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Global Market Comments
January 20, 2023
Fiat Lux
Featured Trade:
(WILL SYNBIO SAVE OR DESTROY THE WORLD?),
(XLV), (XPH), (XBI), (IMB), (GOOG), (AAPL), (CSCO), (BIIB)
CLICK HERE to download today's position sheet.
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 $41.15 billion, has seen its share price fluctuate dramatically due to concerns over its Alzheimer’s drug.
The company withstood significant volatility in 2020, experiencing over 40% price swings in both directions. This is primarily because of the ups and downs of its Aducanumab trials, which heavily swayed the opinion of market participants.
Moving forward, I expect Biogen to have a massive year this 2021.
That’s the upside of this stock.
Even at its midpoint and if major treatments like Aducanumab fail to gain approval, I still anticipate a respectable year for this biotechnology company. That kind of security is worth paying attention to, and it can also signal its capacity to drive strong rewards.
Biogen has been shunned in the past year due to its volatility.
After all, who would want to invest in an unpredictable drug like Aducanumab when there are major stock indices and newcomers like Moderna (MRNA) making record-breaking highs?
For investors willing to look beneath the surface though, Biogen offers so much more than what meets the eye.
Global Market Comments
December 30, 2020
Fiat Lux
Featured Trade:
(WILL SYNBIO SAVE OR DESTROY THE WORLD?),
(XLV), (XPH), (XBI), (IMB), (GOOG), (AAPL), (CSCO), (BIIB)
Global Market Comments
November 13, 2020
Fiat Lux
Featured Trade:
(NOVEMBER 11 BIWEEKLY STRATEGY WEBINAR Q&A),
(AMZN), (TSLA), (FB), (AAPL), (ROKU), (UUP), (ITB), (TLT), (TBT), (FXI), (SPY), (BIDU), (TCTZF), ($NATGAS), (DIS) (AMD), (IP), (BIIB), (VRTX)
Global Market Comments
June 19, 2020
Fiat Lux
Featured Trade:
(JUNE 17 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (AAPL), (FXE), (FXA), (BA), (UAL), (AAPL), (MSFT), (BIIB), (PFE), (OXY), (SPCE), (WMT), (CSCO), (TGT)
The global economy has been dealt a massive blow because of the coronavirus disease (COVID-19), which has now spread across 181 countries -- and it’s showing no signs of stopping anytime soon.
The recent situation report reveals that COVID-19 has caused over 53,975 deaths and more than 1,030,000 confirmed cases worldwide.
To add to that, the International Monetary Fund recently disclosed their concerns that the pandemic could push the world economy on the brink of a depression. What’s worse is that the fear brought by this possibility is already mirrored by major stock indexes across the globe.
Amid the economic turmoil, the Trump administration came up with an emergency package worth $2 trillion in an effort to help companies particularly in the aviation and healthcare sectors.
However, that won’t be enough in the long run, not even by a little bit.
This is why several biotechnology companies have been scrambling to find a vaccine and a treatment for this quickly spreading disease.
In March, Biogen (BIIB) announced its decision to team up with Vir Biotechnology (VIR) to join the race in looking for a cure for COVID-19.
Due to the urgency of the situation, both companies took an unusual move to simply start working together before even finalizing the details of the agreement. What they only have at the moment is a signed letter of intent.
What we know so far is that Biogen will take charge of the cell line and process development along with the manufacturing of Vir’s monoclonal antibodies.
Vir is a biotech company developing treatment for infectious diseases; its partnership with Biogen will help the smaller biotech to manufacture its COVID-19 drug candidate on a bigger scale. It’s also interesting that the company’s current CEO served as Biogen’s CEO up until 2016.
Prior to this deal, Vir has long been regarded as a biotech company with a strong financial position.
In the third quarter of 2019, the company raked in $320.2 million in cash, cash equivalents, as well as short-term investments. Vir’s balance sheet shows roughly $22.5 million in terms of long-term liabilities. Its recorded $1.4 million in revenue for the quarter.
In terms of its COVID-19 efforts, the company started working on a potential cure in January. Basically, Vir is looking into its library of antibodies to find which one could be used to neutralize the novel coronavirus.
This is actually promising since the company already succeeded in utilizing the same technique for Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS), which are also caused by coronaviruses.
Apart from its COVID-19 efforts, Vir’s pipeline includes a number of potential vaccines and treatments for tuberculosis, HIV, and Hepatitis B Virus (HBV).
If you’re planning to buy this stock, make sure to do so before its lock-up period expires on April 8 to maximize your money’s worth.
Between the two companies though, Biogen has been gaining more attention as a more attractive investment since it’s a blue-chip stock selling for cheap these days.
Biogen is a frontrunner in the multiple sclerosis and spinal muscular atrophy space. The giant biotech is also a leader in the development and manufacturing of biosimilars, which are cheaper versions of biologically based therapies.
Its pipeline also has a number of high-value clinical assets particularly for hard-to-treat neurodegenerative diseases like Alzheimer’s and Parkinson’s.
Its acquisition of Nightstar Therapeutics and recent partnership with Sangamo Therapeutics (SGMO) have also transformed Biogen into one of the red-hot players in the emerging gene therapy market.
Biogen is also sitting on $4.5 billion in cash with a relatively reasonable debt-to-equity ratio of 48.2.
Hence, this giant biotech has no issues paying a dividend and can also be considered more or less immune to the threats of COVID-19. This makes it a stock capable of weathering the ongoing pandemic and even the resulting economic crisis.
Looking at the pipeline of the company, Biogen currently has over 25 drug candidates. Five are already in Phase 3. Meanwhile, its win against Mylan’s (MYL) for its blockbuster Tecfidera ensures that Biogen won’t face competition for this moneymaker until 2028.
However, all eyes are focused on its Alzheimer’s drug Aducanumab.
Since the company’s announcement of this treatment, investors have been on a rollercoaster ride with Biogen withdrawing and eventually going back in.
If it gains approval, Biogen shares will definitely soar. If the drug gets rejected, then the stock will suffer from short-term losses.
According to the Alzheimer’s Association, there are 5.8 million people afflicted by the disease in the United States alone. Needless to say, this represents a lucrative market for Biogen.
With a healthy balance sheet overall and a steady near-term outlook, Biogen is an attractive stock for bargain hunters looking to add a pretty cheap large biotech stock in their portfolio.
The indiscriminate wave of selling brought about by the pandemic has clearly opened a once-in-a-lifetime opportunity, particularly for patient investors. The fact that Biogen is part of Buffett’s own portfolio doesn’t hurt its case either.
Global Market Comments
December 30, 2019
Fiat Lux
Featured Trade:
(WILL SYNBIO SAVE OR DESTROY THE WORLD?),
(XLV), (XPH), (XBI), (IMB), (GOOG), (AAPL), (CSCO), (BIIB)
Global Market Comments
October 28, 2019
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or DON’T FIGHT THE FED),
(BIIB), (IBB), (TSLA), (VIX), (BA), (AMZN), (AAPL), (MSFT), (GM)
Don’t fight the Fed.
That was the overwhelming message of the market last week as it ground up to a new intraday all-time high. The economy may be going to hell in a handbasket. But as long as the Fed keeps lowering interest rates, stocks will go up, kicking and screaming all the way. It’s that simple.
America’s central bank will get its next chance to cut rates on Wednesday at 2:00 PM from the current overnight rate of 2.00%.
The big question is: Will the curse of the Fed continue? For the last two times the Fed lowered interest rates, substantial stock market selloffs ensued, the last one reaching a 7.5% haircut. We will know shortly.
The Mad Hedge Lake Tahoe Conference held last weekend was a blowout success, with a great time had by all. The weather couldn’t have been more perfect, with the lake waters calm and crystal clear. A day of market insights were delivered by me and Mad Hedge Technology Letter author Arthur Henry.
The only drawback was that several guests were prevented from going home by mandatory evacuations of several Bay Area cities and the closure of Interstate 80 going back to San Francisco. A handful (including me), had no electric power to return to when they got home.
I’ll share with you the most disturbing chart of the entire day showing the S&P 500 (SPY) has been grinding up to new highs, earnings forecasts have been absolutely falling off a cliff. Clearly, with the Volatility Index (VIX) back down to the lowly $12 handle, this is a market that is cruising for a bruising….someday.
Brexit failed again, taking the quagmire into its fourth year. An EC deal is postponed until January 31, but they’re really not interested at all. British pounds collapsing, creating a new “RISK OFF” leg worldwide. Prime minister Johnson has lost 5 consecutive parliamentary votes, an all-time record. When will he get the message?
US Capital Investment has ground to a halt, with business fixed investment down 1% YOY. No one knows where to put their money, inside the US or not, so they're doing nothing until it is sorted out. Call me when its over.
Biogen (BIIB) exploded to the upside on its FDA application for its new Alzheimer’s drug. Written off for dead six months ago, the company secretly kept working on Aducanumab until today’s blockbuster announcement. The drug reverses amyloid plaques thought responsible for Alzheimer’s. The stock is up an incredible 38% and has even dragged up the biotech ETF (IBB) 3%. Buy (BIIB) on dips.
Boeing soared on accelerated production timeline for 2020. Good thing I bought it just recently. The stock had been severely oversold on a $45 dive in two days. Buy (BA) on the dips.
The trade war is back in business with the Chinese demanding a total end to tariffs before any big ag buys. The rumors knocked stocks back on their heels. The Middle Kingdom also takes issue with recent Pence comments about basketball. Trump is definitely cornered. The trade war pain has gone global, with Europe taking the biggest hit. Some 40% of Germany’s GDP comes from exports. Growth will be on the skids for the next two years, even if a deal is done tomorrow.
Tesla shocked, bringing in a profit for only the third time in company history, and causing the stock to soar $55. The 100,000-unit production target within yearend looks within reach. Most importantly, they opened up a new supercharger station in Incline Village, Nevada! Tesla is now America’s most valuable car maker, beating (GM). The ideological Exxon-financed shorts have been destroyed once and for all. Buy (TSLA) on dips. There’s a ten bagger in this one.
Amazon put out a gloomy Christmas forecast on the back of a disappointing earnings report, crushing the shares by 7%. Looks like the trade war might cause a recession next year. Q3 revenues were great, up 24% to an eye-popping $70 billion. Good thing I took profits on the last option expiration. Poor Jeff Bezos, the abandoned son of an alcoholic circus clown, dropped $7 billion in net worth on Thursday. Buy (AMZN) on the dips.
The safest stock in the market, Microsoft, says it’s all about the cloud. Azure revenues grew a stunning 59% in Q3. (MSFT) is now up 37% on the year. Keep buying every dip, if we ever get another one.
Apple stock soared to new all-time high, taking the market cap just short of $1.1 trillion. iPhones are now less than 50% of total sales. The company is firing on all cylinders. My target is $200. Buy (AAPL) on dips.
Existing Home Sales dropped, down 2.2% in September to 5.38 million units. It’s shocking given the incredibly low level of interest rates. A shortage of supply?
This was a week for the Mad Hedge Trader Alert Service to stay level at an all-time high. With only one position left in Boeing (BA), not much else was going to happen.
My Global Trading Dispatch reached new pinnacle of +349.47% for the past ten years and my 2019 year-to-date accelerated to +48.42%. The notoriously volatile month of October stands at a blockbuster +11.91%. My ten-year average annualized profit held steady at +35.24%.
With my Mad Hedge Market Timing Index sitting around the neutral 62 level, it is too close to neutral to do anything dramatic.
The coming week is pretty non eventful of the data front. Maybe the stock market will be non-eventful as well.
On Monday, October 28 at 8:30 AM, the September Chicago Fed National Activity Index is published. Alphabet (GOOGL), and AT&T (T) report.
On Tuesday, October 29 at 9:00 AM, we get a new S&P Case Shiller National Home Price Index for August. Amgen (AMGN) and Pfizer (P) report.
On Wednesday, October 30, at 8:30 AM, the first read on US Q3 GDP is announced. At 10:30 AM, EIA Energy Stocks are published. Then at 2:00 PM, we obtain the FOMC interest rate decision. Apple (AAPL) and Facebook (FB) report.
On Thursday, October 31 at 8:30 AM, Weekly Jobless Claims are out. US Steel (X) reports.
On Friday, November 1 at 8:30 AM, the October Nonfarm Payroll Report is released. AbbVie (ABBV) and ExxonMobile (XOM) report.
The Baker Hughes Rig Count follows at 2:00 PM.
As for me, I’ll be driving back home from Lake Tahoe. I wonder if I’ll make it.
Good luck and good trading.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
