In this podcast, Motley Fool host Deidre Woollard caught up with Motley Fool biotech analyst Karl Thiel to discuss:
- Biogen's next shot at an Alzheimer's treatment.
- Why companies can't "muscle their way" into making new molecules.
- How Nvidia could change drug development.
- Moderna's vaccine strategy.
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This video was recorded on January 20, 2024.
Karl Thiel: This is a meeting where the very biggest companies are completely dwarfed by the size of a trillion dollar company like Nvidia striding into the room. It associates biotech with one of the biggest buzzwords of the last year, which is AI. That's exactly what he was there for.
Mary Long: I'm Mary Long, and that's Karl Thiel, a Motley Fool biotech analyst. Deidre Woollard caught up with Karl to get some takeaways from the recent JP Morgan Healthcare Conference, where healthcare and biotech companies tell investors what they're up to. Deidre and Karl discuss how Vertex Pharmaceuticals could change pain medication, why winners will probably keep on winning in the weight loss drug space, and a cancer treatment that's frustrating investors.
Deidre Woollard: Something that happened last year, the big story of GLP-1 drugs and diabetes care reinvigorated, it seemed to me the whole space in general. That's probably overstating things, but you saw these companies like Eli Lilly and Novo Nordisk, they had this monster year. They couldn't get these drugs out fast enough. Every time I turn on the TV, somebody is offering a new service, trying to get these drugs out. This seems like an overnight success, but this is like a two-decade story. What is happening in this space?
Karl Thiel: Well, it's interesting you say that it's a two-decade story because I don't think many people appreciate that. The first GLP drug that came out was a drug called Byetta. It was actually, created by a company called Amylin and Lily bought them. Eli Lilly was in it from the very beginning. That was 2005. Iterations ago, that drug was not nearly as good as what's on the market now. But even Ozempic has been on the market since 2017. You see that what's happened in the past year or so, a lot of it's word of mouth and it's surprising how important that can be to a drug. Even when all the data is there, its social media chatter if you look at it, was basically nil on these drugs until around mid-2021 and then, or early 2021, and then kind of went asymptotic in mid-2022 as people just started steamrolling on what these drugs could do and how amazing it is. Frankly, that data came out saying that not only do these drugs help you lose weight, but they might actually be cardioprotective. They might actually help with things like heart disease, where in the past a lot of weight loss drugs have been pulled off the market because they ended up actually doing some damage to the heart.
Deidre Woollard: Yeah. I do remember the whole fen-phen controversy.
Karl Thiel: Right. Then that's just one of them. But yeah, absolutely.
Deidre Woollard: Tell us a little bit more about what else is happening because it's not just these two companies anymore, right?
Karl Thiel: It's not just these two companies. In fact, and from an investor viewpoint, it can be a little frustrating because there are so many people now chasing after this that, it can be really hard to tell who the winners are going to be. GLP-1 as a target is not something that any one company can own. They can own the specific chemicals that interact with that target, but they can't own the target. Lots of people are going after it. You've seen some interesting deals in the space. There's a company, Structure Therapeutics, that went public despite there being an almost complete freeze on IPOs because of interest in their drug in the space. You saw a big acquisition for another company called Cayman around that. But if I had to look out there and say, who's got some of the most interesting stuff going, you're going to have to look to, I think, some of the bigger players. Because if there's one thing we saw, it's that if you're successful in this, even a big company like Lily or Novo Nordisk can't keep up with demand. They've already put a huge amount of investment into the manufacturing that can be used for these drugs and potentially for successor drugs. I would say that the incumbents are doing a lot to keep themselves in the lead even though there are other companies that are likely to come along and likely to be other successes and more deal-making. Honestly, that's what we want in the end. You're looking for incremental improvements in the drugs. You're looking for enough competition, hopefully, to push prices down.
That would be a good thing. But if there's one company that I think is interesting in this area, people are talking about Amgen a fair bit because they have a drug called, well, people are calling it Mary Tide because the full name is a little cumbersome to pronounce. But it is a dual mechanism of action drug. It's a GLP drug, but it also has another gastric inhibitory mechanism of action. They're trying to address, and I think this is going to be a real discussion over the next few years, which is that, these drugs, they're great, they take a lot of weight off. But now what? Do you stay on them forever? All indications are as soon as you go off them, the benefits of them are gone. Is it OK to stay on them for a decade, for two decades? That's not really been studied very much, nor has it been studied if there's ways to wean you off them. There's a lot of questions, and people are also concerned about things that are along the lines of if you lose this much body weight, a lot of it's going to be muscle not just fat. There's a lot of issues. I think one thing that Amgen is really hoping they have is a differentiated drug in that they're hoping for one thing, that it can be dosed out less frequently, which would be a modest, convenient thing. But they also are hoping that it will have a longer maintenance period of effectiveness, possibly even after you stop using it, and that's very much still to be determined, but they're investing big in the area and there should be data later this year. That's going to be an exciting thing I think to watch out for.
Deidre Woollard: When I saw that Nvidia CEO came to the conference and they have a relationship with Amgen. I think anywhere that Jensen Huang goes, interest tends to follow.
Karl Thiel: Yeah. This is a meeting where the very biggest companies are completely dwarfed by the size of a trillion dollar company like Nvidia striding into the room. It associates biotech with one of the biggest buzzwords of the last year, which is AI. That's exactly what he was there for. Amgen was one of the early adopters of Nvidia 's BioNeMo platform, which is basically, it's a set of APIs and other tools for plugging into their supercomputing to do biological generative AI. But what they announced at the meeting was a much broader partnership. It's built on Amgen's deCODE arm. That's a whole story in and of itself that I probably shouldn't go into, but it's fascinating. deCODE Genetics was once an independent company. It's an Icelandic company that existed for reasons just unique to what Iceland is all about. Amgen ended up buying them and they have all of this unique data. They've since expanded well beyond the Icelandic population so that they have deep data on millions of people. That is something that Amgen can plug into this generative AI platform and see where it goes. This is very early, but it's just interesting to see that Amgen is, I think, in a way, taking it more seriously, or at least publicly more seriously than a lot of other companies. It's a space where you can't just muscle your way into calculating the perfect molecule, the physical space. There's too many possibilities. Even the biggest supercomputers would take millions of years to calculate all the possibilities that you could have for molecules to bind. But with generative AI, it's possible that there's a lot of things you could really speed up and it remains to be seen. But it's really interesting to watch Jensen Huang get up on stage and talk about this partnership with Amgen and where it could go.
Deidre Woollard: Wow, we're definitely going to have to keep track of that one. Going back to the GLP-1 drugs. When they first came out, everyone said, well, this is going to be terrible for the continuous glucose monitors. Nobody's going to need those anymore. It's all going to be solved. That isn't the case. I was listening to the Dexcom presentation and, it's interesting because they talk about the situation of course, more than one in four healthcare dollars spent on diabetes. But they introduced this Stelo which is for people that aren't on insulin and it's for type 2 diabetes. They actually talked about working with the GLP-1 drug therapy. This is really interesting. Is this going to be a platform beyond just type 1 diabetes management now?
Karl Thiel: Yeah. First, it's important to point out that Dexcom traditionally serve people with type 1 diabetes where you're dependent on insulin and that is not related to weight loss in any way, that does not impact the course of that disease. That business is unfortunately, I guess, safe for them, but they also have a big business in helping people who do have type 2 diabetes. You could theorize that that will be impacted by some of these GLP-1 drugs. The Stelo platform is really interesting. Just announced the idea is that you can be not on insulin, so you're not really using it as a paired insulin pump. What you're really doing is you're monitoring your blood sugar to figure out how to do things, how to eat in ways that are going to work better. That's something you could use in conjunction with the GLP-1 drug. It's something that could possibly use to maybe help people wean off these in a more effective way down the line. It's really smart planning on their part. It's too early to say where the product itself goes. It's a little bit aimed at the idea that, I forget the wording that they used, but they implied that this might be something that you could even get without a prescription. That it's consumer aimed and meant to be relatively affordable. The health gadget space that has taken off in many ways, they could tap into some of that.
Deidre Woollard: I wanted to also touch on Alzheimer's disease drugs because that was another big thing that they talked about. A lot of the conference and some of the presentations, they talked about the difference between, in the past, the drugs were just to treat the symptoms and now they're getting deeper into catching it faster and maybe slowing the progression. It seems like there's a shift in the way that we consider Alzheimer's disease treatment in general now.
Karl Thiel: This is Biogen's second Alzheimer's drug. Their first one was called Aduhelm. It did get approval, it was very controversial. They pulled it off the market because basically nobody would pay for it. The impact of the drug was weak enough and the price high enough that essentially nobody was willing to reimburse for it. But Leqembi, the newer drug, has, I think a stronger case to make. In fact, they're saying that the insurance reimbursement is not an issue for them. They've got a full approval that opens them up to Medicare reimbursement, which is obviously critical for a age related disease like this or an age correlated disease like this. I think what's interesting is that the amyloid hypothesis, the idea that by reducing amyloid plaque, you're going to change the course of Alzheimer's. It makes a lot of sense on a surface level, but the idea was all but hanging by a thread a couple of years ago because drug after drug showed that it could reduce amyloid plaque and it was not impacting the course of disease and so people were giving up on this idea. That Aduhelm changed that a little bit. Now I think Leqembi and Lily's Donanemab that's in progress I think has gotten this back. But part of it is the idea that, yes, it can have an impact on disease, but it might be important the earlier you can intervene might become more and more critical and so that's certainly an area that they're looking at with this.
Deidre Woollard: Yeah, and I think that's interesting because GE Healthcare, which is of course a spin off from General Electric, they have this new way of imaging the Alzheimer's brain to try to detect those amyloid plaques. Because it does seem like it's all about getting in as soon as possible. I know on the Lily presentation they also talked about that the donanemab probably murdered that pronunciation, but that if people take it earlier, sometimes they can reduce the potential of getting it. It seems like there's all these different ways that companies are coming at this right now.
Karl Thiel: Yeah and in fact, there's some late stage clinical work being done on the basis of using these essentially as preventative drugs. Now, the way they're enrolling the trials is that you have to have no measurable cognition decline so you're asymptomatic, but you do have amyloid plaque and so why would you know that you had amyloid plaque if you're not having any symptoms? Well, it's because you're considered to be a very high risk patient for reasons of genetics or family. Those are going to be really interesting studies. I mean that could make a huge difference if you find that these do changed the course of illness. Now those are by definition have to be fairly long term studies in order to be able to see that. We're talking about results in like 2027, I think Biogen or really Eisai, which is the senior partner with Leqembi, I think they're talking 2026. They're hoping to submit. But you still a ways off before we see much about that.
Deidre Woollard: Well, there were so many companies that presented at the conference. I think I have listened to maybe 10 presentations just for anybody listening. If you are invested in any biotech company, go look on their investor page, see if they present it, because they may have it. It's really interesting. But there's a few that I wanted to talk about with you that I know a lot of people are curious about what's happening and one of them is Moderna. I did this interview with Bethany McLean who wrote Big Fail. She was talking about Moderna going from a teenager to an adult, as a company during the pandemic and so you've got a company that's in an interesting spot. Vaccine, revenue declining. It's got the RSV vaccine that it's bringing out, but then it's also trying to build this pathway with maybe a combination vaccine and more vaccines in the future. How are you thinking about Moderna now?
Karl Thiel: I think they're really interesting. I thought it was interesting that Stéphane Bancel was not actually at the meeting. It was one of their senior executives that was there. I don't know what the story is there, but there's a couple of companies I think about in this space obviously. When you think about the two vaccines for COVID, there was Moderna and there was Pfizer. But Pfizer's technology really came from a company called BioNTech or BioNTech, I guess is how they pronounce it. I think those two companies are really interesting. They both have a lot of core IP in this mRNA space and they're taking two different paths. Moderna is really doubling down on the vaccine business and so that's a little tough because right now everybody's is waiting to find the bottom in COVID vaccine sales. They came in with I think, 6.1 billion in actual vaccine sales in 2023. Not counting some deferred payments, which is, that's a great business going forward if they can maintain that. They're only guiding for $4,000,000,000 this year. They expect it to start growing again in 2025. Well, with that base, you can fund a whole lot of research. They have a very rich pipeline. Their RSV drug, I think is interesting. I also think it's a little bit tough because they're going to be third to the market with an RSV vaccine. There are already two that got approved this past May, one from Pfizer, one from GSK. Neither of those are mRNA vaccines, so there is different, but I haven't. It looks similarly effective like there's not an immediate advantage that you would see now. I may be not fully informed on that, but I think it's going to be a little bit of heavy lifting for them coming into the market. Obviously they're working on flu vaccines which would really make sense if you can get that in a combination with a COVID shot, that would certainly help them break into the flu market, which is that's a sizable market that's led by Sanofi right now. Yeah, I think they're in a good position. I would really love to see them have some successes in the cancer space, in some areas outside of traditional yearly vaccines as well. That would, I think, just get people more excited about the platform. That's a little bit more where BioNTech has focused.
Deidre Woollard: I think for Moderna, that's probably a way off. You mentioned cancer, which is a good segue to talk about Novocure. This one is interesting because it's such a journey in the market. One of our biotech analyst was talking about it the other day and he started with this huge sigh because this is, the technology is interesting. It uses these tumor treating fields to treat cancer. But it's really disappointed investors, some of the initial trials weren't as promising as people were hoping. What happened and what should we be thinking about this business now?
Karl Thiel: I just resisted sighing myself. I'm a shareholder in Novocure, I believe in the technology, I think it's pretty amazing and for better or worse, they are going it alone. Like nobody else is really in this area. They have all the IP around the space and as far as I know, nobody else is really even trying to do this. The idea is that you put a tumor within an electric field, basically you stop the cells from dividing successfully. It messes up the way they align when they divide, and they basically just split and die. This is amply shown to work right in glioblastoma, which is the most common form of brain cancer. The challenge with this is that to work you should really wear the device 24/7 all the time. That's when people who do that or come very close to that, have a really huge survival advantage over people who don't. But even if you wear it half the time, you do get some survival advantage of doing this. The idea has been they can tune the frequency to any type of cancer cell, so it should work broadly. What happened is they had two different things happen in 2023 which are unrelated. One was that they had the results of their lung cancer study. This was really awaited, because it's so much of a bigger market than brain cancer. The study was successful. It did show that it worked, but when you looked at how the study was conducted, basically standards of care had changed while the study was ongoing. They answered a question that nobody was asking anymore.
Even though I think their plan is they've already submitted for approval of the device in lung cancer, they plan to launch it late this year, and they have a whole campaign, they think that they can buy in for it. I think everybody is thinking it's going to be a real uphill climb to get people to prescribe it because it doesn't if they don't have the data to show that it helps in exactly the way that lung cancer is treated now. They are doing that study to have a more of an apples to apples case to make. But that study is not going to be done for several years. That was the first one. But it was still no knock on the technology which seemed still to work really well. Then the second thing happened was their ovarian cancer trial and that one just straight up failed. It's hard to know why. They do have to tune this to the frequency of each tumor cell type and for whatever reason it didn't seem to work there. That gets people really nervous about what's coming next. There are a number of key events this year.
Deidre Woollard: They have enough cash, they've got runway. But I think is it that investors are wondering if the business is smaller than anticipated? If it maybe doesn't work for all cancers?
Karl Thiel: Yeah. Well, part of it is that the glioblastoma business, it produces about $500 million a year in revenue. It's a fine business and it's something that if they wanted that to be their only business, they could make that profitable. It's just that has not grown, that has just flat lined. They're not showing much success in getting beyond 40% market penetration. There's really no reason for that. There's a convenience aspect with the treatment, but they really should be able to get more people on that therapy, and so there's a question about why can't they do that. Now with lung if that's not going to really be able to hit in the market and ovarian failed, all of a sudden you start looking at this as a much less interesting company. They need a win. The stock is languishing and I think it's going to continue to languish until they have some win. This late this quarter, they're going to have the top line results of their medicine study, which is looking at brain metastasis from lung cancer. We'll see how they do there.
Deidre Woollard: Let's talk about another V company. Let's talk about Vertex, because this is what I know a lot of people are watching. It's got that core business of cystic fibrosis and now it also sickle cell disease. But the thing that I found interesting is where they might be going, because they talked about two huge opportunities. A neuropathic pain, a non opioid, a solution for neuropathic pain, and Type I diabetes. Think about where this company is now and where it might be going. Is it as big as they say it could be?
Karl Thiel: Yeah. Everybody obviously focuses on the cystic fibrosis business which has driven this company, it's fantastic. Few companies dominate one disease area as much as Vertex does in cystic fibrosis. They've been incredible about developing therapies that address more and more of the various genetic versions of this disease you can have. It's been great for patients as well as shareholders I think. Then a lot of attention was put on their efforts in gene editing and sickle cell disease. I always saw this pain drug, is this like lottery ticket sitting there. Whenever you have studies in this area, it always makes me nervous because it comes down to how people feel. It's like a lot of studies of antidepressants, you put people on a placebo and oftentimes they'll feel better. What you'll often find is that like, yeah, the drug seemed to work on an absolute basis. They felt better after they took it than they did before they did, but so does the placebo group, and pain isn't quite like that, but there's a similar element to it.
So I was always worried. But as more data comes along, I'm starting to actually feel much more hopeful about this drug. They had their initial phase II work was in basically pain relief after like a bunion removal or a tummy tuck, things like that. So acute use, you're going to use it for a little while while you recover. But the data that they came out with in December was looking at peripheral nerve pain from associated with diabetes. This is a chronic use drug. Obviously a chronic use market is going to be a bigger deal for them. It looked like it wasn't a head to head study. You can't really say anything definitive, but it seemed to perform actually somewhat better than the drug Lyrica, which is widely used in this market. Beyond that, the whole appeal of this drug is that by its very mechanism of action, it should really have zero addictive properties. Lyrica is not a terribly addictive drug either, but it is a scheduled drug. It's a schedule five controlled substance. More than that it's associated with waking and some dizziness and there's certain people who just don't seem to respond to it. It's not going to take on the biggest heavy weight pain, but it could be a really significant drug for them. It's very exciting.
Mary Long: As always, people in 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. I'm Mary Long. Thanks for listening. We'll see you tomorrow.
