COVID News — It’s Bad Again — COVID Is Rising But With Home Tests, The Reported Numbers Are Too Low; China Is Exploding; the Omicron subvariant XBB.1.5 emerges and the weather stinks!

It’s Worse Than The Numbers Show – The Tridemic Is On…And Under-reported

While most national data has been fairly flat in recent days, test positivity is rising sharply. This suggests that there are far more new cases circulating than what official reports show. Moreover, the Omicron subvariant XBB.1.5 has emerged of late. It now makes up nearly 41% of nationwide COVID cases and is responsible for 75% of the cases in the Northeast. Cases and hospitalizations may both increase next week when more regular reporting patterns resume as the Holiday season ends. The latest data shows an 11% drop in positive cases over the past two weeks, but it’s really difficult to believe things are getting any better, in particular as flights and football game are packed around the world. In addition, with home tests and mild symptoms, the actual numbers are probably significantly higher. Positive tests, on the other hand, are up 23% over the same period and those are the more seriously ill patients. Hence, the 8-11% rise in hospitalizations and I.C.U. patients. The ROW cases have followed the U.S. rates, with hot spots in Japan, Europe and Australia. As the exhibit below shows, only about a third of Americans aged 18-64 have received a COVID booster. Assuming the majority of vaccinated received their shots in 2020-2021, most people are walking around unprotected and without masks.

How Big Is China’s Outbreak?

It’s almost impossible to call the actual amount of positive cases in China. The latest Worldometer report says the total number of cases are heading towards half a million, although that sounds way too low. A leading physician in China recently commented that he believed the contagion rate in Shanghai (25 million people) was as high as 70%. With relatively poor vaccine quality, and overcrowded hospitals, it is very hard to know what the global impact will be as the country has basically abandoned its “zero-COVID” policy due to overwhelming national protests. Some countries, including the U.S. and Britain, have reintroduced required testing pre-flight for anyone departing China. Others nations, including Japan and Italy, are only requiring testing upon arrival and quarantine for any COVID-positive travelers.

Total COVID Cases In China?

Flu Still Very High

Flu cases remain in the “very high” range across the country, although it has begun to ease up a little in some regions. Nonetheless, the Tripledemic (COVID, flu, RSV) is still in the intense stages, with pressure on hospital staffing still high. The pace is expected to pick up, as kids go back to school. So its not too early to get a flu vaccine.

SENTIMENT – Will lecanemab’s Approval & JPM Bring Some Relief?

While the biotech sector ended 2023 with a flurry of positive clinical, regulatory and M&A activity, sustained high interest rates and too many biotech companies kept a lid on the indexes. One might think that with all the good news (including a much less onerous Medicare drug pricing policy than thought) that biotech stocks would fare better. Most of the good news on the IRA bill went to the Big Pharma/Big Bios  – where the IBB and DRG indices – outperformed from September to December. On the other hand, the XBI has been treading water over the same period. Why is that? There are just too many companies. On a plus note, BIIB’s Alzheimer’s drug received approval and the major JPMorgan Healthcare Conference begins this week.

And that is why stock picking is so crucial in the sector, and the only thing that will really lead to outsized returns. The chart below shows that from 2013-2018, the number of biotech companies around was roughly 2,000. With the major success of a handful (we believe that the ABBV takeover of MTSL Recommendation PCYC was a key trigger for the explosion in the group), that number has grown by at least 50% since to over 3,000 (and more overseas). Hence, it so important to pick the right stocks and while we will not be able to find every winning company, MTSL has been successfully finding the needles in the haystacks for decades. Since the last Issue, Madrigal (MDGL) – one of our favorites since 2017 – delivered the most successful Phase III NASH results ever – and its stock more than tripled last year.

Number of U.S. Biotech Companies

30-Year Bond Yield vs. XBI

Fighting The Fed Is Still Impossible

With the plethora of new biotech Issues coupled with the historic rise in interest rates, risky biotechs as a whole continue to struggle. The 30-year bond yield closed at 3.56%, down from a peak of around 4.25% at early November. The gap between the 30-year Treasury bond yield and the XBI has narrowed as the XBI acts relatively better but many bios are still undergoing some year-end tax loss selling. And again, while there has been a lot of good biotech news, the sector has had to deal with stabilizing rates versus individual stock tax-loss selling.  As the 30 year has meaningfully come off the peak, the XBI has basically stayed flat (in the 75-85 trading range); hence, relative outperformance but absolute flattish behavior. Around press time, the Fed reiterated it’s hawkish stance (it has to keep the pressure on) and the December job report added more fuel to it’s position. Higher rates bode poorly for biotech stocks, while a peak/change in the Fed stance (not expected in the near-term) would trigger some optimism. Inflation data, on the other hand, is proof that price gains have peaked in many areas. Its just still way above the Fed target. Hints of peak rates and the halting of interest rate hikes will continue throughout the year.

Independent international analysis suggests a higher cardiovascular mortality than previous published in Amgen’s Repatha CVOT study. Also, the Company’s CLEAR data has been accepted for the late-breaker presentation at the upcoming American College of Cardiology (ACC) Meeting in March.

BMJ Open Article Brings New Data

A strong warning has been issued for Amgen’s Repatha (evolocumab) by researchers from Spain and Canada for the use of the proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitor among adult patients who have established atherosclerotic cardiovascular disease following their analysis of purported inconsistencies between the FOURIER trial’s Clinical Study Report (CSR) and publication of primary trial results in 2017. A team of Restoring Invisible and Abandoned Trials (RIAT) investigators was formed for the new review of the FOURIER data in 2018. This team then applied to the European Medicines Agency (EMA), Health Canada, and the FDA for the FOURIER trial’s CSR. Access was granted only by the first 2 agencies, with the FDA noting in October 2019 that it could take up to 7 years to release the CSR, according to a BMJ Open article (https://bmjopen.bmj.com/content/12/12/e060172). Published just last week, the international team from Navarre Health Service, Navarre Institute for Health Research, and The University of British Columbia aim “to restore the trial’s mortality data based on the information contained in the death narratives in the CSR.”

The new review of the data comes to the following conclusion: “After re-adjudication, deaths of cardiac origin were numerically higher in the evolocumab group than in the placebo group in the FOURIER trial, suggesting possible cardiac harm.  When the trial was terminated early, a non-significantly higher risk of cardiovascular mortality was observed with evolocumab, which was numerically greater in our readjudication.  A complete restoration of the FOURIER trial data is required. In the meantime, clinicians should be skeptical about prescribing evolocumab for patients with established atherosclerotic cardiovascular disease.”

• In MAESTRO-NASH, a 52-week serial liver biopsy Phase 3 study in more than 950 patients, resmetirom achieved both primary endpoints and potentially clinically meaningful effects with both daily oral doses, 80 mg and 100 mg, relative to placebo
• NASH resolution (ballooning of 0, inflammation of 0-1) and ≥2-point NAS reduction with no worsening of fibrosis (p<0.0001 at both doses)
• Fibrosis improvement by at least one stage with no worsening of NAS (p=0.0002 and <0.0001 at 80 and 100 mg, respectively)
• Potentially clinically meaningful LDL-lowering, a key secondary endpoint (p<0.0001)

MDGL has pitched a “perfect game” with their pristine MAESTRO-NASH Phase III trial hitting both primary, FDA agreed upon endpoints. The FDA had agreed that even hitting one primary endpoint would lead to approval. They hit both. This is first ever positive Phase III trial for NASH is a watershed event for both NASH patients and MDGL.  With two positive Phase III trials in the bank, MAESTRO-NASH & MAESTRO-NAFLD, resmetirom is poised to become a multi-billion dollar drug as a once-a-day pill to treat both NAFLD and all stages of NASH.

Alaunos TCRT is a true next generation CAR-T cell therapy company focused on treating solid tumors.  The technology incorporates T-cell receptor (TCR) therapies based on its proprietary, non-viral Sleeping Beauty gene transfer technology and its TCR library targeting shared tumor-specific hotspot mutations in key oncogenic genes including KRAS, TP53 and EGFR which are prevalent in solid tumors. Sleeping beauty is a proprietary non-viral delivery system that allows for repeat dosing and improved manufacturing efficiencies compared to using viruses for cell therapy.  The Company has a clinical and strategic collaboration with the National Cancer Institute and one of the world’s leading immune oncologist, Dr. Steven Rosenberg.  To date, TCRT is the only public company to have successfully dosed human solid tumor patients with CAR-T therapy demonstrating sustained POC with Patient #1 who had a partial response and at 24 weeks approximately 30% of all T-cells were TCR-T cells.  CAR-T therapies for cancer have the potential to offer a potential “cure” for patients with success to date only being achieved in much easier to target liquid/blood tumors.  CAR-T therapy for solid tumors is a huge unmet medical need, and in our view, TCRT is a leader in the cutting edge space.

Esperion is a de-risked biotech company in the cardiovascular sector with its lead drug, bempedoic acid (BA) — branded NEXLETOL — already FDA approved to reduce LDL cholesterol. It is a safe and effective alternative to statins and reduces LDL in patients on its own and in those that are statin-intolerant, an enormous market that comprise about 10% of all statin-eligible patients (roughly 20 million people worldwide). In December, ESPR delivered positive, statistically significant top-line clinical data (at least a 15% improvement in MACE-4) from it’s flagship Phase IV study — Cholesterol Lowering via Bempedoic acid, an ACL-Inhibiting Regimen — the  CLEAR Outcomes trial. The Company announced that the trial met its primary endpoint, demonstrating statistically significant risk reduction in MACE-4 (Major Averse Cardiovascular Events) in patients treated with 180 mg/day NEXLETOL compared to placebo. The Company will file for an expanded FDA shortly that will lead to a greatly expanded label (plus widespread insurance coverage) to include these great lifesaving results. Importantly, the CLEAR comprehensive trial data will be presented at the American College of Cardiology (ACC) Annual Scientific Sessions March 4, 2023.

CLEAR Cardiovascular Outcomes Trial CLEAR Outcomes is a Phase 3, event-driven, randomized, multicenter, double-blind, placebo-controlled trial designed to evaluate whether treatment with bempedoic acid (BA) reduces the risk of cardiovascular events (death, heart attack or stroke) in patients with or who are at high risk for cardiovascular disease with documented statin intolerance (inability to tolerate two or more statins, one at a low dose) and elevated LDL-cholesterol levels (fasting blood LDL-C ≥ 100 (2.6 mmol/L)). The study included over 14,000 patients at over 1,200 sites in 32 countries.

MDGL has pitched a “perfect game” with their pristine MAESTRO-NASH Phase III trial for resmetirom hitting both primary, FDA agreed upon endpoints.  The FDA had agreed that even hitting one primary endpoint would lead to approval. They hit both. This is first ever positive Phase III trial for NASH and is a watershed event for both NASH patients and MDGL. The company also had great Phase III MAESTRO-NAFLD data for resmetirom in early 2022. With two positive Phase III trials in the bank, MAESTRO-NASH & MAESTRO-NAFLD, resmetirom is poised to become a multi-billion dollar drug as a once-a-day pill to treat both NAFLD and all stages of NASH.  In our view, the drug is a true best-in-class compound with both outstanding safety and efficacy all in an easy to take daily pill. The Company is expected to file for FDA approval in early H2:23.

We expect a premium buyout for the company given that resmetirom is both wholly-owned and completely de-risked.

The Company’s ULTRA-CAR-T technology has the advantages of non-viral multi-gene delivery, overnight manufacturing process, higher antigen-specific expansion and in vivo persistence, with an integrated kill switch. The lead compounds under development are all in clinical trials with positive data recently and/or about to be presented in 2023.

PRGN-3006 – Recent data was presented at ASH (December) for PRGN-3006 UltraCAR-T® in acute myeloid leukemia (AML); In late-stage, terminal patients, there was a 27% objective response rate with patients receiving one dose in an ongoing Phase 1b study. Dose expansion is underway at the Mayo Clinic in Rochester, Minnesota, with multicenter expansion and technology transfer and site activation activities underway at multiple new centers.

PRGN-2012 – Enrollment is complete in Phase 1 study of PRGN-2012 AdenoVerseTM Immunotherapy in recurrent respiratory papillomatosis (RRP); the data will be presented in January 2023 and it is expected to show at least a 40% response rate in these patients. Recurrent respiratory papillomatosis (RRP) is a disease characterized by recurrent wart-like growths on the surface of the vocal cords or tissue around the vocal cords. A Phase 2 study has been initiated and is rapidly progressing. Most important, based on the positing upcoming results and the fact that there is no other treatment for these patients other than repeated surgeries (tens or hundreds per patient), we believe the Company will be able to gain an accelerated FDA path for PRGN-2012.