(RHHBY) Archives - Page 12 of 18 - Mad Hedge Fund Trader

A Rinse-Wash-Repeat Play for Opportunistic Investors

No matter the short-term consequences of events in the past months, what remains constant is the stock market’s ability to create wealth over the long term.

Each crash or correction that occurred in history was eventually offset by a strong bull market rally.

That’s why it pays to be prepared for when things start to turn around.

Today, I’d like to take a look at another name in the oncology sector that’s poised to skyrocket in the coming years: Exelixis (EXEL).

Here’s a quick overview of Exelixis.

Exelixis is a California-based biotech that’s focused on developing treatments for hard-to-treat types of cancer. To date, the company has three FDA-approved treatments in the market.

The stock has been trading within the $20 and $22 range and sports a market capitalization of roughly $7 billion.

For most of its existence, Exelixis’ growth story centers around its blockbuster therapy, called Cabometyx.

In the second quarter earnings report, Cabometyx’s sales went up 59% compared to its 2020 performance to contribute $275.6 million.

This comprised the bulk of Exelixis’ total revenue worth $385.2 million, which climbed an impressive 48.4% year over year.

Cabometyx is the leading treatment for first- and second-line treatment for advanced renal cell carcinoma (RCC) and advanced hepatocellular carcinoma.

Together, both indications could generate over $1 in annual sales for Cabometyx in 2021 and 2022.

To put things in perspective, the entire Cabometyx franchise was only worth about $742 million in 2020.

What makes Cabometyx an exciting revenue stream is its label-expansion capacity.

Apart from the two approved indications, Exelixis is also conducting six more clinical trials for this drug either as a monotherapy or a combination treatment.

So far, Cabometyx has proven to be effective as a combination therapy with Bristol-Myers Squibb’s (BMY) Opdivo. This additional approval has allowed Exelixis to seize an even bigger share of the RCC market today.

Considering the label-expansion opportunities for Cabometyx, this treatment is projected to become a multi-billion-dollar drug soon.

Given the solid performance of its products and successful collaborations, Exelixis has also become a cash cow.

The company estimates that it would conclude 2021 with roughly $1.6 billion to $1.7 billion in cash and investments—an amount that comprises over 20% of its market capitalization.

With this money, the company can comfortably pursue acquisitions and even strengthen its internal R&D engine.

However, not everything has been smooth sailing for Exelixis in the past months.

One of the major factors that pulled the stock down by a whopping 20% is the unimpressive results from its liver cancer clinical trial with Roche (RHHBY) last June.

However, I think the market overreacted to this piece of negative news.

If anything, Exelixis has already turned the situation around.

Unfazed by its unexpected flop with Roche, Exelixis is again pursuing a difficult-to-treat condition: prostate cancer.

The difference this time is that the company appears to have more confidence in the efficacy of its famed Cabometyx as a treatment for the condition—so much so that they intend to apply for FDA feedback in the high-risk group and possibly even an accelerated approval.

It also celebrated a recent win with the approval of Cabometyx’s label expansion to cover 12 years and older—an approval granted way ahead of their December 4 schedule.

Now, Cabometyx can also be prescribed to treat DTC, which is the most common kind of thyroid cancer in the United States.

More than that, Exelixis is the first to provide a standard treatment option to these patients, making the company a first mover in this segment.

Looking at the history of first movers, such as Vertex (VRTX) in the cystic fibrosis sector and Teladoc (TDOC) in the telehealth space, Exelixis could very well be on its way into becoming a functioning monopoly.

In terms of its pipeline, Exelixis has more than 100 studies going through different stages. These cover diverse indications including gastrointestinal cancers, neuroendocrine tumors, and lung cancer.

While Exelixis has a balance sheet akin to Fort Knox and a remarkable revenue growth, its shares remain range-bound in the past couple of years.

Nonetheless, it has continued to be an impressive “rinse-wash-repeat” covered call play during the same period and is considered a dividend stock with double-digit yields.

Moreover, Exelixis has been consistently ramping up revenue growth in the past years.

The biotech’s big cash balance along with its proven profitability indicate a minimal possibility of dilution.

Considering its price-to-earnings-growth ratio of almost 1, this company is the picture of an ideal balance of double-digit sales growth complemented with great value.

Simply put, it’s a great opportunity for long-term investors.

More importantly, its recent stock-price meltdown makes it an ideal addition to the portfolio of opportunistic investors.

September 7, 2021

Biotech Letter

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

FEATURED TRADE:

(A LONG-TERM STOCK FOR PATIENT INVESTORS)
(REGN), (RHHBY), (BAYN), (SNY), (MRK), (BMY), (NTLA)

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.

August 31, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
August 31, 2021
Fiat Lux

FEATURED TRADE:

(A CANCER PIONEER FOR THE BOOKS)
(SEGN), (MRK), (BMY), (PFE), (GILD), (RHHBY), (TAK), (GMAB)

A Cancer Pioneer for the Books

Biotech Letter

When choosing a biotechnology company to invest in, a good sign to look out for is when management continuously looks for ways to expand its technology.

This means you’re looking at a stock that’s likely to appreciate multiple folds.

Seagen (SEGN) does this in spades.

Since it was founded in 1997, Seagen (SEGN) has reached almost $30.67 billion in market capitalization.

Reviewing its growth story, I think its powerful growth strategy is one of the key elements that help the company with its advancements.

That is, Seagen is aggressively developing and expanding its different labels for the approved drugs in its portfolio while also actively discovering innovative and new treatments and molecules.

Simply put, Seagen’s growth and expansion can be likened to a tree that keeps forming new additional branches.

Over the years, the company has experienced a remarkable transformation from a single-product firm to a diversified and ever-expanding player, particularly in the oncology medication market—a strategy that paid off.

After all, the market for cancer drugs isn’t the type to stand still.

This sector is renowned for its fast-paced demands and rapid growth. If you look at how much has been done, remember that several types of cancer that seemed incurable a mere 10 years ago are now no longer considered death sentences thanks to the innovative therapies discovered.

If roughly 15 years ago, the standard cancer treatment only involved chemotherapy and surgery, the recent years have granted us access to newer technologies like targeted therapy and immunotherapy.

Lately, CAR-T therapy has been hailed as the most effective means of treating blood cancer. Meanwhile, the likes of Merck’s (MRK) Keytruda and Bristol-Myers Squibb (BMY) Opdivo have made chemotherapy and surgery more effective as well.

So, it wouldn’t be a surprise anymore if the technology in the oncology sector advances further in the years to come.

Another relatively fresh innovation is the antibody-drug conjugate (ADC) technology.

This takes and combines all the positive effects of chemotherapy and targeted therapy while simultaneously eliminating the adverse effects of chemotherapy on the patient’s body.

Unlike chemotherapy, ADCs specifically target and eliminate tumor cells and works to spare the healthy ones. Once the tumor cells are detected, a toxic drug is released to kill them.

Basically, it works like a “smart bomb” in that it annihilates only the enemies and protects the allies.

The first drug to be approved based on ADCs is Mylotarg from Pfizer (PFE), which was 20 years ago.

However, it was only in recent years that this technology finally gained traction and attracted commercial success.

So far, roughly 56 pharmaceutical companies are working on developing ADCs.

Aside from Pfizer, another pioneer in ADCs is Seagen. Unlike Pfizer, this company has chosen to continue focusing on the development of the treatment.

Other companies working on ADC technology include Immunomedics, which Gilead Sciences (GILD) acquired, and Roche (RHHBY).

However, Seagen’s work looks to be the most promising in this segment.

Its first ADC drug is Adcetris, which was approved in 2011 for Hodgkin’s lymphoma and made in cooperation with Takeda Pharmaceutical (TAK).

Its indication was later expanded to cover another white blood cell disease, Peripheral T-cell lymphoma (PTCL).

Seagen already holds roughly 45% of the market share in the Hodgkin’s lymphoma segment alone, and this is expected to rise to 50% by 2026.

In terms of projected sales in the US, Adceris is estimated to generate about $1.7 billion by 2026.

On top of that, Seagen also rakes in royalties from Adceris sales outside the US thanks to its Takeda partnership.

Riding the momentum of Adceris, Seagen expanded its ADC pipeline and later gained approval for Padcev in 2019.

This drug received the go signal to treat a fairly common disease in the oncology space: metastatic bladder cancer.

In the US, the average number of new cases of metastatic bladder cancer is 83,000. Given its market size and potential to become part of a combination therapy with the ever-popular Keytruda, Padcev is expected to generate at least $2.6 billion in sales by 2026.

Gaining more confidence in its expertise in the oncology sector, Seagen continued its expansion and gained regulatory approval for breast cancer treatment Tukysa.

Tukysa is expected to bring roughly $1 billion in annual sales in the US and European markets. This figure is projected to rise when it eventually also gains approval for colorectal cancer.

Another notable drug in Seagen’s pipeline is Tisotumab Vedotin (TV), which is a collaboration with Genmab (GMAB). TV is a cervical cancer treatment and is expected to gain approval by the end of 2021.

Shifting gears, let’s take a look at the upcoming growth of Seagen. Initially, its 2021 guidance put its annual sales at $1.28 billion for all the products.

However, Seagen has already exceeded expectations, with Adceris reporting $700 million in sales for a single quarter this year. Actually, both Adceris and Padcev are well on their way into becoming blockbusters in a year or two, thanks to their continuously expanding applications.

Overall, Seagen is an excellent long-term investment.

Aside from its work with giant biopharmaceutical companies like Merck and BMY, its current portfolio of treatments and pipeline programs present a myriad of opportunities for Seagen.

Moreover, its ability to develop powerful treatments and leverage the science of ADCs make Seagen one of the most promising oncology stocks in the market today.

seagen

July 22, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
July 22, 2021
Fiat Lux

FEATURED TRADE:

(ANOTHER STEP CLOSER TO NEURO-VICTORY)
(BAYRY), (BIIB), (LLY), (SIOX), (RHHBY), (ABBV), (MRK), (PFE), (AZN)

Another Step Closer to Neuro-Victory

Biotech Letter

First, Alzheimer’s. Now, Parkinson’s.

Companies working on neurodegenerative diseases are on a roll.

After Biogen’s (BIIB) work with Aduhelm, another biopharmaceutical company has made notable progress: Bayer (BAYRY).

Merely six weeks after DA01 landed in the clinic, Bayer’s Parkinson’s disease drug candidate is getting into the fast lane.

This marks one of the major pipeline candidates that the German company picked up from its $1 billion acquisition of Versant Ventures in 2019.

DA01 is described as a “pluripotent stem cell-derived dopaminergic neuron therapy.”

In layman’s terms, Bayer collects donor cells that have the ability to develop into any other cell type in the body.

It will then engineer these versatile cells to turn into neurons that have the capacity to produce the neurotransmitter dopamine—aka the chemical your nervous system uses to transmit messages to nerve cells.

Those engineered neurons will then be transplanted into a part of the brain, called the putamen, which is in charge of our movements and learning.

What we know so far is that the next phase of the trial will determine the safety and tolerability of the cell transplantation a year following the procedure.

This will also tell us more about the cell survival rate after the transplant and the motor effects a year or two following the procedure.

Like Biogen’s Alzheimer’s candidate, the fast-track designation with the FDA could open doors for a speedy review or even an accelerated approval for Bayer’s DA01.

Aside from transplanting engineered cells into patients’ brains, the company is also looking into other options for Parkinson’s.

In October 2020, it shelled out $2 billion upfront to acquire Asklepios BioPharmaceutical or AskBio for its gene therapy research on Parkinson’s.

Roughly 1 million people in the US are suffering from Parkinson’s disease—a number that’s greater than the combined number of patients diagnosed with Lou Gehrig’s disease, multiple sclerosis, and muscular dystrophy.

What’s worse is that this is expected to climb to 1.2 million by 2030.

In terms of treatment cost, the combined expenses for Parkinson’s, including medical bills and lost income, are estimated to reach about $52 billion annually in the US alone.

The medications alone already amount to an average of $2,500 per year, with therapeutic surgery reaching up to $100,000 per person.

This is why it comes as no surprise that several companies have been working towards figuring out a more potent treatment or even cure for Parkinson’s.

One of the frontrunners is Prevail Therapeutics, a New York-based biotechnology company that’s focused on developing a gene therapy for this disease.

Following a successful Series B financing round in 2019, in which it secured $50 million in investments, the company eventually attracted the attention of big pharma.

By December 2020, it was acquired by Eli Lilly (LLY) for $880 million with the promise to help the smaller biotech company develop three of its most promising Parkinson’s candidates.

Another Parkinson’s-centered biotech company is Axovant Gene Therapies, which has been working on a single-dose treatment for neurodegenerative disease.

Its pipeline proved to be promising, as seen in its $74.7 million public offering just last February 2020, with the company maintaining its solid footing amid the pandemic.

By November, it rebranded itself as Sio Gene Therapies (SIOX).

Outside the US is Irish biotech firm Inflazome, which is working on a unique treatment for Parkinson’s.

Unlike the other candidates, the goal of Inflazome’s drug is to directly deliver the treatment to the affected neurons. That is, it plans to pass through the blood-brain barrier.

Its research attracted the Michael J. Fox Foundation, which granted it $1 million in funding, in March 2019.

Since then, the company’s progress has attracted the attention of other major biopharmaceutical companies with Roche (RHHBY), ultimately landing the acquisition in September 2020.

Of course, talks about neurodegenerative diseases wouldn’t be complete without Biogen.

On top of its Alzheimer’s work, the Massachusetts biotechnology giant has been collaborating with San Francisco-based Parkinson’s company Denali Therapeutics.

The two have been working on the development of three small molecular drugs for $560 million in upfront payments plus $465 million in equity investment into the smaller biotech.

In addition to these, we’re still waiting on what the rest of the major biopharmaceutical companies would come up with in the future.

Given that the likes of AbbVie (ABBV), Merck (MRK), Pfizer (PFE), and AstraZeneca (AZN) have all signed up publicly via the Critical Path for Parkinson’s (CPP) consortium to tackle this debilitating disease, it’s safe to say that there’s hope for the future of this sector.