UTHR Stock and the Xenotransplantation Thesis
Oftentimes, we’ll come across a promising investment thesis that’s sailed through most of its life without accomplishing much. (Graphene anyone?) While some investors bet on carbon-based nanomaterials transforming the entire materials industry, others looked to new engine designs that might disrupt the automotive industry.
We’ve covered at least half a dozen companies trying to reinvent the gas engine, a promise that always seems to attract retail investors in droves because the value proposition is so easily understood. (Scuderi Group is probably the best example ever as to why retail investors should never invest in securities that don’t have liquidity.) An equal number of inventors have read our articles on new engine design startups and offered up their own ideas. These days, it seems like institutional investors are moving beyond better gas-powered engines and looking for better electric-powered motors.
Another thesis investors seem particularly attracted to is a futuristic area of life sciences known as regenerative medicine. Someday, we’ll be able to grow organs instead of transplanting them between humans, or even use 3D bioprinting to create them on demand. Growing replacement organs using animals is the idea behind “xenotransplantation” which is defined as, “the transplantation of living cells, tissues or organs from one species to another.” Here’s what the Ministry of Truth tells us about the sort of questions xenotransplantation raises.
These are good questions so let’s answer them.
Animals which make good candidates for growing organs that humans can use need certain characteristics. Pigs fit the bill because they “mature very quickly, produce large litters and have organs of comparable size and function to human organs.” That’s according to an article by BIO.org which describes the ethical issues, none of which seem to threaten adoption. Sure, we need a fair way to allocate donor animal organs in much the same way we do with human transplants. Yes, we know PETA, the same people who consume 51 pounds of pork per year need to make sure the pigs don’t suffer while they’re being used to save human lives. Indeed, there is a risk that cross-species tinkering may create some new viruses we can’t anticipate (we’re looking at you, ‘Rona). But while there are some kinks to work through, the idea seems promising, even more so with the latest news.
Days ago, headlines around the world praised the success of a man who has been given a pig’s heart and who (checks with Ministry of Truth again) is still alive several weeks after. News of that successful operation immediately made us recall that quirky biotech firm with one unique website and one remarkable founder – United Therapeutics Corporation (UTHR).
The Story of United Therapeutics
Sometimes, the only way to understand a company is by telling a story, and our story starts with a man named Craig Venter who created the first synthetic life form in 2010 – a cell with its own email address and plenty of information hard-coded into its DNA. That remarkable feat was associated with Synthetic Genomics, a startup that Mr. Venter founded back in 2005. Understandably, a great number of investors were interested in buying stock in Synthetic Genomics which led to our 2017 piece on How to Indirectly Invest in Synthetic Genomics Stock. A company called United Health Therapeutics made a $100 million equity investment into Synthetic Genomics and subsequently began painting a vision of the opportunity that attracted lots of attention.
Back in 2017, we first wrote about Xenotransplantation – Harvesting Organs from Pigs noting that UTHR had made some rather aggressive forecasts of growing to “Google-like proportions” with predictions for the “first transplantable organs in human patients before the end of 2019” and “FDA approval around 2023″. UTHR stands for “Under THe Radar,” claimed their charismatic CEO. Those predictions may have been a few years off, but both have come to fruition. Kind of.
In late 2020, the FDA approved a “first-of-its-kind intentional genomic alteration (IGA) in a line of domestic pigs, referred to as GalSafe pigs, which may be used for food or human therapeutics.” That approval was granted to Revivicor Inc, a fully-owned subsidiary of United Therapeutics, that’s developed a special type of pig using gene editing. It’s the same company supplying organs for all the milestones being talked about on the news. As for approval of organs from these pigs being used in humans, that’s an entirely different application. In the meantime, promising progress continues to be made thanks to the successful application of gene editing.
Says the above article, “The donor pig had 10 genetic modifications, including the knockout (inactivation) of four pig genes and the addition of six human genes.”
Some Historic Achievements
United Therapeutics issued a press release a few days ago talking about the successful pig-human heart transplantation. They also noted several other historic achievements including:
- UKidney procedure data published in the American Journal of Transplantation; the first such data published in a peer-reviewed journal
- UThymoKidney™ procedure represents a historic first preclinical human model study
That second bullet point refers to a procedure that took place this past September when “a human preclinical model proved for the first time that UT’s GalSafe™ pig could, as modified, transcend the most proximate immunological barriers to xenotransplantation.”
In UTHR’s recent press release, three people were thanked explicitly, one of them being the man behind Synthetic Genomics – Dr. Craig Venter.
Dr. Craig Venter, whose team at Synthetic Genomics (now UT’s Exponential Biotherapeutic Engineering group) provided essential porcine gene engineering expertise.Credit: United Therapeutics
When the Synthetic Genomics investment disappeared from view, we weren’t sure if the two companies were even working together. So, we emailed both posing the question and never heard back. It seems as if United Therapeutics acquired a chunk of Synthetic Genomics as implied by the statement above which all but says that. (More on this in a bit.)
We would have thought investors would look towards United Therapeutics as news broke of the progress being made in xenotransplantation, but it’s tough to tell if the share price is reacting because it’s so darn volatile. Trying to extract meaning from the year’s dramatic price swings seems pointless, and nobody cares anyway because they’re too busy watching the crypto/tech stock meltdown. Or it could be what United Therapeutics CEO, Martine Rothblatt, told us many moons ago – UTHR stock is indeed flying under the radar and hasn’t been discovered by mainstream pundits. Indeed, our SEO tools show no interest from investors in terms like “xenotransplantation investing” or “xenotransplantation stocks.”
It’s also possible that the reality of xenotransplantation at a commercial scale has many hurdles that need to be crossed and we’re still half a decade out. Or maybe we’ll hit a showstopper and xenotransplantation will be placed on the back shelf along with carbon nanotubes.
Investing in Xenotransplantation
Inevitably, enough people will read these xenotransplantation success stories and catch wind of a potential investment opportunity. Some pundit somewhere will come up with the Foolish idea of selling United Therapeutics as “the next Tesla” and the pied pipers on FinTwat will catch wind of it and stoke the fires of hype. Hopefully, that never happens. United Therapeutics needs to just continue accomplishing milestones that help cement their unmatched pedigree when it comes to working towards making xenotransplantation a reality. They’ll need to assert dominance because George Church’s startup eGenesis is no slouch.
While the United Therapeutics story is an interesting one, they aren’t coming across our radar until they demonstrate progress being made in the form of meaningful revenues. This becomes tricky because United Therapeutics actually has loads of revenues flowing in, just not from xenotransplantation. Five commercial pharmaceutical products are the cash cows driving UTHR’s business right now.
One unanswered question surrounds the total addressable market (TAM) at stake here. As usual, market research firm estimates vary so widely they can largely be considered useless. In the only country in the world where you can buy a kidney, Iran, they’re selling for around $4,500. Right now, 100,791 people are on the kidney transplant waiting list, and they’d gladly pay that. But this isn’t Iran, this is America, which means we’re going to charge at least ten times that. At $46,000 a pop, that’s a cool $4.6 billion in one-time revenues from exhausting the current waitlist. Then you have 3,000 people a month joining the list so, that’s another $1.66 billion in yearly revenues. And we haven’t even started talking about other organs yet. United Therapeutics has several types of organ xenotransplantation therapies in the works, including for the heart, kidney, and lungs.
United Therapeutics is the only pharmaceutical company that’s registered as a public benefit corporation (PBC), so we fully expect their first goal will be to reduce the number of Americans who die waiting for an organ transplant – 3,650 people a year – before they’re able to transform their technology into something that becomes mainstream. There’s also another ambition that’s being manifested which relates to the xenotransplantation thesis that retail investors might find equally compelling. United Therapeutics plans to deliver organs using drones. In fact, they already have.
About Unither Bioelectronics
Unither Bioelectronics, a wholly owned subsidiary of United Therapeutics Corporation, just did a big thing last fall. In October 2021, the company facilitated the “first-ever delivery of a transplanted lung by electric drone at Toronto General Hospital,” something they said demonstrated the feasibility of their goal to deliver transplantable organs with zero carbon footprint aircraft. Through their subsidiary, United Therapeutics is taking some major steps to get involved with the electric Vertical-Take-Off-and-Landing (VTOL) sector. From a piece late last year by media site eVTOL:
China-based EHang is one of three eVTOL makers that have relationships with United Therapeutics to develop certified aircraft for future organ transport; the others are California-based Tier 1 Engineering, which is developing an electric version of a Robinson R44 helicopter, and Beta Technologies of Vermont, which is developing the lift-plus-cruise Alia for missions of up to 250 nautical miles (460 kilometers).Credit: eVTOL
As we’re reaching our word limit for this piece, we’ll save the eVTOL story for another day. Martine Rothblatt has the technical background needed to properly vet all the VTOL value propositions floating around – many nothing but teams with dreams – so we’re curious to see why she chose these three companies.
As for Synthetic Genomics…
As for Synthetic Genomics, they’ve now renamed themselves to “Viridos” and a few months back announced a biofuels agreement with Exxon Mobil. Sound familiar? It should, because that’s exactly what they announced nine years ago when Exxon Mobil said they would sink $600 million into Synthetic Genomics for developing biofuels. They ended up spending about $100 million and then deciding in 2013 that actual commercialization was a decade and a half away. The next update came in 2017 when they announced the agreement had been renewed again. Then, just several months ago, another joint development agreement was announced, this one hinting at there possibly being something to commercialize.
In the past few years Viridos’ leadership in engineering microalgae has achieved greater than 5x bio-oil productivity increases by increasing both the oil content in the algae and the algae yield. The results from outdoor deployment of Viridos’ bio-engineered strains in 2020 and 2021 mark the inflection point toward deployment.Credit: Viridos
As Exxon Mobil shareholders, we’re hoping there’s finally some “there there” and they’re not just pissing away money to appease the ESG types.
But we’re not done with our story yet. Another company to come out of Synthetic Genomics was Codex DNA which had an IPO last year, something we covered in our piece on Codex DNA Stock – A Desktop DNA Factory. Since their market debut, shares of the company have halved, giving them a current market cap of $213 million. They’re too small to be on our radar and we’d be much more interested in what their competitor, DNA Script, is getting up to. That’s a whole different story though which we covered in a recent piece on Challenges Ahead for Twist Bioscience Stock. The point is, all three segments of Synthetic Genomics now seem to be accounted for. They’ve now pivoted their way into oblivion.
At one point in time, we were long United Therapeutics stock because we liked the story. After tidying up our tech stock portfolio and putting together a tech investing methodology focused on minimizing risk, the stock is no longer to be found among the list of names we’re holding. This is a company with mature commercially available therapies that are collecting pretty consistent cash flows. Still, it’s the pharmaceutical industry, so everything is subject to the whims of regulators and lawsuits. While we always view PBCs with a certain amount of suspicion, we’ll take another look at UTHR shares when they start to realize some meaningful revenues from their sacred pig.
Eventually, United Therapeutics may realize their vision of a “solar-powered pig organ harvesting farm with helipads for organ transplant.” But right now that’s just a vision that’s slowly checking off milestones that could lead to revenue. As with any company, we don’t invest pre-revenue. The first time the company adds a revenue segment that can be attributed to the work they’re doing in xenotransplantation, we’ll take another look at this exciting gene-editing success story. Because until there are revenues, it’s just a story, albeit a really good one.
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