Mad Hedge Biotech & Healthcare Letter
July 27, 2021
Fiat Lux
FEATURED TRADE:
(A RESURGENCE STOCK READY FOR THE NEXT WAVE)
(MRNA), (PFE), (BNTX), (JNJ), (NVAX)
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What truly scares investors isn’t really the potential relapse of the financial metrics that would undoubtedly take center stage again since the earnings season already commenced.
As we have been recently reminded, the world’s worst nightmares still place the COVID-19 virus front and center—this, despite the pandemic supposedly already under control.
COVID cases are starting to rise again, and the delta variant is seen as the latest addition to the problem.
That strain has actually become dominant in the United States, sending unvaccinated individuals to hospitals faster than its predecessor.
This delta variant is said to be more contagious than the previous virus. In fact, the fear over this new wave is incredibly high that the US government decided to issue a “Do Not Travel” advisory for the UK, which has been suffering from outbreaks despite their high vaccination rates.
If this is yet another indication of another disastrous year like 2020, then stocks would most certainly fall.
However, stocks managed to bounce back after the initial scare.
While this sparked a debate on the reason behind the recent sharp losses, investors are encouraged to remain focused on how the virus can still affect their lives despite the strong temptation to believe that the stock market will continue to rise from here.
Vigilance is the key to survival these days. It’s critical to bear in mind that the virus that upended our world and forced us to shutter our economies may not be in retreat just yet.
After all, even paranoids have enemies.
That’s what makes the mRNA vaccines a promising answer to this new issue.
Moreover, against this volatile environment, one stock looks to be extremely intriguing: Moderna (MRNA).
Amid the analyses and reports, the most consistent thing about Moderna—and the most notable quality it has—is its solid science.
At its core, mRNA technology can transform the cells in a person’s body into mini-factories with the ability to produce virtually any kind of protein that Moderna wants.
So when people get inoculated with mRNA-1273, the mRNA instructs the body’s cells to start producing inactive replicas of COVID-19 proteins.
Then, the body’s immune system responds to those replicas.
This process effectively teaches the person’s immune system how to protect itself and fight off any type of exposure to the COVID-19 virus proteins.
Moderna’s vaccine is based on mRNA technology, which is primarily an information molecule. This means that this could be used to create various products, which would reach better technical success over time.
Basically, one major benefit of mRNA is that the chemistry behind the formulation for treatments like the flu shot uses exactly the same when creating more advanced products like the COVID-19 vaccine or even the HIV vaccine.
This makes it easier for Moderna to keep developing vaccines and other treatments because the company no longer needs to implement major changes in its manufacturing system for every new drug.
This is incredible leverage for Moderna, particularly across its manufacturing infrastructure and R&D. With the money saved on this advantage, Moderna can make massive investments in other segments like IT and marketing.
In fact, their quickness to market their vaccine is one of the reasons for Moderna’s success in the COVID-19 vaccine race.
Over the course of the last 52 weeks, Moderna stock has performed within the range of $54.21 to $342.51. The stock also managed to sustain its momentum from the surge of investor interest last year and is up by 207% so far this 2021.
In ensuring that it doesn’t get too far behind the leader, Pfizer (PFE)-BioNTech (BNTX), it secured a huge chunk of the market share as well.
Now, there’s a new virus strain threatening to take down everything we’ve worked hard to rebuild since the first COVID-19 case broke last year. This could mean an additional revenue stream for Moderna considering that it can deliver at lightning speed compared to other developers.
Aside from its work on COVID-19, Moderna is also looking for ways to use mRNA technology to develop treatments for heart failure, cancer, and other severe conditions.
To date, Moderna has roughly 24 mRNA-based programs in its pipeline, ranging from the Zika vaccine to cancer treatments.
Admittedly, buying Moderna stock presents risks. However, the greed and fear that continue to rule the markets places Moderna in a unique position to be the answer to all the questions.
Moderna is estimated to rake in $18.8 billion in revenue for 2021, thanks largely to its COVID-19 vaccine, with the number expected to rise as the company ramps up production to reach 3 billion doses in 2022.
Moderna’s dominance today doesn’t necessarily mean it’ll last forever, especially with competition coming in from Johnson & Johnson (JNJ) and Novavax (NVAX).
However, the technology it uses and the fact that it’s one of the only two biotechnology companies that successfully executed the mRNA place Moderna in an extremely unique, profitable, and secure position for the foreseeable future.
Mad Hedge Biotech & Healthcare Letter
July 1, 2021
Fiat Lux
FEATURED TRADE:
(NOT YOUR AVERAGE ONE-HIT WONDER)
(BNTX), (MRNA), (PFE), (REGN), (DNA)
It was only a few months ago when investors believed that COVID-19 developers like Moderna (MRNA) and BioNTech (BNTX) had enjoyed their best performances.
With the uncertainty returning, many figured that the profits and revenues for these stocks have dried up as well.
This isn’t the case these days, though. If anything, it looks like these companies have incredibly bright futures ahead.
BioNTech, in particular, shows tremendous promise after emerging as one of the most compelling success stories in the scientific world during the pandemic.
Working alongside Pfizer (PFE), this German biotechnology company created the first-ever vaccine that utilized messenger RNA to receive authorization across the globe.
Since being a first mover in the COVID-19 vaccine race, BioNTech has established a strong financial position that gave it the capacity to pursue other breakthrough treatments in its pipeline.
Moreover, the general sentiment toward BioNTech remains positive thanks to the effectiveness of its vaccine.
Just last month, the US Centers for Disease Control and Prevention disclosed the latest data on the efficacy of mRNA-based vaccines. It showed an impressive 91% reduction rate in terms of infections based on real-life reports.
The sustained demand for COVID-19 vaccines also translated to an outpouring of orders, with BioNTech recently completing another agreement with New Zealand and even the Philippines.
Health officials are also looking into the need for booster shots, which means it’s entirely possible that a whole new revenue stream could open up for BioNTech once again.
In the first quarter of 2021, revenues from BioNTech’s share from the COVID-19 vaccine marketed alongside Pfizer amounted to over $3.5 billion, including milestone payments.
This puts it on track to reach the $8.3 billion revenues estimated from the vaccine alone in 2021.
Apart from its agreement with Pfizer, this German biotech has been ramping up its own production. So far, it anticipates selling roughly 250 million doses of the COVID-19 vaccine in the first half of 2021.
Let’s say that each dose is sold at $14, and BioNTech could sustain its manufacturing capacity until December, then it can supply a total of 500 million doses.
That would rake in $7 billion in direct revenue.
On top of these, BioNTech has a separate deal with China’s Fosun Pharma.
This means that the earlier estimate of $15 billion in revenue for BioNTech this year is definitely feasible.
However, that’s a conservative estimate.
BioNTech intends to expand its manufacturing capacity to produce 3 billion doses by the end of 2021 and more by 2022.
By next year, the entire world comprising 7 billion people would be eligible to take the vaccine shots as approvals get rolled out.
Even with the competition, BioNTech stands to cover at least 30% market share or roughly 2 billion doses in the years to come.
Despite the expected price reduction to probably $10 per dose, that’s still a whopping $20 billion in annual sales for a biotechnology company with a current market capitalization of $54.10 billion.
Going back to its current deals with bigger biopharmaceutical companies, BioNTech had an impressive first quarter this year, showing off a 7,295% surge in its sales.
Leveraging this massive revenue stream, the company has boosted its pipeline programs and is pushing to ride the momentum.
So far, it has 14 drug candidates queued in clinical trials.
One of the most promising and advanced is its melanoma treatment pipeline, which has two programs slated to advance to Phase 2 within the year.
The first one, BNT111, is a collaboration with Regeneron (REGN), while the other, BNT122, is an approach developed alongside Genentech (DNA).
Aside from these programs, the company has also been busy working on developing mRNA-based treatments for various types of cancers.
If you’re one of the people who thought that the rise of the COVID-19 vaccine stocks is done the moment the entire US population gets vaccinated, then you’re not alone in that assumption.
You’d be surprised though at the strength of the staying power of companies like BioNTech have, especially when some things work out in their favor.
For context, BioNTech is only second to Volkswagen (VWAGY) in terms of profitability in Germany.
That means that a 13-year-old biotech company with fewer than 2,000 employees has grown so much in the past year that it’s now in the same conversation with a company employing over 600,000 people and has a history that predates World War II.
While COVID-19 upended the world, BioNTech has been granted the opportunity to show off its skills and grow its business
From being a virtually unknown company, it has become one of the fastest-growing biotech globally.
Looking at its performance in the past 12 months and its pipeline programs, it’s clear that BioNTech still has so much room for growth.
Mad Hedge Biotech & Healthcare Letter
June 10, 2021
Fiat Lux
FEATURED TRADE:
(IN THE RIGHT PLACE AT THE RIGHT TIME)
(MRNA), (PFE), (BNTX), (NVAX), (CVAC), (SNY), (TMO), (CTLT), (BAX), (INO)
Before the COVID-19 pandemic, only a handful of people had actually heard of messenger RNA (mRNA).
Now, this technology has become a household term thanks to the success of the COVID-19 vaccine programs of Pfizer (PFE), BioNTech (BNTX), and Moderna (MRNA).
Aside from these three names, other players in the mRNA arena include Novavax (NVAX) and an under-the-radar stock called CureVac (CVAC), which has been collaborating with Bayer (BAYRY).
Even Sanofi joined the list recently with its acquisition of mRNA-focused biotechnology company Tidal Therapeutics.
Amid the growing number of mRNA-focused companies, however, the world has come to associate the technology most with Moderna.
This is apparent in the increasing demand for Moderna’s COVID-19 vaccine, which has been pushing the biotech company to quickly expand its manufacturing capacity.
One of the steps it took to meet the supply expectations is to partner with Thermo Fisher (TMO), specifically for fill-finish, labeling, and packaging.
For orders outside the United States, Moderna established a partnership with South Korea’s renowned Samsung Biologics (KRX: 207940) to keep up with the demand.
While TMO and Samsung Biologics are the two major forces helping Moderna in its manufacturing concerns, other companies are also pitching in, including Catalent (CTLT), Sanofi, and Baxter BioPharma Solutions (BAX).
With the assistance of these companies, along with the major expansion of its own manufacturing site, Moderna anticipates that it can supply at least 3 billion doses of its COVID-19 vaccine annually by 2022.
This is promising news, particularly in light of another massive market that Moderna can conquer next: India.
While the United States has managed to turn the corner in the COVID-19 battle, India has been struggling to fight back against the virus. To this day, the country continues to grapple with the increasing number of COVID-19 cases.
Low and sluggish vaccination rates are considered the major contributing factor to this problem, with a measly 3.3% of India’s citizens getting fully vaccinated so far.
With a population of approximately 1.39 billion, this offers a massive opportunity for vaccine developers.
Thus far, only 228 million doses of the COVID-19 vaccines have been shipped to India. That leaves about 1.16 billion people in this huge country to receive a vaccine.
Since India is a developing nation, vaccine makers are expected to charge the low end of their range.
For Moderna, that would be roughly $25 per dose, while Pfizer would probably charge $19.50 per dose.
However, these prices could still go lower depending on the contract negotiated by the Indian government.
Even at the low end of the price point though, the Indian market represents approximately $28 billion in revenue for COVID-19 vaccine developers.
Taking advantage of this momentum, Moderna has been working on booster candidates for its COVID-19 vaccine. In fact, one candidate may be ready by fall.
Of course, competitors are looking into the new variants as well. Aside from Pfizer, smaller companies like Inovio Pharmaceuticals (INO) have started with clinical trials this year.
Moderna is also investing heavily in artificial intelligence (AI) in an effort to become a step ahead of future diseases.
Through AI and machine learning, Moderna aims to predict strains that evade protection provided by their roster of vaccines.
Based on the data, the company will be able to develop next-generation vaccines and boosters before the situation becomes as critical as what happened in 2020.
These efforts are essential for Moderna to sustain its position as the leader in mRNA technology.
Despite its earlier issues with production, Moderna is still set to generate roughly $19.2 billion in revenue for its COVID-19 vaccine thanks to advance purchase agreements.
The potential availability of a booster this year would definitely get the ball rolling in terms of handling newer variants.
The biotechnology industry is favored among investors on the lookout for companies with incredibly strong growth potential.
While it’s a risky environment filled with businesses flaming out practically year after year, winners in this field can come out with extremely impressive results.
In recent months, Moderna has become one of the most successful examples that demonstrated the potential of a biotech when it finds itself with cutting-edge technology at an ideal time.
Mad Hedge Biotech & Healthcare Letter
May 13, 2021
Fiat Lux
FEATURED TRADE:
(THE HOLY GRAIL OF DIABETES)
(NVO), (LLY), (SNY), (BNTX), (CRSP), (EDIT), (NTLA)
Diabetes and obesity continue to be two of the major health issues across the globe—and these problems are only getting worse.
There are about 463 million people worldwide afflicted with diabetes, with only half of this number actually diagnosed and even fewer seeking treatment.
This situation is alarming considering that diabetes is a major cause of diseases like heart attacks, stroke, blindness, kidney failure, and even amputation of the lower limb.
The key to handling diabetes for many diabetics is taking insulin, which is a hormone that aids in regulating the amount of glucose in the patient’s blood.
To date, only 16% of diabetics take insulin.
Interestingly, there are only a handful of producers of this drug despite the fact that the global spending for insulin is estimated to reach $28 billion by 2026.
Only three companies practically control over 90% of the insulin market. That dominance, along with the absence of generic competition, allowed them to generously reward their shareholders.
Currently, one company is dominating the insulin market and holds a virtual monopoly of this lucrative industry: Novo Nordisk (NVO).
In fact, Novo Nordisk shares have increased by over 2,500% since 2000—an honest to goodness wealth-building investment.
For years, Novo Nordisk has focused on developing products specifically for diabetes and obesity.
Thanks to its efforts in these sectors, the company has become the undisputed leader with a 44.5% share of the insulin market and a 49.9% share of the blood sugar drug GLP-1 market.
In 2018 alone, Novo Nordisk generated roughly $14.26 billion in revenue from its diabetes lineup.
In comparison, the second largest producer of these products, Eli Lilly (LLY), generated only $9.71 billion.
Meanwhile, the third challenger in this space, Sanofi (SNY), began its exit from the diabetes industry when the pandemic struck last year.
At this point, Novo Nordisk holds 29.2% of the global diabetes market, making the company within arm’s reach of its goal to conquer one-third of the segment by 2025.
Amid its success in the industry, Novo Nordisk refuses to rest on its laurels. The company continues to come up with innovative treatments for diabetes and obesity.
Novo Nordisk’s latest product is Rybelsus, which is an oral medication for blood sugar, particularly for Type 2 diabetes patients.
In an effort to corner the market, Rybelsus is actually a direct competitor of Novo Nordisk’s own products, Ozempic and Victoza, which target the same market. The difference is that the new product can be taken orally while the two older ones need to be injected into the bloodstream.
When Ryblesus was launched in late 2020, it was hailed as the “holy grail” of diabetes treatments and generated $64.5 million in the first six months.
To understand the potential of Rybelsus, it’s good to remember the growth story of Ozempic.
From $264 million in sales in 2018, this drug skyrocketed to rake in $1.7 billion by 2019 and generated $1.1 billion in the first half of 2020.
Although diabetes clearly holds the bulk of Novo Nordisk’s portfolio, it’s not the sole revenue stream for the company.
In the past years, Novo Nordisk has also been developing treatments for chronic obesity—a condition that could lead to serious diseases, including various types of cancer and heart disorders.
Global obesity has roughly tripled since 1975, with the COVID-19 pandemic accelerating this alarming trend.
For context, 1.9 billion adults were diagnosed as overweight in 2016. Of these, 650 million were considered obese.
More alarmingly, only 2% of 650 million people suffering from obesity are receiving any medical treatment.
In relation to Novo Nordisk’s revenue stream, this offers notable potential for future revenues for the segment.
The company’s flagship obesity drug, Saxenda, has shown extremely strong growth in terms of market share as well as total revenue since its launch.
With incredible attention focused on groundbreaking treatments for diabetes like messenger RNA from companies like BioNTech (BNTX), CRISPR Therapeutics (CRSP), Editas Medicines (EDIT), and Intellia Therapeutics (NTLA), it’s understandable to find a company established in the 1920s extremely boring.
However, it’s important to always keep in mind what investing is truly about. It’s distributing your money to businesses that have the capacity and potential to grow over the long term.
This is what sets apart companies like Novo Nordisk.
Historically, Novo Nordisk has been giving back to its shareholders for decades.
Since it debuted in the US market in 1981, the company has returned roughly 22,000% to its investors.
Four decades later, shareholders can rest easy and expect continuous rewards in the years to come. So, take advantage of this opportunity and buy the dips.
Mad Hedge Biotech & Healthcare Letter
May 6, 2021
Fiat Lux
FEATURED TRADE:
(THE WHITE KNIGHT OF BIOPHARMA)
(PFE), (AMGN), (BMY), (LLY), (GILD), (MRK), (BNTX), (VTRS), (GSK)
After a week of dissatisfying earnings reports from huge biopharmaceutical firms like Amgen (AMGN), Bristol-Myers Squibb (BMY), Eli Lilly (LLY), Gilead Sciences (GILD), and Merck (MRK), one company has managed to buck the trend: Pfizer (PFE).
In its first quarter earnings report for 2021, Pfizer reported adjusted diluted earnings of 93 cents per share, surpassing the earlier experts’ estimate of 77 cents.
Even its reported revenue exceeded the earlier predictions of $13.4 billion, raking in $14.6 billion during the period instead.
Aside from those, Pfizer also massively boosted its projected revenue from the COVID-19 vaccine it developed with BioNTech (BNTX).
Pfizer’s COVID-19 vaccine is slated for approval to be used for 12- to 15-year-olds by next week.
On top of these, the company expects data from its third COVID-19 vaccine candidate. This recent trial is for a booster dose, which could have results by early July and possibly a full emergency approval later on the same month.
The company now estimates $26 billion in sales for the vaccine, which is notably up from its $15 billion projection in February 2021.
Pfizer is also confident in its capacity to manufacture at least 3 billion doses of the COVID-19 vaccine in 2022, with the company already negotiating agreements with countries for their 2022 supply and beyond.
While the huge boost in the company’s COVID-19 vaccine sales expectations definitely grabs headlines, Pfizer’s base business brought in notable results as well.
Apart from the vaccine, the company’s operational growth in the first quarter was mostly driven by the sales from its blood clot treatment Eliquis, which went up by 25% operationally.
Sales of its heart drug Vyndagel soared by 88%, while its cancer drug Xeljanz jumped 18%.
One of the most notable moves from Pfizer is spinning off its off-patent drug division, Upjohn, to form a new company with generic drug developer Mylan, called Viatris (VTRS).
This decision would rid Pfizer of several well-known products, such as Viagra, Lyrica, Lipitor, Celebrex, and Chantix, which were responsible for roughly 15% of its total revenues.
However, sales for these items fell by 30% in the first nine months of 2020 alone—a chronically falling performance since 2017.
By eliminating the products that no longer hold any exclusivity rights and signing them off to Viatris, Pfizer can focus on developing and marketing new and innovative treatments.
So far, this strategy has started to bear fruit.
At the moment, Pfizer has several attractive assets in its pipeline. One of them is non-small cell lung cancer (NSCLC) treatment Lorbrena, which could become one of the highest-selling products in the oncology market.
Lorbrena is estimated to grow to over $40 billion each year by the mid-2020s.
At this point, the drug is in its registration phase and was granted a priority-review status. That means approval is on the horizon in the not-so-distant future.
Other potential blockbuster oncology assets include prostate cancer drug Xtandi, NSCLC treatment Bavencio, and breast cancer medication Ibrance.
All these are in late-stage trials, which means they should be available to market soon.
In total, Pfizer currently has at least 33 drugs queued in either Phase 3 trials or registration. The list includes vaccine candidates, immunology treatments, and, of course, oncology assets.
While Pfizer lost Upjohn in 2020, it gained a new partner in GlaxoSmithKline (GSK). The two companies decided to merge their consumer healthcare programs.
This made them the biggest provider of non-prescription drugs across the globe.
By shedding its sluggishly growing assets, Pfizer managed to develop its culture into one that concentrates on developing and marketing new and innovative products.
Additionally, the company’s current portfolio holds several growing products with the potential for expansion.
Given all these changes, Pfizer raised its financial guidance for 2021 as well.
For this year, the company now estimates adjusted diluted earnings to be valued between $3.55 and $3.65 per share compared to the previous range of $3.10 to $3.20 per share.
In terms of its full-year revenue, the company raised it from its estimate between $59.4 billion and $61.4 billion to $70.50 billion and $72.5 billion.
In terms of its projected revenue compound annual growth rate, Pfizer reconfirmed that it could deliver at least 6% through 2025 and a double-digit growth on its bottom line.
Remarkably, this is still not taking into consideration its COVID-19 vaccine.
If you pull out the revenues from its COVID-19 vaccine, then the company’s projected EPS growth for 2021 is at 15%.
Adding the vaccine into the equation gives us an impressive 41% increase in its EPS.
If you consider the wild card that is Pfizer’s COVID-19 vaccine, which would include a price increase coupled with the possibility of booster shots administered annually, and combine it with its base business, then it’s easy to see how the company’s growth could be turbocharged in the next few years.
