments, and there are excellent investments.
CRISPR Therapeutics (CRSP) has been proving to qualify in the latter category.
In fact, the company is considered one of the best biotechnology stocks to own during these turbulent times. It is estimated to dominate the gene-editing therapy market, which will reach roughly $11.2 billion in worth by 2025.
Four years ago, CRISPR Therapeutics stock was trading at $14.09. Today, each share is worth $90.35.
This means that CRISPR Therapeutics biotechnology company has been trading for 540% more than its value since it went public in 2016.
This is a remarkable pace for a biotechnology stock, with CRISPR Therapeutics raking in $289 million in trailing 12-month revenue thanks to strategic collaborations.
It even has a decent $890 million stored in cash, with the company reporting a 16% profit margin despite not having any treatment or drug available in the market yet.
More importantly, CRISPR Therapeutics holds a novel position of being under absolutely zero pressure to push a product out the door.
Nonetheless, the investor confidence in CRISPR Therapeutics relies heavily on the company’s leading position in the groundbreaking world of gene-altering treatments.
Basically, the company specializes in creating and developing therapies for genetic diseases with either no cure available or require frequent transfusions.
Looking at the results of the recent tests on the company’s pipeline candidates, CRISPR Therapeutics is projected to transform into a household name in the next five to 10 years.
CRISPR Therapeutics has five cell therapy candidates in the clinical stage. Three of these target immuno-oncology, while the two are designed for genetic blood disorders like beta-thalassemia sickle cell disease.
Among the five, the most advanced is CRISPR Therapeutics’ collaborative work with Vertex Pharmaceuticals (VRTX) on beta-thalassemia therapy CTX001.
This candidate received a fast-track designation from the FDA, with CRISPR Therapeutics releasing promising preliminary results recently.
However, it is another Vertex collaboration drug that actually yielded CRISPR Therapeutics $25 million at the beginning of 2020.
The drug, which is developed to treat muscular dystrophy disorder, is expected to account for approximately $800 million in future milestone payments in the next few years.
Although the genetic blood disorder programs are raking in millions these days, CRISPR Therapeutics’ cancer treatment pipeline offers an even greater potential in terms of stable revenue streams.
The company is utilizing a gene-editing platform, called CRISPR/Cas9, to create “off the shelf” novel chimeric receptor (CAR) T-cells.
If successful, then CRISPR Therapeutics can use a single batch to treat a broad group of cancer patients.
This is groundbreaking because the typical way involves harvesting T-cells from the patients, tailor-fitting the therapies, then re-introducing the cells to the body.
With this technology, CRISPR Therapeutics can easily cover more markets and offer regular treatments for patients within shorter intervals.
That’s why it comes as no surprise that a major biotechnology player like Bayer (BAYR) reached out to the smaller company for a collaboration.
The CAR T-cell market is projected to hit $8.4 billion by 2027, with an estimated compound annual growth rate of roughly 15%.
Specifically, CRISPR Therapeutics expects this product to become a leader in the solid tumor cancer therapy space, pegged to reach $425 billion by 2027.
However, it is not only CRISPR Therapeutics that is widely known in the gene-editing sector.
To date, the company has two close competitors: Intellia Therapeutics (NTLA), which has a strategic partnership with Novartis (NVS), and Editas Medicine (EDIT), which is working alongside Bristol Myers-Squibb (BMY).
Both are also using the CRISPR/Cas9 technology to come up with treatments.
Although Intellia Therapeutics and Editas went public the same year as CRISPR Therapeutics, neither has performed quite as well.
For perspective, CRISPR Therapeutics currently has a market capitalization of $6.3 billion. In comparison, Intellia Therapeutics has $1.13 billion while Editas Medicine has $2.13 billion.
Keep in mind though that clinical-stage companies, particularly in the biotechnology sector, are inherently risky plays.
Among the companies in the space, CRISPR Therapeutics is emerging to be a solid bet not only from a cash perspective but also based on its strong pipeline and profitable collaborations.
Overall, CRISPR Therapeutics is still considered a high-risk option.
Hence, the safest way to invest is to build a carefully hedged portfolio filled with well-researched gene-editing stocks. This will minimize your risks and guarantee your exposure to the upside in case any of your chosen biotechnology companies makes it to the market with a groundbreaking therapy.
Another biotechnology company is cashing in on its COVID-19 vaccine efforts: CureVac (CVAC).
CureVac, which has a market capitalization of $9.9 billion, is hoping to follow the footsteps of Moderna (MRNA) and BioNTech (BNTX).
Earlier this year, both small-cap companies saw their value skyrocket, with Moderna now reporting a market capitalization of $27.3 billion while BioNTech is at $16.3 billion.
While the jump in their market capitalization is definitely newsworthy, what is even more impressive is that neither company has a product out in the market today. That is, up until the pandemic struck.
Now, CureVac is looking into raking in the same benefits from its own COVID-19 vaccine work.
Here is a snapshot of how well this stock is doing so far.
CureVac, which raised $213.13 million in its IPO, initially priced its shares at $16 each, started trading at $44 per share and ended the day at $55.90 per share.
The week after, CureVac shares started trading at $79.33 in the premarket hours of Monday, with the price expected to reach an all-time high of approximately $85 per share.
Aside from the Bill and Melinda Gates Foundation, CureVac also attracted backing for its COVID-19 vaccine candidates from the German government and GlaxoSmithKline (GSK). So far, the company has recorded $640 million in funding for its coronavirus program.
What we know about CureVac’s vaccine candidate is that it utilizes the same mRNA-based technology as Moderna and Pfizer (PFE).
While the newly minted biotechnology company is behind competitors, the results of their study are expected to be released by the next quarter.
Prior to prioritizing its COVID-19 vaccine work, CureVac has been focusing on developing cancer and rare disease treatments.
CureVac is also developing CV8102, which is a treatment that can target four different kinds of tumors.
Another frontrunner in its pipeline is CV7202, which is its rabies drug candidate. Its second-generation lipid nanoparticle (LNP) flu vaccine, called CV6301, is also a promising treatment.
Apart from CureVac, another small-cap biotechnology company has been competing against the COVID-19 vaccine frontrunners like AstraZeneca (AZN) and Johnson & Johnson (JNJ).
Earlier this month, Novavax (NVAX) announced the launch of the Phase 2B clinical trial of its COVID-19 vaccine.
The trial for the coronavirus vaccine, called NVX-CoV2373, is set in South Africa and is anticipated to not only provide the company with a larger group but also test the vaccine’s efficacy in an environment where the disease is currently surging.
Although Novavax is also behind the leaders, the level of transmission rate in South Africa, which accounts for half of the COVID-19 cases in Africa, is expected to provide the company a better chance of evaluating its candidate.
Other than that, Novavax has also secured manufacturing deals that can handle more than 2 billion doses.
Novavax has been working on a COVID-19 vaccine since February, with the company receiving $388 million in funding from the Coalition for Epidemic Preparedness Innovations.
By July, the company received a $1.6 billion investment from the US government courtesy of Trump’s Operation Warp Speed project.
If Novavax’s vaccine candidate earns approval, then the company could realistically expect over $10 billion in annual sales.
Riding the momentum, Novavax has also been working on a flu vaccine candidate, called NanoFlu, which can record as much as $1.7 billion in yearly sales.
With the current financial climate, the unprecedented demand for a vaccine will unsurprisingly drive the shares of companies like Novavax and CureVac even higher.
However, it is better to err on the side of caution when it comes to these ultra risky biotechnology companies.
The biotechnology industry has no shortage of investors on the lookout for stocks that can easily make them filthy rich. Although these high-profile stocks can definitely result in massive gains, there are still a number of critical caveats to bear in mind.
While waiting for the actual candidates to get launched, it is safer to bet on tested and proven businesses for now and perhaps dip your toe in the unfamiliar water currently dominated by these small-cap biotechnology companies.
