Mad Hedge Biotech and Healthcare Letter
June 7, 2022
Fiat Lux
Featured Trade:
(A LOW-KEY BIOTECH SET FOR A BULL RUN)
(REGN), (BAYG), (NVS), (RHHBY), (SNY), (ABBV), (PFE), (INCY), (MRK)
Posts
Biotechnology stocks have been sliding for months now, but scientific advancements are not slowing down.
The public’s focus on messenger RNA and gene editing may have dwindled, but the fact remains that more and more patients are benefiting from the discoveries.
More importantly, new treatments are well on their way to clinical trials.
That’s why I think Regeneron (REGN) could easily be one of the big winners in the coming years.
Despite the economic slowdown, Regeneron shares are doing okay. They have actually practically doubled since the start of 2020, when the biotech was thrust under the spotlight for its anti-COVID antibody cocktail, REGEN-COV.
Its popularity heightened when then-president Donald Trump used its treatment.
While the demand for REGEN-COV has since declined, the drug still raked in $7.5 billion in sales in 2021.
However, that would most likely not be the trend since it was proven to be not as effective against the newer strains. In addition, the FDA significantly limited the situations in which the antibody cocktail can be used.
For the foreseeable future, Regeneron shareholders’ earnings are primarily dependent on macular degeneration treatment Eylea and asthma and dermatitis drug Dupixent.
For Eylea, which Regeneron shares with Bayer (BAYG) outside the US, sales grew by 19% in 2021 to record $9.4 billion.
A vital issue Eylea faces is its expiring US patent by mid-2023, which will probably lead to more aggressive biosimilar competition as early as 2024.
Aside from that, more and more rivals are emerging, such as Beovu from Novartis (NVS) and Vabysmo from Roche (RHHBY).
Luckily for Regeneron, Beovu hasn’t gained traction due to safety issues, while Vabysmo is still struggling to establish itself as a viable alternative.
Thanks to its entrenched position as an undisputed market leader, Eylea sales will continue to be a top-selling treatment.
While things are still going well for Eylea, Regeneron has been proactive in establishing Dupixent as another key growth driver.
Dupixent, which was co-developed with Sanofi (SNY), showed off an impressive 51% jump in sales last year to rake in $6.2 billion—and this isn’t the peak yet.
Dupixent is estimated to reach over $14 billion in sales in the following years due to expanded markets.
Sales of this newer drug have caught up with Eylea’s in the past years.
In fact, Dupixent is projected to overtake Eylea sales by 2024, with the figure almost doubling by 2025 compared to the 2021 revenue.
In terms of competition in the atopic dermatitis sector, Dupixent is challenged by Rinvoq from AbbVie (ABBV), Cibinqo from Pfizer (PFE), and Opzelura from Incyte (INCY).
Nonetheless, Dupixent still looks well-positioned to expand into current and new indications in the following years and be able to fight off competitors.
It is critical for any biotechnology and healthcare business to maintain a solid pipeline to respond to upcoming patent losses and the rise of generic competition.
In this aspect, Regeneron has been performing excellently.
It has several treatments queued that complement the existing blockbusters, Eylea and Dupixent, and bolster the long-term growth prospects.
A good example is the company’s experimental treatment Aflibercept, which is slated to release Phase 3 results in the third or fourth quarter of 2022.
If this succeeds, it can enhance and strengthen Eylea’s efficacy, allowing Regeneron to retain its dominant position in the retinal market.
The company is also working on getting the green light for seven new indications on Dupixent-related treatments, which would be out by late 2022 and early 2023.
Another area under Regeneron’s radar is oncology.
While it’s cancer portfolio isn’t likely to become a significant growth driver anytime soon, there’s definitely potential here—and the potential comes in the form of in-house combos with Libtayo.
Libtayo, a cancer checkpoint inhibitor, is the most significant drug candidate in Regeneron’s oncology pipeline today.
Although it’s a latecomer to the field, Regeneron has become one of the frontrunners in the skin cancer segment with the approval of its cutaneous squamous cell carcinoma indication and the addition of the basal cell carcinoma label.
However, those are relatively minor markets. In terms of infiltrating a major market, Libtayo’s first venture is into the lung cancer sector.
But, this could be challenging since Merck’s (MRK) Keytruda has a firm hold of this market.
Still, Libtayo has the potential to achieve blockbuster status—a goal that Regeneron looks to be aggressively pursuing.
Aside from skin and lung cancer treatments, Regeneron has been developing Libtayo-based candidates for prostate cancer treatment REGN5678 and ovarian cancer therapy REGN4018. It is also working on another lung cancer treatment, REGN5093, to hopefully bolster its foothold in this lucrative market.
Needless to say, approval of these cancer treatments would be an incredible game-changer not only for cancer patients but also for Regeneron.
Overall, Regeneron is an outstanding biotechnology company and investment option. The success of its blockbuster treatments will offer a strong foundation for the company’s future growth.
If you add the more than 30 pipeline candidates of Regeneron in the mix, then it’s easy to see that a bull run might just be on the horizon for this stock.
While regulatory hurdles and emerging competitors would present challenges, it’s clear that Regeneron has these issues under control.
Moreover, the company’s pipeline has clearly shown that it’s ready to meet the challenges head-on. Hence, it would be advisable to buy the dip.
Mad Hedge Biotech and Healthcare Letter
May 24, 2022
Fiat Lux
Featured Trade:
(FROM A BORING BIOTECH TO A TRAILBLAZING PIONEER)
(VRTX), (ABBV), (MRNA), (CRSP), (EDIT), (BEAM), (NTLA)
When will the turmoil in the stock market come to an end? Unfortunately, nobody can offer a definitive answer.
At this point, there’s still no end in sight to high inflation, climbing interest rates, and the continuing war in Ukraine.
Needless to say, all these issues are affecting the stock market. However, not all stocks are getting negatively affected by the turmoil.
There are still relatively safe bets to buy, with some crushing the market these days.
One of them is Vertex (VRTX).
Vertex stock soared by over 30% year-to-date by mid-April.
While it has given up some of that gain in the past weeks, this biotechnology and healthcare stock is comfortably outperforming the rest of the market, with its shares still up by around 15%.
One reason for Vertex’s good performance is its undisputed monopoly in the cystic fibrosis (CF) market. In fact, its closest potential competitor is AbbVie (ABBV), which recently announced disappointing results for its Phase 2 trials for a CF combo.
This means Vertex’s dominance in the CF space is set to go on for quite some time.
Here’s a bit of background. Vertex has 4 CF treatments.
Among these, the latest treatment, Trikafta, generates the lion’s share of the profits. It raked in $1.7 billion in the first quarter of 2022 alone, with the total revenue for the entire CF pipeline recording $2 billion.
Considering its approved indications and potential approvals, Trikafta is anticipated to treat 90% of the entire CF patient population.
Looking at its current performance and how strong its hold is in the CF market, it appears that Vertex’s prediction that it can sustain its dominance in this segment until at least the late 2030s will be proven right.
Moreover, it’s evident that Trikafta has yet to reach its peak revenue. However, Vertex isn’t depending on this particular treatment alone.
Rather, the company is working on developing a worthy competitor to this top-selling treatment.
That is, Vertex is working on a CF candidate that may potentially be even more effective than Trikafta.
So far, this new drug candidate not only has the capacity to beat Trikafta in terms of efficacy but also offers a more convenient option.
Trikafta is a twice-a-day oral drug that comes in the form of 3 tablets. Meanwhile, this potential competitor is a once-a-day alternative.
If everything goes according to plan, the Phase 3 trial for this Trikafta challenger could start by the end of 2022 or early 2023.
This means that the closest potential rival for the company’s top-selling treatment is its own candidate.
Apart from this, Vertex is working with Moderna (MRNA) to come up with an mRNA therapy for CF patients.
The goal is to offer an alternative option to patients who are not eligible for the current CF therapies.
Although this continued dominance in the CF sector is already a good enough reason to buy Vertex shares, they may be an even better one.
To date, Vertex has at least 6 programs queued in mid to late-stage clinical studies, all of which are projected to become multi-billion dollar revenue streams.
Outside its CF segment, Vertex could have another big winner in the form of gene-editing treatment CTX001.
This is a treatment for sickle cell disease and transfusion-dependent beta-thalassemia that the company has been working on with CRISPR Therapeutics (CRSP).
While CTX001 is promising, it won’t be entering the gene therapy market without any competition. It has to battle the likes of Editas (EDIT), Beam Therapeutics (BEAM), and Intellia (NTLA).
Nonetheless, CTX001, if approved, is a game-changer because it is developed as a one-time cure for genetic blood disorders.
So far, trial results have been positive, and the collaborating duo is expected to file for regulatory approval by the end of 2022 and possibly launch the product by the first half of 2023.
This gene-editing therapy is a significant milestone for Vertex, with CTX001 expected to become another blockbuster, raking in roughly $1 billion in annual sales for the company even after giving CRISPR its share of the profits.
Recently, Vertex added another $900 million to its collaboration with CRISPR to boost its share from 50% to 60%, indicating that it values CTX001 at roughly $10 billion.
Other critical treatments outside the CF space are VX548, an opioid alternative targeting acute pain, and VX800, a stem cell-derived therapy developed to treat Type 1 diabetes.
Vertex has been accused as a company scared of getting out of its comfort zone for quite some time.
With these new ventures, Vertex has become something of a pioneer—a strategy that is projected to open long-term and lucrative revenue streams for the company.
Overall, all these efforts paint an obvious picture. That is, Vertex is a well-balanced company with a main business that capably and reliably generates billions and is complemented by an exciting pipeline that holds the potential to replicate the success of its already established portfolio.
Mad Hedge Biotech and Healthcare Letter
May 19, 2022
Fiat Lux
Featured Trade:
(A PASSIVE INCOME STOCK THAT STEADILY DELIVERS)
(ABBV), (ABT), (AMGN), (BIIB)
Mad Hedge Biotech and Healthcare Letter
May 17, 2022
Fiat Lux
Featured Trade:
(A BIOTECH PIONEER WITH AN ENDURING LEGACY)
(AMGN), (AZN), (ABBV)
Mad Hedge Biotech and Healthcare Letter
May 19, 2022
Fiat Lux
Featured Trade:
(A RELIABLE STOCK THAT CAN WITHSTAND ANY GLOBAL SHOCKWAVE)
(JNJ), (PFE), (VTRS), (MRK), (OGN), (ABBV), (ABT), (NVO)
Investing is a long-term bet that requires patience and a strong risk appetite to enjoy eventual big wins.
In a world filled with uncertainties and gambles in the ever-evolving stock market trends, risk-averse investors are on the lookout for secure and stable options.
After all, who wouldn’t want to invest their hard-earned cash in a stock that can survive even the most intense macroeconomic shocks?
The name that easily fits these criteria in the biotechnology and healthcare sector is Johnson & Johnson (JNJ).
Reviewing JNJ’s five-year price movements from 2017 until 2022, a steady bullish trend of roughly 46% growth can be seen.
This trend has continued amid the slowdowns, with the stock delivering consistent growth and recovery despite serious dips.
In early 2020, when the COVID-19 outbreak wreaked havoc on the global economy, JNJ tanked along with other stocks. However, the company steadily showed signs of recovery mere weeks following the outbreak.
By 2021, JNJ managed to record a substantial increase of 11.4%. More importantly, it was able to sustain that trend throughout the year.
In March 2022, when the Ukraine-Russia crisis disrupted the economy, several businesses in the industry once again crashed due to supply chain and logistical issues. Amid these disruptions, JNJ still managed to stay on its growth path and develop contingencies to protect its assets.
Widely known as a global healthcare titan, JNJ holds a market capitalization that is hovering close to roughly half a trillion dollars.
As the parent company of the top-rated brands like Benadryl, Listerine, and Neutrogena, JNJ’s market operations are trifurcated into three main segments: MedTech, Pharmaceutical, and Consumer Health.
In November 2021, the company disclosed its plans to spin off its consumer arm into a separate publicly-traded company.
Similar to the move of Pfizer (PFE) with its Viatris (VTRS) spinoff and Merck (MRK) with Organon (OGN), JNJ’s goal is to reclassify a number of its international OTC drugs from its Consumer Health branch to form part of the pipeline of the new spinoff company.
Needless to say, the company’s notably diversified portfolio provides its with a competitive advantage in this highly volatile market.
Meanwhile, its other two segments are also contributing to JNJ’s growth. Its Pharmaceutical branch recorded a 6.3% increase in revenue in the first quarter of 2022, while its MedTech segment grew by 5.9%.
In total, JNJ’s sales for the first quarter of 2022 rose by 5% to reach $23.4 billion. This also boosted the company’s earnings per share to $2.67.
Riding the momentum of its strong first-quarter showing this year, JNJ once again demonstrated why it is hailed as a Dividend King.
The company hiked its quarterly dividend by 6.6% to $1.13 per share, making this the 60th consecutive annual dividend increase.
Considering that the company has been paying out dividends since 1963, this latest increase is indicative of how safe JNJ is for investors who want to multiply their cash while earning a regular income via dividends.
Moreover, JNJ is a clear frontrunner in the healthcare world and continues to work on innovative solutions to keep it ahead of its competitors.
Taking a closer look at the broader competitive field of healthcare industry players that are considered similarly sized, like AbbVie (ABBV), Abbott Laboratories (ABT), and Novo Nordisk (NVO), JNJ has the most significant market capitalization.
In this aspect, the company is the largest among its direct rivals. Therefore, it essentially reinforces its capacity to raise finances.
Given its perpetual bullish climb since its trade initiation back in 1982 and its addition to the Dow Jones Industrial Average (DJI), JNJ stock has been long known to hold strong credibility.
Actually, JNJ and Microsoft (MSFT) are the only two American companies with an AAA credit rating, a grade above the United States government itself.
This means that JNJ has such a strong sense of certainty in debt repayment that it holds a lower probability of default than the US government—an entity allowed by law to print money.
Overall, JNJ has proven to be an excellent option for risk-averse investors searching for growth and profitability.
It has strong financial fundamentals and a commanding market position, making it a highly stable and secure investment.
Moreover, its diverse portfolio minimizes the risk exposure of the company. All these make JNJ a great buy. Hence, it would be a wise move to buy the dip.
Mad Hedge Biotech and Healthcare Letter
April 21, 2022
Fiat Lux
Featured Trade:
LET’S GET READY TO RUMBLE)
(MRNA), (PFE), (BNTX), (AZN), (ABBV), (MRK), (BMY), (TAK), (GILD),
(SNY), (ALNY), (NVS), (REGN), (IONS), (GSK), (BIIB), (CRSP)
As we gradually reach the pinnacle of biotechnology formation, a war is brewing in the life sciences world.
This can be one of the most exciting times for medical innovations for patients. Meanwhile, investors can be picky when picking where to put their money.
Even up-and-coming scientists can seize the opportunities to lay the groundwork for their own dream organizations.
At the same time, those aspiring to climb the corporate ladder have better chances at becoming CEO without the need to slog through the biopharma sector and scramble for whatever opening is available.
However, as more and more companies launch practically every day, claiming to offer groundbreaking and revolutionary breakthroughs, it’s critical to keep in mind that not all biotechs will succeed.
Actually, the number of biotech companies has been steadily rising since 2015.
In that year, 177 firms were formed, with biotech birth rates breaching the 200-per-annum mark by 2017 and 2018.
Seeing as many more have emerged even during the pandemic, it looks like the biotech world won’t be slowing down anytime soon.
Even funding hasn’t been deterred by economic downturns.
From 2015 to 2018, the total funding for biotech companies averaged between $68.6 million to roughly $90.2 million.
After a bustling, record-breaking 2020, the bar leading to 2021 was expectedly high.
Surprisingly, 2021 blew those figures out of the water as private investors opted to raise the bar even higher.
It’s the type of climb that’s truly hard to believe.
Biotechs raised over $22 billion in private funds in 2020 following a sluggish 2019. In 2021, that figure rose to $28.5 billion.
The top earner in these funding rounds last year was China’s Abogen, which took $1 billion in private investors’ money across two rounds.
Abogen is an mRNA-centered firm that’s currently working on a COVID-19 vaccine.
What makes its product different and possibly better than Moderna (MRNA), Pfizer (PFE), BioNTech (BNTX), and AstraZeneca (AZN) is that it would be thermostable. That is, it could be used in areas without access to refrigeration.
Another big winner in 2021 is Massachusetts-based biotech ElevateBio, which aims to be a one-stop shop for cell and gene therapies.
The idea is to develop a technology that fuses its gene-editing platform, cell engineering structure, and manufacturing warehouse into one system to ease and accelerate the drug development process.
Although not entirely the same, this plan has similarities with the strategies of Big Pharma names like AbbVie (ABBV) and Merck (MRK).
Amid the growing number of biotechs, a key challenge is how to stand out among companies that target the same disease areas. This kind of competition could hamper innovation.
The clearest indicator of success would be receiving approval and being able to launch the products commercially.
Ultimately, the goals are to offer safe and effective treatments and provide value to their shareholders.
Unfortunately, the reality is only a handful of startups do make it all the way to the top.
The more feasible scenario is that bigger businesses would acquire these companies—and that seems to be the case these days.
Alongside the booming biotech formation rate are the increasingly aggressive biotech buyout deals.
We’ve seen this before.
It started in 2019, with Bristol Myers Squibb (BMY) buying Celgene, followed by AbbVie splurging on Allergan and Takeda (TAK) merging with Shire.
In 2020, AstraZeneca bought biotech superstar Alexion Pharmaceuticals while Gilead Sciences (GILD) snapped up Immunomedics.
Meanwhile, Sanofi (SNY) stacked its deck with the $3.2 billion acquisition of Translate Bio. As for Merck, this biopharma sneaked in a massive win with an $11.5 billion buyout of Acceleron.
For this year, several names have already been eyed by Big Pharmas.
There’s Alynlam Pharmaceuticals (ALNY), an RNA-centered company, which seems to be the target of both Novartis (NVS) and Regeneron (REGN).
Another RNA-focused company, Ionis Pharmaceuticals (IONS), appears to be a key target as well, with the likes of GlaxoSmithKline (GSK), Bayer, and even Biogen (BIIB) waiting for an opportunity to pounce.
After all, acquisitions form an integral lifeline of the biotech world. Huge businesses with the resources swoop up promising buyout candidates to bolster their own pipelines.
However, M&A isn’t the only option for biotechs. There’s also the path where they can seek companies with similar focus and consolidate to become larger and more competitive entities.
This has been the expected plan for CRISPR Therapeutics (CRSP) for a long time. Hence, it is no surprise if other biotechs with their own groundbreaking technologies decide to follow the same route.
Overall, the biotech industry is booming amid its recent struggles with the market.
The faster growth rate of companies can be attributed to more investors seeing the industry's potential and, of course, better access to technology and scientific advancement.
Moreover, the world has become more interested in the biotech world and what the industry can offer due to the pandemic.
COVID-19 has shone a light on this sector following the quick and effective results of the vaccines and treatments.
That is, people have finally caught on to the idea that there is an incredible opportunity in biotech.
While a correction is to be expected at some point, the critical thing to bear in mind is that great ideas will always generate funding no matter what.
