Shannon Jones: Welcome to Industry Focus,
the show that dives into a different sector of the stock market every day. Today is Tuesday,
January 30th, and we’re talking Healthcare. I’m your host, Shannon Jones. I’m joined via
Skype by healthcare guru, all-around good guy, and now professor — I can add that to
that title — and that is Todd Campbell. Todd, how are you?
Todd Campbell: Good! I missed you last week! You alluded to it, I’m excited, I get to spread
The Foolish word now to a great group of future stock pickers at the University of New Hampshire
up near where I live. It’s going to be quite an experience, no question.
Jones: Can’t wait to hear more about that experience, Todd! Honestly, what a gem,
to be in college learning about investing from one of the pros. They probably
don’t even realize the privilege and the honor that they have of sitting in
Todd Campbell’s class to learn about stocks. Campbell: I tell you, if I could go back in
time and take a class taught by somebody who’s involved in the business that takes the discussion
from the theoretical, oftentimes in the university environment, to the real-world application
of some of the things that we’re going to be talking about this semester, boy, I would
have taken it in a heartbeat. I really hope that they leave the class as excited about
what they learned as I am about what I do every day. Jones: It really should be mandatory for any graduate student, undergraduate student.
They should really learn about investing. Today’s show is about making sure healthcare
investors know which top stories to look out for in 2019. Todd, we’ve got a pretty impressive
lineup, we narrowed it down to about six, and this is by no means an exhaustive list.
These are the ones that a lot of analysts and investors are paying very close
attention to. Todd, how about we jump right in? Let’s start with the first one. This is a
catalyst, I would almost call the un-catalyst in some respects, for a company called Biogen.
That’s ticker symbol BIIB. There’s so much going into their drug, Aducanumab for Alzheimer’s.
No. 1, there’s a lot of uncertainty about Alzheimer’s, which we’ll get into. But even
more importantly for this company, there’s a lot of questions about, A, how are they
going to grow the business? B, will we actually get an interim data read-out on this drug?
Todd, how can we start to make sense of what is going to be an interesting
year for Biogen in 2019? Campbell: This is going to be a delivering
on a moonshot next 12,18 months period for this company. If you’ve been around and followed
biotech as long as we have, when you think of Biogen, you think, “This is a fast-growing
big biotech.” Not so much anymore. They built up their business with these very highly
successful multiple sclerosis drugs. But those drugs are now mature. Last quarter, their year
over year sales growth was only about 6.6%. In order to move the needle for big companies
like this, sometimes you have to take big risks. A couple of years ago, they said,
“We’re going to double down and focus on trying to come up with an effective treatment for Alzheimer’s.”
Anyone who’s listened to our show knows from past discussions on Alzheimer’s just how hard
that is, and what a moonshot it would be if they were able to develop a drug that does,
indeed, either slow the progressions of this disease or maybe even,
who knows, someday reverse it. Jones: Yeah. To give some context to the high
stakes of this drug and any sort of approval, and really, before approval, any positive
news when it comes to data, 99% of clinical stage drugs in Alzheimer’s have failed.
It’s affectionately called the Phase III graveyard for a reason. Speaking of, in a very timely
fashion, Roche also had an Alzheimer’s drug, which they announced today, as a matter
of fact, that they were actually going to be shutting down two of their Phase III studies
for their drug. There was a lot of read-through on Roche’s drug to Biogen’s drug, even though
Biogen has been very explicit in saying that this is different. But analysts and investors
have really been looking at these two drugs as basically being in the same class. So now,
you’ve got Roche stepping back, shutting the doors on two Phase III studies.
You have a slew of other failures — Eli Lilly, J&J — to add to the list. What you’re
seeing as it’s playing out in the markets right now, Biogen is down about
3.5% on the news of Roche, the company that’s partnered with Roche, AC Immune, is actually
down about 65% today on the news, with Roche being about flat. Stakes are very high,
and this new piece of news really does not help Biogen and its investors right now.
Campbell: Yeah. This goal of being able to break down the amyloid plaques that build
up on the synapses to try and restore the ability for the brain to communicate as quickly
and rapidly as it did when it was younger, it’s been very, very difficult to find the
magic formula to try and tackle Alzheimer’s disease. You look back at the Phase II data
for any of these drugs that have failed in Phase III, and one of the common threads
throughout is this, “In a subgroup, we saw… ” kind of presentation of data, where it’s certainly
by no means a slam dunk even as you’re going into Phase III. So, you’ve got Biogen,
this big company. They’re investing a tremendous amount of money with the hope of developing
multiple drugs or therapies for Alzheimer’s disease. This is the most advanced of those drugs.
Their Phase III trial is fully enrolled. We have no idea if we’re going to get
interim data. I didn’t see a note of that when I was scanning through the most recent quarterly
earnings report; however, I may have missed it. So, we don’t know if we’re going to get
interim data. That shifts all eyes to early 2020. So, potentially the next 12 to 14 months,
we’ll find out whether or not this drug actually works in Phase III at slowing disease progression.
Obviously, there’s a tremendous amount at stake. There’s 5.7 million people with Alzheimer’s
disease, and that patient population is only increasing because baby boomers are
getting older and people are living longer. The stakes are very high, but the
odds of success are very low. Jones: Absolutely. Lots to watch in 2019.
We’ll definitely keep our listeners up to date if we get interim data. On the conference
call that Biogen had for their earnings, they deferred to, “We don’t have a comment or a
policy on commenting on interim analyses.” But, it’ll be interesting to see if they
get more investor pressure, especially coming off of Roche and their news.
Lots to look forward to in 2019 there. Let’s turn our attention to the second
big story, what will be a big story in 2019. The reason why it’ll be a big story is because
this could mark first approval for a company that’s on the cutting edge of gene therapy.
This company is none other than bluebird bio. That’s ticker symbol BLUE. The stock has
had a really rough 2018, Todd. I went and looked back, it was actually down about 40%
last year. But, given some movement on the regulatory front, 2019 could actually look
like quite a bit of a turnaround year for them. Campbell: LentiGlobin is the big mover that we’re going to get news on here in 2019.
The 2018 performance, in my view, was mostly tied to increasing research by competitors for
their BCMA-targeting therapies for multiple myeloma. That overshadowed what could be the
launch of bluebird bio’s first gene therapy, LentiGlobin, and that’s transfusion-dependent
beta thalassemia. What’s important here is that this patient population, it’s not huge,
thousands of patients, but they do require constant, continuous transfusions of red blood cells.
Those transfusions are burdensome, they’re costly, and they can cause complications
that end up damaging organs. So, there’s a significant need to reinvent how we treat
patients with beta thalassemia. The approval for bluebird bio that they’re expecting would
be coming not in the U.S., it’d be coming out of the European Union, which has given
it an accelerated pathway. They filed for approval. A decision should come out of the EU,
my guess is sometime before the fall. I don’t know the exact date that they’re
expecting that. Then, if it’s approved, follow that up next year in 2020 with
a potential approval here in the U.S. The trial results were pretty
compelling, Shannon, for LentiGlobin. Jones: They certainly were. What they saw
in the trial was a single dose of LentiGlobin actually resulted in something called transfusion
independence in eight out of 10 patients, which is pretty remarkable. Even more remarkable
was the fact that it was a durable response. All eight of those patients actually maintained
transfusion independence through the last data cut-off period in September, with the
median duration of independence of 38 months. So, not only do you have impressive results,
but you see the durability of response. You mentioned that this will be the first drug approved
for the company, coming in the EU, of course. They’ve got a pipeline, potentially
two others that could be approved and ready to go by 2020. Also, this is a drug
being studied right now, and we’re looking at the TDT indication, but there’s also some read-through
with sickle cell disease which they’re after. All in all, getting across the finish line
just in the EU will spark a lot more investor attention in 2019,
even more so than it did in 2018. Campbell: One of the big questions that’s
going to be on everybody’s minds is, how do you price something that’s a one-and-done
therapy for something like this? If you look at the JP Morgan presentation that bluebird
bio put out, they came up with an intrinsic value for LentiGlobin of $2.1 million
per patient. Now, obviously, you’re not going to get any payer in the European Union
to pay $2.1 million for a one-time treatment. But it certainly does raise the question of,
how are we going to price these types of game-changing therapies so that it works out for everybody
involved? The patient, the company developing it, and the payers? Is it going to be one
of those things where you pay an upfront fee and then maybe you spread the payments out
over five years? Is it going to be an upfront fee, and then you only pay if it actually
does result in transfusion independence? We’ll have to wait and see.
Jones: We’ll have to wait and see on that. As we know, gene therapies have been commanding
the highest price tags across the industry. Whatever benchmark they set out with a potential
EU approval will certainly be interesting to see, if they get approved in the U.S.,
and what that price tag could look like here. Next up, we’re continuing on with the theme
of blood disorders. The next company on our list is a big player in this space,
specifically from a sickle cell disease standpoint. That company is Global Blood Therapeutics.
That’s ticker symbol GBT. Todd, for GBT, there’s so much at stake. Really, everything
for them is resting on the fate of one drug in particular. What can you tell us about that drug?
Campbell: [laughs] Yeah, it’s almost like the name of their company should just be
this one drug, right? Global Blood Therapeutics tells you that they’re focused on blood,
but really, this is their drug. This is what’s going to move the needle for them.
It’s a drug called Voxelotor. I’ll just call it Vox from here because I always struggle with
these names. It must drive our listeners crazy. It’s a treatment for sickle cell disease,
and there’s a big need for new treatment options for these patients, many of whom suffer these
vaso-occlusive events that land them in the hospital. Very painful events that require
opioid intervention, etc, in many cases. This disease can lead to stroke, it can shorten
life spans, it can starve organs of blood. It’s a very important indication for us to
develop new treatment options for. And, the hope is that Global Blood Therapeutics’ Vox
is going to be that treatment. In trials, again, did pretty well. Right, Shannon?
Jones: It certainly did. 65% of patients taking the 15-milligram dose and 33% of those patients
taking a 900-milligram dose did achieve clinically and statistically significant increase in
their hemoglobin. Only about 10% of patients taking the placebo actually achieved that
same benchmark. Impressive results all around. Again, just like we saw with LentiGlobin,
and this was a sustained response, sustained through the 24-week cut-off.
What’s really interesting about this drug is that it’s being developed as an oral once-daily
therapy for patients with sickle cell disease. When you consider all of the costs involved
with treating these patients, the back-and-forth for transfusions and such, you really see
the opportunity that Global Blood Therapeutics has just in the mechanism of action if they
make it through to approval. This was interesting to me for that. Even more interesting to me
is the fact that this will really put a stamp on Global Blood Therapeutics and their product
pipeline. They need an approval, I think, to gain, A, some credibility, potentially
some partnerships, as well. This is another one I think will be a big one to watch in 2019. Campbell: They’re going to have a pre-NDA meeting,
a pre-New Drug Application meeting, with the FDA in the first quarter. That should
influence their decision on when they file for approval of this drug, of Vox.
A couple of things to keep in mind for investors. The primary endpoint is increasing hemoglobin.
That’s not necessarily the endpoint that has been targeted in this indication in the past.
Usually it’s reducing the crises that land these patients in the hospital, that’s the
primary endpoint. It’ll be interesting to see how the FDA ends up viewing this data
and considering this data. You alluded to the size potential of the market. There are
about 100,000 patients in the U.S. with sickle cell. What I saw is that the treatment, average
cost is about $200,000 a year. So, it certainly could be, again, a relatively high-price drug
targeting a relatively large patient indication, if it can get across the finish line.
Jones: All eyes will be on what comes out of this pre-NDA meeting that’s scheduled to
happen sometime in the first half of this year. Assuming the FDA agrees with
Global Blood Therapeutics’ proposal to seek accelerated approval, we should get more updates into 2019.
Then, also, they have a Phase II trial going on in pediatric sickle cell disease.
In the second half, we may get updates on that. Lots to look forward to on that front.
Next up, we’re keeping a close eye on this next indication in particular, and that’s
actually for peanut allergy. Specifically, we’ve got two front runners in the race,
one much further than the other. Let’s start off with the front runner, a company called
Aimmune Therapeutics. Ticker symbol AIMT. It’s got an oral drug that could potentially become
a first-in-class treatment for children suffering from peanut allergy. Todd,
what can you tell us about this drug? Campbell: I don’t know about you, Shannon,
but I know that when I was growing up, peanut butter and jelly sandwiches were a staple
of my school diet. Not so much anymore, it would seem, because the number of people
who suffer from peanut allergies is fairly large. 1.7 million people suffer from peanut allergies.
Of course, that makes it very important to try and come up with approaches that can help
their immune systems not respond in ways that are life-threatening to even the
smallest of exposures to the peanuts. Jones: Yeah. Looking at the trial data,
in a Phase III trial, 67% of patients treated with their drug, AR101, were able to tolerate
the peanut protein equivalent to at least two peanuts. That was good. There were some
mixed reviews, though, especially the fact that 14% of patients taking the drug actually
had to take epinephrine to address the allergic reaction, compared to only about 6.5% of patients
on placebo. With that being said, I highly expect that as they get closer, we’ll probably
have an advisory committee meeting with the FDA to discuss and debate the risk-benefit
profile before we get an approval. It looks like that could be potentially coming maybe
in the third quarter, probably sometime in the second half of the year.
This company in particular, when you talk about the government shutdown, was very vocal
about the delays caused to these marketing applications, with the FDA being closed.
If there’s been anything that investors have been watching, it’s, what’s the new timeline?
Can we get Aimmune’s AR101 across the finish line? Campbell: I think on
January 14th, they came out and said that the FDA won’t review the
application until the shutdown is over, which means that maybe there was a pause in the
progress of this through the regulatory body. The shutdown is temporarily over now. Hopefully,
that means these people are focusing on this application yet again. But, there’s also the
chance that, in a couple of weeks, we shut down again. What’s going to happen at that
point to this application? Any changes to the timeline, of course, are important, especially
when you’re talking about a company that doesn’t have any other drugs that are on the market.
The real big issue here, Shannon, though, is going to be how that AdCom committee comes
out on the other side of reviewing the potential benefit of helping provide some protection
against that minor exposure to a couple of peanuts, vs. that large number of people who
had to use epinephrine to address exposure. Does that mean that people have this feeling
that they can get exposed, so they’re maybe paying less attention to the food that’s around
them? Does it have something to do with, they get exposed to larger amounts, and those larger
amounts then trigger an event that requires the epinephrine shot? That’s probably the
biggest thing to keep an eye on there. They’re not the only company who’s got a
therapy in the works attacking peanut allergy. DBV Technologies is also working on one.
But their idea, which is to build up resistance by using a patch put on the skin, was dealt a big blow
last month in December, when the FDA basically came back to them and said, “Listen, we need
more insight into quality control and manufacturing before we can review your application.” That led
to DBV Technologies withdrawing their application, a pretty steep sell-off in shares.
Jones: They’re expected to basically get their act together and refile. We’ll certainly need
to keep an eye on them in 2019. It certainly gave Aimmune the front runner status here.
Let’s turn our attention to the next major story to keep an eye on. This is for a large
commercial player, Vertex. That ticker symbol is VRTX. Vertex already dominates the cystic
fibrosis market with its three approved drugs, but it’s got a combination cocktail that could
actually expand its market even further in that arena. Todd, what can
you tell us about that? Campbell: This has been such a fantastic story
for patients and for investors. Vertex shifting their gears to cystic fibrosis at the end
of last decade. They launched their first drug, Kalydeco. Then, they came up with
a two-drug combination, Symdeko more recently. They can now treat about 60% of the 75,000
people who have cystic fibrosis with these drugs. As a result, sales have just marched
steadily higher year after year. The idea and the goal for Vertex is to be able to address
everyone with cystic fibrosis. Trials right now that are wrapping up — we should get
data from a second trial very soon — evaluate triplet combination therapies that theoretically
could increase their target market to over 90% of the cystic fibrosis marketplace.
The amount of change since 2012 in this indication has been remarkable, and it’s all due to Vertex.
Jones: All due to Vertex. You mentioned they’ve got a couple of Phase III studies underway.
They’ll decide based on the data from those studies which of the combinations they’ll
be moving forward later this year, so we’ll need to keep an eye on that. To your point,
Todd, Vertex — I actually voted for this in our roundtable that we did at the end of
the year on Industry Focus — Vertex and their management is top-notch when it comes to the
biopharmaceutical industry. Really, the story of how they’ve been so dedicated and so
focused on being able to treat 100%, every single cystic fibrosis patient, is something
that’s not only great, of course, for the industry, but really for these children, for these patients
that deal with this debilitating disease every day. All in all, lots to watch
on their triplet combo coming up. Let’s turn our attention to the last major
catalyst that all investors will want to be watching. That’s for a company that got a
lot of attention in 2016 for their DMD drug, an exon skipping drug. It looks like they’re
coming back in 2019 with potentially some new options. Campbell: Sarepta Therapeutics.
What an amazing story and development for patients. Targeting Duchenne
muscular dystrophy or DMD. That’s a life-shortening, muscle-wasting disease
that’s characterized by the inability to produce functional dystrophin. That’s usually caused
by mutations that occur at different exons. The first drug Sarepta launched, again,
got approval. Some people were wondering whether or not it should get approval. It did
get approval. It’s on the market now. Unfortunately, it only addresses about 13% of the DMD population.
It skips mutations at exon 51 to try and boost the production of functional dystrophin. They have
two therapies, though, that are now fast-approaching the finish line that could more than double
their addressable market, bring them close to 30% of the DMD population. They’ve already
filed for approval of one of them, Golodirsen. They filed for approval for that in December.
That skips mutations at exon 53. Then, later this year, they hope to file for approval
of Casimersen, and that skips mutations at exon 45. Jones: A lot to watch
here for Sarepta Therapeutics. Of course, when you’re first to market,
especially for a drug like their DMD drug, the first one that was approved, you’re going to have
competition on the horizon. One competitor to keep an eye on is WAVE Life Sciences.
It also has an exon 51 skipping drug that will be coming out. Last month, they reported safety
and tolerability data from an early Phase I study that did allow the company to go ahead and put
the thumbs up on moving it to Phase II/ III trials, which will begin this year.
It’s also going to be adding a higher-dose cohort to this Phase I study. All of that
could contribute to an eventual FDA filing, potentially in the second half of this year.
You’ve got competition coming along the way, but it’s certainly good to see Sarepta now
with two additional products that could make it across the finish line, as well.
Campbell: Yeah, it’d be really interesting to see, even if this other drug gets approved.
If you’re a parent and you’ve noticed improvement in your child with DMD on Sarepta’s drug,
with exon 51, would you be willing to move to another therapy? I don’t know.
This is a relatively small indication. It’s going to be interesting to see how the first
mover advantage ends up playing out from here if competition does come along. Again, the exon 51 is
only available to about 13% of the patient population. The fact that Sarepta is so far
ahead on the work in addressing other exon skipping areas, it definitely
makes this a stock to watch. Jones: Absolutely! That wraps up all six of
what we consider our top stories to watch in 2019. As I mentioned earlier, we’ll be
sure to keep you up-to-date on all the latest news and happenings throughout the
biopharma industry. I want to thank you so much for tuning in. Be sure to check us out, we’ve
got a YouTube channel now. Just go to www.youtube/themotleyfool to catch all of our coverage moving forward.
As always, people on the program may have interest in the stocks they talk about, and
The Motley Fool may have formal recommendations for or against, so don’t buy or sell stocks
based solely on what you hear. This show is produced by Austin Morgan. For Todd Campbell,
I’m Shannon Jones. Thanks for listening and Fool on!