We haven’t looked at a biotech teaser pitch in a little while, so this one for a new Mauldin Economics newsletter caught my eye… Chris Wood is helming Healthy Returns, along with celebrity doctor Michael Roizen (now referred to as a “wellness guru” and head of the Wellness Institute at the Cleveland Clinic, he is also a doctor and has partnered on a bunch of projects with Dr. Oz).
Apparently they’re going to be picking “the very best health and wellness stocks” for subscribers, and also, as is fairly common in the investment newsletter industry, offering up health and wellness tips (publishers have noticed that their average newsletter subscribers are both in their wealthiest and most investing-focused years, their 50s and 60s, and in their highest-healthcare-interest years).
I don’t know how the letter will do, of course, and it’s brand new and we haven’t heard anything from subscribers yet… it’s priced as an entry level “wealth and wellness” letter ($49/year), and we’ll probably see more pitches from them if this one works, but you don’t have to rush into anything. We’ll check out the clues for you, identify the “10 times richer” stock they’re pitching this time around, and give you the chance to think for yourself a bit. Then, if you want to subscribe, you can do so without dreams of buying Jeffrey Epstein’s private island (bring your own Clorox wipes) getting in the way of your rational thought.
Here are the bullet points they start us with at the top of the ad:
- “Doctors and millions of patients already demand it
- Insurance companies have agreed to pay for it
- FDA approval is just months away
- It may be bigger than blockbuster Lipitor—the world’s #1 best-selling drug
- And early investors can DOUBLE their investment in as little as six months… and ten times or more in 2022 and beyond!”
OK, so what are we looking at? As the Lipitor reference indicates, this is a cholesterol drug of some sort. Here’s a bit more:
“In the US alone, more than 102 million people have high cholesterol. Perhaps you’re one of them.
“Living with high LDL cholesterol puts you at a significant risk for cardiovascular disease (CVD) because cholesterol, especially the bad LDL cholesterol that builds up in your arteries, can lead to a heart attack, stroke, and death.”
And we’ve all heard about the problems and side effects of statins, at least for some people… so this is a pitch about a non-Statin solution:
“One biotech company is tackling this statin problem head-on with a revolutionary NON-STATIN drug discovery that could end high LDL cholesterol woes forever… and make early investors incredibly wealthy!
“FDA approval, in my estimation, is just months away… and so are skyrocketing profits.”Are you getting our free Daily Update
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More hinting on that point:
“… one company has stepped into the gap to bring desperately needed cholesterol relief to millions of people.
“They may have discovered the holy grail to fighting cholesterol without statins—with not one, but two cholesterol-lowering, non-statin drugs.
“The CEO of the company said earlier this year at a global healthcare conference that these two pioneering, non-statin drugs are ‘poised to change the treatment paradigm for LDL-cholesterol -lowering. This is the first time in history there’s a non-statin oral drug that lowers LDL-cholesterol by 50% like a statin.'”
And these drugs, apparently, have already been through Phase III trials — with both drugs lowering LDL cholesterol dramatically, anywhere from 35-50%. And they’ve already been submitted to the FDA for approval:
“… the company confidently submitted New Drug Applications (NDAs) for these two non-statins to the Food and Drug Administration (FDA) in February.
“When the FDA received the applications, it made the rare announcement it would not call the customary advisory panel to review the newly accepted NDAs—a strong indication the FDA is not concerned about the drugs’ safety. Without calling a panel, these drugs may receive faster FDA approval.
“This news sent the company’s share price shooting up 15% in a single day.”
OK, so that’s making the Thinkolator’s job perhaps a little too easy, but we’ll play along for another minute… here’s what they say as the massive promises continue on the order form:
“FDA approval is just months away on this blockbuster drug that could end heart attacks and strokes forever!
“The time is NOW to buy this #1 Biotech!
“You’re just moments away from retiring TEN TIMES RICHER….
“One company is close to launching a revolutionary new non-statin, cholesterol-lowering drug that tens of millions of patients desperately need. Doctors are eager to write prescriptions. Insurance companies are ready to pay for it.
“FDA approval is just months away and so are skyrocketing profits. I’m talking about a rare ‘ten-bagger’ – a biotech stock that could easily soar 1,000% by this time next year.
“That’s why you must get your hands on my brand-new research report, The #1 Best Biotech to Cure Your Retirement Money Worries.”
Can you feel how powerful that “retire ten times richer” promise hits? Gets you right in the gut, right where your worries lie… and it is, of course, a nonsensical promise. Even getting fortunate with an investment pick that goes up 1,000% doesn’t make you “10 times richer” — it’s not like you’re betting your entire net worth on a single stock pick, right? Yes, hitting the bullseye and turning an investment of $5,000 into $50,000 over a few years would make a difference in helping you beat a S&P 500 Index Fund… but if it makes a massive and life-changing difference, then that also means putting that $5,000 at risk in one position was an awfully big risk for you.
But anyway, you want answers — right? The Thinkolator tells us that this pitch is for Esperion Therapeutics (ESPR), a stock that has been similarly promoted a few times in recent years (Ray Blanco called it the “golden pill” last September, though it’s down 20% or so since then, and last summer Stansberry’s Dave Lashmet called it the “most valuable pill in development”).
And yes, Esperion is expecting approval from the FDA for its two pills, both based on bempedoic acid, early next year — the FDA PDUFA dates (which are a “decision should come by this date” guideline, though not guaranteed) are February 21 for bempedoic acid, and February 26 for the combination of bempedoic acid with ezetimibe. There are also some other data releases likely as we end 2019, including a phase 2 study for people with high LDL-C and type 2 diabetes, and there’s a larger outcomes study that will provide meaningful data at some point in the next couple years, but it’s those February approval dates that investors are mostly looking at.
The timing teased is “could soar 1,000% in a few short years,” and the ad is signed by Chris Wood… but there’s also a quote from Dr. Roizen:
“Phase III drug trials were very positive. Patients did NOT see the side effect statin users complain of. And doctors will want to use this non-statin in combination with statins to get the LDL levels below 70. As with any new drug, the first 6 months of use in the general population will be critical in discovering any unexpected side effects once it gets into general use.”
Side effects and possible cardiovascular risk have been the concern with Esperion in the past, as I recall, probably partly because the FDA is quite aware that a new anti-cholesterol drug is likely to be prescribed to millions of otherwise fairly healthy people, so it’s important to not screw up (this isn’t like a cure for an untreatable cancer, most people are on statins as a preventive and doing OK with that, despite the side effects, so the risk of making things worse is an important consideration).
Longtime readers might recall that this was also a favored stock of Dr. KSS starting back in 2014 (he who wrote biotech columns for us for a couple years), and it saw highs of over $110 and lows of around $10 in not much more than a year back in 2015 and 2016. The story has come quite a long way since then, with some large Phase III studies started a few years ago that have finally finished, providing more evidence of the safety of ESPR’s drugs and their ability to reduce cholesterol (if maybe not some of the more dramatic hoped-for outcomes beyond that), and it’s on the strength of those studies that they applied for marketing approval in May… and now we wait.
The odds of FDA rejection seem pretty low, partly because they’ve already responded to some FDA concerns and partly because bempedoic acid has been somwhat “validated” by the deals they’ve made this year (for European rights with Daiichi Sankyo, and for a partial royalty-like financing deal with Oberland Capital that included a $125 million upfront payment a couple months ago). The FDA does not currently plan to hold an advisory committee meeting to discuss the applications, which probably means that there aren’t any big outstanding questions… though that’s not a guarantee either, and that could change. That’s not a contrarian opinion, though, from what I can tell most people assume it will get approved… and betting on something that a lot of people agree on does not necessarily produce outsize returns.
Apparently Esperion is looking to go it alone with production and commercialization of bempedoic acid instead of partnering it with some larger player in the US, or at least that’s the impression I get from their latest update (in which they say that they think the royalty deal and their license agreements to date have provided enough cash to get them to “cash flow positive” — presumably that’s sometime next year). I don’t know how to guess at the size of the market for Esperion in any analytical way, and we don’t know what price they will charge, but it could also be that the patient cohort expands gradually as more info comes in… and as they get results from the actual outcomes trial that is now enrolling (studying whether bempedoic acid has any impact on reducing the number of “major cardiovascular events” in high-risk patients who can’t tolerate statins).
I have no particular skill in predicting clinical outcomes or FDA decisions, and I tend not to invest in clinical-stage biotechs because I can rarely come up with any revenue or earnings numbers with any degree of certainty, but I would guess that the chances of bempedoic acid being rejected by the FDA are pretty small… and that this will pretty quickly become a stock that reacts not just to “yes or no” decisions by the FDA but to the potential scope — if the dreams of backers come true and this ends up being a drug that is as widely prescribed as statins, with 100+ million patients, then the stock is almost certainly an incredible bargain… if the FDA or most insurance companies tap the brakes and keep it, for whatever reason, in a slower lane by restricting use to a smaller cohort of patients, then no one will be buying a private island this time around.
That’s how I’d think of this stock — after reading about it for so many years I’d tend to have some optimism, but I know myself and my lack of biotech expertise well enough to understand that my optimism doesn’t mean anything (when investing, don’t pick the sector where you’d be the least informed investor in the room). Analysts are penciling in revenue numbers in 2020 and 2021 (up to $200 million in 2021), but those numbers are tiny compared to the sales of branded statins at their peak so clearly the basic assumption is that the drug will be approved but that it won’t immediately take a huge part of the cholesterol-lowering market… whether that’s because drugs take a while to ramp up, or because mass adoption will (hopefully) come later as further studies are conducted, I don’t know.
So I’ll leave you there, dear friends — I’m sure many of you are better biotech investors than I, and probably quite a few of you have been following the ESPR story over the years… if you’ve got thoughts to share on the subject, I hope you’ll do so with a comment below.