The best biotech plays outside the GLP-1 weight-loss market

BMO Capital Markets managing director of biopharma equity research Evan Seigerman joins Market Domination to discuss the best biotech plays outside of the GLP-1 weight-loss space.

The sky-high demand for GLP-1 weight-loss drugs has led the biotech sector to reach new heights over the last year, and Seigerman believes the trend is as "hot as ever." He notes that the 2024 European Association for the Study of Diabetes (EASD) meeting revealed key data highlighting the importance of these weight-loss drugs, and he believes that players like Eli Lilly (LLY) and Novo Nordisk (NVO) continue to lead the industry's growth.

However, he sees opportunities outside of the GLP-1 landscape, pointing specifically to Regeneron (REGN) and Vertex (VRTX) as prime examples. Vertex, a leader in cystic fibrosis research, makes up about $10 billion of its core franchise. The company is on track for early 2025 approval of its next-generation cystic fibrosis treatment as well as a non-opioid, non-addictive pain medication.

In addition, Vertex has partnered with CRISPR Therapeutics (CRSP) and received approval for Casgevy, a cell therapy treatment for sickle cell disease and beta-thalassemia. Seigerman notes that the uptake has been slow as it requires patients to be in the hospital for at least a month as they go through the process. However, he explains that the therapy works and is "really transformational" for patients.

While Seigerman is bullish on Vertex, he notes that the stock's price is rather high, trading in the upper $400s. The other risk he highlights is a non-opioid paid medication competitor coming to market.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

Video transcript

With a presidential election.

Now in the home stretch G LP ones still the hottest drugs on the market and a growing trickle of IP OS too.

We're looking at how to navigate biotech stocks with a Yahoo finance playbook.

And joining us now is Evan Serman BMO Capital Markets managing director, bio Pharmac Equity research.

Great to see you on set.

Great to be here on set.

Always fun to come downtown.

So Evan, so I uh on the show already, we, we've talked about the Fed.

We've talked about A I, it means there's only one big trend left.

It's, it's, and it's in your real life.

You're the guy for GOP one.

You know what's amazing?

I went to um a family dinner recently and there was a cousin of mine who had been taking the G LP one.

Literally, I al I almost walked past him.

I mean, it was amazing.

Now he is, I mean, full, he is mixing that in.

He's hitting the gym, he's got a trainer, but it was remarkable.

I'm just curious that trend.

I mean, is it as hot Evan as it was?

You know, we had you on six months ago, 12 months ago, would you say hot as ever?

It's hot as ever.

And we just got out of the, uh European uh, diabetes.

We did it last week and there was even data showing how important these drugs are really putting Lilly and Novo at the forefront, we had data from Novo's oral Amrein.

Some Roche data that disappointed which only points to the market leaders of Lily Novo and how they're going to maintain their dominance through the end of the decade and yet the two stocks that you came here with today as your recommendations are not GOP one companies.

Hey, listen, I always have Lilly and Novo.

I want to talk Regeneron and Vertex and for it's worth Regeneron does have some work in obesity.

OK.

So that is still there.

But Vertex a great biotech stock that's not solely tied to the GOP one trade.

So, but I guess what I'm asking is, are you still bullish on the GOP one trade?

It's just you should look beyond that.

Is that what you would tell investors?

I think that Lilly and Novo are likely to remain, you know, out performers, you know, this year and next year.

But I think when looking at the whole portfolio, there's other great stuff happening in which is why I like Vertex and how could make the case for the case.

So Vertex the leader in cystic fibrosis, a rare genetic lung condition.

They sell about $10 billion of their core franchise.

They're gonna have an approval early next year.

That gets them.

Basically, the next generation approved could help them pick up patients that they lost for therapy, um helps them reduce their royalty rate o to another company called Royalty Pharma.

Beyond that, the big one ear early next year, they should have approval of their non opioid pain medication.

I think this is huge.

This would be used after someone has a moderate, mild to moderate surgery.

So instead of a Vicodin being prescribed, they're going to be prescribed this and given the opioid crisis, I think that there's gonna be a rapid uptake.

I could see 2 to $3 billion in this setting.

And if they get the chronic setting, remember, Lyrica sold 5 billion at peak.

So that's $8 billion potential, you know, on the horizon for and what is the advantage of this over?

Are there any addictive?

So it doesn't act in the brain, it acts in the periphery so it's not addictive and it works very well.

I think that's what's key getting opioids off the street.

One of the other things that's interesting the vertex has been doing has been partnering with CRISPR on a couple of things.

I believe one of the projects it sort of backed away from but still involved with others CRISPR the gene editing company.

So what are the, I mean, how is that?

So the drug that you, I think you're referring to is called Cash Chevy.

It's been approved and this is a cell therapy to treat and essentially cure sickle cell disease and beta thalassemia that's present elsewhere in the world.

But this is a real cure for some of these patients uptake hasn't been huge.

Has it, it's super slow.

I mean, you have to, these patients, their cells, blood cells need to be harvested, then they have to find a time where they can be in the hospital for at least a month to, you know, go under immuno therapy, kind of not cut their immune system and then re engraft them with their edited cells.

So it takes six months.

So it's quite a hurdle, but it really works and it's really transformational for these patients.

You've made the case very well.

Evan I'm ready to pile in before I do.

What are some risks I should think about with some risk you should think about.

I mean, the stocks trade in the high 400 it's already had a great run this year.

Not quite Lily or Novo like that 20% 20% is not bad, right?

I think the risks are that this launch that I described in pain isn't as strong um that a competitor comes to the market in cystic fibrosis, we really don't see anything meaningful near term, but that could always happen or that one of the other pipeline assets doesn't work, right?

That shifts sentiment.

We saw that in 2020 when they had a blow up in October of 2020.

Evan.

We'll have to have you back soon and dig into regenerate love to do that.

No worries.

We'll talk soon.

Thank you guys.

Thank you.

Appreciate it.