Is Translate Bio Stock a Buy? - Financhill

Is Translate Bio Stock a Buy?

Is Translate Bio Stock a Buy? Translate Bio [NASDAQ: TBIO] is a biotechnology company that specializes in biotechnology, RNA therapeutics, and rare diseases.

The company researches, develops and commercializes mRNA therapeutics to develop a new class of potentially transformative medicines to treat diseases caused by protein or gene dysfunction. It was founded in 2011 and is headquartered in Lexington, Massachusetts, USA.

Is Translate Bio Stock a Buy?

Translate Bio had been grabbing headlines recently after Sanofi  announced an expansion to their 2018 collaboration and licensing agreement to develop messenger mRNA vaccines for infectious diseases. More importantly, it included an mRNA vaccine candidate directed against SARS-CoV-2, the virus that causes COVID-19.

Sanofi S.A. is a French multinational pharmaceutical company. The Paris-based company engages in the research and development, manufacturing and marketing of pharmaceutical drugs in various therapeutic areas, including cardiology, thrombosis, oncology, internal medicine, central nervous system, diabetes and vaccines.

Sanofi is the world’s largest producer of vaccines. The collaboration seeks to leverage Translate Bio’s more than a decade of experience in mRNA R&D and Sanofi’s leadership in vaccine R&D.

The expanded collaboration caused Translate’s stock to jump more than 46%. Sanofi will give Translate $425 million up front in exchange for exclusive rights to multiple infectious disease vaccines, including a SARS-CoV-2 candidate.

The upfront payment includes $300 million in cash and a private placement of $125 million in stock at $25.59 per share. Translate is eligible to receive potential future milestones and other payments up to $1.9 billion as well as tiered royalty payments based upon worldwide sales of any successful vaccines.

As per the agreement, Sanofi will have an exclusive worldwide license to manufacture and commercialize infectious disease vaccines developed by Translate.

The new capital injection by Sanofi could offer Translate a fresh lease of life, which lost $14 million during the first three months of 2020 to end March with $155 million in cash and securities on its balance sheet.

Translate Bio Secondary Raises Millions

Translate, in order to additionally benefit from the spike in its share price, announced a secondary stock offering to further strengthen its balance sheet.  The company decided to offer 12.5 million shares at $22 per share. This includes 6.8 million shares of its existing shareholder, Takeda’s Shire Human Genetic Therapies.

Also, another important point in Translates’ favor is its expertise in mRNA; a technology which holds a lot of promise and potential as dozens of biopharmaceuticals companies and research organizations around the world frantically search for the COVID-19 vaccine.

RNA vaccines enjoy considerable advantages over conventional vaccines, especially when it comes to dealing with a pandemic.

A conventional vaccine works by introducing inactivated pathogens into the body. This trains the immune system to identify them as hostile invaders and mount a response, as well as remember them for the future. A major drawback of this approach is that it suffers from long production times and limited production capacity.

Unlike a normal vaccine, RNA vaccines work by introducing an mRNA sequence (the molecule which tells cells what to build) that encodes the disease-specific antigen to prepare it to fight virus or bacteria.

Production of RNA vaccines is laboratory based, which eventually translates into lower cost and shorter manufacturing times, thereby offering the potential to quickly augment the production to meet the elevated demands of a pandemic. Moreover, they are safer as they are not produced using infectious elements.

Risks of Investing in Translate Bio

Vaccines are generally considered to be one of the top success stories of medicine for the hugely successful role they have played in combatting infectious diseases.

Vaccines, though simple in principle, are complex in practice. This is the reason that, despite all the technological advances, there’s still a lack of understanding of immune responses to infection and the delivery system to induce antibodies that block or neutralize infectious agents.

Vaccine Development Costs Are Enormous

Also, the financial commitment required to develop a vaccine and get the requisite approval from the concerned agencies is huge.

It is also often seen that the less lucrative markets are often the ones with the greatest need for the vaccine. Vaccine makers, as such, are often not keen on investing millions of dollars in R&D for fear of poor ROI.

It has been more than 30 years since scientists secluded HIV, the virus that causes AIDS, but as yet there’s no vaccine for it in sight.  It is the same with dengue fever which was identified way back in 1943, but the vaccine for it saw the light of the day only in 2019, and, that too, amid concerns that it could worsen the symptoms in some patients.

Interestingly, ever since the development of vaccines began, the record for the fastest vaccine to be developed is held by the vaccine for mumps. It took four years!

It is not that scientists will have to start from scratch on developing the coronavirus vaccines. Two coronaviruses, SARS and MERS, have caused lethal outbreaks before, but vaccines could not be licensed for both.

While SARS fizzled out quickly, MERS was limited to the Middle-East.  The experience gained will help scientists in the development of a vaccine for Sars-CoV-2, but there is still a very, very long way to go.

The biggest roadblock is that coronaviruses do not tend to trigger long-lasting immunity. Close to 25 percent of common colds are caused by human coronaviruses, but patients get quickly re-infected owing to the fast fading immune response.

All in all, developing a vaccine is not easy and herein lies the primary risk for Translate Bio. Sanofi, of course, is bankrolling the project, but failure to develop a Covid-19 vaccine on time could sully Translate’s reputation big time. It could dry up further financing which could negatively impact its share price.

Are Translate Bio Competitors a Threat?

Translate Bio’s main competitors are NexImmune, Checkmate Pharmaceuticals and Repare.

NexImmune was founded in 2011 and is headquartered in Gaithersburg, Maryland. NexImmune generates 200 percent of Translate Bio’s revenue which makes it Tranlate’s biggest rival. Checkmate Pharmaceuticals is also one of Translate Bio’s top rivals. Checkmate Pharmaceuticals was founded in 2015, and its headquarters are in Cambridge, Massachusetts. Repare can also be considered as Translate Bio’s rival. Founded in 2016, Repare is based in St. Laurent, Quebec.

Competitors are always a threat, but what favors Translate Bio is its joining force with French drug giant Sanofi to develop the coronavirus vaccine based on innovative Messenger RNA (mRNA)-based vaccine technology.

Translate’s competitors lack the backing of a pharmaceutical giant such as Sanofi, which is the world’s largest vaccine maker. For a small company like Translate to play a role in something as big as this is highly prestigious.

Relying on Translate Bio’s expertise in messenger RNA, or mRNA, Sanofi inked a $425 million deal to develop a vaccine for SARS-CoV-2.

This so-called messenger RNA platform, lauded as a possible solution, currently stands as a frontrunner among the technologies being exploited to develop a vaccine for Covid-19. Messenger RNA, or mRNA tells the body how to make proteins.

The idea behind the concept is to tamper with the genetic code in a way that compels the body to create specific proteins that are also expressed by the novel coronavirus, so that the body can develop antibodies for it.

Is Translate Bio Stock a Buy: The Bottom Line

The importance of quickly developing a vaccine to combat Sars-CoV-2 to reduce morbidity and mortality, and let the world return to a normal life simply cannot be overemphasized.   Globally, there are 11.5 million confirmed coronavirus cases and more than 533,000 deaths.

The US has the world’s highest number of coronavirus deaths and infections, with more than 2.8 million infections and over 130,000 deaths. The Coronavirus pandemic may alter forever how we live, work and travel. For all these reasons, the rush to develop a vaccine has been precipitous— – there are now more than 150 in development.

Translate Bio’s mRNA approach is being used by Moderna [NASDAQ: MRNA], which specializes in developing therapies based on mRNA molecules. Moderna is further along in the development timeline, with its SARS-CoV-2 vaccine in phase 2 trials, but Translate believes its vaccine candidate, currently being tested on animals, could move into human trials before the end of the year.

Should that be successful, it could have the requisite data to win FDA’s approval sometime near the end of 2021.

The road to success is not easy by any stretch of imagination. As mentioned above, coronaviruses do not tend to trigger long-lasting immunity. Another challenge is that the vaccine developed using mRNA approach must be stored at minus-112 degrees Fahrenheit (minus-80 degrees Celsius). This could make transportation and storage of vaccine immensely challenging, which could hinder its delivery to the masses.

Translate Bio is “working feverishly” to develop a formulation that wouldn’t require the vaccine to be stored at such a low temperature.  Chief Executive Officer Ron Renaud said in an interview, “We’re making this with the mindset of having it best suited for everyone.

Similar views were shared by Sanofi’s Chief Executive Officer Paul Hudson who said that it is critical to develop a vaccine that could be deployed under a variety of conditions.

Translate believes it could, in partnership with Sanofi and other manufacturers, develop the requisite capacity to produce in excess of 350 million doses per year. Also, Translate Bio and Sanofi are in talks with the U.S. and other government entities to secure additional funding for its R&D and production efforts.

The additional capital it could receive from the US government, along with the cash provided by Sanofi, could give Translate Bio enough financial resources to allow it to concentrate fully on its goal of quickly developing a vaccine. But, then, only time will tell how successful it proves to be in its endeavor of coming up with an effective vaccine.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.

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