The Sick Economist's Blog, page 9

IS THIS THE END FOR SAGE THERAPEUTICS?

By Aidan Asbill, Biotech Analyst

 

Sage Therapeutics is a biopharmaceutical company committed to developing novel therapies to treat central nervous system disorders. The company made its debut with its drug Zulresso, for the treatment of postpartum depression in adults. The drug was approved in March 2019 becoming the first and only drug approved for postpartum depression. This news propelled stock all the way up to $190 in July 2019 and the company was looking to be at the forefront of treatments for depression. However, this victory was short-lived as the company suffered a failure in its trial for their second drug, SAGE-217. In less than a year the company would plummet all the way to a low of $26 in April 2020. Since then, the company has made great strides to please investors changing its CEO and partnering with Biogen. Even so, with recent lackluster phase 3 results from Zuranonlone, will the company be able to recover to all-time highs, or will it continue to disappoint investors?

In December last year, Sage Therapeutics announced its new CEO, Barry Greene would be taking over while the previous CEO would go into a research role. Greene was a natural fit with over 3 decades of experience in pharmaceutical management and since then the stock increased to a price of $75. However, he will have a very difficult task to take the company back to all-time highs. Sage Therapeutics got off to a strong start with its drug Zulresson, which became the first treatment to get FDA approval for postpartum depression. Zulresson, unlike other depression treatments, is proven to have fast-acting positive effects on its patients. This drug acts fast by utilizing the GABAA receptors in patients, which is the major inhibitory signaling pathway of the brain and central nervous system and contributes significantly to regulating brain function. Despite being the first treatment to earn FDA approval for postpartum depression, the company’s star drug Zulresson hasn’t been nearly as successful as investors hoped. In the first quarter of launch, the drug made an astonishingly low $1.6 million in sales. Since then things haven’t gotten much better with the drug average only about $1.5 million per quarter. Some of this is obviously due to hospitals having to prioritize COVID-19 patients, which may have slowed sales a bit. With that being said, there may still be concerns about the drug’s complicated method of action, which requires patients to stay in the hospital for up to 48-72 hours to be treated. The treatment is also as not as simple as taking a pill. Patients must be infused via CIV injection and monitored until treatment is done. To make matters worse, the drug is very expensive, costing patients without insurance $7,450 per vial for a total of 34,000 for the average treatment. Overall, the drug’s launch has been very underwhelming, but there may still be hope for the company. Postpartum depression affects 400,000 women, which is about 1 in 7 moms in the U.S each year. Sage Therapeutics has only been able to treat a fraction of the massive market for postpartum depression in mothers. Even with the company’s arduous and complicated treatment, if the company works on better implementations in hospitals and potentially lower cost, the drug should continue to slowly grow sales. 

While Zulresson has a long way to go before it impresses investors, the company’s new drug Zuranolone has massive implications for major depressive disorders. Unlike Zulresson, the company’s new drug Zuranolone is a simple pill rather than an injection. Unfortunately, the drug has not gotten off to a great start which has made investors wary to invest in the company. In 2019, the drug failed a phase 3 study investigating the drug’s effectiveness to treat major depressive disorders in patients. This combined with the poor sales from Zulresson became the negative catalyst that caused the massive drop-off in the company’s stock price. This put Sage Therapeutics in a tough spot forcing the company to make the hard decisions of laying off half of its employees. The company was under extreme pressure to create a new successful drug but was burning through cash in the process of creating one. This put Sage on the brink of collapse when Biogen bailed them out with an offer they couldn’t refuse. Sage would get a much-needed upfront payment of $875 million and $650 million equity investments for a total of $1.5 billion investment from Biogen. Biogen in return would get a 50/50 split in U.S. sales of Zuranolone, in addition to royalties on worldwide sales. This deal created a path for the company to recover and relaunch its phase 3 trial of Zuranolone. In May, the company shared a look into the promising results from the phase 3 study of zuranolone. The study found that 80% of patients who received a 50 mg dose and 70% of patients who received 30mg had a positive reaction to the treatment. The drug looked very promising, producing quick positive effects after an average of only 2.2 treatments. However, recently the full study came out which continued to show fast-acting results in the short term, but the drug couldn’t beat the placebo in the long term. Investors were very displeased, questioning the marketability of the drug. This resulted in a sharp 25% sell-off, which may continue as investors have begun to lose faith in the company. While this doesn’t prevent the drug from getting FDA approval, it certainly negatively affects potential sales and the total available market for the drug. Most depression drugs are prescribed for long-term use but after the recent study, Zuranolone seems unlikely to be prescribed for long time use with very underwhelming results. With this news, Sage is once again falling as investors lose faith, but if its pipeline can produce results the company may still have a chance to recover.

Sage therapeutics pipeline includes SAGE-718, a phase 2 neuropsychiatry treatment for Parkinson’s, Alzheimer’s, and Huntington’s disease, as well as several other early development treatments for GABA hypofunction. In the company’s phase 2 study, SAGE-718 showed performance improvements from baseline for cognitive function in its patients. The company will initiate a placebo-controlled phase 2 trial later this year to further evaluate the drug’s potential. While SAGE-718 is still very early in development, the most interesting candidate in the company’s pipeline is SAGE-324, a compound that is in Phase II clinical trial to treat essential tremors, as well as has completed Phase I clinical trial for epilepsy and Parkinson’s diseases. In April, Sage reported topline results from their Phase 2 study of SAGE-324. The drug had very promising results, demonstrating a 36% reduction in upper limb tremor amplitude after 30 days of more treatment. In patients with more severe symptoms, SAGE-324 demonstrated a 41% reduction in upper limb tremor amplitude compared to the starting baseline. These positive results are very encouraging and promising to treat patients suffering from essential tremors, which can be debilitating in many cases. An estimated 6.4 million people suffer from tremors in the United States alone. If SAGE-324 is approved it would be the first medicine approved for the treatment of tremors in over 50 years. Current medicines that treat tremors were made to treat other conditions and just happened to ease symptoms of tremors. However, SAGE-324 is looking to treat the tremors directly with the drugs modern approach that can be groundbreaking in new methods to treat tremors. If successful, the drug may offer the potential for new treatment options for tremor management, as more than 50% of people with ET do not respond optimally to the current standard of care. 

Competitors

Sage is not the only company with a compelling drug to treat the major depressive disorder. The company’s initial failure of their phase 3 trial of SAGE-217 in 2019, allowed Axsome Therapeutics to take the lead in the race to make a drug for major depressive disorder. Shortly after the announcement of the failure of SAGE-217, Axsome announced their clinical phase 3 trial for AXS-05, a direct competitor to SAGE-217. AXS-05 like SAGE-217 is a simple pill, but they utilize different technologies to treat their patients. AXS-05 combines bupropion and dextromethorphan, which when combined help act as an inhibitor of serotonin and dopamine reuptake inhibitor. On the other hand, Zuranolone is a fast-acting oral neuroactive steroid that activates the GABAA receptor positive allosteric modulator. Unfortunately, things only get worse for Sage with the recent reports that show SAGE-217 underwhelming long-term benefits, while AXS-05 has been granted priority review by the FDA to get onto the market. With AXS-05 FDA approval seeming inevitable, the total available market is much better for AXS-05. While Sage is firmly behind Axsome, if approved it can still compete with market demand for major depressive disorder treatments. According to the Anxiety and Depression Association of America, 16.1 million Americans suffer from major depressive orders. Sage also believes that its current pipeline has an addressable market worldwide of 450 million people. While Zuranolone won’t be able to compete with AXS-05 for long-term use it, patients, it could very beneficial for patients suffering from major depression and may be suicidal who need a fast-acting drug to alleviate their suffering. Things look even more interesting when you take into account Sage’s partnership with Biogen. Biogen has recently gotten the first modern FDA-approved Alzheimer’s drug, which skyrocketed the stock 50% on the day of the announcement. Biogen estimates that approximately half of Parkinson’s disease patients, half of the sclerosis patients, and about 40 percent of patients with Alzheimer’s experience depression. With Biogen commercializing Zuranolone, the drug will be paired with Alzheimer’s, Sclerosis, and Parkinson’s disease patients. While Sage will not be the powerhouse depression company that investors hoped it would be, its key partnership with Biogen gives the drug a chance to be marketable in patients needing immediate alleviation from their depression.

 

Sage therapeutics has continued to make good decisions by changing its CEOs and partnering with Biogen. The company has slowly recovered from its catastrophic fall. While Zuranolone’s mediocre results don’t prevent it from getting FDA approval, it doesn’t bode well for sales. The company ended 2020 with more than $2 billion in cash which should help the company ride out yet another fall in the stock price. Investors should continue to be very hesitant to invest until the company can produce compelling results from the drugs in its pipeline. Sage therapeutics partnership with Biogen may save Zuranolone from being a complete disaster, but the drug’s long-term use in patients seems very unlikely. With marketing from Biogen and the company’s future pipeline, this may not be the end for Sage Therapeutics, after all.  However, the future for Sage is not the one investors had previously imagine. The company has a long way to go until it can impress investors again. Ultimately it will be up to investors to decide if Sage Therapeutics can make an impact on the ongoing crisis in brain health or if they will continue to disappoint.

 

 

Disclosure: The Sick Economist owns shares in $SAGE

 

 

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3 CONTROVERSIAL DRUGS

By Dabin Im, Pharmaceutical Analyst 

Questionable Road to Approval 

The FDA’s recent approval of Biogen’s drug, aducanumab, for Alzheimer’s disease finally brought hope for a memorable future. However, there are also quite a few critics due to the seemingly lack of data that the drug actually works. So what is the fine line between rejecting it due to not having enough data and giving it a chance to be used in more people? Whether it is due to safety, efficacy, or sample size, the reasons for not getting FDA’s approval can go on. Although the FDA has specific criteria that has to be met for drug approval, this line still seems unclear to most. Aducanumab’s approval brought out the question, “Are there any other questionable drugs that may not be approved by the FDA?” These three controversial drugs below are currently in, recently completed, or ready to start phase 3 clinical trials. 

1. NurOwn – by BrainStorm Cell Therapeutics (NASDAQ:BCLI)

Amyotrophic lateral sclerosis, known as ALS, is a life-changing disease where the neurons (cells) in the brain and spinal cord degenerate and die. As a result, muscles lose control, involuntarily twitch, and progressively weaken. ALS patients may experience difficulty walking, speaking, swallowing, and even breathing. Therefore, the average survival rate of ALS from diagnosis is three to five years. The exact cause of ALS is unknown, which is why it is so hard to treat this disease. There is no treatment available that stops or reverses progression of ALS. However, four medications have been FDA approved to slow progression of ALS symptoms and prevent further complications. 

Currently, there are over 160 pipeline ALS drugs in both non-clinical and clinical stages. A drug that stands out is NurOwn, which relies on the patient’s own cells for treatment. Cells are collected from the patient’s very own bone marrow and grown in the lab. They become cells that ultimately help the neurons grow and survive. Then, they are injected back into the patient’s spine.

In one of its phase 3 trials, patients with rapidly progressing ALS were studied. In this patient population, 34.7% of patients treated with NurOwn experienced slower disease progression, whereas 27.7% of the placebo group (without medications) experienced the same effect. Unfortunately, this difference was so trivial that the FDA dismissed the results as being most likely due to chance.

In another phase 3 trial, patients with earlier stage ALS were studied. The results were comparably much better in this patient population. The progression of ALS slowed down in 34.6% of patients treated with NurOwn, in contrast to the 15.6% of the placebo group. For ALS patients and their loved ones, this data could be very meaningful because any chance is worth taking if this worsening reality could be forestalled. However, many scientists take a dim view of the data because the results were not statistically significant.  In addition, the mean change in ALSFRS-R (ALS Functional Rating Scale) score was also not statistically significant between the NurOwn group and the placebo group. 

What does it mean when data is “not statistically significant”? It simply means that the data turned out the way it did due to chance or luck. Therefore, if the exact same study were to be replicated, the researchers would not get the same results. Statistical significance is a great way for people to measure whether the data is worth believing in.

The good news is that NurOwn significantly increased the neurotrophic factors that support the growth and survival of neurons. In addition, it decreased the ‘bad’ degenerative and inflammatory factors in the brain, so it will ultimately lead to a longer survival of neurons. These beneficial effects were not seen in the placebo group. 

Not all hope is lost for BrainStorm Therapeutics as it is still looking for a path to get FDA’s approval. Although the data was statistically insignificant, the severity of ALS had an impact on the efficacy of NurOwn. Therefore, more work needs to be done in specifically defining its intended patient population. The increase in ‘good’ factors and decrease in ‘bad’ factors also prove that NurOwn may serve a therapeutic purpose. In addition, BrainStorm Therapeutics is also exploring other ways to utilize NurOwn, including as therapy for Parkinson’s disease, Huntington’s disease, and autism spectrum disorder. 

 

2. Vadadustat – by Akebia Therapeutics (NASDAQ: AKBA)

More than 1 in 7 adults in the US have chronic kidney disease (CKD), where the kidneys cannot filter blood normally due to damage.  A common complication of CKD is anemia, a condition where the  lack of healthy red blood cells cannot deliver enough oxygen throughout the body. Side effects of anemia include feeling tired and weak. As CKD worsens, anemia also worsens. When severe, anemia can lead to heart problems because the heart has to work extra hard to pump red blood cells and oxygen throughout the body. 

Vadadustat is one of the pipeline medications for treating anemia associated with CKD. It is in the HIF-PHI (hypoxia-inducible factor prolyl-hydroxylase inhibitor) class that works by stimulating erythropoietin formation. Erythropoietin is a hormone that increases production of red blood cells when there is a decreasing level of oxygen in tissues. After completing phase 3 trials, Akebia Therapeutics submitted a New Drug Application (NDA) to the FDA, which was accepted on June 1, 2021 for official review. However, vadadustat is quite controversial due to its questionable data.  

One of the first-line medications for anemia due to CKD is currently darbepoetin alfa. It is an erythropoiesis-stimulating agent (ESA) that stimulates the production of red blood cells. In phase 3 trials, when compared with darbepoetin alfa, vadadustat was non-inferior in correcting and maintaining hemoglobin (protein that transports oxygen) concentrations. ‘Non-inferior’ means that vadadustat was ‘just as good as’ darbepoetin alfa. 

However, vadadustat was associated with much higher heart complications compared to darbepoetin alfa, which already leads to some heart problems. There is also not enough data on efficacy because darbepoetin alfa was the only medication in the ESA class that vadadustat was compared to. Not all ESAs are the same, so more research needs to be done to compare the efficacy of vadadustat and other ESAs. 

Although there are definitely gaps to fill in the data and study design, vadadustat does still have a chance of FDA approval because it is non-inferior to darbepoetin alfa. If approved, Akebia Therapeutics estimates a $2 billion opportunity for vadadustat in the market. 

3. BXCL501 – BioXcel Therapeutics (NASDAQ: BTAI)

BXCL501 is a thin film version of dexmedetomidine that is dissolved under the tongue, which allows the drug to work quickly in the body. BXCL501 is versatile in that it is being investigated to treat agitation associated with a variety of diseases such as schizophrenia/bipolar disorders, dementia, and delirium. It is also being studied to treat opioid withdrawal symptoms. 

Opioids are a class of drugs (e.g., morphine and oxycodone) used to treat pain.  Due to its highly addictive nature, substance abuse is very common. When people stop taking opioids, they experience withdrawal symptoms. These symptoms may include anxiety, inability to sleep, and even seizures and hallucinations if severe. To combat these withdrawal symptoms, the patient may need additional drugs. This is when BXCL501 would come in.

Compared to placebo, BXCL501 successfully increased retention rates (the percentage of patients that remain in treatment for substance abuse). A higher retention rate means a lower chance of relapse. Although BXCL501 prevented patients from falling back into opioid abuse by treating withdrawal symptoms, these results were not statistically significant. The retention rates were 42% for 120 microgram group, 52% for the 180 microgram group, compared to the 24% for the placebo group. Because this improvement could have been from luck, it is questionable whether it is worth the wait for BXCL501 to complete phase 3 trials. Regardless, there is still hope for BXCL501 as it could be used for other indications besides opioid withdrawal symptoms. 

 

These three medications are currently controversial in their data. But that does not mean that all the money, research, and hard work must go to waste. Whether it is by modifying the drug or discovering another condition that it can treat, there is still some potential for FDA approval in the future. However, the road to approval is quite questionable. Investing in any of these stocks would not be the best option for the faint of heart. 

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UNNATURAL SELECTION: NETFLIX DOES BIOTECH

By Owen Marino

What if it were possible to correct the genetic mistakes that cause disorders such as down syndrome, cystic fibrosis, and sickle cell anemia? What if it were possible to alter any gene in the composition of living organisms so that nature would behave exactly as we want it to?

These ideas are no longer straight out of science fiction. Groundbreaking innovations in the emerging field of genetic engineering have made it so that scientists now have the potential to use operational methods to directly alter an organism’s genetic composition, meaning that traits such as eye color, hairstyle, and even sex can be directly designed and controlled by man made technology. What do these new developments mean for the future of modern medicine, and what do investors need to know about new biotechnology companies that seek to take the market by storm? 

Genetic engineering is a relatively recent development in the medical community that has the potential to advance medical practices exponentially in the coming years. Unnatural Selection, a four-part Netflix docuseries produced in 2019, details the possibilities and ethical concerns of gene-editing technologies such as CRISPR to fundamentally alter the genetic way of life developed throughout millenia by evolution. Aside from the potential of genetic engineering to create bioluminescent dogs and “designer babies” with customized traits, the series details the possibility of this technology to eradicate diseases such as malaria by reducing mosquito populations as well as editing out the genes that cause mosquitoes to inherit the parasite, and to eliminate an entire species of rats from New Zealand.

CRISPR – short for Clustered Regularly Interspaced Short Palindromic Repeats – is a revolutionary gene-editing technology that uses Cas9 enzymes to “cut” DNA at a specific position in the genetic sequence. The location of this cut is determined by a guiding RNA molecule, and the natural repair mechanisms of the organism’s DNA repair the cut, subsequently correcting the mistake that was there before. Using this technology, scientists can manually activate or silence a chosen genetic sequence, therefore correcting defects caused specifically by mutations in DNA. The series follows Jackson Kennedy, a boy from New Jersey who was born legally blind as a result of Leber Congenital Amaurosis, a rare degenerative condition that affects eyesight because of errors in a person’s RPE65 gene. Filmmakers focus specifically on the complicated process Jackson’s family undergoes in order to get him approved to undergo surgery to receive Luxturna, a recently-developed method of gene therapy that works by delivering a normal copy of the RPE65 gene directly to a patient’s retinal cells, allowing the body to have a new functional copy of the gene to replicate. The procedure improved Jackson’s eyesight from 20/10,000 to 20/80, a previously unimaginable development. 

One of the biggest implications of these genetic therapy treatments, if successful remedies continue to be developed, is that they will fundamentally alter the financial landscape of the medical industry. As effective as many current medicines are for treating and mitigating the symptoms of diseases such as AIDS and diabetes, they still do only that – manage the symptoms of a disease well enough so that it afflicts the life of the patient as minimally as possible. The root cause of the ailment is not fundamentally addressed, however, so the central problem never actually goes away. Because of this, patients necessarily become reliant on their treatments in regular intervals depending on the nature of the disease and treatment. This results in a consistent stream of payments that providers can expect no matter what, because people have no choice but to treat their conditions no matter how expensive they are. Many gene-editing treatments would be able to stop the problem at its source so that people who suffer from them would not have to keep going back for treatments, but in order to recoup the financial deficits created by a loss of dependence, patients would instead see massive upfront costs for these treatments so that the companies that produce and distribute them will still be profitable. At one point, the documentary follows Nick Piazza, a patient with Spinal Muscular Atrophy, whose parents finally reach an agreement with an insurance company to try a new treatment where the first dose costs $750,000. Likewise, the reason Jackson’s family was finally able to set him up for surgery was because insurance finally agreed to cover a significant portion of the $800,000 upfront cost of the two procedures he would have to undergo – one for each eye. 

New successful treatments are not only a godsend for individuals stricken with previously incurable ailments, but just one flagship treatment can generate immense amounts of profit for a company, leading to gains such as Novavax 1023% growth from August 2005 to March 2006. The potential for exponential profits with a hit treatment is one of the most attractive aspects of biotech investing, but investors should be wary to consider the risks these startups come with. One extremely important thing to keep in mind is that many biotech products have little scientific research thus far to back them up. This is not to say that biotech is some sort of pseudo-science void of actual benefit to patients – but since there is so little peer-reviewed research out there, the industry remains extremely volatile and unpredictable by nature. Many of these remedies have not gone through any clinical trials (or are still in preclinical stages) to determine their efficacy, making them extremely risky investments for investors and patients alike. 

Clinical testing is a long and complicated process. People can be encouraged by early indications of success in a drug’s ability to counteract genetic disease, but these drugs often have many more trials and tribulations along the way before they are actually approved for use. 

A typical drug testing cycle involves three phases of assessments, increasing in size as the product moves through trials, where volunteers take the drug in question so that researchers can determine its effectiveness, possible side effects, and correct dosages. However, the process is hardly as simple as it may seem. While most drugs showing some promise are likely to move on the phase II of testing, where researchers use placebo treatments as well as varying level of the drugs in a pool of around 300 patients to try and determine the most effective dosage, only 33% of treatments move onto the third and final phase of clinical trials. This final phase of testing alone can cost companies anywhere from $11 million to $52 million, and the entire process takes an average of six to seven years. The problem is that circumventing the typical lengthy process of approval through clinical trials can lead people to derive a false sense of hope when it comes to a drug’s effectiveness.

The past few years, however, have provided a sense of real hope on the horizon for genetic therapy treatments. In 2018, then-President Donald Trump passed the Right to Try act into law. The act, already passed in 41 states prior to Trump’s signing, allows terminally ill patients to legally self-experiment with treatment methods not approved by the FDA after exhausting their government-regulated medicinal options. This opens the door for companies with drugs undergoing active development (the law permits clears drugs that have passed phase I for self-experimentation) to help recoup research and development costs incurred during production, although the law does not yet allow companies to make profits on drugs not approved by the FDA. Right-to-try allows patients like Tristan Roberts, an HIV-positive individual the series follows, to self-administer DNA antibody treatment for his condition with the help of biotech startup Ascendance Biomedical. Roberts injects himself with the therapy on FaceBook Live as a way of promoting non-conventional, unofficial alternatives to highly priced government regulated treatments for HIV, although Unnatural Selection documents the many uncertainties surrounding Roberts’ status as a test patient.

So, what are the business implications of these new, untested methods, and what essential things should investors keep in mind while weighing the benefits and drawbacks of investing in these companies? Here are three key takeaways that should be at the forefront of any investors mind when examining biotech stocks.

Be Aware of the Volatile Nature of These Stocks

While massive gains in short periods of time are possible due to the enormous impact of these medical breakthroughs, investors should keep in mind that relying on the fate of just one or two products, as most of these companies do, leaves them completely at the mercy of regulatory groups such as the FDA. In 2015, Threshold Pharmaceuticals, which had in-licensed to Merck & Co. for production of its TH-302 cancer therapy, saw its stock price drop by 83% on December 7th as the latter announced the drug’s failure to pass clinical trials. Investors should make sure that their stocks are diversified and that only a small portion of their assets are dedicated to any one stock, especially among early-stage biotech stocks which are very high in risk-to-reward.

Understand the Potential for Market Growth

While the fate of individual stocks remains unpredictable, the biotech sector is expected to fare extremely well in the coming years as a result of larger investments into research as well as government policies such as right-to-try. As a result, the industry as a whole is expected to grow at a CAGR of 15.3% through 2028. A well-researched and diversified biotech portfolio should continue to create positive returns for investors as more and more resources are dedicated to product development. 

Perform Adequate Research

While research into a company’s operations is always important to gain some understanding of its products and future profitability, this is especially essential with developments that are so new to the market such as those in biotech. Investors should make sure they understand how exactly the company generates value, how it is funded, and how factors such as new legislation around medicine will affect each company’s specific products. The biotech sector, more than most others in the market, can be a game of chance, and interested investors must make sure their picks are as educated as possible in order to get the most lucrative possible returns. 

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3 PROMISING DIABETES STOCKS

By Dabin Im, Biotech Analyst

Here is a little crash course on one of the most common health conditions in the United States: Diabetes. There are two main types of diabetes, type 1 and type 2, but the main idea is the same. Both types 1 and 2 are lifelong conditions due to the way that the body handles sugar in blood. To supply the body with energy, sugar from food has to enter the cells through a key called insulin. Without insulin, the blood sugar will be very high, which is a destructive state that damages blood vessels. When blood cannot be supplied properly to vital organs, such as the heart, eye, and kidney, it can lead to diseases all around the body. Therefore, it is important to manage diabetes with medications. Having a high blood sugar is not just about being “hyper” or getting a “sugar rush”. The effects of uncontrolled diabetes are not so sweet. 

The main difference between type 1 and type 2 diabetes is the reason behind why sugar cannot be metabolized. A type of cells called beta cells in the pancreas produces insulin. In type 1 diabetes, the pancreas cannot produce any insulin because these beta cells are destroyed through an autoimmune response. As treatment, the patient has to get insulin. In type 2 diabetes, the cells either do not respond to insulin as well as it used to or the beta cells just do not make enough insulin. Depending on the patient, type 2 diabetics can be treated with non-insulin medications, insulin, or both. 

25% of the health care costs in the United States is spent on diabetes and its complications. About 10% of Americans currently have diabetes, and 33% have prediabetes. Diabetes is not only a problem in the United States but also around the world. 422 million people have diabetes worldwide, with around 1.6 million deaths directly caused by diabetes each year. The scary part is that these numbers are only growing with time.

Diabetes cannot be cured, but it can be managed with medications. Therefore, diabetes medications will never go away. In fact, there is always room for growth in their research and development. Currently, there are 158 medications available for the treatment of diabetes. This wide variety is still not stopping pharmaceutical companies from investing their time and money into developing ‘better’ medications. Out of over 200 diabetes products currently in pipeline, three in particular shine bright like a sugar crystal.

1) Tirzepatide –by Eli Lilly (NYSE: LLY)

Tirzepatide is a combination of glucose-dependent insulinotropic polypeptide (GIP) and glucagon-like peptide 1 receptor agonist (GLP-1RA). These two hormones increase insulin secretion and inhibit glucagon secretion. This dual action works to lower blood sugar levels. Therefore, tirzepatide is a double threat that reduces A1c levels and leads to weight loss. 

A1c levels refer to how much of the proteins in blood are coated with sugar. This gives an accurate measurement of how much sugar in blood there is, not just in the moment of time, but over the past three months. An A1c level greater than 6.5% is considered to be diabetes. On average, in three clinical trials, tirzepatide reduced A1c levels by 2.5% for those with A1c levels greater than 8% and reduced weight by 13.1%, which was 25 pounds. Tirzepatide’s outcomes are even better than those of its competitors currently on the market, including injectable semaglutide. 

One of the best things about tirzepatide is that it can be administered once weekly, compared to insulin, which may have to be injected up to 4 times a day, with a minimum of twice a day. If approved, tirzepetide will be the first medication in the GLP-1/GIP combination class. Eli Lilly expects to apply for tirzepatide’s FDA approval sometime next year.

 

2) Teplizumab –by Provention Bio (NASDAQ: PRVB)

Teplizumab is a humanized anti-CD3 monoclonal antibody. Humanized monoclonal antibodies are made up of a human antibody with a little bit of mouse or rat antibody. Teplizumab inhibits CD3 (Cluster of Differentiation 3), which is protein complex that activates T cells and causes an immune response. This mechanism is perfect, because type 1 diabetes is an autoimmune disease caused by T cells destroying beta cells in the pancreas. Therefore, by inhibiting CD3, teplizumab reduces the destruction of beta cells, allowing them to produce insulin and control glucose levels. Having the slightest amount of rat antibodies in the human body may not sound the most appealing. But it is worth every drip because this drug has the power to slow down or prevent the onset of type 1 diabetes in those at high risk. 

Teplizumab is the first drug proven to delay the diagnosis of type 1 diabetes by 2 years. In clinical trials, all participants were at high risk for developing type 1 diabetes. They had at least two autoantibodies specific to type 1 diabetes and also had unusual blood sugar levels. 72% of participants that did not receive any medications, known as the placebo group, developed type 1 diabetes in 24 months on average. On the other hand, only 43% of participants treated with teplizumab developed type 1 diabetes, which took them an average of 48 months. Patients who received treatment were able to get their blood sugar controlled and required less treatment with insulin. Therefore, teplizumab not only helped prevent and delay the onset of type 1 diabetes but also kept the condition under control. In addition, this study helped define what the criteria for a “high-risk population” is.

In another study, the median time until the diagnosis of diabetes was 27 months for the placebo group. On the brighter side, the median time for the teplizumab group was 60 months. These numbers prove that teplizumab not only reduces the chances of developing type 1 diabetes, but also delays its onset. Not only that, teplizumab led to improved rates of insulin production, whereas the placebo group experienced declined rates of insulin production due to disease progression. The side effects associated with teplizumab were short-term, including a rash and low white blood cell counts. However, these side effects were relatively manageable due to teplizumab being given as an intravenous (IV) infusion every day for 12 days. This 12-day course was given twice, six months apart. 

On May 27, 2021, the FDA Advisory Committee reviewed the data behind teplizumab and held a vote on whether it should be used for delaying type 1 diabetes. The vote was closer than expected, which caused shares of Provention Bio to drop by 28.75% on May 28, 2021. Ten experts were in support for and seven experts were against teplizumab due to the lack of data and safety. 

On July 2, 2021, the FDA will announce its final decision on whether it will approve teplizumab or not. Although it was a close vote, the FDA usually complies with final recommendations from the advisory committee. 

3) Insulin Vaccine – by Diamyd Medical (DMYD-B)

Diamyd Medical is a Swedish pharmaceutical company that focuses on diabetes prevention. Diamyd has two medications currently in clinical development. One of these drugs is conveniently named Diamyd, which is now starting phase 3, and the other one, Remygen, is in phase I/II development. Although it is not publicly traded in the United States, this company is on the Stockholm Stock Exchange and Nasdaq First North Growth Market (DYMD-B). 

Diamyd is an insulin vaccine with a unique mechanism of action. It contains GAD65 (glutamic acid decarboxylase-65), which is an enzyme that is targeted by the immune system in type 1 diabetes. After GAD65 triggers an immune response, these immune cells become active anti-inflammatory cells. They tell the immune system to stop attacking beta cells so that they can properly make insulin. Therefore, it could prevent or delay the onset of type 1 diabetes. 

Diamyd Medical focuses on precision medicine by developing medications specific to the patient’s gene, specifically known as the HLA DR3-DQ2 haplotype. Over 90% of children with type 1 diabetes have either the DR3-DQ2 and/or DR4-DQ8 gene. Therefore, Diamyd is currently focusing on young patients that were diagnosed within the past six months. In clinical trials, participants were injected with this vaccine in their lymph nodes three or four times in 15 months, which led to increased insulin secretion. 

Although this vaccine initially had disappointing results in 2011, Diamyd Medical did not give up. Due to more clarity on its specific target population with precision medicine, this vaccine could be the right medication for the right person at the right time. 

 

Due to the nature of this disease, diabetes will simply not go away. The good news is that when it is managed well with medications, its complications will significantly decrease. Therefore, medications should be a significant part of every diabetic’s life. These three medications will not completely get rid of diabetes as a whole, but they provide a vision for hope in diabetics. 

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CANCER DIAGNOSTICS: SEARCHING FOR PROFIT

Cancer is increasingly having a major impact on society not only in the United States, but all across the world. It is a disease caused by changes to DNA, when cells divide uncontrollably and proliferate into other tissues within the body. In 2021, almost 2 million people were diagnosed with cancer in the United States alone. Therefore, scientists and researchers have been working for years to find an effective cure for cancer. Even with all of our current technology, there is still no cure. With the increasing interest in cancer research, the cancer diagnostic technology industry is also rapidly growing. In 2018, the global cancer diagnostics market size was valued at USD 144.4 billion and is expected to reach USD 249.6 billion by 2026. Expanding the cancer diagnostic industry would lessen the negative impact that cancer has had on society.

By Tammy Tran, Biotech Analyst  

 

Companion Diagnostics 

Companion diagnostics are medical devices, oftentimes in vitro, that provide important information essential for the safe and effective use of a drug or biological product. These diagnostics help a healthcare professional determine whether or not the product’s benefits outweigh the potential risks and side effects. Currently Qiagen ($QGEN), a provider of technologies for molecular diagnostics, applied testing, and academic and pharmaceutical research, is partnering with Mirati Therapeutics ($MRTX), a biotechnology company aimed at developing breakthroughs for cancer patients, in order to develop a new companion diagnostic for cancer patients. They are developing a tissue based KRAS companion diagnostic that will be able to identify cancer patients that have the KRAS G12C mutation, a frequent indicator of cancer. KRAS is a member of the RAS family, a family of genes that are responsible for cell proliferation, differentiation, and survival. It is also an oncogene, a gene that can transform a healthy cell into a tumor cell, and is found to be the most frequently mutated oncogene in cancer patients. The G12C part of the mutation means that it is a single point mutation with a glycine to cysteine substitution at codon 12. However, the current and previous efforts to develop targeted therapies against this mutation have all been unsuccessful. The diagnostic that Qiagen ($QGEN) and Mirati Therapeutics ($MRTX) is working on is a treatment with adagrasib, a potent oral molecular inhibitor of the KRAS G12C mutation. Adagrasib is currently in the Phase 1/2 clinical trial for patients with non-small cell lung cancer and colorectal cancer. It works by inhibiting KRAS G12C which suppresses the signaling pathway and tumor growth. The inhibition increases the amount of regulation genes that are activated throughout the body. The adagrasib along with the other inhibitors produced due to the hyperactivation work together to combat the mutation and increase anti-tumor activity. The companion diagnostics total addressable market was USD 3.7 billion in 2020, and is projected to reach USD 6.8 billion by 2025. Qiagen’s ($QGEN) total addressable market is over USD 11 billion. Specifically, Qiagen’s ($QGEN) revenue for 2020 was USD 1.87 billion and is currently USD 12.9 million for Mirati Therapeutics ($MRTX). The overall revenue for the oncology companion diagnostic market is forecasted to be US 5.7 billion. 

Liquid Biopsy

Another emerging technology in the field of cancer diagnostics is a liquid biopsy. A liquid biopsy is a blood test extracted from a tumor that either looks for cancer cells circulating in the blood or for pieces of DNA. These biopsies are advantageous because they allow for early cancer stage detection. Liquid biopsies are different from tissue biopsies because they are less invasive, risky, costly and painful. There are two types of materials found in blood that can indicate the presence of cancer in molecular analysis: circulating tumor cells (CTCs) and cell-free circulating tumor DNA (cfDNA or ctDNA). The larger the volume of the tumor, the greater the amount of cfDNA that is released into the bloodstream. As a result, healthcare professionals are able to take blood samples from a patient’s arm to determine whether or not the patient has cancer. The amount of cfDNA released into the bloodstream can range anywhere from 0.01% to 90% of the DNA present in the plasma. Abnormal CTCs or cfDNA can help determine: DNA abnormalities, RNA expression, protein expression, amplification and deletions, translocations, chromosomal abnormalities, and point mutations. Although liquid biopsies are primarily used to diagnose cancer at an early stage for intervention purposes, they can also be used in the other stages as well. For localized diseases, liquid biopsies can determine the risk of recurrence after treatment. For metastatic diseases, or cancers that have spread throughout the body, doctors can use the liquid biopsy to select the best treatment plan based on the biomarkers that are present. For refractory diseases, cancers that have stopped responding to treatment, liquid biopsies can help doctors understand the mechanisms of resistance and how the disease progressed. However, since this technology is still in its early stages, there are a few concerns that need to be addressed. The test results can often show false-positives, meaning that these biopsies detect cancerous DNA when the patient is actually healthy. In addition, these biopsies can detect tumors that are actually harmless or will not grow. This could result in over treatment, which could be harmful and expensive for the patient. Many large companies are still working to develop this technology such as: Paragon Genomics, Grail, Guardant Health ($GH), Personal Genome Diagnostics, Thermo Fisher Scientific ($TMO), and many more. Guardant Health ($GH), one of the largest liquid biopsy firms, expects the full year 2021 revenue to be in the range of USD 360-370 million, representing almost a 30% growth compared to 2020. The total addressable market for liquid biopsies should grow from USD 3.8 billion in 2020 to USD 19.6 billion by 2025. This area has many opportunities for growth such as advancement in technologies, growing demand in diagnostic centers, and expansion to developing countries.

Artificial Intelligence: Digital Pathology

AI-led digital pathology is another emerging area for cancer diagnostics. Artificial intelligence is advantageous because it can spot subtle patterns that can be easily missed by humans. Quest Diagnostics ($DGX) is partnering with Paige, a digital pathology company, to develop AI focused cancer diagnostics using pathology images. This new technology relies on Paige’s innovative machine learning and algorithms which then extracts useful diagnostic data from the pathology slides and images. To begin with, this collaboration is focusing on solid tumor cancers such as breast, colorectal and lung. The AI will be able to pick up tissue patterns and markers that are difficult for humans to see. For example, patients can get a full-genome methylation analysis, which checks for small hydrocarbon molecules attached to DNA. Extra methyl groups are oftentimes the mechanism behind epigenetics, the study of heritable changes in gene expression. Different methylation patterns also often indicate that cancer is present. Physicians can then feed the results of the methylation analysis to an AI system, and the computer can classify the tumor. Correct classification of the tumor is extremely important since different tumors require different drug and radiation treatment plans. As a leader in advanced diagnostics, Quest’s ($DGX) yearly revenue was USD 7.73 billion in 2019. Paige’s platform is also growing, with an estimated annual revenue of USD 70.9 million per year. The global article intelligence in diagnostics market size in 2019 was USD 288.1 million in 2019, and is expected to grow by over 30% in the years 2020 to 2027.

Cancer diagnostics is an important field that will continually grow within the next few years. Scientists have been trying to combat and find a cure to cancer for decades and have been unsuccessful. Therefore, finding an early diagnosis is crucial to getting proper treatment. The diagnostic technology industry is only just beginning and will only continue to expand from here on out. Therefore, staying up to date with the current emerging technologies is important for everyone since they will have such a large and positive impact on our society. 

 

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HOW ARE BIOTECH MEDICINES PRICED, AND WHY DOES IT MATTER?

Will your medicine cost $150 or $150,000? If it costs $150,000, does that mean that the pharma company is making more money? Does it mean that they are making too much money? Pharmaceutical pricing in the United States is a notorious “black box.” Few understand why prices are so high, and how biotech companies arrive at these prices. But there is more rhyme and reason to the pricing process than most people realize. Healthcare analyst John Kehoe explains…

The high prices of drugs and medicine has become an increasingly contentious topic in the United States as prices have continued to rise over the past decade. Healthcare in the United States operates under a free market economy, so the prices of these medicines are dictated by numerous different factors that are not easily manipulated. Nonetheless, these questions remain uncomfortable and difficult. Why must I pay thousands of dollars out of pocket in order to receive treatment for my illness? Why is medicine so expensive? It becomes easy to blame this phenomenon on corporate greed, but for the most part companies are simply keeping their shareholder’s best interests in mind in order to further the future of their company and their research. The process that goes into developing new medicines is painstakingly thorough and expensive. This process also holds a substantial amount of risk for the company and its investors. Depending on the size and opportunity within the market, a medicine must be priced at a point where both the company and investors can feel comfortable that they will see returns on their product. 

There are other arguments that lowering the prices of these medicines would diminish potential enthusiasm and innovation within the field, but the majority of the reasoning behind these high prices are the market forces in action and the need to create returns for shareholders. Much of this pricing is dependent on the size of the vulnerable markets for each particular medicine. The total addressable market (TAM) of a product helps a company pinpoint the correct pricing strategy that can allow for their product to cover the investments that have been made for the product’s development. 

What is TAM and how is it calculated? 

One of the most important factors that is taken into consideration when arriving at the price of medicine is the drug’s total addressable market (TAM) and how much potential money there is to be made. TAM can be looked at as the amount of revenue that can be achieved if a company were to sell its services to every available customer within its market. There are a few different ways to calculate TAM, but the most intuitive and easily understood is the top-down approach. For example, imagine a company produces a software that is geared to help basketball coaches analyze team footage. This company has determined that there are 20,000 basketball teams (high school, college, amateur and professional) that have a need or even a potential need for their product. If their product sells for $1,500, their TAM would be $30,000,000 (20,000 x 1,500). The calculation of this TAM can then be used as a figure to attract investors and help the company understand how much of this market they have at their fingertips while selling their products. If their TAM appears to be too low, they may have to consider raising the price of their product in order to cover the costs and expenses associated with their business and eventually find profits. 

How does TAM affect the price of medicine?

While medicine and drugs are certainly different from basketball analytics computer software, in our current economic situation they are treated as a product like any other item in the market. Although, unlike most other products, medicine can cost hundreds of millions of dollars to produce and can take decades to be developed. This creates a large amount of risk for any potential investors in these types of medicine. In this same vein, a drug with a small TAM must adjust its price to a higher level in order to compensate for its price of development and other costs that it has incurred. A drug that is working to remedy or cure a rare disease will have a very small population of its potential customers but can still require a substantial amount of investment and research. 

An example of this high pricing for drugs with a small TAM can be found in the drug Sovaldi which is used to treat the virus known as hepatitis C. Approximately 55,000 cases of hepatitis C occur in the United States per year with less than 5,000 being treated. This obviously leads to a relatively small TAM and very few potential customers. The development and production of this drug remains as exhaustive as all of its competitors who are marketing to a much larger TAM. This drug is priced at $28,000 for a month of treatment which makes it one of the most expensive prescription drugs in the country. This price is used as a means to compete with the profits of other medicines that are marketed to a much larger consumer base. 

The correlation of TAM and the expenses of cancer treatment

The treatment of cancer is difficult and grueling for the patient, which is made even worse by its extravagant price. This massive price seems to conflict with the previous statement about TAM and its correlation to the cost of medicine. Cancer affects approximately 20 million people per year, a number that is steadily growing as time passes. With this many potential “clients”, pharmaceutical companies should hypothetically be able to offer drugs at an affordable price but sadly this is not the case. Each individual cancer patient has a unique reaction to different cancer treatments. Cancer treatment is not a “one size fits all” situation. Therefore, cancer research and development are never ending, and it must act similarly to other rare diseases. Different cancer drugs must target specific types and aspects of cancer, drastically decreasing their TAM. Cancer treatment also usually lasts less than 1.5 years, meaning the drug will only be purchased for a short period of time per patient. 

In 2006, a drug named Revlimid was approved for use by the FDA for use with dexamethasone in patients with multiple myeloma who received at least one prior therapy. Since then it has been approved for even more use with less restrictions and has seen great success in its treatment of multiple myeloma (a disease with a previously poor survival rate). The TAM for multiple myeloma is quite small with an estimated 35,000 cases per year in the United States. Revlimid’s production costs were also very pricey as the company Celgene spent $800 million and 14 years developing the drug. These factors have led this drug to be priced at $16,000 for a month of treatment. This analysis is not meant to diminish the fact that Revlimid is one of the most profitable cancer drugs in the market and could be currently overpriced, but it demystifies the reasons for the high base prices of these drugs. Companies are given the liberty to determine the price they believe will provide them with the most profit, but in order to account for the risks and price of developing a drug for a small TAM the price must begin at a lofty benchmark. 

Putting It All Together

Like all products in the current United States economy, medicine must act as a revenue generator for its company. The high costs that go into the research, development, and distribution of medicine create a unique dilemma when pricing this medicine for the public. While it may seem odd that companies are maximizing their profits in relation to sickness and suffering, this is necessary in order to satisfy the needs of their company’s future endeavors and expectations of their investors.  There is an extensive list of detailed reasons why certain medicines are more expensive than others and why medicine is costly in the first place, but a simple explanation can be found by looking at the TAM of some of the most expensive medicines in the world. A look at the equation and the math behind each drug’s total addressable market can help determine why some companies must set its price high in order to delve into their small customer base.

 

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BEYOND BIOGEN: 3 ALZHEIMER’S COMPANIES TO WATCH

Alzheimer’s is a degenerative brain disease that accounts for 60-80% of all dementia cases. The disease slowly moves through the brain, progressively deteriorating memories and cognitive abilities over time. Alzheimer’s disease is the sixth-leading cause of death in the United States and only one of the six to have no cure, at least not yet. Biogen’s ($BIIB) Alzheimer’s drug aducanumab is the first drug that attempts to cure Alzheimer’s disease. However, the drug has faced a lot of backlash with the FDA advisory committee voting overwhelmingly against aducanumab. The drug is in its final stages and will have its fate determined by June 7th, for the drug’s long-awaited approval decision. If Biogen’s drug is not approved by the FDA shareholders will rethink their investment and the stock will surely be negatively affected. Investors looking to invest in a company with a potentially lucrative Alzheimer’s cure should look at Cassava Sciences, Annovis Bio, and Alector.

By Aidan Asbill 

 

Cassava Sciences ($SAVA) 

Cassava Sciences is a clinical-stage biopharma company focused on developing neuroscience-related drugs. Cassava Sciences broke out into the scene in February when the company reported its six month data for its Alzheimer’s drug simufilam. This study of simufilam found 3.3 points over placebo, which is a strong indicator it could be an effective treatment for Alzheimer’s disease. This was a similar result to an already FDA-approved drug for Alzheimer’s,  Aricept. However, Aricept has diminishing returns after 6 months, while simufilam is showing signs it may still be effective after 6 months. With this news, the stock skyrocketed to over $100 per share. Since then the stock has slowly dropped all the way down to prices as low as $32 per share in April. However, the company is now on the verge of releasing their 9-month data, which comes out in July and will expand upon their last study. With this news, the stock has rallied over 70% with analysts hopeful that simufilam will be the first drug to ever show improvement at 9 months in Alzheimer’s disease. Cassava Sciences Alzheimer drug works differently than most other Alzheimer’s treatments because it seeks to reverse the effects of Alzheimer’s rather than slow them. Simufilam works by binding to misfolded filamin A in the brain of patients with Alzheimer’s disease. Over time the drug restores the misfolded protein’s shape and function, which is critical to reversing the effects of Alzheimer’s.

Cassava science could still be a good investment even if Biogen’s Alzheimer’s drug gets approval. Biogen and Cassavas drugs can be used in coordination, with aducanumab being used to slow the effects of the disease and Simufilam working to reverse the effects. Remi Barbier, chief executive of Cassava Sciences, said that “a win for Biogen stock could propel others working on Alzheimer’s drugs.” He continued by saying that, “Everyone needs to show investors that, yes, it’s possible to get approval in Alzheimer’s disease. And so, a Biogen approval is a win for the entire industry.” Stocks like Cassava Sciences are very volatile because no modern drug has been approved for Alzheimer’s treatment. This leads investors to invest heavily in good news, but also sell just as quickly if they don’t see immediate results. Barbier hopes that if there is evidence of the FDA approval of an Alzheimer’s drug, investors will flock to other Alzheimer treatments that can share in the $13.57 billion by 2027 Alzheimers market. Investors should look for positive news in the 9 months reports this July and then an announcement of a future phase 3 trial for Simufilam. Cassava Sciences, like many other biotech stocks, is a very volatile stock. However, with positive 9-month reports and the possibility of a phase 3 trial, the company has a lot of room to grow.

Annovis Bio ($ANVS) 

Annovis Bio is a biotech company developing drugs to help with Alzheimer’s, Parkinson’s diseases, and other neurodegenerative diseases. Recently the company announced positive phase 2 data for its drug ANVS401. Preliminary data from the Phase II study of ANVS401 showed significant cognitive improvements in patients with Alzheimer’s with only a month of treatment. The study involved patients with both mild and more severe cases of Alzheimer’s disease. After about a month, patients showed a 4.4-point improvement in cognition compared to baseline and a 3.3-point, which is a significant improvement over its competitors.  In contrast, data from the Biogen clinical trial of aducanumab claimed to improve cognitive ability by 1.4 points over 18 months. Annovis Bio’s other competitor, Cassava reported a 1.6-point improvement in cognitive ability over six months. With this news, Annovis Bio more than doubled to close at $60 from the previous close of $26.40. Annovis’ drug posiphen utilized a different method of action than the previous Alzheimer’s drug. The drug does not clear plaques or flood receptors, but rather instead inhibits the amyloid-β precursor protein’s mRNA from translating toxic amyloid-β peptides. In layman’s terms, the posiphen shows promising signs of lowering Amyloid Precursor Proteins and toxic amyloid-β peptides which are present in people suffering from Alzheimer’s disease.

Annovis Bio drug posiphen isn’t just limited to treating Alzheimer’s, the drug also looks promising in Parkinson’s disease, Down syndrome, and stroke recovery. The drug is especially interesting in stroke recovery because both posiphen and its chemical mirror phenserine have been shown to be beneficial. The company is expected to give further information from the phase 2 trial around July or August. This data should help the company determine an effective dose for the drug and then will be presented to the FDA for approval of a Phase 3 trial by the end of 2021. 

Even with things going well, the drug is still very far away from getting to the market without a fast track from the FDA, which seems unlikely. Biogen’s drug, aducanumab finished its phase 2 trial in 2018 and took all the way until now to enter the final FDA approval stage. Annovis Bio could see its star Alzheimer’s drug approved around 2024 with its current trajectory, which would make this stock a long-term hold. Annovis Bio much like Cassava should be very volatile as biotech stocks can be very unpredictable. However, Annovis’ early data is very compelling, and if the company can further prove the drug’s proof of concept the company could become the frontrunner in the race to find an effective treatment for Alzheimer’s. 

Alector ($ALEC) 

Alector is a company headquartered in San Francisco, has a variety of potential neurological treatments in its pipeline. The most interesting candidate is AL002, which is Alzheimer’s treatment in phase 2 of its clinical trial.  Unlike its competitors in Cassava and Annovis, Alector is looking to expand on traditional Alzheimer treatments, rather than test new unproven methods. Alectors drug AL002 is a monoclonal antibody much like Biogen’s aducanumab. However, the company using a slightly different approach than Biogen’s drug. Unlike aducanumab, AL002 does not bind to amyloid plaques, rather the drug works by assisting the triggering receptor expressed on myeloid cells and TREM-2 proteins in the brain.  This is important because one of the key indications of Alzheimer’s is a decline in TREM-2 proteins. If the drug is able to increase TREM-2 protein activity in the brain, this may stimulate the brain’s immune system to attack pathologies in the brain associate with Alzheimer’s disease. Researchers still have very little understanding of what exactly causes neurodegenerative diseases. Alector’s hypothesis is that the immune system is what causes neurodegeneration in patients with disorders such as Alzheimer’s. The company is a pioneer in this immuno-neurology therapy and if its hypothesis is correct, this will be big not only for Alzheimer’s disease but all neurodegenerative diseases.

Alector will give an update to investors this summer on its phase 2 trial of AL002. If the phase 2 trial boasts successful results this could put Alector on the main stage alongside the other big Biotech names. Moving forward into the future, the company is set up very well with its collaboration with biotech giant AbbVie. Alector agreed to a collaboration with AbbVie in 2017 to co-develop and produce therapeutics to treat Alzheimer’s and other neurodegenerative diseases. One potential downside to the company is its similarity to Biogen’s controversial drug aducanumab. If Biogen’s blockbuster Alzheimer’s drug is not approved, investors may be wary to invest in Alector which utilizes the same traditional methods. However, in the case that these new companies such as Cassava and Annovis cant produce results in their clinical trials, the company acts as a great hedge against unproven Alzheimer’s treatment. Either way, if Alector is able to produce promising phase 2 results this summer, this should certainly result in a huge boost in the stock price. Alector has a lot to prove and overcome in order to get a drug FDA approved for Alzheimer’s treatment. However, the company’s compelling immuno-neurology research should makes this a very interesting company for the years to come.

When it comes to biotech, the first drug to reach the market will usually dominate and make potentially billions. With so many promising drugs and Biogen’s fate undetermined, it is not clear who will win the race to become the first Alzheimer’s drug. With that being said, Dementia cases are predicted to triple by 2050. With Alzheimer’s being the main type of dementia, it is a strong possibility that many companies will be able to fulfill the large market demand for a treatment for the disease. With so many companies racing for an Alzheimer’s cure, the possibility of several companies figuring out an effective treatment could become a reality soon. It will be up to investors to decide which company they think will win the race.

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NOVO NORDISK: A HEFTY OPPORTUNITY

A weight loss pill that works with minimal side effects? The idea would have seemed like a scam just five years ago.  But now Novo Nordisk ($NVO) is charging ahead with new science that just may turn fantasy into reality. The leader in diabetes, Novo is well positioned to become the leader in the new field of obesity treatment. Pharmacy Analyst Dabin Im reports….

Background

Novo Nordisk (NYSE:NVO) is a Danish pharmaceutical company with 80 offices around the world and 33 products in 169 countries. For the past 100 years, Novo Nordisk has been a leader in providing innovative treatment for diabetes. In addition, it has the most market share for obesity treatment and the second most for hemophilia treatment. It also provides hormone replacement therapy for women’s health and therapy for growth disorders.

One of the company’s most popular classes of medications is glucagon-like peptide-1 (GLP-1) agonists, which copy the actions of GLP-1. GLP-1 is a natural hormone that stimulates the release of insulin. Without insulin, the body would not be able to turn sugar into energy. When there is too much sugar built up, it can lead to obesity and become the root cause of many diseases. To prevent this, GLP-1 lowers blood sugar levels and increases satiety, which decreases appetite. Novo Nordisk manufacturers two drugs in the GLP-1 agonist class: semaglutide (Brand names: Ozempic and Rybelsus) and liraglutide (Brand names: Victoza and Saxenda).

Novo Nordisk’s diabetes treatment comes with some special benefits. For the first time in history, Novo Nordisk has been able to formulate the big GLP-1 molecule into a tablet (Rybelsus) so that patients do not have to inject themselves like every other medication in this drug class. It is the Tesla of metabolic syndrome. Does everyone really need a self-driving car? No, but it does make life a lot easier. Better yet, Saxenda was approved to be used for weight loss by the FDA because it has been proven safe and efficacious in lowering the body mass index (BMI). Saxenda is an injectable medication, but Novo Nordisk filed for FDA approval in weight loss for Rybelsus (oral tablet of semaglutide), which is currently only approved to treat diabetes. So why aren’t most diabetic patients taking this drug? Well, the main limitation is, not surprisingly, the price. 

Weight of Obesity 

Insurance companies used to feel hesitant towards paying for obesity drugs due to its heavy implications with cosmetic use. However, more insurance companies are starting to realize the importance of combating obesity as it is a disease in itself that can lead to much more expensive expenses, such as hospitalizations and surgical procedures. In fact, they are now required to cover screenings and counselling for obesity at no extra charge. Diseases related to obesity make up 21% of total annual healthcare spending, which is $190.2 billion in America. Insurance also costs around 25-50% more for obese people than those with a Body Mass Index (BMI) below less than 30. Therefore, it is crucial to prioritize tackling obesity, and Novo Nordisk’s drugs allow them to do so. On average, semaglutide leads to a 15% reduction in weight, whereas liraglutide leads to an 8% weight loss. 

Americans spend an annual total of $33 billion on weight loss. If semaglutide and liraglutide are both used to treat obesity 50% of the time, Novo Nordisk’s revenue will increase by 79% from its current 2020 revenue of $20.8 billion. Even if semaglutide and liraglutide were used 10% of the time for obesity, its revenue will still increase considerably by 16%. 

Pipeline  

Besides its current drugs, Novo Nordisk has an optimistic pipeline with the right resources. For example, Novo Nordisk acquired two pharmaceutical companies: Corvidia Therapeutics and Emisphere Technologies. These acquisitions provide a promising future in cardio metabolic diseases, which are closely related to diabetes and obesity. One of its pipeline drugs, ziltivekimab, targets a specific population of increased atherosclerotic cardiovascular disease (ASCVD) risk and chronic kidney disease (CKD) risk with inflammation. Results from the clinical phase II trials are promising, and if the drug receives approval, that is another huge growth opportunity. Emisphere Technologies develops oral formulations of drugs that are hard to maintain the same efficacy when taken by mouth. The oral formulation, such as a tablet or capsule, is one of the main breakthroughs that helps Novo Nordisk stand out. If it could have more oral options for injectable drugs, then that would be the best of both worlds. 

With fourteen drugs in phase 1 development, four drugs in phase 2, seven drugs in phase 3, and two already filed for FDA review, Novo Nordisk continues to innovate and stay competitive in the market. In addition to creating new medications, Novo Nordisk is maximizing its current products to be used for other diseases. For example, Novo Nordisk started phase 3 development for using semaglutide as treatment for Alzheimer’s.

Stock Analysis

When looking at the stock price, it is important to keep in mind that Novo Nordisk is a long-term investment. Over the past year, its operating margin was 42.64%. The operating margin measures whether the company is making enough profit to keep it alive by being able to pay for all the costs associated with running the business. So out of the $100 that Novo Nordisk makes, $42.64 is what it gets to take home. For pharmaceutical companies, the median operating margin is 13.8%, while non-pharmaceutical companies from the S&P 500 Index has a median operating margin of 7.7%. 

Another reason to invest in Novo Nordisk is for its dividends. It offers a 1.8% yield, which is higher than the S&P 500 ETF dividend yield of 1.34%. Therefore, you get paid just for investing in this great long-term stock. 

In addition, Novo Nordisk’s Return on Invested Capital (ROIC) was 35.07 over the past 12 months with its weighted cost of capital (WACC) at 4.34. ROIC is how much money a company makes in relation to how much shareholders invested into it. WACC is the average investment cost that was put into the company. Because ROIC is higher than WACC, the shareholders are getting great value and returns out of Novo Nordisk. 

Company Outlook

Novo Nordisk is a great long-term investment because it focuses on the diseases that can lead to many other diseases. For example, obesity could lead to Type 2 diabetes, which could lead to various heart diseases and damage in the kidney, eye, foot and skin. In fact, 42.4% of American adults were obese in 2020, and this statistic is expected to increase to 48.9% by 2030. In addition, 10.2% of Americans have diabetes with 26.6% having prediabetes. These statistics are also expected to increase, with CDC predicting that 40% of adults in America will develop type 2 diabetes. Diabetes is a life-long disease that does not have a cure and cannot be reversed. It can only be controlled with medications. Therefore, Novo Nordisk will always be needed. Many diabetics are poorly controlled and do not stay adherent to their medications due to a variety of reasons, such as cost and not liking injections. Novo Nordisk can help increase adherence rates with its oral medication and increase sales, especially when more insurance companies start covering this medication.

Novo Nordisk’s goal of reaching one-third of the global market share for diabetes treatments by 2025 seems very feasible with its current market share of 29.2%. Another goal is to double the sales of its obesity treatments by 2025. This is also practical because the desire to combat obesity continues to increase among not only consumers but also insurance companies. The increasing demand of obesity and diabetes treatment can be attributed to the increase in this patient population. 

Over the past five years, the company’s revenue grew 4.63% on average annually. But due to the increasing demand of its products, Novo Nordisk’s profit is now expected to grow around 10%, from $20.8 billion in 2020 to $23.59 billion in 2021. Overall, Novo Nordisk has strong finances, healthy profitability, and a promising outlook. This stock could yield sweet profits for investors. 

 

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3 BIOTECH CATALYSTS FOR THE SUMMER OF ’21

As the world rebounds from Covid, the biotech scene is heating up for the Summer of ’21. New players are entering the game, new products are being launched; deals are being made. But what should you be looking out for this summer? What are the events that could translate into stock profits for you? Analyst Aidan Asbill identified three companies with big catalyst events approaching…..

The biotech market is a very volatile industry with many drastic swings in stock prices. These drastic swings usually derive from a catalyst that can make or break a stock. Positive or negative news can be a catalyst that can skyrocket or tank a biotech stock overnight. This news can be derived from biotech company conferences, outcomes of clinical trial data, and a variety of other factors. For example, a positive catalyst for a stock could be a biotech company getting FDA approval to sell a product in the U.S. While on the other hand, the FDA denying a critical phase 3 drug can be a negative catalyst for a company. Every couple of months, the biotech industry experiences dozens of catalysts. This summer is poised to have a couple of key catalysts that will make or break stock prices. Three companies set up to have potential catalysts this summer are Seagen Inc ($SGEN), Biogen ($BIIB), and Regeneron Pharmaceuticals ($REGN).

Seagen Inc 

Seagen is a Seattle-based biotech company that specializes in empowered monoclonal antibody-based therapies for the treatment of cancer. The company broke out onto the main stage with the release of its revolutionary treatment for Hodgkin Lymphoma in late 2019. However, the company is much more than a one-hit-wonder, with many more promising products in the company’s pipeline. Since 2019, the FDA has also approved two more of Seagen’s inventions. One of the drugs approved by the FDA is Tukysa a very effective chemotherapy drug that treats patients with breast cancer. Seagen agreed to collaborate on Tukysa and one other drug with Merck, which netted them $725 million in upfront licensing revenue in 2020 alone. With their collaboration with Merck, the company was able to double revenue and be profitable for the first time in 4 years. The company made $2.2 billion in revenue last year, which was an increase of 140% from the year before. Recently the company released its first-quarter results which saw a 42% increase in revenue year over year. However, it was a sharp decline in revenue compared to the last 2 quarters.  In spite of Seagen posting impressive year-over-year revenue growth, the shareprice has been on a downward spiral most of 2021. The stock has been trending downwards in the past 6 months, with the stock having a 25% decline in price. This coincides with rising concern that the company is overvalued, which resulted in a sell-off. The company almost hit its 52-week low, but since then the company has started to recover and gain momentum. As it stands the company’s price to earnings ratio, which tends to represent a company’s “true value” has decreased from 50 to 40. This indicates that the stock is at a more modest valuation when compared to before. 

With the market sentiment down on the stock, Seagen has been looking to fix this by expanding its commercialized products. The FDA is considering Padcev for use in additional bladder cancer patients. FDA is looking to make its final decision on Aug. 17. Currently, Padcev was granted accelerated approval for the treatment of patients who already had chemotherapy. This netted the company $34.5 million in sales, in the first quarter it was approved. However, with the FDA’s additional approval, Padcev is projected to make over $300 million in 2021. Seagen has also announced at least seven possible indications for each of its three most popular products. With the FDA’s approval, this could act as the catalyst for the stock price to spike with the additional revenue it will bring. With that being said, in the unlikely case, the FDA does not approve Padcev for wider use, this will probably reflect in another sell-off of the stock. With the company’s promising pipeline and expansion of its commercialized products, Seagen is a very promising growth company for the years to come.

Biogen

Biogen is an American biotech company that specializes in research and treatment for neurological diseases. The company has been a big biotech name for quite some time, which has garnered them lots of attention. In 2019, Biogen was backed by the likes of  Warren Buffett himself, when his company bought more than 192,000 shares. This was quite an unusual move for Buffett, who normally doesn’t invest in biotech companies. However, Buffett’s investment may not pay off. Biogen has had a sinking financial performance with 4 quarters of revenue decreasing. To make matters worse, the company has a lot of pressure from investors on FDA approval of aducanumab for treating Alzheimer’s disease. This approval is looking to be less and less likely though with an FDA advisory committee voting overwhelmingly against aducanumab. Three members of the committee were so against the drug they posted on their publications warning the FDA to not approve the drug. Despite this, the FDA does not always have to agree with its advisory committee, but it does so far more often than not. 

Biogen has already had a negative catalyst when the company lost its patent rights for one of its key drugs Tecfidera last year. This court ruling allows other drug developers to develop a generic version of the drug, essentially take profits away from Biogen. The company previously thought they would have patent rights until 2028, but this is no longer the case. Now the company is at a critical point, with another negative catalyst looming if the FDA denies their Alzheimer’s drug. Alzheimer’s is a deadly form of dementia that affects roughly one in nine Americans over the age of 65 that has no cure. Biogen can be set on a new trajectory if aducanumab is approved it would become the first modern Alzheimer’s disease therapy approved. Alzheimer’s therapeutics market is expected to reach $13.57 billion by 2027. The company is also valued very modestly with a 14 P/E ratio, which is very reasonable when compared to some of its biotech peers. Biogen’s future will be determined on or before June 6, for aducanumab’s long-awaited approval decision. If the FDA denies aducanumab approval, Biogen’s future is very bleak. The company does have some late-stage candidates in their pipeline, but none will offer the returns that aducanumab can have.

Regeneron Pharmaceuticals

Regeneron is a  Biotech company based in New York that has a wide variety of all-star products including Dupixent, Eylea, and more. Outside of its all-star candidates, Regeneron is also one of the few companies selling treatment for COVID-19. The FDA authorized its antibody cocktail for high-risk patients, with the idea of stopping diseases and slowing down the high hospitalization rates. While some countries have slowly gotten a handle on the covid outbreak, other countries have not been as fortunate. With Regeneron’s cocktail aimed at these locations, the company could see big revenues. The company has done just that when its antibody cocktail was approved for emergency use in India. The approval was based on a phase 3 study, which found that the cocktail reduced the risk of hospitalization by 70%. With the news, the stock saw an 8% surge, but since then the stock has been keeping on its trend downwards. The company has seen a 25% dip from all-time highs but has continued to slip. Despite increasing revenue numbers, Regeneron Pharmaceuticals has a P/E Ratio of just 14, low for a company with more than 30 candidates in its pipeline. Investors seem weary of the stock with one of their biggest revenue drivers, Eylea losing its patent very soon. Market sentiment may change soon with a positive catalyst from Regeneron’s Libtayo treatment.

Libtayo has become a major growth driver for the company, having already secured FDA approvals for two types of skin cancers and was recently approved for advanced lung cancer in February. Libtayo is a prescription medicine used as a treatment for patients with severe cases of carcinoma. The Committee for Medical Products recommended the approval of Libtayo for a larger variety of patients with advanced lung cancer and basal cell carcinoma. The European Union has already approved Libtayo for the treatment of patients with advanced cell carcinoma. However, approval from the European Union for use of Libatyo on a larger variety of patients could result in a huge revenue increase. European Commission is expected to make a decision on Libatyo in the coming months. Libtayo is the first immunotherapy to receive a positive CHMP opinion for this indication, which bodes well for the drug getting approval. On top of this, Dupixent pulled in more than $4 billion in sales in 2020, with only 6% market penetration. If Regeneron is able to get approval for its 8 indications, it could increase its customer base for the drug from 190k to 4 million eligible patients in the U.S by 2023. Regeneron is a very promising company that is ready to gain momentum with positive news from their Libtayo or Dupixent drugs. While Eylea’s patent concerns may be troubling for investors in the short term, the company has far too many upcoming catalysts to look past its potential future.

 

The biotech industry can be a rollercoaster with catalysts that can be very detrimental or rewarding for stocks. Getting drugs and treatments into the market will require extensive testing and FDA approval. Companies in the biotech space can see 10% rises or drops in stock price overnight, based on positive or negative news about the company. This volatility can be scary to many investors. However, if an investor chooses stocks with solid fundamentals and strong conviction, they can ride out the storm and be met with a bright horizon.

 

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IS AMAZON A HEALTHCARE COMPANY?

By Dabin Im, Healthcare Analyst 

 

Remember when Amazon was just an online bookstore?

When some think of Amazon, they may think of Jeff Bezos, the richest person in the world. Or they may think of it as an online shopping store with free two-day shipping as a Prime member. Kindle, Audible, and Alexa may also come to mind. Others may think Amazon has a vast combination of everything because it seems to own and sell…everything. So… what exactly is Amazon? 

According to Google, it is an e-commerce technology company, but it is much more than that. Amazon has made its way into many other industries, from having its own ground and air transportation services to a supermarket chain. Amazon even recently opened up its own salon.  The possibilities of Amazon are out of this world (literally, because it also owns an aerospace company).  

Amazon in Healthcare

It was no surprise when Amazon eventually made its way into one of the most profitable industries in this country: healthcare. The national healthcare spending reached $3.8 trillion in 2019. That’s 3,800,000,000,000 dollars. Amazon knew there had to be some opportunities for them to get a little piece of this unimaginably enormous cake. Getting one tenth of this cake would almost double its revenue from the current $386 billion to $766 billion. One percent of the cake may seem to be nothing because it’s just like the leftover icing on the cake board that no one bothers to scrape off. But even if Amazon were to just get that leftover icing, that one percent can increase its revenue by 9.8%. If it wanted one big bite, aka 5% of the whole cake, then it would increase its revenue by 49%. Therefore, just a nibble of this cake is worth the chase for Amazon.   

Amazon is known for buying and collaborating with the ‘right’ companies. In 2018, Amazon acquired PillPack, which is an online pharmacy that delivers medications to patients’ homes. In 2019, Amazon announced that its virtual assistant technology, Alexa, is HIPAA (Health Insurance Portability and Accountability Act) compliant. This means that Alexa can manage patients’ protected health information. By doing so, it can help take care of their health, such as by tracking blood sugar, giving health tips, booking doctor appointments, and storing information about their prescriptions.

The pandemic made it clear that medical professionals and patients wanted two things: less in-person contact and more access to medical care. Amazon observed and then served. That same year, in 2019, Amazon launched Amazon Care, which collaborates with Care Medical, an independent medical practice. Amazon Care provides primary and urgent care virtually in less than a minute. Imagine this. You have a major migraine. You do not want to go to urgent care because it is expensive and do not want to wait in line. The old you would have just waited for the pain to go away. However, the new you with Amazon Care can go into the app, call a doctor, get your condition diagnosed, and get directions on what to do next. If the doctor does not think you can handle it on your own or wants to get some labs checked, medical professionals will be sent to your home. Amazon Care provides a variety of services, including preventative care, such as vaccinations, nutrition guidance, smoking cessation, and screenings. It also provides sexual health services and treats illnesses. In terms of medications, it can fulfill prescription requests, such as refills and delivery. 

Over the past few years, it is clear that Amazon has been making big moves in healthcare. Amazon Care launched in 2019 exclusively for its employees in Seattle. In 2020, it expanded its services to Amazon employees in the rest of Washington. But it is not going to stop here. At least not anytime soon. In fact, Amazon Care’s plan is to provide virtual care to workers in all 50 states. Services will expand to not only its own employees but also to those at other major companies. If that was not enough, it is not only going to be virtual care. After the pandemic subsides, Amazon Care is also planning to open in-person facilities in Baltimore and Washington D.C. 

In addition, Amazon collaborated with Crossover Health, a primary care provider, to open clinics at its fulfillment centers. These clinics are exclusive for Amazon employees and their families. It provides various virtual and in-person services regarding their physical and mental health. Services include preventative care, short-term and long-term disease management, chiropractic care, physical therapy, and behavioral health coaching. Amazon plans to further its role in healthcare through health wearables and connected devices.

Its Potential

Amazon’s goal is to allow customers to ‘shop’ for medications as they would for anything else on Amazon. They want to make ordering and refilling prescriptions easy with just a few clicks. It is only a matter of time. One day, consumers may be able to compare drug prices from different manufacturers as easily as they can with any other item, such as clothes, toys or electronics. This tactic will inevitably bring down drug prices due to increased competition between drug companies. Consumers may even be able to rate and write a review for the drug, reporting any side effects or commenting on its efficacy. 

Back in the day, people did not really think much about how much their medications cost or where they could get a better deal. They just paid however much their pharmacist told them as if they were paying for another necessity, such as groceries. However, due to the increasing drug costs, more and more people are starting to think insurance is not all that worth it and would rather pay cash price. In fact, cash price is even cheaper without insurance sometimes. 

Other online pharmacies, such as Alto and Capsule, offer similar services as Amazon. However, what separates Amazon from all other similar companies is that Amazon already has the infrastructure in place. It can easily pack and ship medications on a massive national scale. Just give them one or two days and your medication will be at your door. Logistically, it is a much easier process for Amazon. 

Amazon the PBM?

Out of the $3.8 trillion national healthcare spending, a decent piece of that cake goes to an unexpected sector called PBMs (Pharmacy Benefit Managers). In fact, the market size for PBMs in 2021 is $402.2 billion. PBMs are middle-men that form contracts with drug manufacturers, retail pharmacies, and insurance companies. Their main goals are to manage prescriptions and control drug costs. PBMs have great control over the drug market because of their purchasing power and unbeatable discounts from manufacturers. Currently, Amazon contracts with PBMs to manage their prescriptions and gets its medications from them.

But if Amazon expands within healthcare, does it really need to form contracts with middle-men? Why doesn’t Amazon just make its own PBM? With Amazon’s potential massive scale within healthcare, it could easily contract directly with the drug manufacturers to get bulk discounts. This would be just like how it ended its contract with FedEx to make its own transportation services. If Amazon became a PBM itself, it could bring greater transparency to the industry. If it already has its own primary care clinics, virtual access to healthcare professionals, and online pharmacy, then what is stopping it from becoming its own PBM?

Amazon’s Business Model

You may wonder how Amazon has managed to diversify itself into so many different industries. How could they afford all of this? Well, Amazon has a uniquely brilliant business model. One word to describe it is patience. For Jeff Bezos, it is all about the long-term. Amazon is in no rush to make money. In fact, Amazon is notorious for losing money. But for Mr. Bezos, it is merely a long-term investment. 

For the first 20 years, Amazon was not making much profit, which was not a big deal. It built expensive infrastructure that eventually led to gaining massive scale, customers, and business. It spent years losing money with the goal of eventually beating its competitors. And it worked. Its strategy was to put profits in the back burner and focus on taking market share, which is the portion of total sales in an industry by a company.  By doing so, Amazon put companies that could not afford to lose money out of business. For example, PBMs and other healthcare companies are impatient because they have to make a certain amount each quarter to keep their lights on. If they do not see profitable results, they can lose their jobs. This is not the case for Amazon, as they have great market share in various industries. Everything, including Amazon’s business model, is meticulously planned. Amazon has entered the healthcare market, and it definitely will not leave anytime soon.

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