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An Emerging King of Biosimilars

Patience is one of the key attributes that long-term investors need to cultivate, but practicing it is challenging. Stock markets are entirely unpredictable, and their ups and downs tend to rattle even the most experienced investors.

However, it’s essential to keep a calm mind and to be confident that the businesses you invest in have the fortitude to overcome even the most challenging economic or market downturn.

The biotechnology industry is an excellent place to search for stocks that can overcome market turmoils and succeed in the long run because the treatments they develop are so crucial to the lives of their clients.

Amgen (AMGN) is a biotech that would make an excellent long-term investment.

This business, which has been a leader in the biotech sector since the 1980s, is among the largest in the world.

Amgen is also a member of the renowned Dow 30 companies, with a focus on oncology, biosimilars, and inflammatory diseases. In the past 10 years, it has established a strong track record and solid revenue growth trajectory.

The company recently released its fourth-quarter results, and they looked a tad flat on the surface. The report disclosed a total revenue growth of only 2%, which could have been caused by the pressures linked to pricing and competition around the company’s top-selling cholesterol-lowering treatment Repatha, migraine drug Aimovig, and immunology medications Otezla and Enbrel.

Still, Amgen continues to be a solid profit-making business, holding an A+ grade in terms of profitability. It sustains considerable pricing power on its treatments under exclusive patents and from its up-and-coming portfolio of biosimilar candidates.

Amgen has maintained a BBB+ rated balance sheet. It also pays a respectable dividend yield of 3.5%, with a well-protected payout ratio of 44%.

The company has also recorded consecutive growth in this aspect for 11 years. Looking at these figures, Amgen has scored primarily As in terms of consistency, growth, dividend, and yield.

Notably, the company’s foray into the biosimilar landscape would make long-term investors of the company quite happy soon.

Its long-awaited biosimilar version of the No. 1 selling drug worldwide, AbbVie’s (ABBV) Humira, has recently been launched to market.

Amgen’s version, called Amgevita, is the leading biosimilar in this market to date. It already has a five-month lead over the next competitor, arming it with a lot of time to establish a more competitive standing.

Beyond this candidate, Amgen has at least six more biosimilars that it plans to launch in the US and across the globe from 2023 until the end of 2030. This timeline would give the company excellent visibility in the long run.

Another potential biosimilar blockbuster is ABP 654, which is a biosimilar of Johnson & Johnson’s (JNJ) top-selling immunology treatment Stelara.

Amgen also has biosimilar versions of Bayer's (BAYG) and Regeneron’s (REGN) eye disorder drug Eylea and AstraZeneca’s (AZN) rare kidney disease treatment Soliris.

Basically, biosimilars are knock-offs for biologic drugs. They cost less because the manufacturers do not spend less in the research, trials, and approval stages. The processes are also shorter and less risky.

Biosimilars provide a way for patients and the whole healthcare system to save billions of dollars, signaling a bright future for this segment. They offer more affordable options to patients, which is an excellent response to the rising prices of medicines.

This means biosimilar development is far less speculative than creating a new drug, as manufacturers only need to replicate the already established results and success of the existing “original” drug.

Moreover, biosimilars bring with them a degree of pricing power. Unlike traditional treatments, no two biosimilars are allowed to carry the same biologic profile and should still undergo a stringent FDA assessment prior to gaining approval.

Overall, Amgen is a good option for long-term investors on the lookout for a quality biotech to add to their portfolios. Thanks to its burgeoning portfolio of potentially top-selling biosimilars, it has long-term solid revenue growth catalysts. These factors make Amgen a compelling buy on the drop.

January 26, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 26, 2023
Fiat Lux

Featured Trade:

(SLOW AND STEADY WINS THE RACE)
(REGN), (SNY), (RHHBY), (BAYN)

Slow and Steady Wins the Race

Biotech Letter

If you are on the lookout for stocks that have the potential to deliver dramatic gains right away, you’d be hard-pressed to find a better place than the biotechnology industry.

Hardly a month passes without at least one or two biotech names skyrocketing or tumbling thanks to updates about clinical studies. And this year won’t be any different for this group.

A particular biotech to keep on an eye on is Regeneron Pharmaceuticals (REGN).

This 2023, Regeneron has several upcoming trial readouts that could potentially push its stock price to an all-time high. The earliest update to watch out for involves its anti-inflammatory drug Dupixent, which is already a leading treatment for asthma and eczema.

Gaining its first approval back in 2017, Dupixent has been generating over $7 billion in sales every year for both Regeneron and its co-developer, Sanofi (SNY).

Riding this momentum, Regeneron stock could climb higher courtesy of the upcoming results of experimental studies with Dupixent and patients suffering from chronic obstructive pulmonary disease or COPD.

Based on data from the World Health Organization, COPD is the third leading cause of death across the globe. Despite this, there remains a shortage of effective and accessible treatment options for patients. Needless to say, this represents an untapped potential market and a promising fresh revenue stream for Regeneron.

Meanwhile, another product in Regeneron’s portfolio could soon get a shot in the arm. After struggling with unimpressive results in the earlier months of 2022, the company’s shares soared around September. As expected when it comes to biotechs, this type of double-digit percentage is triggered by positive clinical updates.

For Regeneron, the trigger was Eylea.

Aside from its blockbuster drug Dupixent, Eylea is another top-selling product of Regeneron. It is a rare eye disorder treatment that it developed with Bayer (BAYN). Recently, Regeneron disclosed that Eylea proved to be effective in a Phase 3 clinical study that justified a higher dosage of the treatment.

For years, Eylea has been a generous cash cow for the companies. Now, it could become an even more lucrative source. However, this development is even more critical for Regeneron because Eylea’s patent exclusivity is set to expire in 2024.
With the recent development, the company could easily apply for an extension of patent protection, which is obviously excellent news for Regeneron and its shareholders.

This news could not have come at a more timely period since Regeneron stock started tumbling following the biotech’s report of lower sales for Eylea in the fourth quarter of 2022.

In a preliminary report on its fourth-quarter earnings, Regeneron shared that the sales for Eylea during this period only reached $1.5 billion, which fell short of the $1.64 billion expectation from analysts.

The disappointing update scared off some shareholders and caused interested investors to think twice before putting their money in this company. However, these results were justifiable since they coincided with the launch of a rival drug treatment, Vabysmo from Roche (RHHBY).

Nonetheless, Regeneron remains a good investment in these turbulent times. Despite the challenges, its products, especially Eylea and Dupixent, continue to deliver solid financial results.

More importantly, the company has several promising pipeline candidates. To date, Regeneron has roughly 40 clinical trials ongoing, with a quarter of these queued for Phase 3 studies. This indicates the company’s capacity and plans to extend its lineup to launch brand-new treatments.

Meanwhile, it has also been working on label extensions for its already successful products, as seen in its efforts with Dupixent and Eylea.

With these solid products in its portfolio and other promising candidates for regulatory approval this 2023 and early 2024, Regeneron looks ready to deliver solid results in 2023 and beyond. Even if it doesn’t, the company is equipped with the tools to keep churning out strong returns in the long run. I suggest you buy the dip.

biotech

September 27, 2022

Biotech Letter

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)

Last Chance at Salvation

Biotech Letter

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.

September 22, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
September 22, 2022
Fiat Lux

Featured Trade:

(GOOD THINGS COME TO THOSE WHO WAIT)
(NTLA), (IONS), (TAK), (CRSP), (EDIT), (CRBU), (BEAM), (ALNY), (PFE), (REGN)

Good Things Come To Those Who Wait

Biotech Letter

CRISPR technology has been receiving so much hype over the past years. However, the promise of this gene editing platform has yet to be realized.

Crispr gene-editing therapies can apply permanent modifications to our DNA by zeroing in on specific genes and then incapacitating them or reworking harmful segments of their genetic instructions.

While this could change in the coming years, investors have become impatient with the progress and lack of any major breakthrough in genomics. Some are losing confidence that this sector could experience explosive growth.

This is what happened with Intellia Therapeutics (NTLA).

Earlier this week, the company showed data that patients who received a one-time gene-editing infusion exhibited sustained improvement in a genetic condition that can result in fatal swelling when left untreated.

To be more specific, Intellia’s update means it could deliver a potentially permanent solution for hereditary angioedema. In this condition, a patient has a miswritten gene in their liver cells that produces a specific protein that triggers a dangerous swelling throughout the body.

Applying the treatment to 6 patients, Intellia’s one-time treatment lowered blood levels of the harmful proteins by more than 90% and decreased the swelling.

This is a more notable effect than the results from existing drugs like Takhzyro from Ionis Pharmaceuticals (IONS) and Takeda Pharmaceutical (TAK).

Despite the encouraging update, Wall Street still spurned the stock, and its price fell.

It looks like investors have lost patience with the slow progress of clinical studies in genetic treatments, pushing some to take advantage of the positive news from Intellia to abandon their positions.

Actually, it’s not only Intellia that suffered from this mistreatment by the market. Investors have also been dumping other stocks utilizing the Nobel-prize-winning technology, Crispr-Cas9, including CRISPR Therapeutics (CRSP), Editas Medicine (EDIT), Caribou Biosciences (CRBU), and Beam Therapeutics (BEAM).

Intellia was hailed the top CRISPR stock in 2021 when the company and its co-collaborator, Regeneron (REGN), shared their promising interim results from a Phase 1 study assessing NTLA-2001, a treatment for a rare genetic disease called transthyretin (ATTR) amyloidosis.

This Crispr infusion candidate managed to knock out rogue genes in the liver cells of 12 patients, halting ATTR’s poisonous effects on their hearts or nerves. Based on clinical data, Intellia’s therapy caused an over 90% drop in the fatal protein triggered by the genetic condition.

If successful, this one-and-done ATTR treatment from Intellia would go head-to-head against other chronic drug therapies like Onpattro by Alnylam Pharmaceuticals (ALNY) or Pfizer’s (PFE) Vyndagel, which generates $2 billion in sales every year.

Many companies use Crispr technology to edit human genomes in an effort to treat and possibly even cure rare genetic diseases. Their treatments typically utilize either an ex vivo or an in vivo approach. With ex vivo therapies, the genes are altered outside the patient’s body.

However, Crispr’s use is not only limited to targeting genetic conditions. There are also gene-editing companies that are working on leveraging the technology to come up with treatments for various kinds of cancer.

In particular, Crispr technology has been a biotech favorite in the development of chimeric antigen receptor T-cell or CAR-T therapies. There are used to genetically engineer immune cells to target specific tumors.

Apart from these, some biotech companies are using Crispr technology to conduct screening. This is different from genetic testing, though.

When using Crispr for screening, the genes are modified in a manner that makes them nonfunctional or inoperative. Crispr screening allows biotechs to explore which genes take on particular functions, which can be critical in the development of drugs and treatments.

Intellia’s recent updates are clear indications that Crispr technology works. Since this will be applied to humans, we should expect the timeline and adaptation to take longer.

I have become more and more thrilled with developments in the gene editing space. Moreover, I believe it’s no longer about “if” but when it will happen.

Overall, the gene editing sector is not for fast-paced investors. This is for those willing to wait for a very long time, particularly for stocks like Intellia Therapeutics.

September 13, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
September 13, 2022
Fiat Lux

Featured Trade:

(A CROWN JEWEL SCORES A GOAL)
(REGN), (BAYRY), (RHHBY), (SNY), (ALNY), (NTLA)

A Crown Jewel Scores A Goal

Biotech Letter

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

August 9, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 9, 2022
Fiat Lux

Featured Trade:

(A REVIVED BIOTECH GAINING MOMENTUM)
(AMGN), (SEGN), (MRK), (REGN), (GILD), (CCX), (BMY)

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