On Thursday after the closing bell, Fate Therapeutics (NASDAQ:FATE) announced that it had gotten the backing of Johnson & Johnson's (NYSE:JNJ) Janssen Biotech division in a drug development deal that could be worth more than $3 billion ... if everything goes perfectly.
News of the agreement sent Fate's shares higher Friday. The stock was trading about 9% higher as of 2 p.m. EDT, while the broader market was down by more than 2%.
For now, Fate Therapeutics will get $50 million upfront and a $50 million investment from Johnson & Johnson. Its new partner will cover all the research and development costs on products targeting up to four different proteins expressed on cancerous cells, up to the filing of investigational new drug applications with the Food and Drug Administration. At that point, Johnson & Johnson can choose to license the therapies and take them through clinical development and commercialization. Fate will be responsible for producing the products, the cost of which will be covered by Johnson & Johnson.
Fate will use its induced pluripotent stem cell (iPSC) technology to develop iPSC-derived chimeric antigen receptor (CAR) NK and CAR T-cell products for the treatment of blood cancers and solid tumors. The deal covers the development of products targeting up to four different proteins expressed on cancerous cells.
Fate is eligible for up to $1.8 billion in development and regulatory milestone payments and up to $1.2 billion in commercial milestone payments, as well as double-digit royalties on sales of products from the collaboration. Fate can choose to co-promote any of the drugs in the U.S. and share equally in profits and losses in the U.S., but if Fate chooses that route, the biotech will have to pay for some of the clinical development costs and will get lower milestone and royalty payments on those drugs.
While COVID-19 spreads globally, hospitals are preparing to handle an ever-growing influx of people infected with the novel coronavirus. Medical resources -- personnel, equipment, and hospital rooms -- have been reallocated for the outbreak. In most cases, non-essential procedures and doctor's visits are being postponed.
Medical device and equipment manufacturers will be affected by both. The U.S. stock market has been eviscerated as investors react to the pandemic and businesses struggle to adapt to a world where consumers are confined to their homes. Could medical device stocks provide a bright spot for your portfolio?
Demand for ventilators
A staggering report from the Society of Critical Care Medicine estimated that as many as 960,000 COVID-19 patients would require ventilation, but the U.S. only has 200,000 ventilators. And that's if you include older units, anesthesia machines, and units in the strategic national stockpile.
In response, Medtronic (NYSE:MDT), one of the largest medical devices makers and a manufacturer of ventilators, issued a statement on March 18 that it is ramping up production of its high-performance ventilators by more than 40%. In addition to Medtronic, expect to see expanded production from other manufacturers including Philips Healthcare, a division of Dutch conglomerate Koninklijke Philips (NYSE:PHG), ResMed (NYSE:RMD), and Becton, Dickinson and Co. (NYSE:BDX). A 2016 market research report noted that the top five manufacturers held 50% of the global ventilator market share.
While those leading makers of the much-needed equipment may be stocks to keep on your radar, watch for news from automakers. Reports emerged that General Motors (NYSE:GM), Ford (NYSE:F), and Fiat Chrysler (NYSE:FCAU) are exploring retooling factories to produce ventilators in this time of crisis. Car production has been halted until March 30, freeing up personnel and equipment. In addition, the White House invoked the 1950s Defense Production Act, which allows the government to direct industrial production.
Tesla (NASDAQ:TSLA) is potentially entering the fray. In response to a call to repurpose its factory to make the machines, Elon Musk tweeted, "We will make ventilators if there is a shortage." New York City's Mayor Bill de Blasio even asked Elon Musk to begin production to help NYC.
A backlog of delayed medical procedures grows
While the stocks of ventilator manufacturers may benefit in the near term, healthcare investors with a longer time horizon may seek to capitalize on a growing, pent-up demand for medical devices. Interventions like knee replacements, eye surgeries, and procedures to alleviate pain will be rescheduled at some point in the future. That makes getting acquainted with some of the leading medical device firms now a good idea.
Many of the elective surgeries fall into the orthopedic basket. These seek to correct chronic pains or replace degenerative parts like knees and hips. Johnson & Johnson (NYSE:JNJ), Stryker (NYSE:SYK), Zimmer Biomet (NYSE:ZBH), Smith & Nephew (NYSE:SNN), and Medtronic round out the largest of the orthopedic device makers.
While J&J's stock lost 17% this year, the other four lost between 33% and 44%. At the current levels, it's worth investing some time to figure out which ones may be right for your portfolio.
Smaller outfits NuVasive (NASDAQ:NUVA), a spine device specialist, and Wright Medical Group (NASDAQ:WMGI), focused on devices for wrists, hands, feet, and ankles, may be worth keeping on your radar screen. NuVasive's stock cratered by 50% this year. Luckily for Wright, it managed to only lose 13.6% in 2020.
Johnson & Johnson will offer its in-development coronavirus vaccine around the world, making it first available to front-line medical workers, Chief Scientific Officer Paul Stoffels told Nikkei.
The company will work with all governments around the globe -- not just in Europe and the U.S., but also countries including Japan, China and South Korea -- to "find ways to provide vaccines in every country," including poor nations, Stoffels said. New Jersey-based Johnson & Johnson, the world's largest health care company, has a presence nearly everywhere in the world, he noted.
In Stoffels' view, the focus is less on where the vaccine goes than on who gets it. "The first people who need to get access are the people at the highest risk," such as "the health care workers who work in hospitals -- the nurses, the doctors and all the people who work with the patients," he said.
As for the price, Stoffels said it is "too early" in the development process to say, but he stressed that it will be as low as possible and that Johnson & Johnson considers the vaccine a not-for-profit project. "We are committed to make it affordable [and] accessible," he said.
Asked how the drugmaker plans to produce its promised 1 billion doses, Stoffels expressed confidence that the company can quickly find peers to help. "We will do capital investment as well as collaborating with partners," he said, adding that the company has begun building a new plant in the U.S. and has capacity in Europe that it can expand.
"We hope we will be able to get four plants in total to start with," he said, adding "Two plants are already in line and two more to come, and we'll work in the next few weeks and months to make sure two more plants will come online."
Clinical trials on the vaccine are slated to begin in early September, and the company is working on scaling up production to make it available early next year, Stoffels said.
https://www.cnbc.com/2020/04/01/white-house-advisor-fauci-says-coronavirus-vaccine-trial-is-on-target-and-will-be-ultimate-game-changer.html