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Investing in biotech stocks - My experience so far
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Michael121 said:This arrowhead what do you think revenues would be if phase 3 trials were successful?It's difficult to say exactly, but it's a lot. One analyst posted this a few months back, but the numbers seem super-conservative to me. Also, I believe most of these will be on the market faster than this analyst thinks:"ARO-AAT: We model for an NDA filing in 2023 and approval in 2024 with the company commercializing the drug in the U.S. and partnering in the E.U. We estimate peak sales of $600 million in the U.S. and $500 mililon in the E.U. Using a 60% probability of approval leads to an NPV of approximately $580 million.
ARO-APOC3: We model for an NDA filing in 2022 and approval in 2023 with the company commercializing the drug in the U.S. and partnering in the E.U. We estimate peak sales of $300 million in the U.S. and $400 million in the E.U. Using a 50% probability of approval leads to an NPV of approximately $290 million.
ARO-ANG3: We model for an NDA filing in 2026 and approval in 2027 with the company commercializing the drug in the U.S. and partnering in the E.U. We estimate peak sales of $1.3 billion in the U.S. and $1.5 billion in the E.U. Using a 30% probability of approval leads to an NPV of approximately $360 million.
ARO-ENaC: We model for an NDA filing in 2024 and approval in 2025 with the company commercializing the drug in the U.S. and partnering in the E.U. We estimate peak sales of $1.0 billion in the U.S. and $1.0 billion in the E.U. Using a 30% probability of approval leads to an NPV of approximately $430 million.
ARO-HIF2: We model for an NDA filing for kidney cancer in 2025 and approval in 2026 with the company commercializing the drug in the U.S. and partnering in the E.U. We estimate peak sales of $1.0 billion in the U.S. and $600 million in the E.U. Using a 30% probability of approval leads to an NPV of approximately $340 million. In addition, we value the extension of the HIF2 program into other solid tumor indications at $1 billion.
ARO-HSD: We model for an NDA filing in 2025 and approval in 2026 with the company commercializing the drug in the U.S. and partnering in the E.U. We estimate peak sales of $1.0 billion in the U.S. and $1.3 billion in the E.U. Using a 30% probability of approval leads to an NPV of approximately $350 million.
Zhiyuan Sun(TMFZhiyuanSun)"You might be able to get a better idea here:Remember, what we are seeing at the moment is just for starters. RNAi can in theory treat any condition where mis-folded proteins are produced, or just too much of a normally useful protein. If I'm not mistaken that's something like 80% of known medical conditions. Arrowhead's CEO at one time said there was a TAM of $1 trillion. Of course it's unlikely we'll have everything to ourselves, but even just a small fraction of that market will be a huge win.
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Well when you put it like that yes that could be a huge win. I just had a quick look on yahoo and thought these numbers can't possibly be right, looks like some gamble if its all riding on how successful trials were going to be. But now i get why investors are so excited.BrockStoker said:Michael121 said:This arrowhead what do you think revenues would be if phase 3 trials were successful?Arrowhead's CEO at one time said there was a TAM of $1 trillion. Of course it's unlikely we'll have everything to ourselves, but even just a small fraction of that market will be a huge win.
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Michael121 said:
Well when you put it like that yes that could be a huge win. I just had a quick look on yahoo and thought these numbers can't possibly be right, looks like some gamble if its all riding on how successful trials were going to be. But now i get why investors are so excited.BrockStoker said:Michael121 said:This arrowhead what do you think revenues would be if phase 3 trials were successful?Arrowhead's CEO at one time said there was a TAM of $1 trillion. Of course it's unlikely we'll have everything to ourselves, but even just a small fraction of that market will be a huge win.There is lots at stake if ARWR can successfully get into tissues other than the liver, but even being successful just in liver alone, investors will be well rewarded. Getting into other tissues successfully, like tumor, lung, etc could easily disrupt hundreds of biotechs (and big pharma)/take their revenues. Many should be forced into deals on ARWR terms if they want to survive - Vertex might yet go that way.Speed is key here - get in there and stake claims before other competitors do (ARWR has comprehensive patent protection - there was a good analysis of ARWR's intellectual property posted on Seeking Alpha a while back, which is now behind a paywall sadly, but let me know if you want to see a few paragraphs from it I have saved, and I'll PM them to you). Management are very clued up and aware of this, so I have no worries on that or any other score. They have the vision to drive the company forward, and the roadmap to becoming a large pharma is clearly visible. All elements seem in in place to me:- Highly disruptive emerging tech giving ARWR the edge over old tech and big advantages over new tech like CRISPR- TRiM leading the way relative to other RNAi companies- Strong balance sheet/finances (no chance of further significant share dilution or running out of cash as long as everything keeps ticking along)- Modest cash burn rate, although that is starting to increase as Arrowhead grows- Patented up to the hilt- Strong and aggressive management, but also extremely knowledgeable about the science, and investor friendly- Amazing record of near perfect clinical data- Strong pipeline set to expand at an almost exponential rate- Spectacular returns over the last 3 years for shareholders, despite the recent dip, and the trend looks set to continue- Partnerships with big pharma that are to die for- Highly under appreciated/under the radarThe guys on the YHMB figured much of this out between themselves (some highly intelligent/knowledgeable posters there), so all credit to them for that. I think, while you can never be 100% certain of the future, this has to be one of the best risk/reward ratios out there right now, if not THE best (at least to my limited knowledge - I'm mostly only interested in biotech). You do have to keep in mind that there are some assumptions - that good data in phase 1 translates to good data in phase 3 trials - but I believe that is justified given the nature of RNAi, the results others in the field are achieving, and how our early data compares to those other's data.Lastly, but not least, investing in something that could soon potentially change the lives of millions of people for the better should not be overlooked - besides the warm fuzzy feelings, the ethical investing movement is gaining traction, and the potential for share holder perks (not getting any younger here, and the potential for a discount on an expensive RNAi therapy is looking more and more like a good idea, although it being a US listed company could hamper access to perks potentially) can't be a bad thing.1 -
What sounds like very good news from Arrowhead this morning.
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moneyfoolish said:What sounds like very good news from Arrowhead this morning.BINGO!Yes, excellent news! But as usual, a "meh" reaction from the market - often see that when ARWR gets very good news, and before it starts to go up.A reminder for those who may not be aware, but the patients in this study, suffering from renal cell carcinoma, had exhausted ALL conventional treatment options, and under normal circumstances would only have months to live. The fact that they are all still alive says something, not to mention one patient had "65% tumor shrinkage"! It's now been 10 or 11 months since the start of the study if I recall correctly - what will the data look like at the 12 month mark!?As far as I'm aware, no one has been able to get such results with cancer - not even close! Hold on tight to your shares (and hats) ARWR investors, ARWR is RED HOT, even if Wall Street can't see it right now.As for our "blip" the other day, it's worth finding BioBoyScout's post from last Friday (on the ARWR YFMB) and reading it + comments. I think he probably understands ARWR better than any other analyst out there - here's what he said:"Definitely not the news we were expecting, as the upside would have been pretty significant, but IMO the downside doesn't even come close to what we're currently seeing. If you follow my valuation models, you'll notice that I only price drugs in the pipeline that are in at least phase 1. All phase 1 drugs in my model are given a 15% probability of success, phase 2 gets 30%, phase 3 gets 60%, approval gets 90%, and commercialization gets 100%.
So for my $107 price target that came out on 8/12/2020, the valuation for ARO-ENaC was $401.8M or $3.93/share - and based on my model, that's the downside. I have no doubt that the market sentiment will see it differently, so please don't rely on what I'm telling you.
BTW, the big event I'm still waiting on is for ARO-AAT and whether they'll get breakthrough therapy designation and move on to phase 3. When this happens, I plan on updating my model, and as you probably figured out, that moves the probability of success valuation in my model from 30% to 60%, and it will also officially graduate Arrowhead from a mid-stage biotech company to a late-stage biotech company. Why is that important? because late stage biotech companies tend to get a reduction in the discount rate when valuing a biotech, and this provides an additional boost in the valuation of entire company.
In any event, if you're short, this is a fantastic opportunity to cover and even jump on board. I do think this is now a screaming buy."Edit to add: I think the market reactions over the last two trading days say more about Wall Street than ARWR. At least with highly technical stocks (the biotech sector being a prime example), the market is definitely not efficient, and at times like this it's plain to see. It's frustrating, but without it, opportunities like ARWR would not exist.Mrs Brock suggested ringing Wall Street to complain, ha! Anyone got their number?
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ARO-YTHDF2 (to treat breast cancer) could well be a possibility now!Today's news brings a cancer franchise another step closer, with multiple indications like the one above, and others. You can bet Merck/BMS/Novartis (the big names in Oncology) are watching VERY closely now, and I would not be surprised to hear CA's phone has been ringing off the hook all day. Make no mistake, ARWR is going to be a household name, like JnJ or GSK. It's not going to happen overnight, and there's going to be more ups n downs no doubt, but there's no doubt in my head now that it will come to pass.0
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New piece on Arrowhead just posted on Seeking Alpha:It includes some more realistic valuations for a couple of indications at least, or rather the size of the potential global markets for these indications: CF market is expected to reach $31.88 billion by 2027 and the Hepatitis B Virus market is expected to reach $35.63 billion in 2030If there is little else to compete with ARWR then there's no reason ARWR couldn't take most of the pie in each case. My guess is that the global market for solid tumors is going to be upwards of $50 billion peak annual sales, perhaps 2x that. I believe one in three people will get cancer in their life times (if memory serves), but not all will be solid tumor types. Even so that is a lot of people, and Arrowhead should be able to help the majority with solid tumors.So the potential is there for Arrowhead to pull in $100+ billion in annual sales, just from a couple large indications + a single franchise - caveat: Partnering waters this down, but means ARWR has to do less work allowing it to concentrate on other things (eg. expanding it's pipeline).Very rough calculations I know, but it shows that even if ARWR were to stop expanding it's pipeline at this point in time, what it has already (even if only partially successful) will ensure a significantly higher market cap for ARWR in the future than it has today. BUT Arrowhead is NOT stopping, or even slowing down, it's gearing up to expand, and I think just how fast it does so will catch many by surprise (it's not as if there have not been any hints!), once again. I also think ARWR's current pipeline will do significantly better than "partially successful", based on the data so far.So while the market remains irrational for the moment, one day it will have to reverse, given that the good data in HUMANS keeps coming. After all, we are not trying to cure rats here, or at least that is not the final goal! Keep your eyes on the prize!0
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For anyone who missed them, here's a post from chemwhiz on the ARWR YFMB which hits the nail on the head IMHO:"I am concerned that some folks are confused about the drug development process. Of course I don't know if they are sincere, or just bashers. Phase one trials start after a relatively brief tox study in one rodent and one non rodent. At the same time, chronic tox trials, lasting months, and then six months, and then a year are started. Tox issues may not surface until the chronic dosing trials are well underway. This is normal, and talk of how CA should have known what the trials would show before they are done is ludicrous. Furthermore, toxicity is expected during these tests! They will jack up the dose levels until SOMETHING is seen. That way, they will know what to look for in the clinic. If a toxicity issue is identified that is concerning, the prudent thing is to stop dosing humans until more is known about severity, reversibility, mechanism of toxicity, etc., and whether it is even relevant to the clinical situation. Considerations about how this pause might affect the stock price should not enter into that judgement, and any suggestion that patients should have been endangered just so you could flip your shares for a quick buck is disgusting. It takes integrity, wisdom, and experience to make these difficult calls.
By taking the prudent path, CA has demonstrated these qualities. Incidentally, he has also preserved the good name of the company with the FDA. I think he is doing a great job!"And, regarding ENaC, this from Fierce Biotech:It does irk me that some supposedly professional analysts have effectively rubbished ARWR over what was very likely nothing. It's as if there were a concerted smear campaign to tarnish ARWR's reputation, and that would not surprise me given what is at stake and the big toes we could potentially be treading on.Ultimately all of this over-reaction could have been avoided if investors knew what they owned, and didn't act like scared herd animals. Anyone new to this needs to learn the lessons here. There's no such thing as a smooth ride, but for those who can hang on, the longer the better, the "ups" will dwarf the "downs". We are definitely due some "ups", and hopefully sooner rather than later!1 -
In spite of the many positive comments I see including broker forecasts, ARWR and AMRS are becoming disaster shares for me. They are just falling day after day. In the case of ARWR, the market seems to have lost confidence in viability of ENAC following the CF setback.
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Could be worse, EVFM is worse off.moneyfoolish said:In spite of the many positive comments I see including broker forecasts, ARWR and AMRS are becoming disaster shares for me. They are just falling day after day. In the case of ARWR, the market seems to have lost confidence in viability of ENAC following the CF setback."It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
G_M/ Bowlhead99 RIP0
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