COVID News: Spring Spike As Outdoor Life Resumes, Europe/China Not Making It Any Easier; Boosters/Antivirals Still Avoid Worst Cases; Where Is NVAX? JNJ, GSK Show Solid COVID Sales

Overall The U.S. Doesn’t Look Bad But…..

Positive cases are up 53% over the past two weeks, led by the Northeast. Deaths (-32%) and hosptializations (+4%) have declined overall but there is a lag between the positive infections and the worst outcomes (hosp/death) so one can expect to see the very bad new cases rise again, at least a little. Testing is up 8% but with the spike in new cases, look for more testing to be needed, too. The second chart above in NY shows the larger rise in daily hospital admissions due to COVID, and the CDC is recommending mask mandates in many counties. The warmer weather is leading to a resumption of large gatherings again (e.g., concerts, religious, etc.) and that is often led by un-boosted or not vaccinated people. So we have ongoing COVID concerns, not to mention the increasing long COVID sufferers.

China Spiking & So Is Europe

Turning to the ROW, it really is not a pretty picture. The lockdown of Shanghai is only adding to the slowdown in global trade and hence, inflationary implications. The U.S. spike looks relatively light compared with Germany, France, Italy and South Korea. So COVID – often forgotten with the Ukraine crisis – is a major reason that the U.S. is raising interest rates to slow down out of control prices.

Second Booster Recommendations Widening

An FDA advisory panel last week supported extending boosters. Even though the ba.2 variant is overall a milder version, we are still learning a lot about its virulence. Obvious symptoms – cough, fever, aches/pains – are being dismissed as minor but the inflammatory and autoimmune components are starting to emerge for longer term disability. While the vaccines haven’t stopped the virus dead in its tracks like we all had hoped they might, vaccines prevent the worst outcomes of hospitalization and death. So getting a second booster after 4-5 months is a smart move. Vaccine stocks are hanging in there for now (except NVAX which is still not FDA approved).

NVAX EUA Still Elusive

Despite positive clinical data and approval in some overseas countries, the long underperformance of Novavax continues with a COVID vaccine that is nowhere in sight in the U.S. Not that we need another vaccine at this point, but NVAX was one of the early frontrunners in the race and a recent FDA AdCom pointed out that it is still not entirely sure when any EUA will come.

Both JNJ, GSK Deliver Solid COVID Performances

With both companies somewhat under the radar (vs. PFE and MRNA), it shows that the use of COVID vaccines and antibodies is not just limited to the first two vaccines. JNJ’s Janssen vaccine and GSK’s antibody (Xevudy) released positive, larger than expected revenues in their latest quarterly reports.

SENTIMENT – Rates UP, Stocks DOWN

The basics are very simple. When rates go up, stocks go down. More specific to biotech, when rates go way up, risky stocks go way down. We have put long bond yields in the MTSL this year to show this effect. One cannot fight the Fed and this type of very aggressive Fed in particular is faced with the consequences of long overdue free money stoking inflation that has run wild. As they pull that extended safe rug out from under investors, we really have seen that there is no place to hide. The wealth disparity has widened to unreasonable levels by any measurement, with the implications of the Elon Musk takeover of Twitter for $44 billion alone shows how extreme things have become. On top of that, the Fed is in a bind with too many variables that are out of its control (e.g., Russia, supply chain and ongoing COVID spikes to name a few) and has to resort to major interest rate hikes to stop runway prices. That just hurts risk assets regardless, and really hurts unprofitable, risky stocks like the bios.

As long term biotech analysts, one has to be an optimist on at least a handful of companies with encouraging compounds and improving fundamentals. This week’s great example on the plus side is Alkermes (ALKS) and BioMarin (BMRN), two MTSL Recommendations that delivered the goods in broad overall quarterly beats that even the shorts can’t argue with. Frankly speaking, the majority of biotech companies are coming up short lately – especially at the FDA, the industry’s most crucial gatekeeper. Earlier this year we wrote of increasing “green shoots” with positive data updates and even an FDA approval or two. There was select good news for BTAI but one of the sector leaders, ALNY, received a 3-month delay for vutrisiran. Other recent FDA pushbacks from AXSM and MYOV are just a sample of the longer list that has many thinking the FDA is becoming a lot tougher than it has been in a while.

Lybalvi is off to a strong start and has exceeded Wall Street’s expectations with $13.9 miilion in revenue vs. the $9 million consensus estimate for the drug’s first full quarter since launch.  The stronger than expected Q1;22 results for LYBALVI led a solid first full quarter for ALKS with total revenues of $278.5 million easily beating the Wall Street consensus of $256 million.  Outside of Lybalvi, Vivitrol came in at $84.9 million vs. the Wall Street consensus of $80 million, and Aristada revenue was $72.5 million vs. the Wall Street consensus of $67 million.  Higher manufacturing and royalty revenues from Vumerity also drove the beat.

In our view, Lybalvi’s has peak sales potential of over a $1 billion based on initial demand trends with clinician receptivity to the product’s unique profile (significantly less weight gain vs. Olanzapine) and positioning.   We are encouraged by both the quarterly results and 2022 outlook and by management commentary on launch dynamics to date. The extent of Olanzapine switching (representing 50% of Lybalvi patients to date), and also the extent of patient capture in the Bipolar indication (50% of patients) given the larger market opportunity in bipolar disease vs. schizophrenia are both positives for the drug’s launch. While Olanzapine has historically seen greater use in this indication, the bipolar patient population is potentially more attractive from a commercial perspective, given that this group is more heavily weighted toward patients with commercial payer coverage (i.e., potential for higher net price).

In April 2022, ALKS began arbitration proceedings related to Janssen’s partial termination of two license agreements with the company in the U.S. and Janssen’s royalty and other obligations under the agreements. Under these agreements, Janssen received access and rights to Alkermes‘ small particle pharmaceutical compound technology, known as NanoCrystal® Technology, which enabled the development and commercialization of a number of successful products, such as INVEGA SUSTENNA, INVEGA TRINZA, INVEGA HAFYERA and CABENUVA®.

BMRN recently reported their financials for Q1 and delivered revenue of $519 million (+7% Y/Y) which was slightly below the Wall Street consensus estimate $509 million.  In our view, investor focus this year continues to be on the Voxzogo’s launch, which has been so strong out of the gate that the company has already raised guidance to $100-125 million from $90-115 million.  The potential EU and US Roctavian approvals in mid/3Q and 4Q, respectively will also continue to attract investor attention. Within the early gene therapy pipeline, Phase I/II dosing of BMN 331 (HAE) has begun while BMN 307 (PKU) will remain on clinical hold for several more quarters pending non-clinical study results.

Voxzogo is clearly exceeding expectations as 1Q net sales of $20 million easily toppced the Wall Street consensus estimate of $15 million, with 2/3 from ex-US regions.  The drug is now commercial in 15 markets, with 284 children (83 US, 201 ex-US) on paid drug as of 3/31 and 53+ in process in US.  Two important upcoming events for the drug include potential approval in the key Japan market in late 2022 and discussing potential expansion to <5 year olds with the FDA after recent positive Phase II data.

Two Roctavian reviews are upcoming with a CHMP opinion now expected mid-2022 (previously estimated 2Q), and a June BLA re-submission would imply potential US approval by year end. The company said that previously reported Phase I/II salivary gland mass data deemed not attributable to Roctavian will be presented next month at ASGCT and will also be provided to FDA/EMA as part of safety/regulatory reviews.

INCY recently inked a deal with the Japanese specialty pharmaceutical company who focuses in dermatology, Maruho Co., Ltd., for the development, manufacturing and exclusive commercialization of ruxolitinib cream, a novel cream formulation of INCY’s selective JAK2 inhibitor ruxolitinib, for treatment of autoimmune and inflammatory dermatology indications in Japan.  A topical formulation which some on Wall Street have modest expectations for, in our view, ruxolitinib has significant potential in previously underserved inflammatory dermatologic diseases, including vitiligo and atopic dermatitis.

Under the terms of the agreement, Maruho will make an upfront payment to INCY and will also receive additional potential development, regulatory and commercial milestones and royalties on net sales of the licensed product in Japan.  In return, Maruho will receive the rights to develop, manufacture and exclusively commercialize ruxolitinib cream, and other potential future topical formulations of ruxolitinib, in autoimmune and inflammatory dermatologic diseases, including vitiligo and atopic dermatitis, in Japan.