(RHHBY) Archives - Page 9 of 18 - Mad Hedge Fund Trader

A Low-Key Biotech Set for a Bull Run

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.

May 6, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
May 6, 2022
Fiat Lux

Featured Trade:

(A PANDEMIC CONQUEROR READY FOR MORE)
(PFE), (BNTX), (AMGN), (JNJ), (BIIB), (RHHBY), (SGMO), (BMRN)

A Pandemic Conqueror Ready for More

Biotech Letter

The past 50 years have been excellent for investors as stocks have climbed by over 100% within a five-year span ending last December 2021.

Sadly, this story has taken a different course in 2022 as investors became more cautious primarily due to inflationary fears.

However, a handful of businesses are strong and promising enough to survive and even thrive in a high inflation environment.

One company that met this challenge head-on in the healthcare and biotechnology sector is Pfizer (PFE).

In fact, Pfizer didn’t simply meet the estimates of Wall Street in its 2022 first-quarter earnings report. It blew past their expectations.

Pfizer recorded $25.7 billion in revenue for the first quarter, well above the consensus estimate of $23.9 billion. This represented a 77% surge year-over-year.

Meanwhile, its earnings per share of $1.62 was notably higher than the average $1.47.

As anticipated, these gains were mainly driven by the staggering revenues from its COVID-19 vaccine and antiviral medication.

Comirnaty continued its winning ways, with Pfizer generating a jaw-dropping $13.2 billion in sales from the vaccine it co-created with BioNTech (BNTX).

The company's market share in the developed world currently stands at 67%, while it holds 62% of the global market.

As for its Paxlovid antiviral treatment, this drug raked in $1.5 billion in the first quarter and claimed approximately 90% of the US market.

Evidently, Pfizer continues to receive massive boosts from its COVID-19 treatments.

Now, the real question moving forward hinges on whether these financial results can be normalized as part of Pfizer’s future regardless of the pandemic’s effects.

After all, the vaccine sales comprised almost 60% of the company’s total revenue. With this in mind, Pfizer remains firm in its projections that it could rake in $98 billion to $102 billion in annual revenue for 2022.

While this still indicates a strong belief in the pandemic-related treatments, it’s also indicative of a deeper and more diverse pipeline.

Although not as high-flying as the COVID-19 vaccines, a number of other categories notched notable gains year-over-year, like its rare disease segment, which saw a 23% increase.

The growth of its oncology sector, which recorded a 6% climb, was mainly attributed to the 35% rise and expansion of Pfizer’s biosimilar arm.

So far, the top-selling treatments in this segment are Retactrit, a biosimilar of Amgen’s (AMGN) Epogen and Johnson & Johnson’s (JNJ) Procrit, Zirabev, a biosimilar of Roche’s (RHHBY) Avastin, and Rixience, a biosimilar of Biogen’s (BIIB) Rituxan.

Even Pfizer’s pneumonia vaccines showed off a 22% growth this quarter with $1.57 billion in sales.

Apart from these, the FDA has recently lifted the hold on the Hemophilia A gene therapy clinical trials of Pfizer and Sangamo (SGMO).

Without this limitation, the two companies may already have the opportunity to catch up to the leading biotech in this sector, BioMarin (BMRN). If everything works out, Pfizer and Sangamo are slated to release a readout from this program by the second half of 2023.

Another venture that’s expected to pay off soon is Pfizer’s $6.7 billion acquisition of Arena Pharmaceuticals, which was seen as a decisive move to bolster its inflammation and immunology segment.

The company is expected to file for a regulatory for Etrasimod, Arena’s lead program on ulcerative colitis and Crohn’s disease, by the second half of 2022.

This means that the recent acquisition is already expected to add to the near-term growth of Pfizer, which could be as early as 2023.

Moreover, Etrasimod represents an incredible market opportunity, with the treatment projected to reach $28 billion in annual sales by 2025.

Aside from the promising potential of Arena’s pipeline, Pfizer’s move also shows how the company is leveraging the capital influx from its COVID sales and its strategy on a more aggressive growth investment cycle.

On top of that, Pfizer’s partnership with BioNTech highlighted the benefits and competitive advantage in terms of how the biopharmaceutical titan works and collaborates with smaller biotechnology firms.

Hence, Pfizer has made itself the first and obvious choice among budding companies with groundbreaking innovations.

Overall, Pfizer has proven itself more than capable of handling any economic and health crisis. Not only has it come up with a solution that ultimately saved humanity from a deadly virus, but it also emerged victorious and stronger amid a global meltdown.

Given its history and trajectory, it looks like it has nowhere else to go but up. Hence, it would be best if you bought the dip.

April 19, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
April 19, 2022
Fiat Lux

Featured Trade:

(A BUDDING UNDERDOG TO DOMINATE THE ALZHEIMER’S BATTLE)
(SAVA), (BIIB), (LLY), (RHHBY), (ABBV), (AMGN)

A Budding Underdog to Dominate the Alzheimer's Battle

Biotech Letter

One of the most significant unmet medical needs worldwide is the treatment of Alzheimer’s Disease (AD).

With over 6 million people affected in the US alone and roughly 40 million globally, this number is projected to double by 2050 as the population ages and more individuals live longer lives.

That’s why it comes as no surprise that even though the Centers for Medicare & Medicaid Services decided to limit the coverage of Biogen’s (BIIB) AD drug, Aduhelm, more and more drugmakers continue to move forward with their own candidates.

Eli Lilly (LLY) continues to work on Donanemab, which could be available for review by mid-2023. Meanwhile, Roche (RHHBY) is anticipated to release data on Gantenerumab by the end of 2022.

Among the drugmakers pursuing this field, one name continues to rake in positive reports: Cassava Sciences (SAVA).

Cassava’s lead AD drug candidate is Simufilam, a small oral pill. Thus far, this has shown no safety issues and even released the best clinical AD data.

Notably, this is the only treatment that demonstrated tangible cognitive improvement for longer than 6 months in the clinical studies for AD.

The fact that Cassava’s candidate bested Donanemab and Gantenerumab, which both received breakthrough designations, and Aduhelm, which got an accelerated approval, indicates its candidate’s strong potential.

Between their promising results, convenient storage of the pill, easy dosing method, impressive safety data, and the vast unmet medical market, Simufilam could very well be hailed as the best-selling AD treatment the moment it gains approval.

Another indicator of Simufilam’s promise is the lack—or even absence—of insider trading within Cassava in the past years.

Typically, company insiders know more about the projects than anyone else. Strong insider selling is generally followed by a fall in a company’s stock price.

This has not been spotted anywhere in Cassava, with multiple insiders taking on very big stakes in the company.

However, the strongest indicator for Cassava’s impending win is Simufilam being in clinical progression. In fact, it’s already dosing in Phase 3 trials.

While other drugmakers working on an AD treatment may have promising options, the earlier a candidate is in the clinical trials, the higher the risk of failure and the longer it’ll take to be commercialized.

Each step forward in clinical trials is basically a way to “de-risk” the candidates, which leads to an increased value of the company.

Naturally, one of the questions raised when dealing with a biotech not as large as AbbVie (ABBV) or even Amgen (AMGN) concerns financial health.

Cassava’s recent financial filings showed that the company has roughly $240 million in cash and $0 debt.

Looking at their workflow, Cassava typically burns about $9 million every quarter.

As they ramp up their Simufilam trials, this is obviously expected to change.

After all, Phase 3 trials tend to cost more. So, the company anticipates a bump in spending to reach $12.5 million to $15 million per quarter this 2022.

While this is a substantial increase in capital expenditure, the jump remains within reasonable projections of the price of Phase 3 trials.

Taking into consideration the higher burn rate of roughly $15 million every quarter, Cassava would still have sufficient cash to operate for 16 quarters or 4 years without the need to resort to any additional financing rounds—at least for Simufilam.

If it fails, investors would already know whether Simufilam was a success.

That means if Cassava does pursue financing efforts, it would be for new projects and not for this particular AD treatment.

The market has not been kind to the biotechnology sector lately. It’s because the market tends to overreact to negative news.

Farsighted investors who recognize the enduring potential of a company—even at its vulnerable periods—can sometimes reap outsized returns if they turn out correct.

However, a successful strategy for some investors is to bet on companies that other investors are afraid to touch.

Nevertheless, it’s still prudent to keep in mind that investing in a roller coaster like Cassava means preparing yourself for an unexpected and possibly wild ride.

March 22, 2022

Biotech Letter

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

Featured Trade:

(THE 800-POUND GORILLA IN THE GENE-SEQUENCING SECTOR)
(ILMN), (A), (TMO), (MRK), (RHHBY)

The 800-Pound Gorilla in Gene-Sequencing Sector

Biotech Letter

I’m a huge fan of the "razor and blades" business strategy, where the pricing and marketing model is designed to generate recurring, dependable income by ensuring that a customer is locked in onto a product or service for a long time.

The COVID-19 pandemic underscored the significance of DNA sequencing in improving and monitoring global health.

Thanks to DNA sequencing, we were able to identify the novel coronavirus and eventually developed vaccines and PCR-based tests. This also played a crucial role in detecting new strains and even transmission tracking.

To date, the top name in the DNA sequencing community is Illumina (ILMN).

In terms of competitors, the closest to Illumina’s dominance are Agilent Technologies (A) and Thermo Fisher Scientific (TMO). However, neither have developed their platforms enough to be directly comparable to Illumina.

Illumina has a notable installed base comprising approximately 20,000 machines owned by roughly 7,300 clients.

With the rising popularity of DNA sequencing, the demand for the company’s installation base is estimated to continue growing and along with it is the sale of consumables.

This is where the razor and blades business model comes in.

The consumables form a major part of Illumina’s strategy, with the instruments serving as “razors” and consumables as “blades.”

The cost of instruments can fall within the range of $20,000 to $1 million and are essential elements of expanding the company’s portfolio and locking in clients into long-term commitments.

Consumables typically represent 50% or more of the revenue of any DNA sequencing company. For Illumina, the number climbs to 80%.

Considering that the consumables also need repairs, this segment is expected to continue generating profits in services and contracts.

Evidently, 80% recurring revenue is highly indicative of a rock-solid business.

While the business model isn’t unique to Illumina, the company has attracted attention in Wall Street due to its exponential growth over the past years.

In the last five years, Illumina has practically doubled its revenue. During the COVID-induced economic slowdown, the company quickly recovered from a brief slump and accelerated its revenue growth at an even faster pace.

In the fourth quarter report for 2021, Illumina reported about $1.9 billion in revenue or an impressive 25% increase year-over-year.

As for 2022, the company is conservatively anticipating a 14% to 16% growth in its revenue.

Another step towards securing dominance in this field is Illumina’s decision to launch the TruSight Oncology Comprehensive test in Europe.

This is basically a cancer test that uses a single tissue sample to test for a broad range of tumor genes and biomarkers.

The goal is to create a “tumor profile” of patients with rare conditions to find a matching treatment option via precision technology. This doesn’t only cover available cancer therapies in the market but also clinical trials.

While this test focuses on the oncology sector, Illumina and its competitors are presumably working on more sophisticated genetic profile-based diagnostic tools for other conditions.

Although this has yet to be launched on a larger scale, Illumina is reported to seek collaborations with leading oncology treatment providers like Merck (MRK), Bayer (BAYN), and Roche (RHHBY).

Illumina has invested in seven new startups to further expand its pipeline: 4SR Biosciences; B4X; Cache DNA; CRISP-HR Therapeutics; NonExomics; Purpose Health; and Rethink Bio.

These focus on breakthrough therapies, DNA storage, mental wellness, sustainable food, and diagnostics.

Illumina has invested in 68 startups to date. This is a brilliant scheme to continue company growth and pipeline expansion for decades.

The DNA sequencing market was valued at $6.243 million in 2017 and is projected to hit $25.470 million by 2025.

Illumina’s remarkable execution of the razor and blades model, strong profit margins, and proactive profitability initiatives catapulted it to the top of the DNA sequencing sector.

Needless to say, Illumina is the 800-pound gorilla in the gene-sequencing sector—a dominance that is expected to go on for years.

March 17, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
March 17, 2022
Fiat Lux

Featured Trade:

(A SECURE STOCK TO ASSUAGE YOUR FEARS)
(NVS), (INCY), (ABBV), (VYGR), (PFE), (BNTX), (CVAC), (RHHBY)

A Secure Stock to Assuage your Fears

Biotech Letter

The year 2022 marked the time fear made a comeback to Wall Street.

Since the year began, we’ve been plagued with fears over Russia’s invasion of Ukraine, constant threats of high inflation, and the possibility of a recession.

There’s even the fear of major corrections among overheated stocks that could drag the entire market along with it.

Nevertheless, it’s critical to bear in mind that what we have is a market of stocks rather than a stock market.

Although the S&P has been unstable and the Nasdaq continues to be riddled with corrections, we can still be confident that value stocks and, of course, dividend stocks are faring much better.

Truth be told, that’s hardly surprising since value stocks typically outperform the market even in the most challenging periods.

Moreover, the highest-quality stocks tend to deliver the best performance.

When it comes to high-value stocks, one of the defensive, low volatility names that constantly crops up is Novartis (NVS).

To date, Novartis is considered as one of the Big Pharma companies globally, with a staggering market capitalization of $224 billion.

Recently, Novartis has become more aggressive in diversifying its lineup—a strategy that showed tremendous payoffs.

After all, one of the competitive edges of Novartis is its solid profitability compared to its peers, which is primarily driven by the company’s well-balanced portfolio.

For years, the company has been widely known for its oncology treatment portfolio, which was strengthened by its eventual collaboration with Incyte (INCY).

Apart from cancer, it has so far succeeded in developing treatments for cardiovascular, immunology, and even blood disorders.

Its current portfolio of drugs generated impressive revenue despite the economic slowdown over the past months.

For example, psoriatic arthritis drug Cosentyx, which is AbbVie’s (ABBV) top-selling Humira’s biggest competitor, raked in $3.5 billion in sales last year, showing off a 20% increase year-over-year, while myelofibrosis treatment Jakavi reported a 23% jump to reach $1.2 billion.

Meanwhile, heart failure treatment Entresto recorded an impressive 46% climb year-over-year to reach roughly $3 billion.

Aside from these, Novartis has a promising pipeline. Thus far, it has 54 programs queued for Phase 3 trials.

Even if we assume that the company only achieves a 50% success rate, these new products could still add substantial revenue streams within the next few years.

Further leveraging its size and capital, Novartis has been searching for avenues to expand its in the biotechnology market.

Its latest move towards this direction is a license option agreement with Voyager Therapeutics (VYGR).

Novartis has long been on a perennial search for revolutionary therapies to take under its wing, and this deal with Voyager appears to be an excellent opportunity for both companies.

In a nutshell, the two companies have agreed to collaborate on gene therapy programs for adeno-associated virus capsids.

This biobucks deal sees Novartis paying Voyager $54 million upfront, with the possibility of shelling out up to $1.7 billion in several milestone payments and royalties.

The agreement covers three programs targeting the central nervous system plus potentially two more after 12 months.

In addition, Novartis will be granted access to Voyager’s proprietary RNA-based screening platform used to deliver the payload in gene therapy-based treatments.

Another biotechnology-related venture for Novartis is its deal with Carisma Therapeutics.

Following its success with the COVID-19 vaccine production for Pfizer (PFE) and BioNTech (BNTX), the Big Pharma company entered another contract manufacturing agreement with Carisma Therapeutics.

In this deal, Novartis will handle the manufacture of Carisma’s HER2-targeted CAR-M cell therapy, which is under development for the treatment of solid tumors and is slated to be submitted for approval in 2023.

Other than Carisma, Novartis also signed an initial manufacturing deal with CureVac (CVAC) and Roche (RHHBY) in 2021.

Overall, this makes Novartis a relatively safe and low-risk play in the biotechnology and healthcare sector.

March 3, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
March 3, 2022
Fiat Lux

Featured Trade:

CHEATING DEATH: ARE WE GETTING CLOSER TO IMMORTALITY?)
(AMZN), (FB), (GSK), (RHHBY), (GOOGL)

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