September 28, 2020 BARRON’S 25
credit markets that yields even 2%?
AbbVie has a spectacular immunology
business and an excellent oncology
business, and what will people use
when life starts returning to normal?
Botox! [AbbVie bought Allergan, the
maker of Botox, this year.] These are
three terrific franchises. Other good
companies in the biopharma sector are
trading for 10 to 15 times earnings. The
stocks outperformed from late March
until about June. Since then, there has
been a rotation out of the group and
into tech stocks and recovering
consumer stocks. Health care has
underperformed in the past few
months. There is a lot of election-
related anxiety among investors. But
there are a lot of opportunities in the
sector, not just among large-caps but in
relatively small companies engaged in
accelerated drug development or that
could get accelerated regulatory
approval for their products.
What other stocks do you like?
Porges: AbbVie is trading around $87
and probably has 20% to 25% upside
as investors get comfortable with the
Allergan acquisition. I am also positive
on FibroGen [FGEN]. The stock
trades for $44 and could double in the
next six to 12 months once investors
price in the full value of the company’s
anemia drug, roxadustat, and start to
get comfortable with its IPF [idiopathic
pulmonary fibrosis] treatment. The
treatment of fibrotic diseases is still in
an early stage of development.
Celniker: That’s correct. Pliant
Therapeutics [PLRX], a development-
stage biotech company launched by
Third Rock, hasfour clinical-stage
programs. That gives them a number
of shots on goal. Understanding the
underlying mechanisms of fibrosis
gives you an opportunity to treat
many different diseases, including
pulmonary and liver diseases. Even
skin diseases can be treated easily
with an antifibrosis strategy. Many
diseases caused by inflammation can
result in fibrosis. I’m excited about
Pliant, which came public in June. The
company expects multiple data
readouts from some of its clinical
trials In 2021. Pliant is well
capitalized, with more than $312
million in cash at the end of the
second quarter. It also has a
partnership with Novartis [NVS] to
develop and commercialize a
treatment for liver fibrosis associated
with NASH [nonalcoholic
steatohepatitis], one of its clinical-
stage programs.
What else do you like, Abbie?
Celniker: Revolution Medicines
[RVMD] is another exciting Third Rock
company. Its stated mission is
“translating oncology targets to
outsmart cancer.” The company has a
program in the clinic right now
targeting SHP2—a key target in a cell-
growth and survival pathway known
as the RAS [reticular activating system]
pathway. It also has a development deal
worth up to $500 million with Sanofi,
and about $325 million of cash on its
balance sheet, which gives it lots of
runway. There has been a lot of hype
about the RAS pathway in oncology.
Revolution has an interesting approach
to modulating RAS and understanding
different mutations that could be
driving this pathway. This could be
game-changing in treating about 30%
of all cancers.
Investors should also keep their eyes
open to private companies coming
down the line. We are excited about
Goldfinch Bio, which we launched in
- [Celniker is the chairwoman of
Goldfinch Bio.] Eli likes it, too. [Casdin
Capital is an investor in Goldfinch.] It is
one of the few companies focused on
the discovery and development of drugs
for kidney disease. CKD [chronic
kidney disease] is a driver of mortality
across age, race, and stage of disease
progression, affecting more than one in
nine people worldwide. Treating kidney
disease costs Medicare hundreds of
billions of dollars a year, but less than
1% of all drug development is focused
on it. That’s just wrong.
Goldfinch has been able to identify
some of the key pathways that drive
kidney disease, and has identified
multiple ways to modulate them. They
have maintained a good working
relationship with the FDA, which has
evolved the way it looks at endpoints
[drug-trial outcomes that represent
clinical benefits] for trials in kidney
disease. As a result, you can use a
unique approach that can accelerate
drug development. Goldfinch will have
some key trial readouts in 2021 and
- The company just closed on a
$100 million Series B round of
funding, and also has a good
development deal with Gilead.
Tango Therapeutics, a cancer
company we launched in 2017, has two
great deals with Gilead. Such deals are
an important part of how we build and
finance companies. We like validating
support from larger biopharma
partners. Tango works on synthetic
lethality [which occurs when a
combination of deficiencies in two or
more genes leads to cell death]. In such
cases, a combination of drugs can work
better than a single drug. Tango just
raised a Series B round of funding, in
addition to striking its deals with
Gilead. It is using a novel screening
technology to find new drug targets.
Eli, what excites you in this market?
Casdin: The diagnostics area is
starting to leverage technology and
recent scientific advances to change the
paradigm of how patients are
diagnosed, and at what stage. Thrive
Earlier Detection is a privately held
company looking to diagnose cancer at
its earliest stage with a pan-cancer
blood-based biopsy. Unique to this
solution, Thrive recognizes that the test
needs to be integrated into the health-
care infrastructure that Eddie
described, and the solution needs to
help patients deal with the information
and guide them through the journey
that follows. Thrive is as much about
the data captured as the test. As with
most early-stage life-science
companies, Thrive is still pre-revenue,
but has raised substantial capital to
push forward R&D. The time has come
for earlier and more effective cancer
screening, and we think Thrive can be
a real leader in the space.
Significant products will be
developed in China in the next decade,
and some will make it to the U.S. We
like Burning Rock Biotech [BNR], a
China-based diagnostics company,
whose revenue grew 83% last year.
Burning Rock will have close to $60
million-plus in revenue this year.
Burning Rock is using next-generation
sequencing to develop molecular
profiles of diseases, similar to what
Foundation Medicine [acquired by
Roche Holding (RHHBY)] and
Guardant [GH] do. But the size of the
total addressable market in China is a
multiple larger than what it is in the
U.S. As the largest provider of
molecular tests in China, and with a
market that is only 6% penetrated, the
growth potential is enormous. The
company went public in June, and the
stock is trading around $22. Shares
have come down [from a high of
$32.40] as the U.S.-China narrative has
grown more tense.
What else appeals to you?
Casdin: Allogene Therapeutics
[ALLO] develops allogeneic CAR-T
[chimeric antigen receptor] therapies
for treatment of cancers. This is
effectively an off-the-shelf solution, as
opposed to an autologous solution
wherein cells are taken from the patient,
engineered in a lab, and reinfused into
the patient—a more expensive and
cumbersome process. Allogene is run
by a proven team with a history of
creating and monetizing value. It is the
same group of entrepreneurs that sold
Kite Pharma to Gilead in 2017. Allogene
has over $1 billon of cash, and an
impressive technology showing early
signs of efficacy. If the data hold, we can
see the company expanding into other
indications and becoming a significant
cell-therapy leader.
Abbie touched on precision
medicine. For the first 30 years of the
biotech industry, if you mark the
Genentech IPO in 1980 as the start,
drug development was like the cartoon
that shows a guy under a street lamp
looking for his car keys. A policeman
asks, did you drop your keys here?
And the guy answers, no, but this is
where the light is. Well, fundamental
advances in technologies for analyzing
and manipulating molecular biology
have turned on all the lights and fueled
an explosion in the understanding of
biology and the drivers of disease. The
best companies combine genetic
understanding with powerful
technology platforms to create a
pipeline of precision medicines. We like
companies such as Relay
Therapeutics [RLAY], Revolution
Medicines, and Blueprint Medicines
[BPMC]. They are applying genetic
“Treating kidney disease costs Medicare hun-
dreds of billions of dollars a year, but less
than 1% of all drug development is focused
on it. That’s just wrong.” Abbie Celniker