The Sick Economist's Blog, page 4

SHOULD NEOGENOMICS LABORATORIES BE ON THE RADAR FOR GROWTH INVESTORS?

Neogenomics Laboratories ($NEO) is a lab dedicated solely to the diagnosis and study of cancer. This “behind the scenes” oncology player offers services to practicing oncologists and pharmaceutical firms performing cancer research. They have recently launched a new liquid biopsy that could be adopted by oncologists as part of routine practice. Is now a good time to scoop up shares of this little known healthcare business?

Equity analyst Joshua Mazher investigates…….

 

“We have detected cancer” may be one of the most terrifying things to hear when awaiting biopsy results. Unfortunately, this has become a reality for nearly 2 million Americans in 2022, and this number will only continue to rise exponentially as the population ages (10,000 Americans per day receive Medicare cards). The medical world has made great strides in recent years with a surge of technological advancements in biotech, however, cancer remains a beast that has yet to be tamed. Perhaps the most lethal quality in cancerous cells is their ability to adapt to different drugs and medicines designed to suppress them. Cancer’s variability is another aspect that makes it so complex. Cancer has five stages (Stage 0 through Stage 4) of progression, with Stage 0 signifying the detection of abnormal cell formation and Stage 4 signifying that the cancer has metastasized to different parts of the body. While most diseases have a set pattern, cancer’s progression rate differs from person to person. For some, it may take a month or two for a cancerous tumor to fully develop; for others, it may lay dormant for decades before one starts noticing symptoms. Such variability in the disease is why even after two centuries’ worth of research in the field of oncology, scientists have yet to find a definitive cure. That said, a “cure” needn’t be the end-all-be-all as recent trends have shown a handful of biopharmaceutical firms that are trailblazing a new era of hope in the form of biotech for cancer patients across the globe. 

Recent cancer developments have enabled some of the world’s best oncologists to have a clearer understanding of cancer treatments in the near future. Groundbreaking new technology is being developed at an astonishing rate, and biopharmaceutical concerns with an aim to find potential cures are on the rise. One such company that I would like to highlight is NeoGenomics. NeoGenomics was founded in 2002 with a streamlined vision that is best summarized in its mission statement: We create better, more hopeful futures for people living with cancer. It’s in our DNA. This concise yet effective motto essentially summarizes the golden standard of cancer treatments in today’s age. Sure, a definitive cure for cancer doesn’t exist. However, this doesn’t mean that treatments to help better the lives of those battling cancer day-to-day don’t exist as well. NeoGenomics has established itself as a world leader in cancer diagnostics. They boast an impressive catalog of over 650 diagnostic tests, involving intricate DNA and RNA gene sequencing. Now if 650 plus tests seems a bit much, it’s important to see the logic behind cancer treatment development.

Cancer and the Importance of Diagnostics 

As aforementioned, finding an overarching cure for cancer is close to impossible due to the variability in the disease from person to person. That is why it is paramount for companies like NeoGenomics to develop a variety of diagnostic tests in order to create personalized treatments for patients. We can see this trend in similar companies such as Foundation Medicine, who have also committed themselves to developing personalized cancer treatment plans. Having a personalized approach to fighting cancer is a surprisingly recent development.

Everyone reading this has probably heard stories from cancer patients who have undergone chemo. Chemotherapy is the most widely used form of treating cancer, but its notorious consequences are never pretty. In addition to the surface-level drawbacks such as hair loss and immunity deficiencies, chemo’s biggest flaw is that it can only suppress cancerous cells for so long. Unless completely eliminated (which is close to impossible), tumors learn to adapt and resurface over time. Thus in the modern age of genetic sequencing, personalized diagnostic tests are the best asset in identifying the root cause of what causes the cancerous cells to resurface after initial treatments, enabling doctors and oncologists the best opportunity to ensure that cancer can be suppressed as long as possible with the fewest ailments to the patients. Such a task is no easy feat, however, NeoGeonomics has patented one of their premier cancer diagnostic tests, the Radar Assay.

Profit on the Radar? 

In March of 2021, the world of cancer-related biotech was put on notice as NeoGenomic’s Radar Assay diagnostic testing product got approved by the FDA. Radar Assay itself is a liquid biopsy that boasts an incredible sensitivity to the detection of cancer, down to a patient’s blood cells. Oftentimes, the difference between saving a patient’s life versus losing a patient to cancer comes down to how quickly doctors can identify a growing tumor. Radar Assay provides exceptional speed in the detection of cancerous cells, and many experts believe that it is a step above competitors’ diagnostic tests in terms of sheer accuracy. Blood that contains ctDNA (Circulating Tumor DNA) refers to DNA that comes directly from cancerous cells. If one is able to detect ctDNA in a person’s bloodstream, it is a very effective means for measuring cancer. Radar Assay boasts impressive accuracy in identifying ctDNA in patients, with astonishing accuracy. According to a recent tracer study, “Prior to neoadjuvant therapy, Radar detected ctDNA in 88% of patients (38/43) and allowed for ctDNA dynamics monitoring during treatment, surgical periods, and after therapy.” And compared to many competitors’ digital PCR Assay tests, Radar detected up to 10 times the amount of ctDNA.

So what does this entail? Well, NeoGenomics is quickly climbing the ranks of effective cancer treatments, and in the world of finance, it stands firm as a go-to choice for the onlooking investor. When analyzing the total addressable market of cancer diagnostic testing, in 2022 the market was estimated to be at USD 135.16 billion. As previously stated, cancer’s difficulty in finding a cure is why health experts predict that the number of cancer patients will only continue to grow well into 2030. Thus, by 2030, the market is expected to grow to an estimated $258.54 billion. To give a better measure of what this means, the CAGR between 2022 and 2030 is poised to be approximately 8.4%. This statistic highlights the remarkable growth rate of the cancer diagnostic market and the opportunities for investors looking to expand their portfolios. The key players in this market include Big Pharma giants like Roche Diagnostics as well as smaller biopharmaceutical companies providing key innovations like BioGenex. Few firms are as specialized in cancer as NeoGenomics. 

Since cancer research is one of the world’s most popular fields, innovation and product design are key to emerging as a leading cancer development program. Companies that end up becoming the most financially succesfull tend to have a product that they hone and develop to the point where it breaks through the consumer spectrum, thereby accelerating their growth and separating it from the rest of the field. As an investor, the key is to find that take-off point and invest right before the world begins to take notice. Timing is key and the timing couldn’t be better for NeoGenomics with their promising product Radar. On June 15th, 2023 NeoGenomics announced its first commercial insurance coverage partnership with none other than Blue Cross Blue Shield. For reference, BCBS is a global leader in health insurance, covering 1 in 3 Americans. In California alone, BCBS has an astonishing 31% of the market share in the state’s ACA healthinsurance marketplace. It’s pretty safe to say that the reach of BCBS is massive, and a partnership with NeoGenomics spells certain exposure to clients from across the nation. In combination with its already promising results of testing, NeoGenomics’ Radar assay product should gain traction at a brisk rate.

As things currently stand, NeoGenomics has a market cap of USD 2.05 billion, with a share price of $16.07. For the past few years, NeoGenomics has had negative cash flow and profit margins. However, in March of 2023, their cash flow suddenly shot up to a positive $12.43 million. The addition of Chris Smith, the new CEO of NeoGenomics, explains how such a turnaround could be possible. Mr. Smith has an extensive track record of remarkable quarterly turnarounds. In his four year stint with OrthoClinical Diagnostics prior to joining NeoGenomics, Smith accelerated revenue growth from 1% to double digit levels.

This indicates the next step in NeoGenomics’  commercial progression, as they are now ready to market their products instead of expending the majority of their revenue on the development of their products. Currently NeoGenomics has captured roughly 1.5% of the total cancer testing marketplace, however with the recent developments involving its new product, 10% is a milestone that certainly seems attainable in years to come.  Public companies in niche spaces like cancer diagnostic testing are known to optimize their bang-for-buck, and so trading for five times their revenue is certainly a possibility. That could eventually mean a total market capitalization as high as $20 Billion, up from today’s $2 Billion. 

The originally stated share price of $16.07 won’t stick around forever, so if you are an investor who is interested, now is the best time to jump into NeoGenomics. If you are looking for a company that is getting ready to capitalize on a new product engineered to detect cancer faster than the competition and quickly make its mark on the evergrowing field of oncology diagnostics, then look no further than NeoGenomics.

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HOW TO EARN A FORTUNE WITHOUT EVER MAKING A DOLLAR

There are hundreds of speculative biotech companies in the Spider S&P Biotech Index ($XBI). A shocking number of these companies do not earn an annual profit, and many don’t even generate a dollar in revenue. And yet, multi-billion dollar payouts are common. How do these scientists, entrepreneurs and executives manage to squeeze so much money out of unprofitable companies? Why does anyone go along with this?  Sudheer Narasima, our newest equity analyst, analyzes one such deal looking for answers…..

 

The niche field of immunology can seem complicated and difficult to understand. At the most simple level, Immunology is a critical field of study that explores the intricate workings of the immune system, which serves as the body’s defense against harmful pathogens, such as bacteria, viruses, and parasites. Understanding immunology is vital because it sheds light on the mechanisms that protect us from infections and diseases, as well as the dysregulation of the immune system that can lead to autoimmune disorders and allergies. The development and technology of new immunology treatments are always beneficial because our immune systems  are always combating viruses of all sorts. One such company who was at the forefront of these breakthroughs is Dice Therapeutics.  Dice Therapeutics focused on revolutionizing the space of immunology treatment by changing how the treatment was made. In a space where most treatments are administered through injections(intramuscular) or directly into the veins (IV), Dice focuses on creating treatments that can be taken orally. This would be much easier to administer, and even self-administer compared to the already existing treatment options. As we will discuss later, this is what gives Dice value and sets it apart. 

Employing an innovative approach, Dice Therapeutics embraces the power of AI-driven drug discovery to accelerate the identification of promising drug candidates. Through sophisticated algorithms and machine learning models, vast libraries of chemical compounds are analyzed and evaluated, predicting their potential to interact with specific biological targets. This computational prowess enables Dice Therapeutics to efficiently navigate the boundless chemical space and identify drug candidates that possess a high likelihood of success, saving valuable time and resources in the drug development process. One company that looked to capitalize on this innovation and add to its autoimmune arsenal is Eli Lilly. ($LLY) 

Eli Lilly and Company is a renowned global pharmaceutical company that has been at the forefront of medical innovation for over a century. Founded in 1876, Eli Lilly has built a strong reputation for its unwavering commitment to discovering, developing, and delivering high-quality medicines that address some of the world’s most pressing health challenges. With a diverse portfolio spanning numerous therapeutic areas, including neuroscience, oncology, diabetes, immunology, and more, Eli Lilly strives to improve the lives of millions of people worldwide. As a company, Eli Lilly has grown quite a bit and they wish to grow even further with this daring bet on Dice Therapeutics. 

Lilly Rolls the Dice…..

Eli Lilly has acquired Dice Therapeutics for about 2.4 billion dollars. The actual terms of agreement is Eli Lilly will buy Dice Therapeutics at 48 dollars per share and this deal is set to close during the third quarter of 2023. However, the interesting part of Dice Therapeutics is that the company has not even made profit yet. In fact, the company has been reportedly making losses. So why did Eli Lilly acquire this “unprofitable” company for such a large sum of money? Because Eli Lilly is willing to bet on the innovation and science behind Dice Therapeutics. The projected total addressable market for autoimmune diseases in 2025 is about 153 billion dollars. As I said before, Dice has plans to revolutionize this field. If Dice can even capture 10% of this market, they can earn around 15 billion dollars in annual revenue. As they push towards 20%, they will start to earn nearly 30 billion dollars. Although the company itself is not profitable currently, the technology and people behind Dice are extremely valuable in the field of immunology. This means that the science and research behind what Dice does is highly likely to be profitable in the future.

This kind of transaction isn’t all too uncommon. Merck has agreed to purchase Prometheus Biosciences for about 11 billion dollars. Prometheus is another company in the immunology field that is currently not making any profits. Yet, another big company is willing to bet big money on the science and research behind Prometheus. Going back to the Eli Lilly deal, the important question that arises is: what does this mean for investors? 

This deal could be very profitable for the shareholders of Dice Therapeutics. For example, if a person were to own 1% of Dice, they would be making 24 million dollars. A person who owns 1% of the company would be going from investing in a company that makes no profit, to reaping a $24 million payout. If we get a little more specific, we can find that the CEO J. Kevin Judice owns about 2.4%. This would mean that he would walk out with around 57 million dollars. Not a bad payday! 

As a group, the executive board owns about 5% of total shares. This would be 120 million dollars going into their pockets.  Around 6 months ago DICE stock was valued at 32.28 dollars per share. Now, it’s around 46 dollars per share. Around 6 months ago, selling 100 shares of Dice would have only yielded 3,200 dollars. Now, that same sale would go for around 4,600 dollars. This is not only potentially profitable for Dice shareholders, but potentially profitable for investors of Eli Lilly as well. The 2.4 billion is about 4 months worth of free flowing cash for Eli Lilly. On the other hand, Eli Lilly could make huge profits off of this new technology they just acquired. They just need patience and deep pockets; never a problem for a titan of the Big Pharma world.

 

For Eli Lilly, this looks like a low risk and potentially high reward deal. The same could be said for investors looking to invest in Eli Lilly right now. 

 

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VERTEX PHARMACEUTICALS: A BIG PHARMA IS BORN?

Long known as an innovator in the world of Cystic Fibrosis, Vertex Pharmaceuticals ($VRTX) is on the verge of launching  a number of potential blockbuster treatments for a range of new disease states. Is Vertex poised to become one of tomorrow’s pharmaceutical giants? 

By Joshua Mazher, Biotech Securities Analyst 

 

The life of a person with cystic fibrosis (CF) is often one full of several complications. Whether that be persistent coughing, constant wheezing, or several trips to the doctor’s office, CF is a miserable hand to be dealt to anyone. Even though the disease itself is rare relative to other diseases in America, it is one of the most commonly inherited disorders, with close to 40,000 people dealing with it in the country.

The keyword here is inherited. Anytime we are dealing with inheritance, the root of the problem can be whittled down to one thing: Genetics. The process of dealing with diseases that are passed down through genes can be complicated, to say the least. However, modern-day advances in molecular biology have led some of the world’s best scientists to discover the specific mutations that are at play when it comes to certain diseases passed down through generations. In the case of CF, the root cause boils down to a gene mutation called cystic fibrosis transmembrane conductance regulator (CFTR). In layman’s terms, it is a mutation that causes a person to develop unusually thick and sticky mucus, leading to a variety of complications mentioned at the beginning of this piece.

So CF exists… and? Fortunately, CF patients can rest assured that groundbreaking developments in CF medications have helped thousands find workable treatments to significantly help reduce the symptoms. A disease that was a certain death sentence just two decades ago is now eminently treatable. I’d like to shift our attention to one of the pioneers in developing effective treatments for CF, Vertex.

Vertex Pharmaceuticals: Hungry for Innovation and Growth 

Vertex ($VRTX) is a biopharmaceutical company that was founded on developing treatments for serious diseases. Vertex’s claim to fame lies in its groundbreaking pipeline for treating CF. The notable stages in development for treating CF are Ivacaftor, Lumacaftor, Tezacaftor, and Trikafta. These culminated into medicines that have been invaluable in helping CF patients across the world, while also forcing other biopharmaceutical companies to take notice of Vertex’s prowess in developing treatments related to molecular biology and gene therapy. These therapies have transformed Vertex into a highly lucrative, cash generating machine.

 As of 2023, Vertex’s pipeline of new medications is quite extensive, with CF being one of several other diseases that are in the company’s sights. Recently, Vertex has once again put the biotech world on notice as its sickle cell disease pipeline is making great strides. Gene editing therapy has long been one of Vertex’s primary partnerships for making critical breakthroughs in drug development, however, the company’s recent expenditure takes this relationship to a whole new level. In March of this year, Vertex made one of the boldest and most opportunistic moves since its founding– a partnership with world-renowned CRISPR Therapeutics costing a substantial 100 million dollars.

The specific therapy that is being provided to Vertex from CRISPR is a gene-edited therapy called Exa-cel. Without boring you too much with the specifics, this advanced therapy can be used to edit a person’s hematopoietic stem cells. These cells are responsible for producing fetal hemoglobin, which can typically only be produced during the infancy stages of one’s life. However, by editing the gene responsible for the production of hemoglobin, Exa-cel provides a promising solution by simply tricking the body into producing fetal hemoglobin in adults. Exa-cel marks the start of a potential Vertex-driven reign over the future of an ample innovation pipeline. In the cut-throat world of first-come-first-serve, timing is everything. Life may not be considered a rat race, however being approved for the next groundbreaking discovery in a major biopharmaceutical space certainly is. The timeline behind the stages of drug development is critical to determining which companies can profit the most from innovation. Vertex is leading the race to commercialize a cure for sickle cell disease. 

While initially the deal between Vertex and CRISPR was made on the premise of Type I diabetes treatments, the company quickly steered its sights on sickle cell disease, one of the more deadly/life-threatening diseases known to mankind. According to Mayo Clinic, sickle cell disease (otherwise known as sickle cell anemia) affects the red blood cells in the human body. Healthy blood cells should be round and flexible, however, those affected by the disease produce “sickle” or moon-shaped blood cells that are more rigid, This rigidity causes a lack of blood flow throughout the body, resulting in symptoms such as fatigue, pain, and delayed growth. However, thanks to the recent partnership with CRISPR Therapeutics, Vertex believes that it is on the brink of a breakthrough in a cost-effective and efficient drug treatment. Needless to say, Vertex isn’t the only company to attempt to derive a treatment for sickle cell.

Companies such as Bluebird Bio and Novartis are amongst several biopharmaceuticals that are attempting to get their respective sickle cell disease treatments approved. However, the leader of the pack is still Vertex as its sickle cell mission awaiting its final stages of approval. Specifically, Vertex is in the process of applying for a “BLA” or Biologics License Application. According to the FDA, BLA is, “a request for permission to introduce, or deliver for introduction, a biologic product into interstate commerce”. Meanwhile, most other competitors are still in the preliminary phases of approval. (This link shows the steps in the drug approval process). Based on how far along each company is on their respective sickle cell pipelines, Vertex is the clear favorite to launch their medicine into the market first, indicating a surge of profit heading their way.

As is the general theme of bio pharmacy overall, the world of biotech is full of stiff and unrelenting competition. So being ahead of the curve is paramount to the success of any up-and-coming bio company. Trying to upend biopharmaceutical giants such as Pfizer ($PFE) and Merck & Co. ($MRK) is a steep mountain to climb for any relatively new company like Vertex. For starters, let’s compare the numbers of Pfizer and Merck. Pfizer has a market cap of 226.15 billion USD with a P/E ratio of 7.89. Meanwhile, Merck has a market cap of 277.39 billion USD with a P/E ratio of 22.33. Right out of the gate, these numbers are hard to compete with for any company, much less those that are still in their infantile states. With a significant and positive cash flow statement alongside a relatively low P/E ratio, Pfizer’s history of continually churning out new and improved drug products makes it a titan in the industry. The same can be said about Merck, which was listed as having a net income of 14.53 billion in the past year alone. The only tangible way for a smaller-scale company to crack into the market and see exponentially growing dividends is by having an extensive pipeline with a history of fast-growing innovation that can convince investors to opt-in before their breakthrough… Sound familiar? Let’s reexamine Vertex again, shall we?

First, let’s look at the total market capitalization of Vertex on the stock market. As of the publishing of this article, Vertex is valued at approximately 88.52 billion USD with a P/E ratio of 27.38. While the numbers don’t necessarily stack up to Pfizer and Merck and Co., they are certainly good enough to hold their own in the market in general. With a relatively high capitalization of 88 and a half billion dollars, Vertex has a lot of room to spare in terms of innovative expenditures. As we’ve already discussed, they recently spent a fair penny in partnering with CRISPR, showing that they aren’t afraid to use their resources given the opportunity to be the first on a fast track toward a revolutionary new product like a cure for sickle cell disease. 

For any investors that believe that Vertex might be biting off a little more than it can chew, the numbers from the past year don’t lie. As of their latest quarterly report, Vertex holds $10.4 billion in cash, with no debt. As we’ve seen from Vertex already, it’s a company that isn’t afraid to stack the chips and aggressively opt into anything that helps them innovate. With the backing that they already have, as well as their general reputation of being one of the most efficient biotech innovators in the world, it is only a matter of time before their stock price begins to soar. It’s important to also mention Vertex’s growing pipeline. During its early stages after being founded in 1989, Vertex was known as a “One Disease State” company due to its solitary focus on treating cystic fibrosis. Even though CF was a great success for the company, investors noted the lack of other pipeline drugs compared to other more established brands like Pfizer. However, this isn’t the case in 2023. Vertex, as any highly prospective bio company would, has begun to stretch its wings. When reexamining its pipeline, we can see that Vertex already has quite a few medicines at or approaching their third phase of approval. Whether it be pain, sickle cell disease, or beta thalassemia, Vertex’s empire is only beginning to show its true potential. While of course, Vertex still has a lot of work to do to catch up with the established Big Pharma giants like Pfizer, their historical footprint in the treatment of diseases like cystic fibrosis and sickle cell shows that it has the potential to match the diversification (and larger market capitalization) of these Big Pharma titans, eventually. 

Pivoting back to consumer expenditure, another aspect to take into consideration is the effectiveness of the medications that Vertex can provide. Vertex’s revolutionary sickle cell disease pipeline is almost ready to hit the markets, and drug cost experts predict that the medicine produced will be cost-effective for most patients. While the price is listed at $1.93 million, patients and payors can be assured that it is a one-time cure. This is really where Vertex tends to stand out. Most other competitors will sell drugs, however, they must be taken throughout life. The modern-day paradigm for health-related drugs is effectiveness combined with convenience. Though the price tag of 1.9 million dollars is certainly hefty, it is a good deal because patients won’t have to consistently take it for years upon years. Of course, this price is set at face value, and the next step in Vertex’s path is the business negotiation side of things. Though the process can seem arduous at times, investors can rest assured that the drug will hit the market sooner rather than later and will have a huge impact on the future of pharmaceuticals. Overall, the ultimatum of any successful drug is if it works, and if so, how well does it work? It’s pretty safe to say that Vertex’s pipelines do work, and will work financially as well as clinically. If you are looking to expand your portfolio and opt into a company that advances innovation while staying one step ahead of the curve, look no further than Vertex.

 

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MODERNA’S MOMENT OF TRUTH

Moderna was the biotech darling of the Covid era. But with Covid revenues declining and new products still in development, does Moderna have what it takes to transform itself into an ominpresent biopharma player for the 21st century? 

 

By Nathan Suryabudi, Equity Analyst 

Moderna is a biotechnology company that has gained significant attention and success in recent years, particularly due to its groundbreaking COVID-19 vaccine. The company was founded in 2010 by a group of scientists, including Dr. Derrick Rossi, Dr. Kenneth Chien, and Noubar Afeyan, with the goal of leveraging messenger RNA (mRNA) technology to develop new therapeutics and vaccines.

Moderna’s mRNA technology is based on the idea of using synthetic mRNA molecules to instruct cells in the body to produce specific proteins. This approach has the potential to revolutionize the field of medicine by enabling the production of a wide range of therapeutic proteins within the patient’s body. This approach has the potential to treat a wide range of diseases by harnessing the body’s own cellular machinery to produce therapeutic proteins.

The company’s initial focus was on using mRNA technology to develop personalized cancer vaccines and therapies.

However, when the COVID-19 pandemic emerged in early 2020, Moderna quickly shifted its resources and expertise towards developing a vaccine against the novel coronavirus. They were able to leverage their mRNA technology platform to develop a highly effective vaccine in record time. Moderna’s COVID-19 vaccine, known as the mRNA-1273, received emergency use authorization in several countries and played a crucial role in the global vaccination efforts.

Moderna’s COVID-19 vaccine was developed in collaboration with the National Institute of Allergy and Infectious Diseases (NIAID) and the Biomedical Advanced Research and Development Authority (BARDA). The vaccine utilizes a small piece of the coronavirus’s genetic material, its mRNA, to instruct cells to produce the spike protein found on the surface of the virus. This spike protein triggers an immune response in the body, priming it to recognize and fight against the actual virus if encountered.

The success of Moderna’s COVID-19 vaccine has been extraordinary. Clinical trials demonstrated high efficacy rates in preventing COVID-19 infection, leading to widespread adoption of the vaccine worldwide. The company ramped up production and distribution to meet the global demand, which contributed to their financial success during the pandemic.

Due to the urgent need for COVID-19 vaccines, Moderna secured numerous supply agreements with governments and organizations, which boosted its revenues significantly. The company also benefited from collaborations with other pharmaceutical companies, such as Lonza Group, for large-scale manufacturing of the vaccine.

The success of Moderna’s COVID-19 vaccine has not only contributed to the company’s financial success but has also solidified its position as a leader in mRNA technology. The vaccine’s efficacy and safety profile have generated confidence in the broader application of mRNA therapeutics and vaccines for future diseases.

Moderna’s Revenue

Although Moderna has experienced a remarkable journey of growth, investors are becoming uneasy as to whether to invest in Moderna as vaccination campaigns progress and the global population reaches higher levels of immunization. The demand for Covid vaccines has begun to plateau. This saturation in the vaccine market has created uncertainty regarding Moderna’s ability to sustain its exceptional revenue growth. In 2020, Moderna reported annual revenue of $0.803 billion, marking a substantial increase of 1238.33% compared to the previous year. This surge was primarily driven by the development and production of its mRNA-based COVID-19 vaccine, which gained global attention and demand.

The following year, in 2021, Moderna’s annual revenue skyrocketed to $18.471 billion, representing a remarkable 2200.25% increase from the previous year. This surge was primarily due to the global distribution and sales of its COVID-19 vaccine, as it played a crucial role in combating the pandemic.

However, in the first quarter of 2023, Moderna experienced a decline in revenue compared to the same period the previous year. For the quarter ending March 31, 2023, Moderna’s revenue was $1.862 billion, reflecting a 69.3% decrease year-over-year. It’s important to note that this decline could be attributed to a variety of factors, such as changes in vaccine demand or competition from other pharmaceutical companies.

Looking at the twelve-month period ending March 31, 2023, Moderna’s revenue stood at $15.059 billion, representing a 33.37% decline compared to the same period the previous year. This decline indicates a reduction in revenue growth compared to the previous years, which can be expected as the initial surge in demand for COVID-19 vaccines may have subsided. The company’s stock price has declined precipitously along with the falling revenue.

Looking Ahead

Moderna’s future prospects appear promising, as the company looks to expand its focus beyond COVID-19 vaccines and delve into rare disease therapeutics. With its groundbreaking mRNA technology, which has already proven successful in the development of COVID-19 vaccines, Moderna is now aiming to leverage its programmable messenger molecule to address rare genetic conditions. 

The recent early-stage study results of Moderna’s therapy for children with a metabolic disease showed encouraging outcomes. The mRNA therapy enabled these children to produce a crucial enzyme that their bodies were previously missing, resulting in a significant reduction in dangerous metabolic crises. This positive clinical signal has prompted Moderna’s CEO, Stéphane Bancel, to express enthusiasm and commitment towards rare diseases, stating that “Moderna will be a rare disease company.

Moderna’s push into rare diseases comes at a time when several other companies have scaled back their efforts in this area. With a substantial cash reserve of approximately $16.4 billion as of March 31, Moderna has the financial capability to invest in this new therapeutic domain. The company has already increased its R&D budget to $4.5 billion and plans to hire additional employees to expand its pipeline and strengthen its capabilities. 

However, Moderna has experienced a significant increase in its long-term debt over the past few years. Starting in 2020, Moderna Experienced a notable increase of 184.32% in its long-term debt, bringing it to $0.11 billion. In 2021, Moderna’s long-term debt reached $0.599B, which is a 444.55% increase from 2020. This steep increase likely reflects the company’s efforts in scaling up its operations to meet the demand for its COVID-19 vaccine, as well as continued investments in its pipeline of mRNA-based therapies and vaccines. Moving forward to 2022, Moderna’s long-term debt continued to rise, with a 52.25% increase compared to the previous year. The debt reached $0.912 billion, indicating ongoing investments in research and development, manufacturing capabilities, and global distribution infrastructure.

By the quarter ending on March 31, 2023, Moderna’s long-term debt amounted to $0.831 billion, representing a 28.64% increase year-over-year. This suggests that the company is still actively leveraging debt to fund its growth initiatives and expand its product portfolio.

The potential for success in rare diseases is significant, as it offers lucrative market opportunities. The pricing for rare disease treatments can be substantially higher than traditional medicines, with some rare disease medications charging $1,000,000 or more. In addition, many of these kinds of medicines are so specialized, that they enter a market with little or no competition.

By creating a pipeline of mRNA-based therapies for rare diseases, Moderna aims to tap into this market and potentially become a leader in the field, drawing comparisons to renowned biotech companies like Genzyme.

Moderna’s mRNA technology’s programmability is a key advantage, enabling the company to apply the same formulation and targeting strategies to multiple diseases by simply tinkering with the genetic sequence. This versatility has been exemplified in Moderna’s extensive vaccine pipeline, which includes candidates for various infectious diseases.

Moderna Vs. Cancer 

In addition to rare disease therapeutics, Moderna is also exploring personalized cancer vaccines in collaboration with Merck. This indicates the company’s ambition to expand into other therapeutic areas and maximize the potential of its mRNA technology. 

The collaborative effort between Moderna and Merck in developing an experimental cancer vaccine shows promising results in the fight against melanoma, the most deadly form of skin cancer. The mid stage trial results, published recently, indicate that the vaccine, when used in combination with Merck’s Keytruda immunotherapy treatment, reduced the risk of melanoma spreading to other parts of the body or causing death by 65% in patients with stage 3 or 4 of the disease. This finding highlights the potential of this novel vaccine as an effective strategy to combat advanced melanoma. In the United States alone, there are almost 100,000 cases of Melanoma diagnosed each and every year. 

The experimental cancer vaccine developed by Moderna and Merck represents an innovative approach to all kinds of cancer treatment. Unlike traditional vaccines that target infectious diseases, this vaccine is designed to activate the patient’s immune system specifically against cancer cells. By utilizing messenger RNA (mRNA) technology, Moderna has developed a vaccine that instructs cells in the body to produce specific antigens found on melanoma cells. These antigens then trigger an immune response, enabling the immune system to recognize and target the cancer cells more effectively. The company is conducting extensive research to determine if this approach will work for a panopoly of different cancers. 

The combination of the experimental cancer vaccine with Merck’s Keytruda, an immune checkpoint inhibitor, has shown promising synergy in the clinical trial. Keytruda works by blocking the mechanisms that prevent the immune system from attacking cancer cells. When used in conjunction with the vaccine, it appears to enhance the immune response against melanoma, leading to a significant reduction in the risk of disease progression and improved patient outcomes. 

Should I Invest? 

Analysts and investors have shown cautious optimism about Moderna’s future prospects. The positive interim data from the early-stage studies, along with the company’s robust financial position, have instilled confidence in its ability to succeed in the rare disease space. Moderna has received FDA Breakthrough Therapy Designation for its investigational respiratory syncytial virus (RSV) vaccine candidate, mRNA-1345. This designation recognizes the potential of the vaccine to provide a significant improvement over existing treatments for RSV, a common respiratory infection that can be severe, particularly in infants and older adults. In addition, Moderna has other promising medications in the pipeline with four drugs in stage 3 trials and eight drugs in stage 2 trials. If Moderna continues to demonstrate safety and efficacy in its ongoing trials and obtains positive data in its rare disease programs, it could pave the way for a significant influx of therapies advancing from the laboratory to the clinic.

The rare disease market is already a large market, and it is projected to experience significant growth in the coming years. Based on Yahoo Finance, the market is estimated to increase from $161.4 billion in 2020 to $547.5 billion by 2030. If Moderna can capture just 10% market share they could earn around $54 billion in annual revenue. Established companies in this market typically trade for 5 times revenue, so that would be $$270 billion for Moderna. They are currently valued at just $47.81 billion as of June 20, 2023. 

However Moderna may find it difficult to rise to the top and gain an acceptable market share. With established companies like Pfizer,Roche, Abbott, Sanofi and Eli Lilly as competitors, Moderna needs to identify unmet needs within specific rare diseases, leverage their unique strengths, and differentiate themselves from competitors to succeed in the rare disease market.

Moderna’s stock has the potential to be a valuable addition to one’s investment portfolio, particularly in the long term, given the prospects of their innovative mRNA technology and a strong pipeline. Moderna has demonstrated its capabilities during the COVID-19 pandemic, but its potential extends beyond that as well. Moderna has already proven they can be a leader in a market, and few would be surprised if they can do it again in rare diseases or cancer vaccines. 

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SAGE THERAPEUTICS: A WISE INVESTMENT IN A DEPRESSION BREAKTHROUGH?

 

14,000,000 Americans suffer from persistent, tough to treat depression. Current medications leave a lot to be desired. Now Sage Therapeutics is about to launch a totally new way of treating the disease. Is this the opportunity biotech investors have been looking for?

 

By Nathaniel Suryabudi, Biotech Analyst 

When it comes to treatment, depression is a debilitating mental health condition that poses significant unmet needs. With millions of new cases reported each year, depression is a severe disorder that affects mood, thoughts, and daily functioning, often leading to a sense of hopelessness and despair. The exact cause of depression is not fully understood, but it is believed to involve a complex interplay of genetic, environmental, and biochemical factors.

Depression is particularly challenging to treat due to several factors. First, the diagnostic process for depression can be subjective and complex, relying primarily on self-reported symptoms and clinical assessments. This can lead to variations in diagnosis and difficulty in accurately identifying the condition in some cases.

Secondly, the available treatment options for depression are not universally effective for all individuals. For the past 60 years, monoamine-based antidepressants and SSRIs have served as the established treatment for chronic management of Major Depressive Disorder (MDD). These treatments involve daily administration, necessitating consistent usage and adequate exposure to maintain their therapeutic effects. They may not provide significant relief for everyone or may take upwards of 10 weeks to start working. The response to treatment can vary widely among individuals, and finding the right approach often involves a trial-and-error process. According to the Sequenced Treatment Alternatives to Relieve Depression (STAR*D) study, which was conducted in the early 2000s, around 66% of individuals with major depressive disorder did not achieve remission after the first medication trial. The study followed a sequence of treatment steps, where participants who did not respond to an initial medication were switched to a different medication or combination of medications. Subsequent treatment steps involved different medications, augmentation strategies, or even referral for other treatments like psychotherapy or electroconvulsive therapy.

The birth of Sage Therapeutics and Zuranolone

Sage Therapeutics is a biopharmaceutical company specializing in the development of novel medicines to address critical unmet needs in the field of central nervous system (CNS) disorders. The company was founded in 2010 and is headquartered in Cambridge, Massachusetts, USA.

Sage Therapeutics focuses on developing therapies that target GABA and NMDA receptors, which are key neurotransmitter systems involved in the regulation of mood, cognition, and behavior. The company’s research and development efforts primarily concentrate on conditions such as major depressive disorder (MDD), postpartum depression (PPD), essential tremor, and various forms of epilepsy.

In recent years, Sage Therapeutics has gained attention for its investigational drug called Zuranolone (previously known as SAGE-217), which is being developed for the treatment of MDD and PPD. Zuranolone is designed to modulate GABA receptors and has demonstrated promising results in clinical trials, showing rapid and sustained improvements in depressive symptoms. Zuranolone is an oral drug currently being investigated as a potential treatment for Major Depressive Disorder (MDD). What makes Zuranolone notable is its unique design, which aims to provide a rapid-acting and sustainable therapeutic option for individuals with depression. This novel molecule has the potential to represent a significant breakthrough in the current management of depression.

One of the key advantages of Zuranolone is its proposed treatment duration. Unlike traditional antidepressants that require daily administration over an extended period, Zuranolone is designed as a two-week, once-daily treatment. This shorter treatment duration could offer several benefits, such as increased convenience for patients and potentially improved treatment adherence.

Zuranolone’s rapid-acting properties are another promising aspect. Early clinical trial results suggest that it may lead to a relatively fast onset of antidepressant effects, providing relief for individuals with depression sooner than conventional treatments. This rapid response is particularly crucial for patients experiencing severe depressive symptoms or those in urgent need of relief.

Sage Therapeutics has engaged in several strategic partnerships to further its research and development efforts. One notable collaboration is with Biogen, a well-established biotechnology company specializing in neurological and neurodegenerative diseases. In December 2019, Sage Therapeutics and Biogen entered into a partnership to jointly develop and commercialize Zuranolone for the treatment of MDD and PPD.

Under the terms of the collaboration, Biogen obtained exclusive rights to develop and commercialize Zuranolone outside of the United States, while Sage Therapeutics retained exclusive rights within the United States. The partnership aimed to leverage Biogen’s global reach and expertise in neurology to maximize the potential impact of Zuranolone on a global scale.

By partnering with Biogen, Sage Therapeutics sought to accelerate the development and regulatory processes, expand the clinical program, and ensure the broad availability of Zuranolone to patients worldwide. The collaboration brought together the complementary strengths and resources of both companies to advance the understanding and treatment of depression, ultimately benefiting patients who are in need of new and innovative therapeutic options.

How many people and how much?

In 2020, it is estimated that over 21 million adults experienced at least one major depressive episode, with nearly 14 million individuals diagnosed with major depressive disorder (MDD). Additionally, approximately 500,000 cases of postpartum depression occur annually. The scale of these numbers underscores the substantial total addressable market (TAM) for depression treatments within the United States.

It is important to note that the TAM may fluctuate over time due to factors such as changes in diagnostic criteria, increased awareness and recognition of depression, and evolving treatment practices. Additionally, variations in access to healthcare, regional disparities, and cultural factors can influence the actual market penetration and utilization of depression treatments.

In 2016, individuals diagnosed with major depression exhibited significantly higher rates of healthcare service utilization compared to those without this diagnosis in the United States. This increased utilization was associated with average healthcare costs that were more than two-fold higher for individuals with major depression, amounting to $10,673, compared to $4,283 for those without major depression. The average amount spent per person per year to treat only major depression is $920 meaning the excess amount is due to things like emergency room visits and overnight stays. The price of Zuralone is not yet out yet as the drug has not been registered or marketed yet, but early signs is that it will be around $290 for 25 mg. The depression medication market has shown significant growth and presents exciting opportunities for pharmaceutical companies and healthcare providers. With the increasing prevalence of depression worldwide and a growing recognition of the importance of mental health, the demand for effective treatments has been on the rise. In 2020, the depression drugs market was valued at approximately $13 billion. This substantial market size reflects the significant investment and resources dedicated to the research, development, and marketing of depression medications. Looking ahead, the sales forecast for the depression medication market in 2031 is estimated to reach around $20 billion.

Should I invest?

JNJ’s Spravato is currently the only potential competitor to SAGE-217 in the market. Other candidates, such as Allergan’s Rapastinel and Vistagen’s AV-101, have failed recent clinical trials despite showing promise in earlier stages. Relmada Therapeutics is attempting to target the NMDA receptor with an opiate enantiomer called REL-1017, but research suggests this approach may not be viable due to the potential opioid-related adverse events. The trial methods for REL-1017 have also raised concerns, as they lack long-term evaluation and follow-up for potential opioid addiction/withdrawal. In contrast, SAGE-217 is expected to gain approval, resulting in a duopoly with JNJ’s Esketamine in a multi-billion dollar market. In addition, if the total depression market is $20 Billion by 2031, and if Sage Therapeutics can capture 15% market share, Sage can earn $3 billion in revenue per year. Established companies in this market typically trade for 5 times revenue, so that would be $15 billion for Sage and they are currently valued at just $3 billion. In addition to Zuranalone, the company also boasts a promising pipeline of other neurologic drugs. 

Sage’s stock could be a very powerful investment for one’s portfolio especially in the long-term as Zuranolone is just waiting to be registered. Sage Therapeutics is a worthwhile endeavor barring any obstacles with registration.  With the low competition in a multi-billion market they could be a shining star within the depression medication community. There are few companies that are better set up for success in this industry than Sage Therapeutics. 

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REGENERON PHARMACEUTICALS: THE NEXT PLAYER IN THE OBESITY MARKET?

New, effective obesity treatments seem to be taking the world by storm. After constantly struggling with a growing obesity problem, suddenly Ozempic, Wegovy and Mounjaro have burst upon the scene. The media is filled with stories of celebrities  losing thirty, forty pounds or even more. But regular people are struggling to afford these medications, and, as their usage grows, many are pointing out that the treatments still leave much to be desired.  

These shortcomings may leave space for other biotech contenders to enter the market. Among the players who want to enter the game are Regeneron and AstraZeneca, who are partnering to attack obesity from a whole new angle. Given that the market for the medical management of obesity just keeps growing, should investors take Regeneron’s new approach seriously? 

By Joshua Mazher, Securities Analyst 

 

Let’s face it – regarding America’s health concerns, obesity has been one of the main focal points of 21st-century medical care. Despite the groundbreaking developments in some significant health categories such as cardiovascular and vaccine-preventable diseases, obesity rates have consistently climbed over the last several decades. It doesn’t take a genius to know that if these trends continue, our society will face a tsunami of health and economic challenges. That said, some of the world’s leading biopharmaceutical companies have begun to take the bull by the horns and facilitate research into the oftentimes taboo subject of weight gain.

Regeneron is one such company that has begun to shift its sights toward furthering obesity research, down to the genetic level. Known for its development of “REGN-COV 2”, a monoclonal antibody cocktail created to cure COVID-19, as well as a long history of creating medicine to help with various autoimmune diseases and cancer, Regeneron has been making steady process in the development of a cure for obesity. Of course the term “cure” must be used with a grain of salt because obesity is a multi-faceted medical condition with no singular cause. However, the research has made significant strides in identifying certain areas within a genome that trigger obesity (we will touch on a specific example later on). The results have yet to materialize into the magical cure to eradicate obesity once and for all – however, the trajectory of the entire operation points strongly in favor of those willing to invest.

The Regeneron Genetic Center, one of the world’s most renowned pharmaceutical research institutes, has been studying a specific mutation of the GPR75 gene. Why should anyone reading this without an extensive background in biology care? Well, in simple terms: those who have an inactive copy of this gene weighed, on average, 12 lbs less than those without it while additionally being 54% less likely to develop obesity throughout their life. Now those numbers are certainly more eye-popping to people without a Ph.D. in molecular biology. However, what’s considered to be the biggest breakthrough isn’t necessarily the drug product itself, but the selling point. Currently, Regeneron may have an advantage over other obesity market giants like Eli Lilly and Novo Nordisk because of a very unique feature— short-term usage. Right now, patients taking Ozempic, Wegovy or Mounjaro must commit to taking the costly medication every month, for life. Regeneron’s new drug candidates work with a different method of action than anything else available currently. Regeneron seeks to attack obesity at the genetic level; seeking to fix the cause, rather than just the symptoms.  This leaves the company with a much broader arsenal against the bad genetics that cause excessive weight gain. “Discovery of protective mutations – many of which have been made by the Regeneron Genetics Center in its eight-year history – will allow us to unlock the full potential of genetic medicine by instructing on where to deploy cutting-edge approaches like gene-editing, gene-silencing and viral vector technologies”   said George D Yancopoulos, MD, PhD, President and Chief Scientific Officer, Regeneron. 

Obesity: A Big, Fat, Market Opportunity

As any experienced biotech investor will say, research initiatives on a major health concern will have their ups and downs, especially on the financial side of things. A breakthrough discovery can be revolutionary just as much as it can be shortlived. The process of FDA approval is a tough one, and one man’s trash can easily become another man’s treasure, and vice versa. However, positive long-term trends are the pot of gold for anyone with an appetite for ownership of the biotech world. Looking at day-to-day or even month-to-month trends will be futile, as increases of up to 400% can turn into losses of 200% the very next cycle. Thus, when analyzing any breakthrough discovery, it’s important to wait and look at the trends. Fortunately for us and unfortunately for obesity, the trends of obesity-related medicine production all point towards greater revenue and significantly more attention in the years to come.

In 2021, the total obesity market was valued at $14.02 billion. A sizable market, but the real statistic to pay special attention to is the CAGR. CAGR, or compound annual growth rate, is a special way to calculate the growth of a company over a specified time frame. In our case, the financial trends show a CAGR of approximately 10.1% through 2030. The trend shows that approximately every seven years, the market will double. But some analysts expect the market for obesity drugs to grow at an even more accelerated rate, reaching $200 billion within the next ten years. 

On a more pragmatic note, biopharmaceutical concerns such as Regeneron have certainly put their foot in the door, however, the path to massive obesity reductions has still not materialized. Ultimately, obesity is a tried and tested field, with many clinical setbacks along the way. Medicine might provide glorious results, but at a cost of constant usage throughout the course of one’s life once a person commits to a certain medication. Nevertheless, the partnership between Regeneron and AstraZeneca is one example of several potential partnerships between major biopharma companies and the heavyweight Big Pharma brands. As the aforementioned CAGR of 10% suggests, obesity is quickly climbing the ranks of the most sought-after treatments and only time will tell just how much gold lies in the following decades.

Competitors and Valuations

Perhaps the most recognizable success story in the obesity market is Novo Nordisk’s Ozempic. It, alongside its sister drug Wegovy , has begun to really flourish this past year. In 2022 alone, Novo Nordisk’s obesity drugs brought in 2.5 billion dollars in sales , double its sales from 2021. Such numbers prove that the rise in obesity rates across all demographics in America has begun to take effect on potential clients. This entails deeper pockets for motivated biopharmaceuticals to capitalize on making the next breakthrough in obesity, churning out improved products over the years. With this in mind, let’s look at some valuations.

Currently, the two biggest companies invested in the obesity market are Eli Lilly and Novo Nordisk. In fact, experts are claiming that by 2030, each competitor could capture 40% of the entire obesity market. It’s clear that these juggernauts won’t be overtaken anytime soon, however, their respective Price to Earnings ratio is steep for newcomer investors. As of June 6th 2023, Eli Lilly’s P/E ratio is 64.01 while Novo Nordisk’s P/E ratio is 41.54.  This means that just one share of Novo Nordisk currently sells for 64 years worth of expected profits! Meanwhile, Regeneron’s P/E ratio is a low 19.11. Chances are if you are reading this article now and haven’t already invested in either Lily or Novo, it might be too late to gather up any major profit opportunities. However, Regeneron’s miracle drug breakthrough could be the future, and the chance to capitalize on major profits is now.

Still not convinced? Well, the additional benefits speak for themselves. One study has shown that those who have taken obesity medication have reduced the risk of heart attacks, strokes, and cardiovascular deaths by 17% or more. Profits and revenues aside, the human value of the obesity market is incomparable. Ultimately, being heavily overweight will cause several health problems for anyone, with diabetes and cholesterol being only the beginning. For the average American, these increasing annual rates should be frightening, however for the keen investor, it is a window of golden opportunity that will quickly close unless action is taken. With obesity showing no signs of slowing down, there will only be more and more demand for patients who want drugs that are effective, efficient, and ultimately worth the purchase. AstraZeneca’s partnership with Regeneron is only the beginning. Once Regeneron’s drug starts to gain traction, profitable opportunities could multiply for the company, given it’s unique clinical approach. 

So where does this put the willing investor? Luckily for anyone reading this right here and now, the next few years will serve as the foundation for significant long-term profits off of research-based biopharmaceutical companies like Regeneron that have begun to develop novel, gene based drugs to combat obesity. Profit margins will only continue to rise from here, and the world will quickly take notice. Don’t wait before it’s too late. Obesity is fast becoming a global health priority, and Regeneron’s discovery and research of  lasting medical care is a clear indicator of the future of biopharma. It should be at the forefront for eager investors searching for an opportunity to take advantage of the ever-increasing obesity market.

 

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THE SHEEP IN WOLF’S CLOTHING: WHAT BIOTECH INVESTORS NEED TO KNOW ABOUT HEALTHCARE REFORM

 

The passage of the Inflation Reduction Act (IRA) has been hailed by many as a crackdown on Big Pharma. The focal point of the legislation has been the Federal Government’s new authorization to negotiate prices for drugs offered through Medicare. This authorization has long been feared by biotech and Big Pharma investors, the rationale being that the government will simply name whatever price it wants, robbing pharma investors of profit and stunting incentive to innovate new medicines. 

However, it turns out, fears have not matched reality. In fact, many provisions of the new law stand to benefit pharma investors in a big way. What was supposed to represent a “crackdown” on excessive pharmaceutical profits may, in fact, represent one of the largest investor bonanzas of the twenty-first century. 

By the Sick Economist 

 

Price negotiation with Medicare. Just this little phrase sent shivers down the spines of pharmaceutical investors for years. It was the ultimate boogeyman. For decades, Medicare had to pay the same rate as the best rate offered to commercial insurers. Even though the program represented the single largest buyer of pharmaceuticals in the world, the program was not allowed to negotiate directly on drug prices. The rationale was simple; there would be no real negotiating with the largest provider of healthcare services in the world. Coverage by Medicare is so essential for the success of a drug, access to millions of elderly patients so critical, that Medicare would unfairly dominate any negotiation. Without access to tens of millions of elderly Americans, a drug would have little chance of success. Thus, Medicare could just name its price, whether that price covered Big Pharma’s costs for research and development, or not. Negotiation with Medicare was seen as a potential catastrophe for the global pharmaceutical industry. 

But reality has not turned out that way. Some would blame the IRA’s generous provisions on an overly powerful pharmaceutical lobby in Washington, others would say that our government, in its wisdom, decided to keep the profit flowing in order to encourage the development of new treatments and cures. But whatever the cause, two things happened. 

First, the actual Medicare negotiation provision of the law is not so bad. What, when, and how Medicare can negotiate price is quite limited. 

Second, perhaps most importantly, Big Pharma got something in exchange for giving up pricing power in its Medicare business. While pharma investors will receive somewhat less profit on certain highly visible blockbuster drugs, the new law contains a gift to the pharmaceutical industry unparalleled in American history. 

Medicare Negotiation: Limits on the Price Limits

The scenario that made pharmaceutical executives wake up in a cold sweat was the idea that Medicare would be able to negotiate prices the way that any commercial insurer negotiates prices. For example, United Health offers pharmaceutical coverage for thousands of drugs. Very simply put, they are free to use every tool in their substantial arsenal to wrangle the lowest prices they can for the wide range of pharmaceutical products that United’s patients expect and demand.  

Big Pharma’s struggles with PBM’s are infamous. Suffice it to say, as America’s largest insurers have gone from big to behemoth, those negotiations have gotten tough. It’s the massive, all-encompassing nature of these insurance companies that allows them to drive hard bargains. If you miss out on a deal with United, you miss out on millions upon millions of patients. 

The “sum of all fears” was that the global pharmaceutical industry would wind up in the same position with Medicare. If United is huge, then Medicare is mind boggling. 10,000 Americans per day receive Medicare cards. 83,000,000 Americans currently depend on Medicare for their prescription medications. If a pharmaceutical company were to be excluded  by Medicare, it would be catastrophic for their business. Thus, if Medicare were allowed to negotiate dirty, like United Health, Aetna, or other private entities, it would be the stuff of nightmares for pharma executives everywhere. 

But that is not what wound up happening. As German statesman Otto Von Bismark once famously quipped, “One ought not witness the making of sausages or the making of laws.”  

The actual provisions of the new IRA are quite gentle on pharma. Law firm Holland and Knight describes the new legal provisions: 

 

The legislation allows the Medicare program to set the price of certain high-expenditure prescription drugs. Negotiation is limited to the single-source drugs with the highest-spend in Part B or Part D for 1) U.S. Food and Drug Administration (FDA)-approved drugs for which at least seven years have elapsed from approval and for which there is no generic on the market and 2) FDA-licensed biologics for which at least 11 years have elapsed since licensure and for which there is no biosimilar on the market. Small biotech drugs (until 2028), orphan drugs, low-spend Medicare drugs and plasma-derived products are excluded from price negotiation.

Drugs subject to the new negotiated price requirement will be initially selected in 2023, and the prices set will be applied beginning in 2026. Drugs must be selected by the Centers for Medicare & Medicaid Services (CMS) and an agreement must be reached with the manufacturer two years before the new price will apply.

Specifically, the bill directs HHS to negotiate prices for:

2026 (only Part D drugs eligible for negotiation): 10 drugs based on Part D spending2027 (only Part D drugs eligible for negotiation): 15 drugs based on Part D spending2028 (first year both Part B and D drugs are eligible for negotiation): 15 drugs based on combined Part B and Part D spending2029 and beyond: 20 drugs based on combined Part B and Part D spending

 

On the most simple level, the IRA does not unchain the Federal Government to perform the kinds of “no holds barred” negotiations that are common in private industry. The provisions ensure that new, groundbreaking drugs will still remain highly profitable for pharma investors for between seven and eleven years. Additionally, certain kinds of highly specialized drugs will remain protected and highly profitable. Lastly, the Federal Government must choose a limited number of drugs that can be negotiated. It’s likely that Medicare will choose only the most established, high profile and expensive drugs to negotiate. That means that one of today’s pharmaceutical titans might only have to negotiate 20% or less of their portfolio with Medicare. For every other drug, it’s business as usual.  

Some would say that these provisions have been watered down, while others would say that the new law wisely preserves the strong profit motive that drives business people to take big risks in pursuit of innovative new drugs. Suffice it to say: Medicare’s new, but limited, mandate to negotiate will have far reaching effects on corporate strategy, but is very far from the calamity that Biopharma executives feared. 

Backdoor Bonus 

Perhaps the single most important provision of the law is the least understood. As of 2025, no American over the age of 65 will ever pay more than $2,000 a year for medication. Ever. 

As Anchorman’s Ron Burgundy would say, “Uhhhh, I’m kind of a big deal.” 

This change is indeed, a “big deal.”  Obviously, this sounds like a great thing for America’s seniors. Although their exposure to pharmaceutical costs is already limited on Medicare, they still often wind up facing co-pays, and “catastrophic” pharmaceutical coverage doesn’t kick in until they spend $7,000 per year on drugs. Now, that limit will effectively be just $2,000. 

Obviously, this will be a popular change amongst America’s senior citizens. But what the general public doesn’t realize, is that it will be an even more popular change amongst American’s senior pharmaceutical executives. Right now, both seniors directly on Medicare, and Seniors on Medicare Advantage programs, must deal with a system that forces them to share at least a modest amount of cost for their own pharmaceutical decisions. For many disease states, there are a variety of pharmaceutical choices, and the different copays force a senior to think like a competitive shopper. Does Grandma  really need the latest, most advanced drug for her diabetes, or would an older, generic drug work almost as well for a much lower price? Right now, both doctors and patients are incentivized to design the most affordable medication regimen that works. 

Starting in 2025, that all goes away. After Grandma pays $2,000 out of pocket in one year, she and her doctor can choose any medication for her, and the price will be the same: $0.  Why bother with an older generic, when the latest, greatest medicines will all be free?  

Untethering senior citizens from financial responsibility will enable Big Pharma to push the most expensive new drugs. As long as they are just a little bit better than older, cheaper drugs, doctors will feel free to recommend the newest, most expensive stuff to every one of those 85,000,000 Medicare Beneficiaries. If, today, your typical senior takes five medications, four being generic and one being a new, branded drug, by 2030 it’s’ very likely that the ratio will be the exact opposite. Except for the poorest seniors (who may still see $2,000 as a lot of money), Medicare beneficiaries will now have every incentive to choose the newest, most expensive medication every time. 

The result is a colossal “win/win” for elderly patients and pharma investors. The big loser will be the American taxpayer, who would probably kick the wall and scream if she really understood what was happening. How on earth does unlimited drug expenditure for seniors help to reduce inflation?  You would have to ask the people who decided to call the new law “the Inflation Reduction Act.”   I guess it sounded better than the “Big Pharma Profit Improvement Act.” 

Other Provisions 

There are other pieces of the law that are attracting a lot of media attention, but, in reality, will be of minor significance to patients or investors. 

Perhaps the part of the new law that has attracted the most media hype is a $35 out of pocket maximum for insulin. While this will help millions of Americans in the short term, this new provision will be more or less neutral in the long run for a few reasons. 

The first reason is that science has gone about as far as it’s going to go with insulin. In the last twenty years, we have seen radical improvements in the features and benefits of various kinds of insulin. Rather than insulin being something that patients must take several times a day with mercurial highs and lows, millions of patients can now take insulin once a week, or less. This is about as far as this technology is going. The $35 price cap is nice, but most of the medicines will be going generic over the next few years anyhow. 

The second, most important reason why the insulin copay cap is over hyped is: insulin as a category is rapidly losing its importance. The recent domination of the GILP-1 family of medicines means many millions fewer people will need insulin moving forward. Famous medicines such as Ozempic and Mounjaro will help millions lose enough weight that their diabetes will never progress, and they will never need insulin. However, currently, millions upon millions of pre-diabetic and early diabetic patients are not taking a GLP-1 because Big Pharma has set these prices very high. By 2025, it won’t even matter what the price is: 85,000,000 senior citizens will have unfettered access to modern, expensive diabetic and obesity medicine no matter how high the price is set.  Of course pharma executives are happy to cap the price of insulin. Medicare negotiators just won yesterday’s war. 

Lastly, the new legislation provides some modest incentives to support the adoption of “biosimilar” drugs. Biosimilar drugs are the twenty-first century equivalent of generic drugs. The only difference is that these drugs are produced by genetically modified, living bacteria, rather than churned out in a lab. This makes them more challenging to produce than traditional generic medications. The new incentives should help foster further innovation in the creation and adoption of biosimilars. However, this remains a niche category, and is unlikely to cause too many headaches for pharmaceutical investors. 

 

Overall, the Inflation Reduction Act should please millions of Americans. It means the Boomers will essentially enjoy any medications they want for decades to come. It means that the companies who provide these medications should find ways to reap unprecedented profits. The only loser would be the American taxpayer, or any American who worries about our national debt and our nation’s rapidly deteriorating fiscal picture.  But that is a different analysis, for a different day. 

 

The Inflation Reduction Act will limit medication costs for millions of American seniors while opening up the floodgates to unlimited profits for biopharma investors. That’s a deal we can live with. 

 

To Read More about the IRA In Detail:

https://www.hklaw.com/

 

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3 BIOTECH TRENDS FOR 2023

 

By The Sick Economist

 

 “Smooth Seas Never Made a Strong Sailor” 

2022 has been one stormy year for biotech. XBI, an exchange traded fund that broadly represents the more speculative end of the biotech world, has fallen by more than 40%. This is in addition to a precipitous decline in 2021. Panicky investors have been abandoning ship left and right, leaving only the most dedicated biotech investors at the helm. 

Why has the world of speculative biotech taken such a beating lately? With the Fed rapidly raising interest rates to fight inflation, the entire universe of speculative stocks has been crushed. After many years where “risk on” plays were in vogue, investor sentiment has suddenly begun to favor established companies with reliable cash flows. Most names in the XBI do not fit that description. Most biotech companies in this corner of the market are start ups striving to pioneer new science. They are the farthest thing from steady and stable. 

Does that mean that the entire biotech enterprise is heading for the rocks? No. Not at all. If anything the experienced pilot realizes that there are huge rewards just over the horizon. Every day 10,000 Baby Boomers get Medicare cards, which means that demand for new medical treatments will only continue to grow exponentially.   Additionally, the long term return of the XBI index has been incomparable; In 2012, the index was valued at just $7.73. Today, even after the intense pressure on the sector, the same index is worth around $80. In a decade, the biotech investor with the steady hand and nerves of steel has earned more than a 1,000% return. There is no reason to think that the next several decades couldn’t produce the same kind of returns. 

A sailor can’t control the weather. But he can maximize his results by understanding the prevailing winds, and adapting his sailing techniques to suit those winds. How does he trim the sails? What course does he set? Does he provide a steady hand at the helm?  A sailor who understands what is going on in his environment has a much better chance of reaching calm waters than a novice who panics. 

Below, we discuss three big trends in the biotech world for 2023. As the saying goes, “prayer is not a strategy.”  Understanding these trends, and how they fit the larger investment picture, will help you plot a steady course for your financial ship. 

 

1. Cash is King 

For many years after 2008, money was cheap or downright free. Almost anyone could borrow money cheaply at great terms. This was because the Federal Reserve lowered interest rates to combat the Great Financial Crisis and never really raised them again. This trend became even more pronounced during the Covid crisis. It became so easy for biotech companies to raise large amounts of money, that it seemed like all you needed was a test tube and a powerpoint to raise $100 million. According to Biopharmadive.com, in 2021, at the height of Covid craziness, 100 biotech companies went public, raising more than $15 billion in total. 

That didn’t end well. Many of those newly public companies saw their stock prices collapse within months of their debut on the market. Legions of investors were wiped out. It wasn’t uncommon for speculative grade biotechs to lose 70% or more of their market value. 

This boom and bust has led to a situation that is the dead opposite of 2020 and 2021. The funding spigots have suddenly been turned off. While it used to be easy for even the most questionable ventures to raise funds, now the opposite is occurring; many of the most worthy endeavors are starving for capital. 

Amongst many of the young companies that went public between 2018 and 2021, most were unprofitable, and many were so young that they didn’t even have any revenue yet. They were still running tests in phase 2, or even phase 1 of new technologies, which meant that they were at least several years away from real revenue, let alone profit. Some companies went public without even having any molecules in human testing!  

At the time, the assumption seemed to be that investment capital would just be available forever. Unfortunately, that turned out to be a bad assumption. “Forever” has come and gone, and now investors have become very reluctant to fund money burning biotech start ups (a stock crash will tend to have that effect). 

This doesn’t mean that no biotech will ever be able to raise funds ever again. This just means that today’s young companies need to be able to stay alive long enough to show real, measurable results in the clinic. Mouse Models and theories will not be enough to raise money moving forward; real results in people will be required. 

In order to keep moving clinical development forward, companies need cash. Basically, the companies that did a good job of raising cash when times were good still have outstanding prospects; companies that never bothered to build up a proper war chest are realistically looking at bankruptcy. These days, the wise investors focuses on companies with a “long runway,” i.e. enough cash in the bank to keep the whole enterprise functioning until clinical results “take off.” What is considered a strong cash runway? How does an investor measure? 

A good cash runway is not a number, it’s a situation. If your company has $100 million in cash, and your clinical operations burn about $25 million per year, it could be said that you have a runway of 4 years. This would be considered to be a comfortable situation. This means that your team has 4 years to produce real, tangible results. At the end of four years, hopefully your company will have produced enough real results to more confidently raise investor capital, or, most optimally, actually produce revenue by selling something. 

On the other hand, if your company has $100 million in the bank, but typically spends $100 million per year on clinical operations, that means that your runway is only one year. That is a bad situation. It means that a very real risk exists that your enterprise will run out of money before it can produce enough clinical results to merit further funding. 

In a new world where investment capital is scarce, you can save yourself a lot of stress by choosing to invest in companies with strong runways. Three companies that currently have a runway into 2025 are: Zentalis ($ZNTL), Sage Therapeutics ($SAGE) and Regenex Bio ($RGNX).  All three have clinical programs with agents in at least stage II testing, meaning that they could well have viable products by 2025, before they run out of cash.

How can you determine if your target companies have a strong cash runway? These days, cash is all that analysts talk about. This means that most companies in this sector will present this information plainly in their press releases when they release their quarterly financial reports. Every public company must release quarterly financial reports, and most will produce easy to read, easy to understand press releases to update the investing public on the company’s progress. These press releases typically feature a discussion of the company’s cash position. Make sure you do your homework to help you pick some biotech winners that will stay afloat during these tempestuous times. 

 

2. More for mRNA 

One of the reasons why biotech remains one of the most attractive investment sectors is that this industry’s impact on our day to day lives is so enormous and tangible. If you have any doubts about this statement, consider the current Covid scenario in the Western World vrs. China.

Towards the end of 2022, the Western world has mostly returned to normal. Although certain socioeconomic consequences of Covid will be felt for decades, most Americans and Europeans today feel comfortable not wearing masks, and almost total freedom of movement has been regained. Group events like the World Cup in Qatar and Art Basel in Miami have had bigger attendance than ever. 

Compare that to the authoritarian hellscape that is China. Covid never ended in China. Harsh lockdowns have been constant, and there is nothing at all about Chinese life that resembles their pre-covid world. It’s almost surreal to watch reporters in China face the camera wearing masks and full Covid garb when the threat has been neutralized on this side of the globe for at least a year. 

Why is there such a yawning gap between East and West? There are a number of complex socioeconomic factors that could be discussed, but for this post, the most important fact is: the Chinese made vaccine doesn’t work. It never really worked. According to The Economist:

In much of the world, hard lockdowns to curb transmission of SARS-CoV-2 seem a thing of the past. Not in China. On April 19th, Shanghai entered its third week of a strict lockdown, having registered 19,442 new transmissions the day before (ten deaths have been recorded in the current wave). The disruptions clearly have a huge human and economic cost, but the government appears to have no clear plan B. The main problem is that the elderly in China are insufficiently vaccinated. But it does not help that at one or two doses, at least one of its vaccines is less effective than an mRNA shot widely available elsewhere.

(April 19, 2022).

As 2022 wore on, the situation in China didn’t get better; in fact, it got worse. As the West has returned to a more typical existence, China’s lack of mRNA vaccine has only cost it more and more (literally; the economic damage to China, due to extensive lock downs, has been incalculable).  

The gulf between the West and East is more socioeconomic than clinical; The Chinese Communist Party has steadfastly refused to admit that their non mRNA vaccines don’t work well. But politics should not be the main lesson drawn from this situation; the main lesson should be: mRNA technology is a new and powerful tool in the never ending war against human disease. 

Covid isn’t the end for mRNA, in fact, it’s just the beginning. The fact that the technology could be adapted so rapidly to fight Covid was just a happy coincidence; prior to Covid, the technology was being tested for a wide range of other applications. 

“We now return to our regularly scheduled program,” as the saying goes. With Covid largely in the rear view mirror (at least for the West) scientists are now re-focusing on their original mRNA targets. 

The most well known players in the mRNA field are Moderna ($MRNA) and BionTech ($BNTX).  These two companies are now applying their messenger RNA technology to a vast array of clinical investigations; other respiratory diseases, a variety of cancers, and even HIV are all in the companies’ crosshairs. 

Not to be left behind, other major pharmaceutical players are rapidly acquiring smaller biotech firms so that they can develop their own mRNA platforms. Sanofi Aventis has lately gone on a biotech buying spree and Pfizer has hungrily been on the prowl to increase its mRNA capabilities. 

In short, Covid was just the beginning for messenger RNA technology. The astute investor will be following this space, and looking for long term investment opportunities. 

3. All In on Allogeneic 

Another world changing technology is called Car-T therapy. Car-T therapy was not invented in 2022; but 2022 was the breakthrough year where it really became clear that the therapy has legs. 

Car-T is a way of treating cancer (and, soon, other diseases) by which immune cells are removed from the patient’s own body, genetically modified in a lab to fight a particular cancer, and then reintroduced into the patient’s body. The new, “souped up” cells then do a much better of fighting a particular cancer than they would have naturally.  

These treatments have been available for a while, but they are just now gaining widespread acceptance in the oncology community. In 2022, Gilead sciences saw two of its Car-T treatments grow by 72% (Tecartus) and 81% (Yescarty). Analysts now expect these treatments to grow into blockbusters. 

So the “Car-T” concept (modifying immune cells to fight cancer) is now proven, both clinically and commercially. But these new medicines still represent just a fraction of what they could be. Right now, the process is extremely labor intensive. Each particular patient has her cells extracted, flown to a special lab, custom modified in that special lab, and then flown all the way back to her to be reinjected. The process is expensive and time consuming. 

Enter: Allogeneic cells. These treatments are also referred to as “off the shelf” cell immune cell treatments. These are special immune modified cells that can be mass produced, inventoried and dispensed just like any other modern pharmaceutical product. Instead of the laborious process of custom making each treatment for millions of cancer patients, the idea is to create cell infusions that can benefit from modern mass production techniques. 

So far, this concept is just that, a concept. But allogeneic cell therapies are getting closer and closer to reality. In 2022, several companies released data that suggests that mass production of cancer killing cells is not just a dream. Additionally, these allogeneic treatment are being targeted against both blood cancers and solid cancer tumors. Up until now, Car-T has only been effective against blood cancers. 

Three companies that present solid data regarding allogeneic cell therapies are: Caribou Biosciences ($CRBU), Allogene therapeutics ($ALLO) and Crispr Therapeutics ($CRSP).  All three are well funded, feature partnerships with major Big Pharma players, and have presented data that seems to be pointing towards real world, commercially viable products. 2023 should bring some exciting clinical advances in this niche. 

Ask any long time sailor, and he’ll tell you that short term fluctuations in the weather can be unpredictable. All that really matters is keeping a firm hand on the wheel and a steady eye on the horizon. 

Despite the recent extreme turbulence that has buffeted the biotech sector, demand for cures is higher than ever. The ability of science and industry to meet that demand is also unprecedented. The investor who stays her course, no matter how violent the tempest may become, may very well earn outsized rewards. 

 

 

Disclosure: The Sick Economist owns shares in $CRBU, $SAGE, $MRNA and $ZNTL 

 

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NEW HORIZONS IN CANCER TREATMENT: WHAT INVESTORS NEED TO KNOW

By Subin Im, PharmD 

 

With over 700 cancer drugs in late stages of development, the percentage of cancer medications in the overall drug pipeline increased from 26.8% in 2010 to 35.2% in 2019. Therefore, it is no surprise that the global oncology medication market value is expected to grow from $135.5 billion in 2020 to $274.4 billion by 2030 at a CAGR (compound annual growth rate) of 7.5%.

Due to these innovations, cancers that once had no available treatment options are now being cured. There is no doubt that this industry has come a long way, but there is still a long way to go. Out of the 332 cancer drugs approved from 2009 to 2016, only 16% worked through a new method of action. The average monthly cost of newly approved cancer medications is $10,000

But what are patients getting in return? An extra 2.4 months of life. The average extended median survival from 92 newly approved cancer medications from 2000 to 2016 was only 2.4 months (73 days). Rather than just simply treating signs, symptoms, and complications from cancer, pharmaceutical and biotech companies have been focusing on treating the underlying root cause of cancer by targeting disease. But they still have a long way to go. 

Below are the different cutting-edge technology platforms that are currently being developed with the goal of extending life by far more than 2.4 months. 

1. Bispecific antibodies

Bispecific antibodies are the new and improved version of monoclonal antibodies. Monoclonal antibodies are proteins made in the lab that stick to antigens (foreign substances like toxic chemicals) and destroy them. The huge advantage of bispecific antibodies over monoclonal antibodies is that bispecific antibodies can bind to two different antigens because they are two monoclonal antibodies that are linked together. On the other hand, monoclonal antibodies can only bind to one specific antigen, making bispecific antibodies much more effective in fighting off antigens. The current leaders in the development of bispecific antibodies include: Ligand Pharmaceuticals ($LGND) , Regeneron ($REGN)  and TG Therapeutics ($TGTX). 

2. CAR-T therapy

CAR-T therapy is the most expensive cancer therapy at $475,000 for a one-time dose of Kymriah, which was the first CAR-T cell therapy to be approved by the FDA in 2017. Due to its heavy price tag, it is not used as the first option for cancer patients yet even though it is extremely efficacious. First, a patient’s T cells are taken out of their blood and in the lab, a gene called the CAR (chimeric antigen receptor) is stuck to those T cells. Then, these CAR-T cells are infused back into the patient’s blood. 90% of acute lymphoblastic leukemia (a type of blood cancer) patients who did not respond to other cancer treatments were able to achieve full remission with this CAR-T therapy.   

Since 2017, six CAR-T therapies have been FDA approved and over 250 CAR-T therapies are in various stages of clinical development. In fact, over 300 clinical trials for CAR-T therapies have been approved by drug regulatory agencies at different countries, including the FDA in the US. With more competition driving down the prices in the future, CAR-T therapy will most likely be a part of the first-line therapy for different types of cancer. Pharmaceutical companies with already approved CAR-T therapies are Novartis (Kymriah), Kite Pharma (Yescarta, Tecartus), Bristol Myers Squibb (Breyanzi, Abecma), and Janssen (Carvykti). 

3.  Antibody Drug Conjugate (ADC)

ADCs have inactive toxins attached to them and once they are actually in the cancer cell, the toxins get activated and kill the cancer cell rapidly. Because ADCs can only go into cancer cells, healthy cells are not affected, which minimizes side effects. ADCs are basically smart bombs that target cancer cells. 

There are twelve ADCs approved by the FDA with more than 100 ADCs in clinical development. The market for ADCs is expected to increase from $4.24 billion in 2021 to $13.17 billion in 2028 at a CAGR of 18.9%. Leaders in ADCs include Daiichi Sankyo ($DSNKY) , Seagen ($SGEN), ADC Therapeutics ($ADCT) , Roche ($RHHBY)  and Gilead  Sciences ($GILD). 

4.  Oncolytic virus 

Oncolytic viruses work by making cancer cells burst (die) and releasing danger signals so that the immune system can act accordingly to protect itself and fight against cancer. The only oncolytic virus approved by the FDA is T-VEC (Imlygic), which is manufactured by Amgen ($AMGN). 

5. Vaccines

The purpose of cancer vaccines is to teach the immune system  what tumor cells look like and how to fight them so that when tumor cells actually arise, the immune system can recognize and kill them. Vaccines can either prevent or treat cancer. For prevention, vaccines work because some viruses can cause specific types of cancer. For example, the HPV (human papillomavirus) is a virus that can cause different types of cancers, such as cervical, vaginal, throat, and penile, Therefore, the HPV vaccine protects people from getting these cancers once they become in contact with this virus. In terms of treatment, there are currently three FDA vaccines that can treat specific types of cancer. For example, Sipuleucel-T vaccine can be used to treat metastatic prostate cancer, and the BCG live vaccine can be used to treat early stage bladder cancer.  Companies like Moderna ($MRNA) and BioNTech ($BNTX) are aiming to use the same mRNA vaccine technology that they used against Covid to attack cancer.

6.  Gene therapy

With the development of RNAi and CRISPR technology, gene editing could be the future of cancer treatment even though it is still a bit too early to tell. Gene therapy can be used to either delete genes that can cause cancer or to insert genes into cancer cells so they will be more easily killed by chemotherapy. Although not yet approved by the FDA, Gendicine was the first gene therapy approved by the Chinese State Food and Drug Administration in 2003. Gendicine is used to treat neck and squamous cell cancer by overexpressing the P53 gene, which triggers the immune system to fight off and kill tumors. 

 

Once these technologies and medications come to fruition, it is very likely for certain types of cancers to be cured or become a “chronic” disease that patients live with. For example, 47% of adults in the US have hypertension (high blood pressure). Even though hypertension is a risk factor for deadly conditions such as heart disease and stroke, hypertension is a chronic disease that patients can live with as long as they keep their blood pressure controlled with medications every day. The same principle can apply for cancer if tumor growth can be kept under control. The technologies and mechanisms mentioned above have the potential to turn cancer into a chronic disease. Just as treatments for chronic heart conditions and diabetes have yielded massive benefits for both patients and investors, we look forward to a new era of mutual benefit in the world of oncology. 

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BIOGEN, INC: A COMEBACK FOR THE BRAINIAC?

By Subin Im, PharmD

 

When it comes to treatment, Alzheimer’s disease has the most dire unmet needs. With 500,000 new diagnoses in the U.S. each year, Alzheimer’s is a terrible neurodegenerative disease that destroys memory and thinking, preventing people from completing simple tasks. The exact cause of Alzheimer’s is unknown, but it is thought to be due to a buildup of proteins that form amyloid plaque, which clogs up the space around brain cells. Alzheimer’s disease is extremely difficult to treat due to a murky diagnostic process, the lack of treatment options, and the struggle for drugs to get to the brain through the blood brain barrier. As a result of these challenges, many investors and companies have fled this therapeutic minefield. 

Before Biogen got the FDA approval on adacanumab to treat Alzheimer’s disease in June 2021, the last drug approval for Alzheimer’s disease was back in 2003. But adacanumab is the first medication to be approved for the treatment of Alzheimer’s disease that delays disease progression, whereas all the other medications prior were only approved for the symptom management of Alzheimer’s disease rather than for curative intent. Therefore, it was no surprise when Biogen’s stock surged by nearly 40% overnight when this drug got approved. However, now its stock price is even lower than prior to aducanumab’s approval. So what went wrong? 

Adacanumab works by removing a type of protein called amyloid that forms plaques around brain cells. If Alzheimer’s is supposedly caused by this plaque buildup, it would only make sense for Alzheimer’s to be cured by the removal of this plaque buildup. However, in it’s haste to cross the approval finish line, Biogen neglected to present firm evidence that plaque removal actually did improve cognitive performance for patients. It’s crystal clear that adacanumab removes amyloid plaques in the brain. What’s still not so clear is whether or not these patients can suddenly think clearly again. 

Another thing that is is very clear is that adacanumab creates some daunting side effects. Side effects described as “common” are brain swelling and brain bleeding. You don’t have to be a neurologist to guess that adacanumab represents some pretty risky business. Speaking of business, Biogen also provoked controversy by attempting to demand a premium price for it’s questionable new drug. While today’s price is “merely” in the $50,000 range, adacanumab attempted to debut with a price tag above $1,000,000. 

Faced with the facts above, many health professionals are hesitant to use adacanumab and think it should have never even been approved in the first place due to its questionable clinical benefit, vicious side effects, and high price tag. 

Is Biogen more than adacanumab? After all, it is a medication that tarnished Biogen’s reputation. However, there are other medications in the pipeline that could shape its trajectory even after its blockbuster multiple sclerosis medication, Tecfidera, came off patent, resulting in a 18% drop in the 2021 third quarter revenue. Below are three medications that could redeem Biogen’s reputation and attract investors. 

1. Lecanemab

Lecanemab is supposedly the new and improved version of adacanumab. Like adacanumab, lecanemab works by reducing amyloid plaques but in a slightly different way. Lecanemab targets the amyloid protein that hasn’t clumped up yet to form plaques, whereas adacanumab targets the plaques. Currently in phase 3, lecanemab is unlikely to gain much traction if its results aren’t convincing. If they are similar to adacanumab, it is in trouble as adacanumab’s sales came in at $300,000 during the third quarter of 2021, which is a dramatic decline from the expected $14 million. However, it does have potential as lecanemab’s trial data has already shown 25% less ARIA (amyloid-related imaging abnormalities) compared to adacanumab. This time Biogen may also do a better job of proving concrete clinical benefit for patients. 

2. Zuranolone 

Zuranolone is currently in phase 3 trials for major depressive disorder and postpartum depression. One of the major caveats to current antidepressants is that they can take four to six weeks for it to fully work and be effective. In some cases, it can take up to a few months. However, one of the biggest perks to zuranolone is that it is efficacious in 75% of patients after just two weeks with a robust, well-tolerated safety profile. Ironically, standard antidepressants can have the opposite effect than its intended use and actually lead to an increase in suicidal thoughts and actions. However, zuranolone did not lead to this side effect. 

With over 250 million people diagnosed with depression worldwide, the global market size is expected to grow at a CAGR (compound annual growth rate) of 5.4%, leading to an increase from $15.61 billion in 2021 to $16.44 billion in 2022. With zuranolone’s quick efficacy and relatively favorable safety profile, it could possibly reap in $3.288 billion if it were to just take over 20% of the market. 

3. TMS-007

Just like zuranolone, TMS-007 has a huge advantage with one of the most important determinants of health outcomes: the timing. TMS-007 is currently in phase 2 for the treatment of acute ischemic stroke by breaking down blood clots and inhibiting swelling from those clots. Although there are treatment options already available now, they can only be used if the patient presents to a healthcare facility within 3 or 4.5 hours of stroke symptom onset, depending on patient-specific factors. However, the “golden hour” with the most promising outcome is within one hour of symptom onset. Stroke symptoms are referred to as the acronym FAST: Facial drooping, Arm weakness, Speech difficulty, Time to call 911. 

TMS-007 can offer what money can’t buy: time. It can be used up to 12 hours after onset of stroke symptoms without resulting in a higher risk for bleeding in the brain. 46% of ischemic stroke patients arrive at the hospital within 3 hours of symptom onset, and 61% within 6 hours. In a phase 2 trial with TMS-007, the researchers noted, “The average time to treatment was 9.5 and 9.3 hours for patients who received TMS-007 and placebo, respectively. All patients who received TMS-007 were dosed beyond the time window of approved thrombolytic agents.”

This longer window for treatment efficacy automatically gears 39% to 54% of acute ischemic stroke patients towards TMS-007 if it were to get approved. With a CAGR of 4.13%, the global market for acute ischemic stroke medications is expected to reach $11.12 billion in 2027. Therefore, due to TMS-007’s huge advantage, 40% of the market could belong to this candidate, reaping in $4.448 billion. 

With its negative press on adacanumab and expiring patents on its blockbuster medications, Biogen is not the best choice for the short-term investor. However, with eight exciting phase 3 pipeline medications and 33 clinical programs, it has a promising long-term future that could make the current price a bargain.

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