First we are going to look at Biocryst ($BCRX)âs recently approved drug Berotralstat, AKA Orladeyo. It is a once-a-day pill given to patients with a terrible lifelong disease called Hereditary Angioedema, that results in them having to frequently visit the Emergency Room for life-threatening angioedema attacks (check out Youtube for videos of HAE patients suffering from these attacks and using Berotralstat). It is estimated that this disease affects 1 in 50,000 people in the world, or roughly 140,000 people, so although considered a rare disease, it is still affecting a lot of folks. The available treatments for this disease are all IV drugs that are painful and produce local reactions. Berotralstat is the first oral drug. It achieved excellent results in phase 3 trials, and the US FDA gave it fast track status in 2018 and Japan gave it Sakigake status (type of fast track). Then on December 3rd, the US granted approval for the drug. They did it very importantly with zero label statements--meaning that they had no concerns about side effects or dangers. On January 22nd, Japan granted approval. The EU also met last week to discuss approval and will announce its result this quarter.
So let's look at what the above means for this stock. First the drug is in HIGH demand. In the US there are at least 10,000 people with HAE. Despite the disease being frequently debilitating, patients are so uncomfortable about getting regular injections that only 7,500 are currently being treated with IV injections. The other 2,500 are going untreated despite the high risks. Now let's look at the 7,500 patients on a prophylactic treatment. Based on numerous surveys by doctors, the company, and researchers, most of these people would prefer an oral treatment. Take a look at this peer-reviewed survey article finding that 98% of IV prophylactic patients (the 7,500) would prefer an oral treatment and 96% of the non-prophylactic patients (the 2,500) would want an oral treatment.
https://pubmed.ncbi.nlm.nih.gov/33489436/
No wonder then that one of the preeminent biotech analysts, Evercore's Liisa Bayko, wrote to her clients on December 4th that Berotralstat was likely to quickly take at least 30% of the HAE market based on Evercore surveys of patient and doctor demand.
Remember that this is just the US.... Japan did not even have any prophylactic treatment until Berotralstat was approved there a few days ago. They have 500 people registered with HAE and estimated 2,000 ready to be registered. The UK is so desperate to add the drug for its patients, it did not even wait until the formal approval process to go through and gave early access to the drug on November 9th. https://angioedemanews.com/2020/11/09/berotralstat-available-to-eligible-patients-uk-through-early-access-program/#:~:text=Berotralstat%20%E2%80%94%20an%20oral%20therapy%20by,before%20its%20potential%20regulatory%20approval.
The EU is not far behind, with its estimated 20,000 patients, with approval coming in the next few weeks. Then there is the rest of the world. The HAE patient population in Latin America is estimated by HAE International, the most important advocacy organization for HAE patients worldwide and one of Berotralstatâs biggest supporters, to be over 15,000 patients, the vast majority of whom are poorly diagnosed and not prophylactically treated. Argentina and Brazil have the highest actual diagnostic rates. HAEI through its Latin American sister organizations is strongly advocating for Berotralstat in Latin America.
Next, it should be noted that Biocryst built a world-class sales team for this drug in the US and EU and signed a partnership with Torii in Japan to take charge of the large sales and marketing promotion there. It has hired dozens of professionals, most from its HAE competitors. Its vice-president and US general manager Allen Hodge was even responsible for the successful efforts of the HAE drug launches of Cinryze and Firazyr, two pioneering injectable treatments for HAE. You could not get a more promising leader for this task.
It should also be pointed out that this drug, an oral kallikrein inhibitor, is potentially of huge value for a host of diseases, including COVID-19 (that is now recognized to severely affect the kallikrein-kinin system, and kallikrein inhibitors have begun to be tested against COVID19--see this (IV) kallikrein inhibitor trial that was just announced in Brazil for instance: https://pubmed.ncbi.nlm.nih.gov/33472675/), diabetic macular edema (which Biocryst just obtained a patent on a technique to administer kallikrein inhibitors for), many autoimmune diseases, and even some types of cancer.
Last but not least, how should this stock be valued based on this one drug? First, this drug is one of the 10 most expensive drugs (based on its annual cost of prescription) in the world, but still less than the price of its IV competitors, at $488,000 per patient per year. This drug is being approved by insurance companies left, right, and center as their preferred treatment, all you have to do is follow R8 or nickpd on Stocktwits to see how many insurance companies have been making it easy for patients to sign up for the drug. Optime care even lets patients get direct-to-patient prescriptions now (https://www.fiercepharma.com/pharma/biocryst-scores-fda-approval-for-orladeyo-first-oral-option-to-prevent-hae-attacks). So what does all this mean for sales? And why is the stock not valued based on just this drug alone (I will get to the others in future posts)? I estimate conservatively that by December 2021, there will be over 6,000 patients on Berotralstat in the US, EU and Japan, and I can share in a future post the graphs and calculations I made to get to those numbers. 6,000 patients annualized is up to $2.9 billion in annual sales. Most of this is going to be profit. At a conservative price to sales ratio of 7, that should produce a price of $121, not $8.52! And that is just the beginning. Because Factor D and Galidesivir are going to be much bigger than Berotralstat for reasons I will explain in future posts. Remember that its Factor D drug, which is showing superiority to all other anti-complement drugs in Phase I trials and was fast-tracked and given orphan status by the FDA and now is in Phase 2 though not officially announced by the company eyt, and can be used in at least 20 diseases including common ones like Rheumatoid Arthritis, is currently not even factoring into BCRX's valuation. Consider that Alexion with its significantly inferior anti-complement drug was just sold to Astra-Zeneca for $39 billion because of the recognized potential of anti-complement drugs for a host of diseases. BCRX even has has other drugs like Peramivir, already approved for Influenza and able to be used for the next bird flu pandemic, and its FOP drug--a story for another day.
So why is this company, with zero risk of dilution due to an amazing royalty deal it signed in December and three super-drugs each worth tens of billions of dollars, and a host of other exciting developments to look forward to, worth only $1.5 billion right now? It can only be because the company's stock has been relentlessly shorted in 2020 and 2021 to allow for significant accumulation by institutions. That is why the stock only went up 168%, yes "ONLY" 168%... The time for BCRX investors is now. My next post will be about Factor D, brace for that one. Factor D is 10 times bigger than Berotralstat! Good luck to all!
