Not the best start to the week but to be honest, it is not surprising that we get some weakness as we were stretched to the top of the trading range. I still would not rule out of break this week but the chart probably needed to reset the overbought conditions in the near term. Today will likely be a key day as another leg lower likely makes a run at a breakout this week pretty low odds. There is an interesting give and take in the market between the Fed, the economy and investor expectations. The Fed is a drag, the economy is a wild card as we can still get a soft or hard landings, and investors generally expect a rough start to the year (and we know when everyone expects one thing it can be a contrarian signal).
- MRNA reported positive data on their RSV vaccine and unlike the cancer vaccine, I think these data look pretty solid. The viral efficacy was 83.7% and in a phase III trial with no major safety issue, it looks like a drug that will be approved. This is not the only RSV vaccine and so there will be commercial competition (with I think GSK and PFE) but this is a nice win and a high likelihood approval. There has always been a tickle in the back of my mind that this technology will end up being great for vaccine but less effective outside of that wheelhouse. I know it was the cancer “vaccine” that was weak in my opinion and I do not consider that a tradition vaccine like COVID or RSV. It seems to me the technology is great in this traditional vaccine space but, as of yet, has not had the same success out of it. What this means for valuation or long term prospects is TBD but my rule of thumb with mRNA drugs is if it is a traditional vaccine indication it is likely to succeed and if it is not then it is likely to fail. It will not always be the case but that that is the trend at this point.
- LQDA is one that I cannot quite figure out how to play. It looked at some point last year that they had a clear win with the patent case against UTHR but then the courts seemed to take a different view than the PATB. We should get clarity in 2023, although there remains a chance that it extends into 2024. That being said, LQDA secured some non-dilutive capital that will take them through the final decisions and so there is no financing overhang. The question is whether they win and I am not a lawyer. I think the odds are more likely that they win than lose but when that will become clear is also not clear.
- Of course, this only matters because there is a belief that the LQDA version of the DPI of Tyvaso is better with a larger therapeutic window and better ease of use. That could be the case but is the difference large enough for a smaller player like LQDA to outcompete the UTHR salesforce? That is the bigger question over the longer term as this drug will make it to market at some point. I think there is money to be made in a LQDA trade but at this point there are too many unknowns. My strategy at this point is to wait for the court cases to become final and see its valuation at that point because then we have fewer unknowns and variable to work with in the analysis. All that being said it is an interesting one to watch as it likely has a big move one way or another.
I will end it here as I hope we are able to have a nice strong day to get us back to the edge of the breakout.
Disclosure: Long UTHR