3 HOT NEW BIOTECH LAUNCHES FOR YOUR SWELTERING SUMMER

By the Sick Economist

The mercury is high and you could fry an egg on the sidewalk. No doubt, we have a long, hot summer in front of us. But 2024 also promises to be a hot summer for biotech stocks. After crashing to a devastating low of $61 in 2023, XBI, a biotech index that represents the galaxy of biotech start ups and innovators, has rebounded to trade in the mid $80’s.  Advances in genomics and AI have drawn all new interest in the biotech sector. And many exciting new medicines are getting ready to make it past the “approval” finish line.

Below find three hot stocks for the summer of 2024. These are companies that are finally seeking clinical approval for their new drugs, after years or even decades of painstaking research. If they gain approval, this means these small companies will cross the threshold from research projects into actual revenue generating businesses. This milestone often represents a good entry point for investors looking to beef up their biotech holdings.

1. Verona Pharma

Imagine trying breath through a straw. Sadly, this is what you may experience if you suffer from COPD, a progressive lung disease that could effect up to 30 million Americans at any time .

Unfortunately, there is currently no cure for COPD; only medications that help manage the symptoms. Many patients never achieve an adequate level of comfort and security and are forced to endure a suboptimal lifestyle with a slow, chronic decline in their ability to breath. Into this grim world charges Verona Pharma, a small startup with a brand new method of treating COPD.

Ensifentrine will not cure COPD, but data demonstrates that it may represent a powerful new option in the management of the disease.  Ensifentrine could be the first novel mechanism available for the maintenance treatment of COPD in more than a decade if approved by the FDA, with a PDUFA target date of June 26, 2024.

The company is well financed, having recently secured access to an additional $650 million to help launch the product. Adding this to the company’s pre-exising cash pile of $255 million, and we see that the company now has access to cash that equals its current stock market valuation of  $950 million. You read that right. Verona has cash resources that equal it’s stock market valuation. This would imply that all of it’s intellectual property, all of it’s scientific equipment and connections in the scientific community are worth $0.  An investor who chooses to buy into Verona today, gets access to $950 million in cash, and the fortune in intellectual property comes for free.

Somehow, the market has missed the value in Verona. These are the kinds of mismatches that the astute biotech investor lives for.

2. Madrigal Pharmaceuticals 

This is a much more high profile biotech company, because it is currently launching an approved product for a very widespread, common condition.  As we speak, Madrigal is the only company that has won approval to sell a remedy for NASH, a common, chronic condition of the liver. As many as 25% of all adult Americans suffer from NASH, which is closely associated with obesity and diabetes.

Madrigal currently sports a market cap of $4.7 billion, which is relatively low for a company launching an approved product for a condition that effects countless millions. Has the market overlooked another gem?

One reason for Madrigal’s restrained valuation is the competitive market place. As GLP-1 weight loss drugs have stormed upon the scene, Madrigal’s star has dimmed somewhat. Recent data from Eli Lilly demonstrated that a high percentage of Tizeperatide patients will see great improvements of their NASH metrics as they lose weight. (Here, the disease is listed as MASH instead of NASH, but the two diseases are very close cousins).

The apparent success of GLP-1 in treating NASH may render Madrigal a niche player. But still, even a niche in market that effects 20% of American adults could be very, very profitable. Madrigal may not necessarily be a case of the market missing an opportunity, but rather misunderstanding an opportunity. You don’t have to be a genius to make money in biotech. You just have to understand a little bit more than the general market. This may be one of those situations.

3. Moderna Therapeutics

Moderna could be a good bet for an investor who likes a good comeback story. Everybody knows that Moderna burst on the scene in 2020, emerging from the obscure world of mRNA based cancer research to pioneer and launch the Covid vaccine. It was the first time in history that a vaccine had been conceived, researched, and launch so quickly, and tsunamis of cash rolled in for this formerly nascent biotech.

But the good times couldn’t last forever. As America moved past Covid, revenue fell from $7.1 billion in Q4, 2021, to just $167 million in the lastest quarter. The company went from minting money to losing money. Despite a very promising pipeline of novel cancer drugs, Moderna is currently burning cash.  The simple question is: can the company successfully launch a new product that will generate enough revenue and profit to stop the financial bleeding while their oncology pipeline matures?

Management is optimistic. They boldly predict the company will generate $4 billion in sales in 2024, due the upcoming launch of their new RSV vaccine. This vaccine will use similar technology to the Covid vaccine, and may eventually be combined into a “triplet” shot for senior citizens that would help to ward of Covid, RSV and the Flu, all at once. This is the vision that compels the company to predict that they will once again be in the black by 2026. (An mRNA flu vaccine is also in the works).

But smooth sailing is not guaranteed for Moderna. Unlike the mad rush of Covid, they would be launching into competitive markets. Other major players are also launching RSV vaccines, and, as you may well know, various types of Flu vaccines already exist.

In it’s most recent financial report, the company had roughly $8.5 billion in cash on hand, after burning through roughly $1 billion in cash over the last year. Launching new drugs into a competitive market will not be cheap, but it seems unlikely that the company will go broke anytime soon. The new RSV drug just gained approval; the rollout will be a gradual process over the remainder of 2024.  Lastly, with a market capitalization of $56 billion, Moderna is much cheaper than it used to be, but still, not cheap. If they have short term success with their new respiratory vaccines, but the long term oncology pipeline flubs, the shares won’t be a good investment. However, Merck, a leader in the world of cutting edge oncology, is currently valued at over $300 billion dollars, indicating a potential 500% upside for the patient and brave Moderna investor.

Moderna is a company with a story. It involves a young biotech ingenue’s rocket ride to fame, oceans of cash, and a fall from grace. If you think that the next chapter of our biotech soap opera could be big oncology success, then you might take a gamble on $MRNA. If you prefer less drama, then other companies may be for you.

For most people, “summer” means barbecues, days at the beach, and baseball. But the dedicated biotech investor never stops looking for sizzling deals. The three names above might just fall into that category.