Mad Hedge Biotech and Healthcare Letter
November 14, 2023
Fiat Lux
Featured Trade:
(REWRITING BIOPHARMA’S TRADITIONAL SCRIPT)
(AZN), (JNJ), (BMY), (NVO)
Posts
In the high-stakes game of pharmaceutical innovation, AstraZeneca (AZN) isn't just playing to win; it's rewriting the rulebook.
A century-old company, born in the quiet labs of 1913 Sweden, AstraZeneca has become a linchpin in today’s cutting-edge medical advances. This isn't merely a story of corporate survival; it's a journey of transformation, emblematic of how old-world tenacity meets new-world innovation.
As we navigate the intricate world of biotechnology and healthcare, where even giants like Johnson & Johnson (JNJ) and Bristol Myers Squibb (BMY) wobble despite outperforming estimates, AstraZeneca emerges as a study in strategic agility.
Picture this: a company whose shares have seen a 5.7% dip this year, yet it stands as a beacon of opportunity for the discerning investor.
Trading at 15.6 times expected earnings over the next 12 months, it beckons with a valuation that whispers promise, floating below its five-year average.
Needless to say, these aren’t only financial figures but signposts pointing towards a rare investment opportunity in a volatile marketplace.
Let’s delve into the heart of AstraZeneca’s financial anatomy.
Twelve medicines in its arsenal are each marching towards the $1 billion revenue mark this 2023. Tagrisso, its flagship drug, contributes a mere 13.1% to its first-half revenue, showcasing a diversified portfolio that's resilient and well-balanced.
However, innovation isn't without its hurdles.
AstraZeneca faced a 16% decline in Soliris revenue due to patient transitions to newer treatments.
Here lies a lesson in the pursuit of progress – commitment to innovation and affordability can sometimes be a double-edged sword, affecting short-term gains but setting the stage for long-term sustainability. Still, AstraZeneca isn’t one to dwell on its losses for long.
Now, let's turn the page to AstraZeneca's audacious new chapter: entering the fiercely competitive arena of weight-loss medication.
Through a licensing agreement with China’s Eccogene, it's poised to develop an oral medication in the same class as Novo Nordisk’s (NVO) Wegovy drug.
But, the key factor that distinguishes AstraZeneca’s efforts is the pricing, which the company aims to be roughly half the current cost today.
To put things in perspective, Wegovy is priced at $1,349.02 per package. This figure unfolds into a weekly cost of $269.80. When extended over the span of a year, the drug becomes a more substantial financial commitment at $16,188.24.
Notably, the success of Wegovy has catalyzed Novo Nordisk's shares to soar by almost 50% this year.
Given the demand and AstraZeneca’s plan to adjust the price point, this is more than a simple business move for AstraZeneca; it's a venture that could redefine the accessibility of treatments for conditions like diabetes and obesity, impacting over 1 billion people globally.
In the crucible of the pandemic, AstraZeneca partnered with Oxford University to forge a path in the global health crisis, delivering over 3.5 billion doses of a COVID-19 vaccine worldwide.
Looking ahead, AstraZeneca’s leaders view obesity as another pandemic, signaling a strategic shift that melds business acumen with a commitment to global health.
Meanwhile, the latest earnings report from AstraZeneca is proof of its resilient business model.
Amid a 5.7% dip in its shares, the company's outlook is bullish, with an expectation of a low-teens percentage increase in total revenue excluding COVID-19 drugs.
This projection, backed by a 6% year-over-year revenue growth to $22.3 billion and an adjusted core EPS increase of 13% to $4.07, isn't only impressive; it's a narrative of sustained growth amidst adversity.
In conclusion, AstraZeneca's journey isn’t confined to financial returns; it's about being part of a narrative that’s shaping the future of healthcare innovation. I recommend you buy the dip.
Mad Hedge Biotech and Healthcare Letter
October 17, 2023
Fiat Lux
Featured Trade:
(AN EXCELLENT BLUEPRINT FOR SUCCESS)
(AMGN), (ABBV), (BMY)
Dividends, the consistent source of passive income, have long anchored many investment portfolios. For stock market investors, particularly those with an eye on the biotechnology and healthcare sector, dividends offer both stability and potential growth.
However, the landscape of dividends is not without its pitfalls. A significant concern for investors is when a company decides to cut or suspend these payouts. So, how can one navigate this challenge? The key is to pinpoint corporations that not only offer dividends but are also poised for sustained growth.
This brings us to a prime example: Amgen (AMGN).
Amgen, in recent times, has grappled with challenges that are not uncommon in the pharmaceutical world. The competitive landscape has chipped away at the market share of some of its flagship drugs, leading to a stagnation in revenue growth.
New therapies, like the asthma treatment Tezspire, have received approval but have yet to be the sales catalysts the company might have hoped for. However, it's crucial to understand that in the pharmaceutical industry, stagnation is not a death sentence but a call to innovate and adapt.
Recognizing the need for strategic growth, Amgen unveiled its plans to acquire Horizon Therapeutics for $28.3 billion in cash.
Horizon, specializing in rare autoimmune diseases, offers a rich pipeline of over 20 programs and an array of approved products. This move is not just an expansion; it's a strategic enhancement of Amgen's portfolio.
After some initial regulatory challenges, the acquisition was sealed on October 6, 2023, at $116.50 per share in cash, amounting to an equity value of $27.8 billion.
Now, let's delve into the numbers. Horizon reported a revenue of $3.6 billion for the year ending June 30, 2023, and an operating income of $513 million. When we juxtapose these figures against Amgen's performance, projections suggest that Horizon could amplify Amgen's annual revenue by a notable 12% to 14%.
As of October 9, 2023, Amgen's equity value stood at approximately $143 billion, translating to an equity value to an annual revenue ratio of 5.3x. In comparison, Horizon's ratio is 7.9x.
For the discerning investor, these figures hint at Amgen's belief in Horizon's potential to be a significant revenue generator.
But Amgen's story doesn't end with Horizon. The company's resilience is evident in its global strategies.
The inclusion of Repatha on China’s National Reimbursement Drug List as of January 1, 2022, bore fruit, with sales jumping from $388 million in the first quarter of this year to $424 million by the second quarter.
Even drugs like Enbrel and XGEVA, which faced concerns about increased competition, have shown promising sales trajectories. By the second quarter of 2023, Amgen's total product sales touched $6,683 million, a 14% leap from the previous quarter.
With a global footprint and encouraging data for drugs like Tarlatamab and LUMAKRAS, Amgen's revenue projections of $26.6 billion to $27.4 billion for 2023 seem well within reach.
Diversification is another feather in Amgen's cap. Beyond acquisitions, the company is nurturing a robust pipeline with numerous programs in development.
Venturing into the biosimilar market, Amgen is crafting alternatives to blockbuster drugs to compete with the more expensive options offered by the likes of Bristol Myers Squibb (BMY) and AbbVie (ABBV). In an era where affordable healthcare is not just a demand but a necessity, this strategy could further cement Amgen's position in the market.
In the intricate world of biotech investing, adaptability is the rhythm, and forward-thinking is the step. Challenges, while inevitable, are also opportunities in disguise. Strategic decisions, exemplified by Amgen's acquisition of Horizon, can chart the path for sustained growth.
For investors, the numbers are compelling. A dividend growth of 61% over five years, a competitive yield of 3.26%, and a forward P/E ratio of 14.3 paint a picture of stability and promise.
Ultimately, Amgen's journey in the biotech sector underscores the significance of adaptability, innovation, and strategic growth. In an industry marked by rapid changes and high stakes, the company emerges as a symbol of resilience.
For investors with an eye on biotechnology and healthcare, Amgen offers not just dividends but a vision of sustained growth and stability, making it an investment worth considering. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
September 19, 2023
Fiat Lux
Featured Trade:
(A SHOT AT HOPE)
(MRNA), (IMTX), (MRK), (PFE), (BMY), (GH), (ILMN), (NVS), (RHHBY), (BGNE), (AZN)
In a quaint Boston lab, as the first rays of dawn broke, a team of scientists, led by Moderna (MRNA), embarked on a mission. Their goal? To craft a solution to one of humanity's most persistent adversaries: cancer.
The grim reality remains that cancer is a leading cause of death in the United States. The statistics are daunting, with over 1.9 million new cases anticipated in 2023 and a projected death toll exceeding 600,000. The financial implications mirror this gravity, with costs expected to soar from $156 billion in 2018 to a staggering $246 billion by 2030.
As the world watched with bated breath, Moderna, already a household name for its COVID-19 vaccine, was silently weaving a narrative that could redefine the future of oncology.
Needless to say, the biotechnology sector, a realm of ceaseless innovation, has been abuzz with Moderna's latest venture. Earlier this month, the biotech announced its agreement with the German drug developer Immatics (IMTX) to develop cancer vaccines and therapies. As part of the deal, Moderna will pay $120 million in cash and will also make additional milestone payments.
This collaboration is not just about the financials; it's a beacon of hope for millions.
The partnership is set to merge Moderna's mRNA technology with Immatics’s T-cell receptor platform, focusing on various therapeutic modalities such as bispecifics, cell therapies, and cancer vaccines. Their combined research aims to leverage mRNA technology for in vivo expression of Immatics's half-life extended TCR bispecifics targeting cancer-specific HLA-presented peptides, among other innovative approaches.
With an upfront investment of $120 million, Moderna has made it clear: they're in it to win it. And the stakes? Potentially life-changing cancer vaccines.
However, this isn’t Moderna’s first foray into the realm of cancer treatments.
Building on the momentum of the technology of its highly potent COVID-19 shots, Moderna announced a partnership with Merck (MRK) earlier this year, combining their efforts to come up with treatments that can drastically reduce the spread of skin cancer. By leveraging Merck's Keytruda with its own innovative vaccine, Moderna has showcased the potential of such collaborations in advancing cancer treatment.
After all, the global community oncology services market is not just growing; it's clearly thriving.
From $47.95 billion in 2022 to a projected $53.79 billion in 2023, the numbers speak for themselves. By 2027, this figure is set to skyrocket to $81.33 billion. Such exponential growth underscores the immense potential and critical importance of advancements in oncology.
Yet, as expected, Moderna isn't the only player on the field.
Giants like Novartis (NVS) and Roche (RHHBY) have also thrown their hats in the ring, collaborating with known international cancer organizations to democratize access to cancer medicines. Among the myriad of promising stocks these days, though, Moderna, China’s BeiGene, Ltd. (BGNE), and the UK’s AstraZeneca PLC (AZN) shine the brightest.
Other notable contributors to the fight against cancer include Bristol Myers Squibb (BMY), Guardant Health (GH), Illumina (ILMN), and Pfizer (PFE). Their diverse portfolios and relentless pursuit of innovation are set to shape the future of oncology.
But as the curtains draw on this narrative, the spotlight remains firmly on Moderna. Their success with the COVID-19 vaccine has already etched their name in the annals of medical history. With their sights now set on cancer vaccines, the world waits with eager anticipation.
In the grand tapestry of medical advancements, Moderna's endeavors in the cancer vaccine domain promise to be a golden thread. Their journey, fraught with challenges and uncertainties, is proof of human resilience and ingenuity. As investors, we're not left standing on the sidelines watching history unfold; we're granted an active role in it.
The potential of Moderna's innovations in oncology beckons a promising horizon. For those looking to make a mark in the annals of medical investments, this biotech offers a gateway to the future of oncology. Act now, and be part of this groundbreaking narrative.
Mad Hedge Biotech and Healthcare Letter
September 14, 2023
Fiat Lux
Featured Trade:
(A PIGGYBACK RIDE TO THE FUTURE)
(BMY), (NVS), (PFE), (MDT), (ABT), (TMO), (HCA), (UHS), (DGX), (LH)
As I walked the sterile, fluorescent-lit hallways of a leading biotechnological institute last summer, I overheard snippets of a conversation that immediately piqued my interest: “human-pig kidney,” “game-changer,” and “investor's goldmine.”
We often think of medical advancements in terms of their immediate patient benefits. Yet, in this chance encounter, the talk of the town was how these breakthroughs could cascade into lucrative opportunities in the stock market.
But how close are we to realizing this future?
Imagine a world where organ shortages, a grim reality for over 106,000 hopeful recipients in the U.S., could become a thing of the past. This isn’t a whimsical daydream but a tangible reality we're inching towards.
The mastermind behind this evolution? Kidneys grown inside pig embryos with a human cell composition ranging between 50% to 70%. This meticulous procedure, entailing 1,820 genetically modified pig embryos transplanted into 13 surrogate mothers, brought forth five specimens that met research criteria.
Switching our perspective, from a purely financial lens, the world of biotechnology is ripe with promise. But with the emergence of this organ transplant technology, investors should sit up and pay attention.
Consider giants like Bristol Myers Squibb (BMY), Novartis AG (NVS), and Pfizer Inc. (PFE). Their R&D teams are burning the midnight oil to roll out immunosuppressive drugs, pivotal for post-transplant procedures. Influenced by such groundbreaking endeavors, their stock trajectory could be a sight to behold in 2023.
Transitioning to medical equipment, Medtronic plc (MDT), Abbott Laboratories (ABT), and Thermo Fisher Scientific Inc. (TMO) aren't just names in the medical devices sphere. They represent the zenith of innovation, manufacturing state-of-the-art equipment integral to organ transplant procedures. If this biotechnological marvel scales, they stand at the precipice of unprecedented growth.
Moving onto healthcare, HCA Healthcare, Inc. (HCA) and Universal Health Services, Inc. (UHS) are the custodians of transplant centers. Their potential upswing is directly proportional to the success of human-pig kidney transplantations. And not to be overlooked, Quest Diagnostics Incorporated (DGX) and LabCorp (LH) are at the heart of organ compatibility diagnostics. As this transplant technology forges ahead, they are poised for a meteoric rise as well.
However, a word of caution is due.
While the financial forecasts appear rosy, any discerning investor is well aware of the need to balance enthusiasm with caution. The stock market's volatile nature, coupled with regulatory shifts and unpredictable research outcomes, can be game-changers. It is extremely crucial to keep your finger on the pulse of the sector and maybe even conduct more in-depth research on the potential of each company before making investment decisions.
Also, beyond finance, it would be remiss not to address the elephant in the room. The melding of human cells into pig embryos has raised eyebrows and ethical concerns. With human cells found in the embryos' brains and spinal cords, it prompts uneasy questions about the potential integration into the pigs' cognitive or reproductive systems. How the scientific community and regulators address these concerns will undoubtedly influence both the pace and direction of research, as well as investor sentiment.
Looking back, my chance encounter in that research institute was an omen of the times to come. On the brink of a scientific revolution, we are witnesses to a watershed moment in healthcare. But for the astute observer, it’s not just about saving lives. It's about understanding how such advancements can recalibrate the entire financial landscape.
To encapsulate the mood, let me leave you with this quote from the infamous Marie Curie: "Nothing in life is to be feared; it is only to be understood. Now is the time to understand more so that we may fear less.”
Mad Hedge Biotech and Healthcare Letter
August 8, 2023
Fiat Lux
Featured Trade:
(A DISCOUNTED PHOENIX SET TO RISE)
(BMY), (JNJ), (GSK), (MRK)
The rollercoaster ride that is the equity market never fails to excite, surprise, and occasionally bemuse us. There's an erratic heartbeat in how it functions - illogical at times, downright whimsical at others. The upshot? Sometimes, great companies find themselves in the bargain bin of Wall Street – perfect for investors who love a good discount.
This is where Bristol Myers Squibb (BMY) comes in.
In the rear-view mirror of the past year, Bristol Myers Squibb hasn't exactly been the star of the stock market show. Its financial pulse has been somewhat weak, with lethargic revenue growth and, at times, flatlining completely. A big part of this has been the loss of patent exclusivity on a once superstar medication last year, causing its top line to struggle.
Flash forward to BMY dropping its Q2 2023 financial report, and the question is whether the company met the Street's expectations. Well, not exactly.
Let's dive into the numbers. The Q2 2023 revenue was a hefty $11.23 billion, albeit a 0.97% dip from the previous quarter and a 5.6% drop year-over-year. Non-GAAP net earnings clocked in at $3.7 billion or $1.75 per share, a quarter less than my earlier prediction.
The culprit? A steeper decline in Revlimid's sales than expected. The blockbuster sales were $1,468 million, a sizable 41.3% YoY drop, thanks to generics flooding the market and lower net selling prices in Europe.
Cue the traders and investors giving a thumbs down to the financials, sending the stock price spiraling down by 4.2% in just two days.
Over half a year, BMY's share price shrank by a whopping 16%, even with a bunch of positive clinical trial results and a flurry of medicine approvals.
Meanwhile, the bigwigs of the global cardiovascular and oncology drug market, Johnson & Johnson (JNJ), GSK (GSK), and Merck (MRK), have been doing a victory lap.
Still, there’s a silver lining here.
Bristol Myers is currently strutting around with a forward price-to-earnings (P/E) ratio of just 8. If you stack that against the pharmaceutical industry's average of 15.3, our friend Bristol Myers looks appealing. This is especially true when you consider the company is far from down for the count and has quite a few tricks up its sleeve to stage a solid comeback.
Projected revenue for Bristol-Myers Squibb for Q3 2023 lands somewhere in the ballpark of $10.8 billion to $11.92 billion, which, sure, marks a 4.5% dip from Q2 expectations. But hold onto your hats because Bristol-Myers Squibb's revenue is projected to comfortably clear the bar and pull in a cool $11.35 billion.
The heroes of this victory? Groundbreaking drugs like Yervoy and Opdualag have become hotter than a two-dollar pistol in the medical world.
We're talking about a Q2 2023 sales total of $154 million for Opdualag alone, up a jaw-dropping 165.6% from Q2 2022. And let's not forget this medical marvel only debuted in March 2022 and has been selling like hotcakes thanks to its performance in clinical trials.
What's more, Bristol Myers Squibb has been as busy as a bee, adding nine innovative medicines to its repertoire over the last three years. These new kids on the block are set to step up to the plate and replace older, soon-to-be patent-less drugs. They're also expected to drive sales growth into the stratosphere for the foreseeable future.
Bristol Myers Squibb is expected to report continuous growth, thanks to its proven clinical trials and potential to expand its labels. The company is already rolling up its sleeves to test the safety and efficacy of Camzyos for conditions like non-obstructive hypertrophic cardiomyopathy and heart failure with preserved ejection fraction (HFpEF).
As we look towards the horizon of 2025, Bristol Myers forecasts an impressive revenue of $10 billion to $13 billion from its freshest batch of products. Considering it pulled in $2 billion last year from these drugs, that's not too shabby. But don't think it’s resting on its laurels. The company is already testing over 50 clinical compounds across a smorgasbord of trials.
Let's also pay attention to Bristol Myers' attractive dividend profile.
The company currently offers a yield of 3.5%, dwarfing the S&P 500's average of 1.5%. Plus, it has bumped its payouts by 43% over the last five years.
With a cash payout ratio of around 42%, there's much room for this trend to continue into the foreseeable future.
Despite recent stumbles on the revenue and stock value front, BMY is no slouch. Its unyielding character and unwavering commitment to ploughing funds into fresh offerings signal a robust comeback on the horizon.
So, in the immortal words of an old Wall Street sage, it’s time to "Buy low, sell high,” and BMY is looking like quite a bargain right now.
