Lauren R. Rublin has a feature article in this weekend’s (September 30, 2019) Barron’s, “The Future Of Biotech,” which is quite lengthy/several pages long — so, I will do my best to highlight the key points/takeaways. I refer you to this weekend’s Barron’s for the full article.
Ms. Rublin begins, “recent advances in biotechnology, from data-driven diagnostics, to game-changing gene therapies, suggest we’re on the cusp of a golden age in which many feared diseases will become treatable, or even cured.” Ms. Rublin interviewed five members of Barron’s first biotech roundtable of analysts and investors to discuss “what excites them about the coming disruption in health care — and, how to invest in and profit from them, too.”
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Ziad Barki, [fund] manager of the $12.5B T. Rowe Price Health Sciences Fund (ticker: PRHSX), told Barron’s/Ms. Rublin that “It’s difficult to differentiate among early stage opportunities. We look for therapies that have achieved some level of proof of concept, whether in terms of survival benefit, or other clinical benefit. If they are without competitors, that is the holy grail. Recently, there has been so much innovation that multiple companies are coming to the market to treat the same conditions. When that happens, you see new competition. The migraine space is a good example,” he said.
“You’ll pay more for proof of concept, but the risk is diminished,” Mr. Barki said, and of course the price per share of the stock is also higher. “If the company has a good management team, and a platform that suggests the science that produced its first product, can produce more than one drug, that’s even better. But they don’t have to do it again. AveXis had one successful product, Zolgensma, and got acquired by Novartis.”
David Schenkein, General-Partner at GV, the venture-capital arm of Alphabet [Google], and co-head of the GV life-sciences investment team, told Barron’s that he was “super optimistic about novel therapies — particularly cell and gene therapies. It is one thing to be able to deliver these therapies in an academic medical center in New York or Baltimore, or Boston, but in smaller centers around the world, the technology still requires a fair amount of heavy lifting.”
Eli Caslin, Founder and Chief Investment Officer of Caslin Capital, a New York-based investment firm focusing on life sciences and health care, told Barron’s, “there are investment opportunities around that statement. We’re an investor in BioLife Solutions [BLFS], which offers a diverse set of gene- and cell-therapy tools, including products for freezing, thawing, and delivering cells and tissues. When Mr. Riblin asked “which therapies excited him the most?,” Mr. Caslin explained that he is “a hematologist and medical oncologist,” so naturally that is a comfortable investment space for him.” Caslin’s theraputic pick is MyoKardia (MYOK), “which is developing targeted, small-cell-molecule therapies for congestive heart failure and hypertrophic cardiomyopathy [thickening of heart muscle],” Ms. Rublin wrote. “MyKardia doesn have any profits; but their [clinical] data looks compelling,” he added.
Skipping to comments made by Gbola Amusa, Director of Research and head of health care research at Chardan Capital Markets, a boutique investment bank focused on health-care innovation, told Ms. Rublin that “in Parkinson’s disease, Prevail Theraputics (PRVL), is testing a gene therapy targeting a particular genetically defined population. I don’t cover the company, but to me, that’s a good starting point.” Mr. Caslin said that “we’re investors in Invitae (NVTA), a company that provides clinical sequencing for inherited genetic diseases. Invitae solves the diagnostics problem with a DNA sequencing-based test costing an average of $471 that takes less than two weeks to come back with an answer as to the genetic mutation responsible
Gena Wang, Director of Biotech Equity Research at Barclays, and a research analyst covering U.S. small and mid-cap stocks, told Barron’s her pick is Regenxbio (RGNX), a gene therapy that appears to reduce the need for intraocular injections of monoclonal antibody; the standard treatment for wet, age-related macular degeneration, and currently incurable. Sarepta Theraputics (SRPT) is another company we like.” She acknowledged the stock is currently “out of favor, and focuses on the treatment for Duchenne Muscular Dystrophy. Sarepta doesn’t have too many catalysts, but we see upside longer-term before the company releases important data in the second half of 2020.”
Ms. Rublin stated that “Hemophilia has been a battleground for biotech companies. Which compaines do you expect to prevail with successful gene therapies?” Ms. Wang said “BioMarin Pharmaceuticals (BMRN) Spark Theraputics (ONCE) and Sangamo Theraputics (SGMO) are all developing one-time-gene-therapy treatments for hemophilia A. We aren’t impressed by BioMarin’s data so far. Spark has a better clinical profile. Sangamo’s data looks good; but, I would like to see more about durability, which we will get at ASH (American Society of Hemotology) this year (December 7-10). We favor Spark and Sangamo’s hemophilia A programs over BiiMarin. Spark also has reported good data on its hemophilia B treatment, as has uniQure (QURE). Based on clinical profiles, they are close competitors.”
Ms. Rublin then asked the Barron’s biotech roundtable members to discuss “companies that intrigue you.” Ms. Caslin once again cited BioLife Solutions, and Magenta Theraputics (MGTA), another small company developing targeted conditioning regimes for cell therapy and transplant patients, to make the procedures less toxic and more accessible. If Magenta is successful, it will build a company with multiple, high-value, high-margin products.”
Ms. Rublin asked Mr. Barki “which of your biotechs could be big winners?” Mr. Barki said “Vertex Pharmaceuticals (VRTX) is a larger company that hits on a lot of diseases we/ve been discussing. Vertex generates more than $3B of revenue a year from cystic fibrosis treatments. The company has developed transformational drugs for a severe, life-threatening disease. It has a defined patient population, and no competition. It can reach 70,000 patients around the world with a small sales force. This is precision medicine at its finest, and also a really good business. Its costs are relatively low.” Mr. Barki’s two small-cap picks are: “Ascendis Pharmaceuticals (ASND), and Tricida ((TCDA). Ascendis isn’t a sexy gene therapy company or a player in molecular medicine,” Mr. Barki told Barron’s. “It modifies the drug-like properties of hormones used to treat medical conditions like parathyroid hormone and human growth hormone. He further explains in the Barron’s article.
Tricida is “an off-the-radar company focusing on a drug for kidney disease,” Mr. Barki explained. “It is using an older, polymer technology approved in other diseases to soak up hydrogen ions, which makes kidney-disease patients less acidotic. Tricida’s [new] drug application [NDA] has been filed with the FDA, and the drug could be approved next year [2020]. There are a lot of data indicating that if you improve the acidosis [reducing the level of acid in the blood] of these patients, you will affect the course of the disease in a positive way.
“Let’s turn to what excites you,” Ms. Rublin said. Mr. Barki mentioned Regenxbio once again, and added that “UniQure is another one of my top picks entering 2019, is up 50 percent this year, resulting in about a $1.6B cap.” Mr. Barki “expects it to get acquired, perhaps by BioMarin, and perhaps after UniQure releases in 2020 its pivotal Phase 3 data for its hemophilia B gene therapy, BioMarin has a hemophilia A therapy in late-stage development and would see synergy in having a hemophilia B asset, and UniQure’s National Institutes of Health patents.”
When asked “what else do you like?” Ms. Amusa said “MeiraGTx Holdings (MGTX) and The Medicine Company (MDCO). See this weekend’s Barron’s for her reasoning. Ms. Amusa also likes Krystal Biotech (KRYS), which is doing unique gene therapy for skin conditions; and, Kodiak Sciences (KODI), which focuses on retinal diseases, diabetic retinopathy and retinal vein occlusion.”
Again, there is quite a bit of background information that is contained in this weekend’s Barron’s and their feature article on the future of biotech. Remember, if you decided to take an equity position in any of these companies, be sure to do your own due diligence, understand your risk tolerance and time horizon, and appreciate there are only two guarantees — death and taxes. Otherwise, good luck. RCP, fortunascorner.com
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