(ABBV) Archives

A Playbook For A Biotech Triple Crown

AbbVie (ABBV): A biotech stock that's been on my radar longer than most. If I could travel back to my UCLA biochem days, I'd tell young John to ditch the petri dishes and buy shares in this pharma giant. Why?

Because AbbVie isn't just another pharma play – it's a masterclass in diversification, innovation, and market-beating performance.

This is the stock that could turn a bright-eyed student into a savvy investor faster than you can say "immunology franchise."

In fact, if you've been paying attention to the market, you might have noticed that AbbVie's stock has been outperforming the broader U.S. market since mid-April, and for good reason.

This is a company that's been running at full throttle, posting some seriously impressive numbers in Q2 2024. We're talking $14.46 billion in revenue, a whopping 17.5% increase from the previous quarter and beating consensus estimates by a cool $430 million.

Earnings per share may have fallen just short of analysts' expectations, but they still climbed by a respectable 34 cents to $2.65.

But here's the thing: AbbVie's success isn't just a flash in the pan. This is a company with a diversified portfolio that's driving growth across multiple fronts.

I'm talking about their immunology, oncology, and neuroscience franchises, which together account for a staggering 75% of the company's total revenue.

Let's start with immunology. Now, I know what you're thinking - isn't that just Humira, AbbVie's blockbuster drug for Crohn's disease and ulcerative colitis? Well, yes and no.

While Humira has been facing some generic competition from the likes of Teva Pharmaceutical (TEVA), Pfizer (PFE), and Amgen (AMGN), resulting in a 30% year-over-year decline in global sales, AbbVie's got a couple of other tricks up its sleeve.

Enter Skyrizi and Rinvoq, two immunology drugs that are picking up the slack in a big way. Sales of these bad boys climbed 45% and 56%, respectively, in Q2 2024.

Skyrizi, in particular, has been an absolute beast, raking in $2.73 billion and growing 44.8% year-over-year. And with the FDA giving it the green light for moderate-to-severe ulcerative colitis in June 2024, the sky's the limit for this game-changer.

But AbbVie's not content to rest on its laurels. They're pushing the envelope with Rinvoq, a JAK inhibitor that's been approved for a wide range of indications and is showing some serious promise.

In Q2 2024, Rinvoq brought in $1.43 billion, a 30.8% quarter-over-quarter increase, thanks to strong demand in the U.S., excellent clinical trial results, and FDA approval for treating children with psoriatic arthritis and juvenile idiopathic arthritis.

And let's not forget about giant cell arteritis, a condition that AbbVie's been targeting with Rinvoq.

Recent trials have shown some impressive results, with 46% of adult patients taking Rinvoq 15 mg experiencing sustained remission, compared to just 29% of those on placebo.

No wonder AbbVie's been submitting applications left and right to get this drug approved for even more indications.

But it's not just immunology where AbbVie's making waves. Their oncology portfolio, bolstered by the acquisition of ImmunoGen in mid-February 2024, is also delivering the goods.

Sure, demand for Imbruvica may be declining due to newer BTK inhibitors from AstraZeneca (AZN), BeiGene (BGNE), and Eli Lilly (LLY), but Elahere, an antibody-drug conjugate for ovarian cancer, is quickly becoming a rising star.

In Q2 2024, Elahere sales jumped 65.4% quarter-over-quarter to $128 million, driven by increased marketing, growing awareness among physicians, and promising data from clinical trials.

Finally, let's not overlook AbbVie's neuroscience franchise, which generated a cool $2.16 billion in Q2 2024, a 14.7% year-over-year increase.

Headlining this portfolio are Qulipta and Ubrelvy for migraine treatment, and Vraylar for a range of psychiatric conditions.

Qulipta, specifically, has been a standout, with sales surging 56.3% year-over-year to $150 million, thanks to its convenient oral administration and long-term efficacy data.

Looking ahead, AbbVie's got even more irons in the fire. Their $8.7 billion acquisition of Cerevel Therapeutics (CERE) is set to close soon, bringing promising neuroscience candidates like emraclidine for schizophrenia and davapidon for Parkinson's into the fold.

With all these positive developments, it's no wonder AbbVie's feeling confident enough to raise its full-year adjusted EPS guidance to $10.71-$10.91, up from the previous range of $10.61-$10.81. Talk about a biochemistry experiment gone right!

So, there you have it. AbbVie: a healthcare powerhouse that's firing on all cylinders and poised for even greater success in the years to come. If only I could've shown this to my younger self back in those UCLA labs – he might've traded his test tubes for trading terminals a lot sooner.

Now, if you're ready to take a ride on this rocket ship, I suggest you buckle up and hang on tight. Because let me tell you, dissecting AbbVie's financial DNA has been more thrilling than any fracking adventure or hedge fund rodeo I've ever been on.

And if there's one thing I've learned in my years hopscotching from biochem labs to Wall Street, it's that the view from the top of a well-diversified, innovative pharma giant is always worth the climb. I suggest you buy the dip.

July 16, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
July 16, 2024
Fiat Lux

Featured Trade:

(SMALL GIANTS RISING)

(GMAB), (OPHLY), (VRTX), (INCY), (BIIB), (AHKSY), (ALNY), (ARGX), (BGNE), (MRNA), (NBIX), (BNTX), (IPSEY), (CTLT), (NVO), (LLY), (JNJ), (GILD), (ABBV), (MRK), (SNY), (BMY), (GSK)

Small Giants Rising

Biotech Letter

Remember when David took down Goliath? Well, history's repeating itself in the biotech arena, and this time, David's got deep pockets and a Ph.D.

Since April, I've been watching a trend on the so-called "next-generation" players in biotech and healthcare world. It reminds me of the massive changes I witnessed in Asian markets back in the '70s.

Over the past months, companies like Genmab (GMAB), Ono Pharmaceutical (OPHLY), Vertex (VRTX), Incyte (INCY), Biogen (BIIB), and Asahi Kasei (AHKSY) have been making waves that would impress even the most seasoned surfer. And these next-gen dealmakers aren't just dipping their toes in the M&A pool - they're doing cannonballs.

With cash reserves that would make Scrooge McDuck blush, these companies are overturning industry norms, already joining the prestigious $100 billion market cap club. At this celebration, the champagne flows freely.

So, what’s the play here?

With IPOs cooling down like day-old coffee, companies eyeing public debuts are now ripe targets for acquisition, more tempting than a juicy peach.

This fresh class of biotechs, unphased by the FTC's scrutiny that acts like kryptonite to pharma giants, are acting more like rocket fuel for these agile consolidators.

They slide through regulatory gaps faster than a greased pig at a county fair, grabbing six out of ten biopharma M&A deals in the second quarter alone. They’re not just taking a slice of the pie—they’re rewriting the recipe.

And if we're talking about firepower? These newcomers boast an average of $3.8 billion in pro forma adjusted cash, which isn't just walking-around money — that's "buy a small country" money.

But don't think for a second that this cash is just sitting pretty in their coffers. These upstarts are putting their money where their mouth is.

Take Incyte, for instance. They flexed their financial muscle with a $2 billion buyback in May 2024, sending a clear message to the market: "We're here to play, and we're playing to win."

And that's just the tip of the iceberg. The industry as a whole is lounging on a cool $1.5 trillion. That's enough liquidity to stretch the imagination — perhaps even to purchase a small planet. Mars, anyone? Elon might give us a discount.

But this financial might isn't just about buying power – it's about survival. As I said before, Big Pharma is teetering on a patent cliff that threatens to erode their revenue streams. To stay competitive, they're scrambling to replenish their pipelines, acquiring promising assets and gobbling up innovative technologies with the voracity of Pac-Man on steroids. And it's not just the usual suspects making moves.

This sense of urgency has created a fertile ground for an emerging cohort of aggressive dealmakers. Companies like Alnylam (ALNY), argenx (ARGX), BeiGene (BGNE), Moderna (MRNA), Neurocrine Biosciences (NBIX), BioNTech (BNTX), and Ipsen (IPSEY) are biting off more than the market expected them to chew, and they're coming to the table hungry.

And these companies aren't just nibbling around the edges. They're making bold moves, acquiring cutting-edge biotech firms with promising pipelines. We're talking oncology, epilepsy, kidney diseases, cardiovascular plays – it's like someone turned a medical textbook into a shopping catalog.

In fact, even the big boys are flexing their muscles.

Novo Holdings (NVO) dropped a jaw-dropping $16.5 billion on Catalent (CTLT). That's not even for a drug - it's for manufacturing. Talk about betting on the picks and shovels in this biotech gold rush.

Eli Lilly (LLY) just plunked down $3.2 billion on Morphic Therapeutic (MORF), betting big on inflammation, immunity, and oncology.

Johnson & Johnson's (JNJ) been on a shopping spree, too, snagging Numab's Yellow Jersey for $1.25 billion and Proteologix for $850 million. Both plays in inflammation and immunity - clearly, they've found their sweet spot.

Biogen's not twiddling its thumbs either, striking a deal with HI-Bio worth up to $1.8 billion.

Not to be outdone, Gilead (GILD) shook hands with CymaBay Therapeutics to the tune of $4.3 billion. Even AbbVie (ABBV), playing it cooler, still dropped a cool $250 million on Celsius.

Meanwhile, Merck's (MRK) set its sights on EyeBio for up to $3 billion, focusing on ophthalmology.

Sanofi (SNY), Bristol Myers Squibb (BMY), GSK (GSK) - they're all in, placing their chips on everything from rare diseases to generics to asthma. Clearly, the Big Pharma giants are also trying to keep up with this shift.

As the biotech field evolves, watching these underdogs will be like watching history in the making — where today's Davids become tomorrow's Goliaths. I suggest you keep a close eye on the names above. Adding them to your portfolio would mean you’re not just watching the giants rise — you’ll be a part of the story.

June 27, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 27, 2024
Fiat Lux

Featured Trade:

(THE BIOTECH LEATHERNECK THAT WON’T STAND DOWN)

(VRTX), (CRSP), (ABBV)

The Biotech Leatherneck That Won't Stand Down

Biotech Letter

Back in my Marine days, I remember being dropped in the middle of nowhere during a grueling field exercise. No map, no compass, just our wits and training to guide us back to base.

The odds were stacked against us, but we adapted, improvised, and overcame. Fast forward to roughly half a century, and I'm seeing the same spirit in an unlikely place - the biotechnology sector.

Vertex Pharmaceuticals (VRTX) has been executing maneuvers that would make any seasoned Marine proud. They move with the precision of a well-oiled M16 and the adaptability of a Force Recon team.

Their strategic acquisitions? As coordinated as an amphibious landing. That pipeline of theirs? Locked and loaded like a Marine fire team.

As I dive into Vertex's recent maneuvers, I can't help but see parallels to the strategies we used to employ. They're not just developing drugs – they're waging a full-scale assault on diseases that have long evaded defeat.

It's this Marine-like tenacity that's kept this $122 billion biotech on my radar, and why I think they've still got plenty of fight left in them.

Remember when I last wrote about Vertex in February? The stock was already hotter than a mess tent coffee pot then. Since that newsletter, it's climbed another 10%, leaving the S&P 500 in its dust like a young boot on a forced march.

And if you've been holding onto Vertex for the past decade? Well, pour yourself a whiskey and celebrate. You're sitting on a 545% return. That's not a typo, my friends. It has truly beaten the S&P 500 by over 300 points.

Now, I know what you're thinking. "John," you say, "hasn't this non-dividend payer run out of ammo after adding $20 billion to its market cap?" Well, let me tell you why I think Vertex still has enough firepower to make even a seasoned Gunny sit up and take notice.

So, here's the skinny on Vertex – they've got a knack for developing groundbreaking drugs that would make even our old field medics green with envy. They lock 'em down with patents tighter than a drill sergeant's schedule, and dominate niche markets like we used to dominate obstacle courses.

In Q1 2024, Vertex hauled in $2.69 billion in revenue, up 14% from last year. That's not just chump change – that's serious cabbage, even by Wall Street standards.

But here's where it gets interesting, and I mean more interesting than finding an unopened can of beer in your rucksack after a long hump.

Vertex isn't just sitting pretty. Their late-stage pipeline is packed tighter than a C-130 on deployment day, full of potential blockbusters that could change lives – and fatten our wallets.

Take Vanzacaftor, for instance. This cystic fibrosis drug is showing more promise than a boot camp graduate on family day. If it lives up to the hype, we could be looking at a new gold standard in CF treatment.

And then there's Suzetrigine. Now, this one's got me more excited than a three-day pass in Vegas. It's a non-opioid painkiller, and with the opioid crisis still raging harder than a Category 5 hurricane, a safe, effective alternative could be a game-changer.

Early data looks promising, and Vertex is pushing to finish its rolling submission by Q2 2024. As for its potential market? Well, that's bigger than the chow line on Thanksgiving.

We're talking about 80 million patients prescribed pain meds in the U.S. every year, covering one billion calendar days of treatment.

If Suzetrigine can grab even a slice of that pie, we're looking at another potential blockbuster that could make AbbVie’s (ABBV) top-selling Humira look like small potatoes.

But Vertex isn't content with just dominating CF and pain management. They're also pushing into new territories.

In April, they dropped $4.9 billion to snap up Alpine Immune Sciences, grabbing the rights to Povetacicept. This mid-stage drug targets IgA Nephropathy, which affects about 130,000 people in the U.S. That's a smart flanking maneuver if I ever saw one.

On top of all these, though, I think the biotech’s real showstopper might be Casgevy, Vertex's gene therapy for sickle cell disease and beta-thalassemia.

Developed with CRISPR Therapeutics (CRSP), this cutting-edge treatment uses CRISPR gene-editing technology.

It's like having a sniper rifle when everyone else is still using muskets. Vertex sees this as a potential multi-billion dollar opportunity, and I'm inclined to agree. It could be bigger than the Pentagon's budget – well, almost.

Look, I get it. Vertex doesn't pay a dividend, which might turn off some of you income-focused folks faster than a week-old MRE. But for those willing to bet on growth, this biotech juggernaut still has plenty of fight left in it.

With a killer pipeline spanning CF, pain management, kidney health, and even type 1 diabetes, Vertex is primed to keep growing like kudzu in August.

Their solid portfolio and promising drug candidates make it a compelling investment, and those revenue and EPS projections? They're music to my ears – sweeter than Taps at the end of a long day.

Here's my take: With a fair stock price target of $566, Vertex still has significant upside potential. I think it’s a biotech powerhouse that deserves a spot on your watchlist – right next to your old service medals.

June 11, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 11, 2024
Fiat Lux

Featured Trade:

(THE CAPITAL CURE)

(ABBV), (MRK), (PFE), (RHHBY), (JNJ), (AZN), (GSK), (MRNA), (BNTX), (CRSP), (NTLA), (BEAM), (TPTX), (ZNTL), (MRTX), (BPMC), (MGNX), (TYRA), (SPRT), (VRTX), (FOLD), (RARE), (CRBU)

The Capital Cure

Biotech Letter

Imagine you're the CEO of a major pharmaceutical company. You've got blockbuster drugs that are raking in billions, a cushy corner office, and a corporate jet at your disposal. Life is good.

But then, you look at the calendar and realize that your patents are about to expire. Suddenly, that jet feels more like a crop duster, and your corner office starts to feel like a broom closet.

That's the reality facing Big Pharma right now. These pharma big shots are sweating bullets over losing their golden geese like AbbVie's (ABBV) Humira and Merck's (MRK) Keytruda.

That’s roughly $300 billion in products about to get kicked to the curb.

But these guys didn't get to the top by sitting on their hands. They've got a war chest of $1 trillion, and they're not afraid to use it.

Major pharmaceutical giants like Pfizer (PFE), Roche (RHHBY), Johnson & Johnson (JNJ), AstraZeneca (AZN), and GlaxoSmithKline (GSK) are about to go on the mother of all shopping sprees.

Why the rush? Because they're staring down the barrel of a patent cliff that's going to make the Grand Canyon look like a pothole.

We're talking $198 billion worth of branded drugs going off the patent cliff between 2021 and 2025. That's a gut-wrenching 56% jump from the last five years.

But don't think for a second that they're just going to sit back and watch their profits go up in smoke. No sir, they're on the hunt for the next big thing, and they've got their sights set on some juicy targets – and biotech is at the top of their list.

Leading the biotech charge are mRNA pioneers Moderna (MRNA) and BioNTech (BNTX), each sitting on a gold mine of potential blockbusters taking on everything from flu to cancer vaccines.

Underdogs like CRISPR (CRSP) biotech stars Intellia (NTLA) and Beam Therapeutics (BEAM) are also squarely in Big Pharma's acquisition crosshairs for their cutting-edge work in genetic disease treatments.

But beyond the headliners, don't overlook the sleeper hits that could catalyze the next big boom.

Oncology, in particular, is a prime hunting ground, accounting for 37% of pharma M&A deal value in 2023 as the $392 billion global cancer drug market continues to boom.

Companies like Turning Point Therapeutics (TPTX) and Zentalis Pharmaceuticals (ZNTL), with their promising targeted therapies for various solid tumors, are particularly attractive prospects.

Mirati Therapeutics (MRTX), focused on KRAS inhibitors, and Blueprint Medicines (BPMC), specializing in precision therapies, have also caught the eye of big pharma with their innovative approaches.

Additionally, companies with late-stage assets like MacroGenics (MGNX), Mereo BioPharma (MREO), and Tyra Biosciences (TYRA) could offer promising near-term revenue opportunities for acquiring companies looking to bolster their oncology portfolios.

Close behind are rare disease treatments, snagging 16% of new drug approvals and 9 of the top 100 deals last year in this $262 billion market ripe for more growth.

This lucrative sector has captivated pharma giants, who see potential in companies like Sarepta Therapeutics (SRPT) and Vertex Pharmaceuticals (VRTX), leaders in rare disease therapies with strong financial performance and consistent growth.

Aside from these, smaller biotechs like Amicus Therapeutics (FOLD) and Ultragenyx Pharmaceutical (RARE), focused on developing innovative therapies for a range of rare diseases, are attracting attention for their potential to address unmet medical needs and deliver substantial returns on investment.

But the real wild card everyone wants a piece of is cell and gene therapies. This medical Wild West is projected to explode to $66.8 billion by 2030, with the FDA already greenlighting 6 cutting-edge therapies like next-gen CAR-T treatments from Caribou Biosciences (CRBU) in 2023 alone.

Notably, the buying frenzy is very much already underway. In fact, 2023 saw the biggest biotech M&A spree in a decade, with a staggering $122.2 billion changing hands as the FDA approved 50% more new therapies.

Pharma mega-mergers also hit $135.5 billion as firms raced to reload pipelines.

Interestingly, these deals are only the tip of the iceberg. As Wall Street predicts, with record-smashing deals, sky-high demand, and new approvals surging, "biotech's got plenty of reasons to be cautiously optimistic."

Especially if interest rates finally cooperate, throwing gasoline on the M&A bonfire and making biotech the belle of the ball as soon as late 2024.

So keep your eyes peeled and your powder dry. I suggest you add these innovative biotech names to your watchlist, and you might just discover the next blockbuster drug or breakthrough therapy that could reshape medicine – and deliver explosive returns in the process.

April 30, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
April 30, 2024
Fiat Lux

Featured Trade:

(HITTING CTRL+ALT+DELETE ON DRUG R&D)

(DNA), (GOOGL), (JNJ), (ILMN), (JNJ), (ALTO), (GROIV)

April 25, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
April 25, 2024
Fiat Lux

Featured Trade:

(RACING TO SWAP A GOLDEN GOOSE FOR A NEW FLOCK)

(MRK), (NVO), (LLY), (JNJ), (ABBV), (PFE)

Racing To Swap A Golden Goose For A New Flock

Biotech Letter

Big pharma usually makes investors smile - fat profits, juicy dividends, and stocks that crush the market.

Lately, though, some of these giants are looking more like grumpy old men. Sure, there are exceptions like Novo Nordisk (NVO) and Eli Lilly (LLY) printing money with their obesity blockbusters.

But what about the rest? Even with Washington breathing down their necks, patent cliffs, and a shaky economy, you'd think these drug titans wouldn't be lagging the market, right? Wrong.

Check out the "Big Eight" top dogs - Johnson & Johnson (JNJ), Merck (MRK), AbbVie (ABBV), Pfizer (PFE), and the rest. Only a few have really delivered the goods in the past five years. AbbVie and Merck have been alright, but the others? They make me want to take a nap.

Now, I'm not saying give up on pharma entirely - there's still money to be made. But you've got to do your homework. Today, let's take a look at Merck.

They raked in $60.1 billion in 2023, making them a heavy hitter. But without their COVID cash machine Lagevrio, growth is...less impressive. Still up, but not setting the world on fire.

The real story is spending - Merck went on a spree, burning through cash on R&D. Why? Their golden goose Keytruda, that $25 billion cancer blockbuster, is facing generic competition soon.

Merck isn't just sitting around waiting for the Keytruda patent cliff either. They're furiously throwing money at new drugs, acquisitions, cancer, heart disease, immune disorders - hoping to find the next Keytruda before the current one fades away. It's like an aging rockstar desperately trying to write another big hit.

But let's be real, finding billion-dollar breakthroughs is a gamble, even for giants like Merck. They've got potential in the pipeline for sure, but it's a long road from the lab to pharmacy shelves. Plenty of drugs flame out along the way.

Looking back, 2023 wasn't a victory parade for Merck. It was more like a mad dash to spend their way out of the looming Keytruda patent cliff. But hey, sometimes you've gotta break a few eggs to make an omelet, right?

Speaking of potential winners, let's talk about those newly approved lung drugs – sotatercept could be a major player.

Merck's vaccine department is looking strong too, with potential blockbusters targeting lung infections and RSV in the pipeline.

Of course, it hasn't all been smooth sailing. That new cough drug, gefapixant, getting rejected by the FDA again? Merck took a hit on that. Still, this biotech’s not giving up. This is a company buying time to build up a whole new arsenal, and the Keytruda cliff might hurt, but they'll come out swinging.

So, let’s forget about that 2023 earnings dip. Merck's forecasting a serious jump in 2024 profits as they dial back the crazy spending. Yes, their balance sheet took a hit, but look at what they're building. They're hunting big deals to bolster that pipeline, and that's a good thing in my book.

Speaking of big moves, Merck's been on a shopping spree. Wall Street might get nervous if they drop another bombshell, but I trust their judgment. These aren't just random buys; this is how they protect their future cash flows. Besides, any short-term drama from a big deal could be a sweet buying opportunity.

And while Merck’s still figuring out which one could be the next big thing, the true star of the show, until that patent cliff arrives, is still Keytruda.

That beast is still growing and could keep going strong for years, especially in early-stage treatments. Plus, that new subcutaneous version of this blockbuster treatment? Talk about extending the gravy train well past the generic competition.

Let's also check out the other horses in this race: sotatercept's early sales numbers, a potential FDA approval for that HER2 drug, the saga of gefapixant's third shot (or not), and the cash potential of V116 and Welireg. Not to mention, juicy updates on that Moderna (MRNA) partnership…Merck’s next months could be packed with surprises.

As for this company’s dividend? Decent track record, but don't expect fireworks after the recent hike. As for buybacks, Merck seems to have...other priorities right now. Those profits are pouring straight into the growth pipeline.

The bottom line: While some of Big Pharma looks pale lately, Merck is still bringing it, share price gains and all. Sure, that gefapixant rejection stings. But Keytruda keeps roaring, and Merck's pipeline is buzzing with potential. I'm not sweating earnings.

Merck's got contingencies lined up for the Keytruda patent apocalypse - new drugs, deals, maybe even extending Keytruda itself. They're playing for the long game here. I suggest you buy the dip.

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