Mad Hedge Biotech & Healthcare Letter
January 26, 2021
(EMERGING COVID-19 ALLIANCES)
(CVAC), (PFE), (MRNA), (TSLA), (NVAX), (JNJ), (SNY), (GSK), (BAYN)
Mad Hedge Biotech & Healthcare Letter
January 26, 2021
(EMERGING COVID-19 ALLIANCES)
(CVAC), (PFE), (MRNA), (TSLA), (NVAX), (JNJ), (SNY), (GSK), (BAYN)
Mad Hedge Biotech & Healthcare Letter
January 19, 2021
(CAN NOVAVAX EXTEND ITS WINNING STREAK?)
(NVAX), (MRNA), (PFE), (AZN), (BNTX), (BTC)
Would you believe that there was a bigger winner than Bitcoin (BTC) in 2020?
Amid the fanfare generated by COVID-19 vaccine developers like Moderna (MRNA) and Pfizer (PFE), there’s one biotechnology company that has quietly boosted its humble $4 share price to an impressive $128: Novavax (NVAX).
As incredible as that sounds, this isn’t the most unbelievable prediction for Novavax.
Despite recording a jaw-dropping 2,600% increase last year, this Maryland-based biotechnology company is projected to sustain the momentum in 2021 and beyond.
Let me share how Novavax can achieve a long-lasting winning streak.
Unlike Moderna and Pfizer, Novavax did not utilize RNA technology to develop NVX-CoV2373. Instead, the company opted for a more established approach.
The decision to pursue a more established technology could be viewed as a cost-cutting strategy for Novavax.
Doing so means dramatically lowering supply chain pressures, such as storage issues.
In effect, the Novavax vaccine would be the more convenient option that offers an equally potent result.
At this point, Novavax has yet to reveal its Phase 3 trial results. The tests, which involve trials in the UK, would prove to be the turning point for the company’s future.
Here’s a rough estimate of how the results could affect Novavax shares.
If the results show that NVX-CoV2373 is 90% effective, this would put the vaccine in the same league as Pfizer and Moderna. Consequently, shares will go up by 30% with this news.
Meanwhile, an efficacy result clocking in at less than 80% would have the stock falling by up to 20% primarily due to the strong competition in the COVID-19 market.
Approximately $40 billion in COVID-19 revenue is at stake this year.
While competitors Pfizer, Moderna, and AstraZeneca (AZN) have already had their vaccines approved for emergency use, Novavax still has a strong chance of getting a piece of the action.
Despite these candidates getting rolled out in other countries, Novavax’s NVAX-CoV2373 remains a heavy favorite among experts and analysts alike.
At this rate, NVX-CoV2373 could generate at least $4 billion of the $40 billion COVID-19 market in 2021.
Considering that Novavax has an $8 billion market capitalization, this alone more than justifies the company’s valuation.
Admittedly, Pfizer and Moderna hold the competitive advantage in being the first to market. It wouldn’t be surprising if both would end up gobbling up market share while Novavax awaits regulatory approval.
More importantly, both have achieved the coveted name recognition when it comes to COVID-19 vaccine so that could offer them power in the soon-to-be-crowded marketplace down the road.
However, both vaccine leaders have a considerable drawback.
Their vaccines require extremely delicate storage and transportation.
In fact, Pfizer and BioNTech’s (BNTX) BNT162b2 must be stored at minus 94 degrees—a requirement that not all countries, much less commercial distributors could adhere to.
This is where Novavax’s vaccine comes in.
NVX-CoV2373 can be stored and transported at refrigerated temperatures. This means it would be easier to distribute particularly in remote areas.
Any hiccups with storage or transportation involving the Moderna or Pfizer vaccines could offer Novavax an opening to generate vaccine sales that would otherwise no longer be available.
This scenario would translate to a more dominant presence of Novavax in the second half of 2021 until the early part of 2022.
Pfizer and Moderna may have been the first to market, but Novavax’s vaccine holds the potential to generate a sizable impact on sales over the long term.
In terms of revenue, the vaccine would be a significant boost for Novavax. It would transform from a zero product revenue to billions in a short period.
While Novavax has yet to announce the official pricing for the product, we can use its US price of $16 per dose as a benchmark for the rest of the contracts.
So far, Novavax has secured roughly orders for 300 million doses in the US alone. This would amount to $4.8 billion in sales—and all signs point to the number climbing higher this year.
Novavax has been ramping up its capacity to produce as many as 2 billion doses by mid-2021.
In comparison, Pfizer has a maximum capacity of 1.3 billion doses this year while Moderna would peak at 1 billion.
Evidently, Novavax holds an edge over the two companies in terms of capacity to fill orders.
Outside its COVID-19 efforts, Novavax has another potential blockbuster in its pipeline.
Although data is sparse, the company is expected to file for regulatory approval for its experimental flu vaccine called NanoFlu.
Oddly enough, NanoFlu was the reason that Novavax trounced the cryptocurrency surges in 2020.
Investors got all fired up following the promising showing of the flu vaccine candidate, with the stock gaining unprecedented attention when it reported remarkable results in a head-to-head study against the leading flu vaccine in the market today, Sanofi’s (SNY) FluZone Quadrivalent.
With all these in mind, Novavax’s earnings outlook is showing strong signs of even more stellar and stronger performance than that of Moderna this year.
So far, earnings per share for Novavax this year is estimated at $21 while Moderna’s is $10.
Another possible game-changer for Novavax is its plan to combine a flu-coronavirus vaccine to be marketed post-pandemic.
Before making any moves though, it’s important to invest in Novavax with all the facts out in the open.
Inasmuch as it’s a promising stock, this is still a risky investment. This means that only aggressive investors should consider buying this biotechnology stock.
In a number of ways, Novavax and Bitcoin share some similarities.
Both are speculative assets that could either skyrocket or sink. They’re extremely attractive to aggressive investors on the lookout for big wins but also unafraid of massive risks.
The main difference is that with Novavax, it’s simpler to understand the reason for its rise or fall.
The potential drivers for its success or failure appear to be less cryptic than those behind the cryptocurrency.
Aducanumab isn’t going gently into the night.
Positive data from Eli Lilly (LLY) breathed renewed interest in the efforts to find a cure for Alzheimer’s disease, the most common form of dementia and the sixth leading cause of death among Americans.
With 1 in 10 people aged 65 and older suffering from this condition, it’s no wonder that Big Pharma has invested so much in searching for a treatment.
Lilly’s candidate, Trailblazer-ALZ 2, is in its Phase 2 trials. Results showed that the progression of moderate Alzheimer’s disease among patients who took the drug showed a 32% decline compared to a placebo.
In a sector riven by failure and with a potential target market as lucrative as $30 billion annually, investors welcomed Lilly’s news with enthusiasm.
If successful, Trailblazer-ALZ 2 could reach $5 billion in peak sales. As expected, the results boosted Lilly’s stock, with it rising by 14% from $166 to $190.
While the Lilly study is promising, it involved only 272 patients.
This is easily dwarfed by Biogen’s (BIIB) efforts to find a cure for Alzheimer’s. As of last count, the giant biotechnology company’s previous trial for its own drug, Aducanumab, involved over 3,200 patients.
More importantly, Lilly’s Trailblazer-ALZ 2 is projected to hit the market in 2025, while Biogen’s Aducanumab is “ready to go.”
Aducanumab is a monthly infusion designed as a long-term treatment for generally healthy individuals who are beginning to show symptoms of Alzheimer’s disease.
Although this treatment has yet to be approved, the FDA is said to be in favor of its approval.
Outside the US, Biogen has also filed for potential approval in Japan and Europe. All approvals could come by early to mid-2021.
If approved, Aducanumab is expected to reach $12 billion in peak sales.
While this plan is still up in the air, the $12 billion in sales alone could easily justify the entire company’s current valuation.
Despite the uncertainty, Biogen remains promising thanks to the high potential of the existing drugs in its roster and its R&D unit.
In terms of pipeline, the company has at least 30 active clinical programs. Eight of which are already in Phase 3 and filed, including Aducanumab.
In recent years, Biogen has been focusing on expanding its neuroscience segment.
With over $28 billion potential market size, it no longer comes as a surprise why Biogen is pouring in cash in this particular sector.
Bolstering its efforts in the neuroscience segment, Biogen has recently invested in the Series A round of Atalanta Therapeutics, a Boston-based pioneering neurodegenerative diseases biotechnology company founded in 2018.
Attracted by Atalanta’s research on siRNA, which are molecules that can “silence” genes in the brain, Biogen and another biotechnology bigwig, Genentech (DNA), invested a combined $110 million to get a piece of the action.
Specifically, Biogen signed up to collaborate with Atalanta on treatments for Huntington’s along with several other central nervous system disorders.
As for Genentech, the $73.9 billion valued company’s deal with Atalanta covers Alzheimer’s and Parkinson’s.
In both agreements, Atalanta gets upfront payments, milestones, and royalties.
What we know so far is that Atalanta’s siRNA can silence Huntington’s disease gene for at least six months. It can also alleviate symptoms affecting the spinal cords, but this part of the research has only been done on nonhuman primates.
Biogen, which has a market capitalization of $41.15 billion, has seen its share price fluctuate dramatically due to concerns over its Alzheimer’s drug.
The company withstood significant volatility in 2020, experiencing over 40% price swings in both directions. This is primarily because of the ups and downs of its Aducanumab trials, which heavily swayed the opinion of market participants.
Moving forward, I expect Biogen to have a massive year this 2021.
That’s the upside of this stock.
Even at its midpoint and if major treatments like Aducanumab fail to gain approval, I still anticipate a respectable year for this biotechnology company. That kind of security is worth paying attention to, and it can also signal its capacity to drive strong rewards.
Biogen has been shunned in the past year due to its volatility.
After all, who would want to invest in an unpredictable drug like Aducanumab when there are major stock indices and newcomers like Moderna (MRNA) making record-breaking highs?
For investors willing to look beneath the surface though, Biogen offers so much more than what meets the eye.
They say there’s always a light at the end of the tunnel, but what a very long tunnel we’re in right now.
More contagious strains of the SARS-CoV-2 have been discovered in the UK and South Africa, with these new variants threatening to make the situation worse before we even get the chance to try to make things better.
However, there’s still hope.
Just take another look at the leading vaccines developed in response to the COVID-19 pandemic and you’ll realize that we could be nearing the light at the end of this dark road.
In fact, the innovative solutions that emerged in 2020 could serve as beacons of light to illuminate the darker paths that the biotechnology and healthcare sector has been struggling with for decades.
The more we study the effects of the new vaccines, the more it becomes plausible that they could not only be used as weapons to fight off the 2020’s ultimate grim reaper, COVID-19, but also annihilate grimmer reapers like cancer.
Among the vaccine developers that launched their COVID-19 program, the technology used by Moderna (MRNA), Pfizer (PFE) – BioNTech (BNTX), and CureVac NV (CVAC) proved to be the most groundbreaking.
All these utilized the nucleic acids, more commonly known as RNA or mRNA, to create their COVID-19 vaccines.
Traditional vaccines are typically injected into the body to trigger an immune response, which would, later on, be useful in fighting off the live pathogen. The problem with this is that it requires so much time and exposes the vaccines to contamination.
In comparison, mRNA vaccines do not suffer from these setbacks. Basically, these vaccines instruct the body to replicate parts of the virus.
In the case of SARS-CoV-2, the mRNA vaccines tell our bodies to replicate the proteins wrapped around the virus. This way, the body gets to practice on the replicated proteins and prepare for the day when the actual virus shows up in the system.
By familiarizing the body with the genetic makeup of the deadly virus, the mRNA vaccines help us perfect the immune response for when the real thing attacks us—and therein lies the much bigger promise of this technology.
mRNA has the capacity to instruct our cells to create whatever protein necessary, which means it can be applied to fight off other diseases apart from COVID-19.
Researchers since the 1970s have been attempting to shed light on this technique but failed to get traction.
Due to the urgency caused by the pandemic, companies like BioNTech and Moderna have been given practically carte blanche of the funds to finally develop the mRNA vaccines and show the world not only how potent it could be but how quickly we can have it ready compared to more traditional processes.
Now, the technology is gaining more attention because it could finally be the cure to a myriad of diseases including cancer.
These days, we treat malignant tumors by zapping them with radiation or via chemicals. These methods tend to damage lots of surrounding tissues in the process.
Moderna and BioNTech have come up with a better idea.
Instead of blindly zapping in one general direction, they believe that each should be treated as a genetically unique tumor. Therefore, it would be more effective and less damaging to the patients if their immune systems are accurately programmed to attack specific enemies.
This is where mRNA comes in.
Once the antigen is identified, the scientists can determine its unique makeup or fingerprint.
Then, they can reverse engineer its entire cellular instructions to be able to come up with the blueprint that can help them develop an accurate plan on how to target the culprit.
Similar to how Moderna and BioNTech’s COVID-19 vaccines work, the body will then be conditioned to do the rest.
What’s more exciting is that these plans are no longer just ideas.
Both Moderna and BioNTech have been filling their pipelines with drug trials for cancer treatments of the skin, lung, breast, pancreas, prostate, and brain. They’ve been working on mRNA-based vaccines for a wide range of diseases as well including Zika, rabies, and even influenza.
The success of Moderna and BioNTech’s COVID-19 programs accomplished more than just giving the companies a marketable product. It turbo-charged decades-long processes.
Remember, it only took 11 months since the discovery of the SARS-CoV-2 virus for the UK and US regulators to declare that the mRNA vaccine for COVID-19 is not only safely tolerated by people but also effective.
Prior to this, no vaccine had been developed in less than four years. The approval period takes even longer.
That is, COVID-19 inadvertently led to the grand debut and definitive proof of concept of this much-awaited technology.
If you missed out on Moderna or BioNTech’s rally in 2020, buying on the dip is definitely a smart move now.
One of the key things to remember in choosing companies to invest in is their long-term prospects. With these firmly in place, compounding can practically do most of the heavy lifting in the years to come.
Sure. It’s easy to be blinded by hot growth businesses these days—ones that seemingly promise unabated growth forever or those with cheap valuations but with no definitive growth prospects.
That is, you need to find businesses with not only promising prospects but are also trading at reasonable valuations. This requires a delicate balancing act.
With that balance in mind, one of the most obvious trends that fits the bill is to capitalize on the aging populations across the world.
As people age, it will drive higher demand for a myriad of healthcare services and the sector that responds most to this trend is the medical insurance segment.
Among the companies in this industry, I find Anthem (ANTM), UnitedHealth (UNH), and CVS Health (CVS) to bring the most bang for your buck.
While these companies are as fun to talk about as an actuarial table, they offer predictable cash flows and long-term prospects at reasonably priced valuations.
Let’s take Anthem for example.
From a valuation point of view, Anthem has traded hands at roughly 11.5 times its trailing earnings. More impressively, those earnings are estimated to increase by approximately 14.5% clip over the next five years.
That’s a reasonable, if not really cheap, price to pay for a company that’s well-positioned for what the future is expected to bring.
The aging population will also swell the ranks of UnitedHealth, being the largest health insurer in the country with over 14 million members in its Medicare programs.
Among the three, I find CVS the most intriguing.
The problem with this business is that people generally believe it’s only a pharmacy company. The truth is, it’s only one facet of CVS’ business, and, surprisingly, that’s its least profitable sector to date.
During the first six months of 2020, the total revenues of CVS went up 5% year over year to $132 billion.
Meanwhile, revenues of its pharmacy services sector grew by 2% compared to the same period in 2019 while its retails segment increased by 3%.
Notably, the biggest gainer is its healthcare benefits segment with a 6% jump year over year in revenues.
During these six months, CVS increased its medical memberships by 134,000 individuals to add Medicare and Medicaid insurance products.
On top of these, CVS reported that it had administered almost 2 million tests for COVID-19 in July—a number that continued to grow as the pandemic progressed throughout 2020.
Taking cue from the success of companies like Teladoc (TDOC), CVS also invested heavily in telehealth services.
In its second quarter earnings report, the company recorded a 15% increase in the number of its HealthHUB visits for regular members and Aetna cardholders.
This 2021, CVS plans to boost its digital health services by adding more segments like a behavioral support unit.
Overall, CVS has been performing better than its peers despite the pandemic thanks to its efforts on transforming itself into a more affordable healthcare benefits provider.
In fact, the company raked in $4.9 billion in profits in July 2020 alone—a whopping 48% jump from its performance in the previous year over the same period.
Most importantly, CVS is offering a dividend of $0.50 per share. Although the company hasn’t exactly raised this since 2017, it remains a preferable yield of 3.54%. This is way better than the average 1.8% payout from the S&P 500.
Despite all these, CVS is still one of the unpopular stocks among investors today.
All three companies have managed to still make a notable profit and fared relatively well despite the pandemic.
They are also underpriced, trading at roughly 14 times earnings or even less. On top of these, each pays dividends and offers an ROE of at least 11%.
Keep in mind that aging is an unstoppable and undeniable trend.
You’ve heard about the large number of Baby Boomers hitting retirement age, with the last of the roughly 72 million from that generation in the US alone turning 65 by 2030.
By 2034, older adults will outnumber children aged 18 and under. That has never happened in American history.
This isn’t a unique case in the US either.
The same is happening in Europe, where 1 of 5 people is already at least 65 years old. Asia is also expected to experience the same thing within the decade, particularly in South Korea and Singapore.
All three stocks, Anthem, UnitedHealth, and CVS offer reasonable opportunities at their current prices. They actually fit the textbook definition of value stocks. Hence, buying and holding these stocks is one of the most straightforward strategies over the next decade and beyond.
To put it simply, this only means one thing. For investors of these medical insurance stocks, time is literally on your side.
I am pleased to announce the launch of the Mad Hedge Biotech & Healthcare Trade Alert Service.
The goal is to alert traders and investors when entry sweet spots occur for Biotech & Healthcare stocks with the strongest long-term fundamentals.
Don’t expect any immediate trade alerts today, tomorrow, this week, or even this month. Actual market sweet spots are rare and only take place after prolonged bottoming processes. However, they DO make it easier for investors to move into the best companies at the right time and achieve immediate profits.
Each alert will include recommendations for the stock, options, and ETF so you can tailor the position to your own level of experience and risk tolerance.
In order to receive Biotech text alerts, we need your cell phone number to get text messages to you immediately. To register, please click here.
I look forward to working with you with this service.
CEO & Publisher
The Mad Hedge Biotech & Healthcare Letter
The latest update on AstraZeneca’s (AZN) COVID-19 vaccine candidate has received a lot of attention from investors.
The company and its research partner Oxford University recently landed a deal to deliver 2 million doses of their COVID-19 vaccine weekly to the UK starting mid-January.
This is on top of the massive deal AstraZeneca sealed with India for emergency use approval as well.
While these are exciting updates, the reality is that AstraZeneca aims to market its COVID-19 vaccine candidate at cost.
As the race to supply COVID-19 vaccine to the world continues, it’s undeniable that a huge chunk of the roughly $40 billion COVID-19 revenue would go to the current frontrunners Pfizer (PFE) and Moderna (MRNA).
This is particularly true for Moderna’s case as the biotechnology company employed a revolutionary technology to create its COVID-19 vaccine candidate.
The success of its vaccine so far is indicative of future treatments and even vaccines based on the mRNA technology. This offers incredible promise not only for the current pandemic but for a myriad of rare diseases.
In comparison, AstraZeneca and even Johnson & Johnson (JNJ) opted for more traditional approaches for their COVID-19 vaccine candidates.
While these are also promising, it’s likely that these companies do not anticipate their COVID-19 programs to be the profit centers for 2021.
In fact, there are a lot of good reasons to buy AstraZeneca shares right now – and its COVID-19 vaccine candidate didn’t make the top of the list.
One of the main reasons AstraZeneca deserves a spot in your portfolio is the fact that it already has an established and successful pipeline.
While its COVID-19 program definitely boosted its popularity, this effort was not altogether necessary in terms of the company’s overall growth.
Despite the pandemic that brought down businesses in 2020, including commercial launches of new drugs, sales of AstraZeneca’s new products rose 9% year over year.
In fact, throughout the past 12 months, the company managed to generate approximately $1.9 billion in free cash flow.
In the first nine months of 2020, the company reported core earnings growth of 13% year over year, with a 2.8% dividend.
To close the year with a bang, AstraZeneca announced its $39 billion acquisition of one of our closely-watched biotechnology companies: Alexion Pharmaceuticals (ALXN).
Although this initially didn’t bode well with its investors, AstraZeneca is set to gain the blockbuster franchise composed of the Soliris-Ultomiris duo.
At its current growth rate, Alexion’s prized Soliris franchise is estimated to generate at least $6 billion in sales in 2021.
Meanwhile, Soliris’ longer-lasting version, Ultomiris, which was launched in 2018, is projected to rake in almost twice in profits this year.
Both Soliris and Ultomiris require regular treatment, with the former administered every other week while the latter is an infusion needed every other month.
Although there are less expensive biosimilar options already making the in the market today, particularly for Soliris, the move of Alexion to develop Ultomiris as a longer-lasting and more convenient version all but obliterates any future competition.
Simply put, AstraZeneca will have a monopoly of this market once the acquisition is complete by mid-2021.
Speaking of convenient options for prolonged treatments, AstraZeneca recently gained expanded approval for its easy-to-swallow tablet called Tagrisso. This drug is developed for lung cancer patients with tumors caused by specific gene mutations.
The latest approval allows Tagrisso to be prescribed to newly diagnosed patients who just had their tumors removed surgically.
This presents a lucrative market for AstraZeneca considering that these patients undergo therapy for long periods.
More importantly, AstraZeneca doesn’t really need to market Tagrisso’s value to oncologists.
Clinical results show that the tablet can lower the risk of the disease’s recurrence or even death by as much as 80% among their patients.
Putting these results in the context of AstraZeneca’s records, Tagrisso’s sales for the third quarter of 2020 alone grew by 30% year over year to reach $4.6 billion.
With the recent FDA approval, this number is set to increase to transform Tagrisso into a certified blockbuster drug.
Other than Tagrisso, AstraZeneca has a number of oncology blockbusters in its portfolio and pipeline.
In the first nine months of 2020, the sales of the company’s therapies unit rose by 23% year over year to a record $8.2 billion. Admittedly, Tagrisso contributed a substantial amount.
However, it’s not the sole growth driver in AstraZeneca’s oncology lineup.
Another moneymaker is Lynparza, which showed a 42% jump year over year in its third quarter sales in 2020 to reach $1.9 billion.
This drug, which was initially approved as an ovarian cancer treatment, is now prescribed to treat prostate, pancreatic, and breast cancer. Therefore, the expanded approvals are expected to offer more lift this year.
Another promising addition to AstraZeneca’s oncology pipeline is Enhertu, which the company gained from its $1.35 billion collaboration project with Daiichi Sankyo.
Since the two companies started working together last year, Enhertu has received approval for breast cancer patients who relapse or do not respond to standard care.
Aside from this, Enhertu is also under review as a treatment for stomach cancer.
Although the companies are still awaiting approval, the treatment is reported to have a great chance at approval because of its impressive ability to lower the risk of cancer patients’ death by 41% compared to chemotherapy.
AstraZeneca’s decision to boost its oncology segment by adding the likes of Alexion Pharmaceuticals and collaborating with Daiichi Sankyo guarantees that the company remains in a position to be able to deliver gains no matter what happens to the broader economy.
The continuous success for all the products in AstraZeneca’s pipeline could lead to market-crushing gains.
However, investors who own the stock don’t necessarily need to rely on luck to know that they are set to get a healthy return.
That assurance makes AstraZeneca a great stock to buy today and hold for a long time.
No other industry has ever been watched as closely in 2020 as the healthcare and biotechnology sector, with drug developers placed under pressure to deliver COVID-19 treatments and vaccines within an unprecedented timeframe.
Despite all the attention and fanfare, the overall performance of the sector’s stocks remained underwhelming. However, 2021 promises to bring in better returns and bring back the industry to pre-pandemic performance.
For perspective, the S&P 500 Health Care Sector Index rose by 8% through mid-December compared to the 13% increase of the S&P 500.
The financial and health crises affected the performance of the subgroups in different ways. For example, the diagnostics subgroup jumped by 31% while the demand for clinical labs was up 18%.
Meanwhile, biotechnology stocks rose by 13%. In comparison, traditional pharmaceutical stocks and even hospitals only managed to record a measly 3% increase.
As for retail pharmacies, this subgroup sank by 18%.
Despite the underperformance of the industry, there are still companies that stood out this year and are poised to soar come 2021.
One of them is Vertex Pharmaceuticals (VRTX).
Vertex is possibly one of the most undervalued large-cap biotechnology stocks in the market today.
This company, which has $61.7 billion in market capitalization, has been continuously growing and transforming into the most dominant player in the cystic fibrosis (CF) space.
Truth be told, Vertex holds the monopoly on the approved drugs used to treat CF, namely, Trikafta, Kalydeco, Orkambi, and Symdeko.
With the recent approvals the company received, this momentum is expected to grow.
Vertex just won additional EU approval for its CF drug Kaftrio. This indicates another cash cow for the company as the drug, also known as Trikafta, already transformed itself into a megablockbuster in the US market.
Apart from its efforts to continuously dominate the CF sector, Vertex also has several moonshots that can eventually turn into major catalysts.
Among those is its partnership with CRISPR Therapeutics (CRSP).
The two biotechnology companies are developing a gene therapy, called CTX001, which can cure rare genetic blood diseases. Specifically, CTX001 is designed to cure beta-thalassemia and sickle cell disease.
Apart from its partnership with CRISPR Therapeutics, Vertex also acquired Semma Therapeutics in 2019 with the goal of coming up with a cure for Type 1 diabetes.
If things go as planned, a gene therapy for this genetic disease will advance to clinical testing by early 2021.
Another under the radar biotechnology stock set to soar in 2020 is Illumina (ILMN).
Illumina, with a market capitalization of $54.10 billion, is the leader in the genomics market.
Since the pandemic broke, the biotechnology sector’s leading manufacturer of hardware for genetic sequencing has been supplying testing kits for hospitals across the US.
Apart from Illumina, other companies in the genomics sectors include Vertex’s partner, CRISPR Therapeutics, which has a market capitalization of $4.48 billion, and bluebird bio (BLUE) with $4.03 billion.
In a nutshell, genomics refers to the analysis of the genetic information found in human cells. Companies working on this field aim to not only develop more accurate and efficient disease testing processes but also come up with more personalized treatments for a range of diseases including cancer.
Looking at Illumina’s profile and even taking into consideration the effects of the recession along with the competitive pressure to be expected soon enough, this biotechnology company is still set to deliver solid returns over the next 3 to 5 years.
Ever since its establishment, Illumina has been hailed as the leader in the gene-sequencing segment.
To date, the company holds almost 90% of the market.
Apart from that, the company has been an active participant in the move to lower the costs of gene-sequencing processes. In effect, Illumina managed to expand its customer reach.
Illumina’s participation in the 13-year Human Genome Project, which started at $3 billion per genome submitted for sequencing in 2003.
Nowadays, the cost has dropped to $800 for each genome, with Illumina eyeing to drop the price to $100 via its NovaSeq platform.
Based on the company’s performance in the past years, Illumina’s revenue is expected to climb higher annually in the next 5 years.
By 2021, the company is projected to report a 21.16% year over year growth in annual revenue to reach 4.23 billion.
Meanwhile, its 2022 annual revenue is estimated to hit $4.79 billion, showing off a 13.37% increase.
Despite the attention it has been receiving, Illumina remains a bargain buy.
This is because the company’s gene-sequencing projects have been moving along at a decent pace even before the COVID-19 crisis hit.
Given the company’s growth and future plans, Illumina is a no-brainer long-term investment. However, investors looking for quick returns might find the company’s pace a bit sluggish for their liking.
Among the biotechnology companies out there today, I think Vertex and Illumina stand out the most because both hold a monopoly in their respective fields.
Sure, there would be competition eventually but the combination of all their strengths and the strong potential of their pipeline put them in a league of their own.
Over the past month, COVID-19 vaccine developers like Pfizer (PFE), Moderna (MRNA), and AstraZeneca (AZN) have offered the world a bit of good news.
For the first time since the pandemic started, we have seen a light at the end of this crisis’ tunnel.
This time around next year, the economy should be close to its normal state.
Before we see the struggling financial market completely recover, you might want to consider buying shares of an under-the-radar COVID-19 vaccine developer that could be on its way to performing better in 2021: Merck (MRK).
Major healthcare and drug stocks rarely get this cheap relative to the S&P 500 in the last 15 years, Merck is a prime example of this once-in-a-blue-moon phenomenon.
Although it was slow to start and report on updates in its COVID-19 vaccine, Merck has been making strides in emerging as a major competitor against Gilead Sciences (GILD) when it comes to developing a COVID-19 drug.
To date, Merck landed a $356 million supply agreement with the US government to deliver 60,000 to 100,000 doses of its oral antiviral drug for COVID-19.
While vaccines are definitely valuable in helping prevent the spread of the virus, there is another important market that healthcare companies are targeting: the hospitalized COVID-19 patients.
With this recent announcement from Merck, it’s obvious that the company has its hands on both the vaccine market and the hospitalized patient group.
In terms of vaccine development, Merck may be behind Pfizer and Moderna but this New Jersey-based titan has one of the leading vaccine franchises in the industry.
The frontrunner in Merck’s vaccine franchise is its cervical cancer vaccine Gardasil, which is estimated to be worth half of its current market value of approximately $200 billion.
The company is also anticipated to record high single-digit earnings growth in the years to come, thanks to the 2021 spinoff of its Organon unit.
Following Pfizer and Mylan footsteps in the newly formed Viatris (VTRS), Organon will be used to unload the slower-growth products from Merck’s current portfolio.
With the purging of its product portfolio of the low-performing treatments comes the expansion of Merck’s R&D courtesy of its $2.75 acquisition of biotechnology startup VelosBio.
Thanks to this deal, Merck will gain access to VelosBio’s prized VLS-101, which is basically a miniature chemotherapy grenade that would disintegrate cancer cells.
This collaboration could turn out into another moneymaker for the company.
Merck is no stranger when it comes to picking winning oncology investments.
The last massive deal it completed was a $1.16 billion deal with AstraZeneca in 2017, with the two companies agreeing to milestone payments of up to $6.15 billion.
This partnership brought to life one of the highest-selling cancer drugs in the world today, Lynparza.
To date, Lynparza is not only used for prostate cancer but also gained expanded approval for breast and pancreatic cancer.
In the third quarter of 2020 alone, even with the pandemic still wreaking havoc everywhere, Merck’s share of profits for Lynparza jumped 59% year over year to reach $196 million—a number that is projected to continue to climb as the drug awaits more approvals from the EU.
Merck offers the most attractive upside case among the healthcare stocks today, with the company projected to report consistent revenue growth until at least 2025.
Moreover, this pharmaceutical company has a strong balance sheet, as seen in its recent acquisitions and potential partnerships still underway.
So far, Merck’s shares are down 12% this year to only $80, with the stock trading 13 times its projected earnings in 2021 at $6.29 per share.
This pharmaceutical giant has a stable dividend yield of 3.3%, which is double the S&P 500.
As the economy continues with its recovery, you can expect Merck to get stronger and the stock should rally sooner rather than later.
Hence, buying it before it completely bounces back could allow you to cash in some spectacular returns.
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