Mad Hedge Biotech and Healthcare Letter
December 14, 2021
Fiat Lux
Featured Trade:
(FROM AN UNKNOWN mRNA PIONEER TO BIG PHARMA PLAYER)
(BNTX), (PFE), (MRNA), (AZN), (JNJ), (SNY), (CVAC), (REGN), (MRK), (BMY)
Posts
Almost everything that could go right has gone right for BioNTech so far.
Its COVID-19 vaccine with Pfizer (PFE), Comirnaty, has been breaking records left and right, and more and more approvals in other countries are piling up.
Needless to say, BioNTech has transformed into one of the most profitable biotechnology companies with a rapidly growing cash stockpile.
Now, the company is up for another challenge: the Omicron variant.
Although BioNTech and even Moderna (MRNA) insist that they offer more than COVID vaccines, the reality is that their pipelines still have not reached the stage where they can generate as much revenue.
Hence, it is no surprise that their share prices have climbed since discovering the Omicron strain.
The emergence of this new mutation sparked another competition among COVID-19 vaccine developers, specifically in the mRNA segment dominated by BioNTech and Moderna.
Since news broke about the Omicron variant, these companies have been racing to come up with the most effective vaccine against it.
BioNTech holds a competitive advantage between the two since the company reportedly has been working with Pfizer on a vaccine candidate for this type of situation months before the discovery.
In comparison, Moderna has yet to determine where their candidate stands in terms of fighting off the new variant.
The same can be said about other vaccine developers like AstraZeneca (AZN) and Johnson & Johnson (JNJ).
What happens to their efforts if the Omicron variant turns out to be less dangerous and possibly closer to the common flu?
In this case, the vaccine developers would most likely boost the prices of their products 10-fold because then they’d end up with fewer orders to private customers instead of sealing agreements with governments.
The flu vaccine market is worth roughly $8 billion annually, while the COVID vaccination market is projected to bring in approximately $25 billion each year in the post-pandemic period.
Either way, this situation could offer speculative investors a solid stream of price catalysts.
The uncertainty will result in a higher valuation for BioNTech in the short term because the company has already proven its ability to deliver an effective vaccine within a short period.
Prior to its COVID work, BioNTech was actually known as one of the “Big 3” and a pioneer in the mRNA world. At that time, it shared this title with Moderna and CureVac (CVAC).
Since then, the segment has grown, and new challengers have joined the mRNA industry.
Some of the promising ones include China’s Abogen Biosciences, which managed to raise over $700 million in funding for its own mRNA COVID vaccine, and of course, Sanofi (SNY), which splurged in a $3.2 billion acquisition of Translate Bio to access the latter’s mRNA pipeline for cystic fibrosis and several genetic conditions.
Meanwhile, BioNTech has retained its focus on cancer, with 16 of the 18 programs targeting oncology in its Phase 1 pipeline.
If BioNTech successfully develops an mRNA treatment for cancer, they’ll be breaking into a massive and lucrative market.
By 2024, the market for cancer treatments is projected to grow and reach over $200 billion.
Apart from its work on oncology therapies, BioNTech is also known for its infectious disease pipeline, including vaccines for HIV, malaria, and tuberculosis. It’s also collaborating with Pfizer on 2 influenza vaccines.
By the end of 2021, BioNTech is anticipated to release 5 updates on its vaccine trials involving solid tumors that target head and neck cancer, melanoma, and colorectal cancer.
Other than Pfizer, the company has been working with Regeneron (REGN), Genentech, Merck (MRK), Bristol Myers Squibb (BMY), and Sanofi.
In terms of performance so far, BioNTech has raked in $15.2 billion in revenues for the first three quarters of 2021, with full-year earnings expected to reach $18.1 to $19.2 billion.
Overall, I view BioNTech as a long-term investment.
While many still see it as a pure COVID play, this German company is increasingly starting to act more and more like the Big Pharma organizations.
It’s realistically expecting that its profit-generating asset, Comirnaty, may not have a very long shelf life. Therefore, it understands the necessity to come up with new products to sustain its current valuation over the longer term.
Mad Hedge Biotech and Healthcare Letter
December 7, 2021
Fiat Lux
Featured Trade:
(GET READY FOR THE SECOND WAVE OF COVID-19 VACCINES)
(NVAX), (MRNA), (PFE), (BNTX), (JNJ), (AZN), (SNY)
Moderna (MRNA) and Pfizer (PFE) / BioNTech (BNTX) unquestionably rule the COVID-19 vaccine market these days.
These companies have amassed billions in quarterly revenue from their vaccine candidates, with Moderna expecting $18 billion and Pfizer/BioNTech anticipating $36 billion in annual sales this year.
Other than these two, Johnson & Johnson (JNJ) and AstraZeneca (AZN) offer COVID-19 vaccines, but these appear to be distant rivals to the mRNA contenders.
However, it looks like the COVID-19 vaccine market will soon get another competitor—one that has a solid potential to truly carve out a considerable share: Novavax (NVAX).
At this point, Novavax’s vaccine candidate has yet to gain authorization in major markets.
Its shares have also fallen by over 30% since it started in January this year. Nonetheless, the company is projected to turn things around starting this December.
For one, it has already started filing for regulatory approval in various countries and recently gained authorization in Indonesia and the Philippines. Meanwhile, it plans to file for approval in the US before 2021 ends.
To date, Novavax has secured $7 billion worth of advance purchase agreements for its vaccine by 2022.
But a more promising catalyst for Novavax lies in its proven technology.
This makes it notably distinct from Moderna and Pfizer’s vaccines. Simply put, Novavax isn’t offering new technology like the mRNA vaccine.
Rather, Novavax uses a tried and tested approach in the form of protein subunit vaccines. These constitute the very same technology used in vaccines that have been long available in markets, such as the Hepatitis B vaccine.
Considering the pushback in using new technology like mRNA, which comes from healthcare professionals and patients, the entry of a long-established vaccine technology would encourage more people to get the coronavirus jab.
Moreover, Novavax’s candidate can be stored at refrigerator temperatures. This is more convenient compared to the vaccines of Moderna and Pfizer, which require freezer temperatures.
The latest coronavirus variant, Omicron, brings about another catalyst.
Since the WHO announced Omicron’s presence last month, the entire world, including the stock market, has been rattled.
However, this announcement also served to light a fire under COVID-19 vaccine stocks.
After all, every problem can offer an opportunity. Omicron’s emergence has boosted the demand for COVID-19 vaccines.
While it’s never advisable to get the cart ahead of the horse, especially since the worries over the Omicron might be premature, it’s still reasonable to assume that the anxiety triggered by the news will most likely increase the popularity of vaccine stocks.
In the case of Novavax, the company is taking advantage of this exposure to announce that it is currently working on a candidate that’s potent against the new variant.
Beyond Novavax’s COVID-19 vaccine, the company has 8 more programs queued in its pipeline. Of these, 3 are in Phase 2/3 clinical trials.
These include ResVax and RSV F, which are vaccines against the respiratory syncytial virus (RSV). While adults can recover from RSV within weeks, this virus can be fatal to infants and children.
The most promising candidate is NanoFlu, which received a Fast Track Designation from the US FDA in early 2020. It also recorded top-line data against Fluzone from Sanofi (SNY), the leading flu vaccine today.
To give an idea of NanoFlu’s potential, Fluzone raked in $2.9 billion in sales in 2020—and it hasn’t even covered most of the market yet.
Considering NanoFlu’s Phase 3 clinical trials results, the product is estimated to generate more than $9.5 billion in global revenue by 2027.
Admittedly, Novavax investors have experienced a bumpy ride throughout 2021. However, it appears that the biotechnology company is on its way up, thanks to a couple of catalysts that lie ahead.
While I still think that Moderna and Pfizer are great stocks for long-term investments, these companies have already reaped the benefits of share performance. It may very well be Novavax’s turn to impress the market in the next few weeks.
Mad Hedge Biotech and Healthcare Letter
December 2, 2021
Fiat Lux
Featured Trade:
(A REMARKABLE COVID-19 JUGGERNAUT)
(PFE), (BNTX), (MRNA), (JNJ), (AZN), (MYOV), (AKCA)
Unless you have been living under the rock in the past two years, you probably heard that Pfizer (PFE) is one of the frontrunners in the COVID-19 market.
Between its incredibly successful vaccine and its soon-to-be-approved antiviral treatments, this company has undoubtedly risen to meet—and even surpass—the expectations.
And while a juggernaut in the pharmaceutical and healthcare industry may not seem like your run-of-the-mill growth stock, Pfizer has been showing no signs of slowing down.
If anything, this vaccine leader is anticipated to deepen its lead and reward its investors with market-crushing returns.
Moreover, the foundation of a good growth stock is a great product.
Pfizer clearly has that with its COVID-19 vaccine, Comirnaty, which raked in $13 billion in sales in the third quarter of 2021 alone—and there are surely billions more to come in the next months.
The company actually projects roughly $36 billion from Comirnaty sales this year, which is $2.5 billion more than the initial guidance of $33.5 billion announced earlier, with opportunities appearing to be multiplying more rapidly than even the management anticipated.
For 2022, Pfizer projects $29 billion in sales from Comirnaty—a number that could still rise given the recent approval for vaccines for children over 5 years old and the authorization for booster shots for adults.
On top of the vaccine sales, Pfizer has yet to take into account the potential of its COVID-19 pill, which has at least 90 countries interested.
Actually, the Biden administration has already allocated $5.3 billion to buy 10 million doses in advance of the anticipated approval.
This antiviral pill, called Paxlovid, can serve as an excellent alternative for those who are still hesitant over the vaccine. Plus, it has an 89% effectiveness in reducing the risk of severe COVID-19.
Considering that COVID-19 doesn’t seem to be disappearing anytime soon, there’s no question that Pfizer has a wide runway for growth.
Here’s one example of how Pfizer has been leveraging its expertise and technology lately.
In November, the world was alarmed by the news of yet another COVID-19 variant called Omicron, which was discovered in South Africa.
Although not much is known about it yet, scientists think it’s an escape variant because of its ability to double mutations compared to the Delta variant.
More alarmingly, Omicron is considerably distinct from the original virus that was the basis for the existing COVID-19 vaccines.
That led to growing concerns over the effectiveness of the current vaccines in the face of a highly virulent variant.
Countries like the US, the UK, Canada, Singapore, and Australia have decided to impose travel restrictions on passengers arriving from Africa to curb another pandemic.
The news of this new variant alarmed the world so much that even the stock market experienced a downtrend, particularly in the travel and hospital sectors. This is devastating considering that international travels have only been recently reopened.
Amidst the panic over the Omicron variant, Pfizer and its vaccine partner BioNTech (BNTX) shared that they have been long prepared over the possibility of an “escape variant” emerging.
In fact, the two have taken action months before the news broke and worked to modify their mRNA vaccine to target the new variant, with their candidate ready to be shipped out within 100 days.
This is an impressive foresight on the side of Pfizer and BioNTech, especially in light of the fact that its competitors, Moderna (MRNA), Johnson & Johnson (JNJ), and AstraZeneca (AZN), are only about to investigate the efficacy of their vaccines against Omicron.
Meanwhile, Pfizer has 94 programs in its pipeline. Of these, 38 are enrolled in Phase 2 and 3 clinical trials.
It also has 6 mRNA projects with its German partner BioNTech for additional COVID-19 vaccines and an mRNA flu vaccine.
In terms of expanding its other segments, Pfizer has collaborations with several companies in numerous specializations.
These include the acquisition of Trillium Therapeutics (TRIL) and work with Myovant Sciences (MYOV) to expand its oncology segment, while its collaboration with Akcea Therapeutics (AKCA) targets its cardiovascular sector.
Overall, Pfizer has proven itself to be the safest COVID-19 stock in the market today. Moreover, the continuous expansion of its core business and its heavy focus on R&D all guarantee that it remains in a tremendous position even in a post-COVID world.
Mad Hedge Biotech and Healthcare Letter
November 30, 2021
Fiat Lux
Featured Trade:
(BEYOND THE COVID-19 VACCINE)
(AZN), (PFE), (BNTX), (REGN), (GILD), (INCY), (MRNA)
Even altruism has its limits.
Adding to the list of things we didn’t expect to happen in 2021, AstraZeneca (AZN) has followed the footsteps of Pfizer (PFE) and BioNTech (BNTX) and decided to begin making money off its COVID-19 vaccine.
The news is an about-face from the Cambridge-based company’s previous pledge to not profit from this while the pandemic is still ongoing.
Given AstraZeneca’s decision, there’s a possibility that it no longer believes that COVID-19 remains a threat of global proportions—or it at least thinks the issue has become more manageable.
It remains to be seen how the company will react to the emergence of the Omicron variant, and if it plans to push through with this decision.
While AstraZeneca’s agreements with different countries won’t allow it to come right out of the gate and just start slapping massive profits all over the place, the company plans to begin “progressively transitioning” to profitability following its third-quarter call.
Moreover, the company assured that its COVID-19 vaccine would remain reasonably priced for low- to middle-income countries. This means that it plans to jack up the price in wealthier nations instead.
However, AstraZeneca isn’t doing this for purely financial reasons.
According to the company, profits from the vaccine will be allocated to another COVID-19-related effort, its antibody therapy called AZD7442—a treatment that’s expected to compete with therapies from Regeneron (REGN) and Gilead Sciences (GILD).
Regardless of how they spin this recent turn of events, the key takeaway is that they’ll start making money off the vaccine.
Although changing their tune about the COVID-19 vaccine might get them some flak, it’s crucial to bear in mind that AstraZeneca is a for-profit company. This is the natural course for them to take vis-a-vis their products.
Besides its work on COVID-19, AstraZeneca has been pouring money on R&D over the past 12 months to fund different clinical trials for its oncology, cardiovascular, and immunology segments. To date, the company’s spending on research and development has climbed by 27.5% year-over-year to reach $3.54 billion in the first 6 months of 2021.
This move to invest heavily in developing new drugs for severe medical conditions is anticipated to secure a solid future revenue and continuous growth in earnings per share for the company.
Given its pipeline and history, AstraZeneca is actually projected to grow by over 20% annually over the course of the next five years.
One result of this effort is the expansion of the company’s top-selling cancer drug, Imfinzi.
At the moment, Imfinzi is approved as a lung cancer treatment. However, it can soon boost its sales to include biliary tract cancer in its indications.
There are roughly 50,000 individuals diagnosed with biliary tract cancer annually in the United States, Japan, and Europe, with the number hitting 210,000 across the globe.
In terms of profitability, we can look at Incyte’s (INCY) Pemazyre, which was approved in 2020. Sales of the drug grew four-fold in the first 9 months to reach $48 million.
Admittedly, Imfinzi’s market share will rely on its efficacy and safety results.
However, the treatment has a track record of delivering a superior standard of care and guaranteeing that it has the same safety profile as chemotherapy.
Hence, it’s reasonable to say that we can conservatively expect Imfinzi to capture at least 15% of the whole biliary tract cancer market. This would be roughly 30,000 patients worldwide.
Currently, Imfinzi’s price tag is at $180,000 in the US, but the drug might be cheaper in other countries.
Based on the market potential of its biliary tract cancer indication, this additional indication could rake in an additional $600 million annually for AstraZeneca once it gains regulatory approval.
Although this is merely less than 2% of the projected $36.1 billion total revenue for AstraZeneca in 2021, adding $600 million would still be a notable tailwind to the $2.5 billion estimated earnings from Imfinzi.
While its COVID-19 vaccine did not deliver the same outstanding efficacy results as the mRNA vaccines of Moderna (MRNA) and Pfizer / BioNTech, it’s still one of the handfuls of major pharmaceutical companies that managed to develop and distribute an effective product.
Overall, vaccine decisions aside, AstraZeneca appears to be in a great place with a robust oncology portfolio. Therefore, this stock looks like a solid buy with several upcoming price catalysts in 2021 and 2022.
Mad Hedge Biotech and Healthcare Letter
November 16, 2021
Fiat Lux
Featured Trade:
(FORGOTTEN COVID-19 STOCK STILL ALIVE AND KICKING)
(GILD), (REGN), (MRNA), (AZN), (JNJ), (PFE), (BNTX), (MRK)
At times, it can be rewarding to go against the tide. This can also be applicable to the stock market.
Forgotten names or companies with shares that got hammered can eventually transform into remarkable investment opportunities. After all, it's always wise to invest in a quality stock when it loses some serious altitude.
Now, let's take a look at a biotechnology and healthcare business that has been performing poorly in the past 12 months but still holds a promising chance of bouncing back: Gilead Sciences (GILD).
This biotechnology giant is still reeling after its recent regulatory setback involving Filgotinib, a potential treatment for rheumatoid arthritis.
Initially, Filgotinib was slated as Gilead Sciences' next blockbuster drug. Unfortunately, the US FDA didn't agree with those plans.
The regulatory body rejected the treatment, pointing out the risks of patients developing male fertility problems as one of the significant reasons.
By November 2020, Gilead Sciences completely abandoned the Filgotinib project, at least in the United States.
Prior to this, Gilead Sciences took center stage when its Remdesivir, sold under the brand name Veklury, was identified as an effective COVID-19 treatment.
While this product has taken the back seat since other treatments from the likes of Regeneron (REGN) and especially vaccines from Moderna (MRNA), Johnson & Johnson (JNJ), AstraZeneca (AZN), Pfizer (PFE), and BioNTech (BNTX) have emerged, it still generated impressive numbers.
In the second quarter alone, Veklury brought in $829 million in revenue.
Gilead Sciences anticipate sales to reach somewhere between $2.7 billion and $3.1 billion for this drug in 2021.
Arguably, though, the biggest draw in buying Gilead Sciences stock is its HIV pipeline.
To date, the company holds roughly 75% of the market share in the US and approximately 50% in Europe.
What's even more promising is that the company's top-selling HIV product, Biktarvy, still has vast room to grow.
This is impressive considering that Biktarvy raked in approximately $2 billion in sales in the second quarter of 2021, showing off a 24.3% year-over-year jump.
Looking at its trajectory and considering that the drug generated $7.3 billion in 2020, Biktarvy sales are estimated to hit $11.7 billion in 2026.
More than the company's incredible dominance in cornering the HIV market, Gilead Sciences also has an excellent pipeline with over three dozen clinical programs queued.
Inevitably, one of its major concentrations is expanding its HIV portfolio.
In fact, it has recently teamed up with fellow biotechnology giant Merck (MRK) to collaborate on a potential HIV treatment—a candidate that's anticipated to equal if not surpass Biktarvy's fame.
One more potential blockbuster in the HIV market is Lenacapavir, which is an injection regiment that Gilead Sciences recently submitted for approval to the FDA.
If granted the green light, this will be administered once every 6 months, making it the first-ever long-acting regimen for HIV patients.
Meanwhile, the company is also growing its Hepatitis B franchise to avoid being too dependent on a single market.
So far, Gilead Sciences estimates about $1 billion in sales for this lineup in 2022, making the Hepatitis B portfolio a reliable part of the business.
Another growing section of the business is its cell therapy segment, with Yescarta and Tecartus nearing their peak performances at $1 billion in sales yearly.
Even its newly developed cancer cell therapy Magrolimab looks promising, with the potential to rake in another $1 billion in peak sales as well.
Needless to say, Gilead Sciences' new products and expansions have been displaying realistic potential to drive billions in added yearly revenue.
Overall, Gilead Sciences is a stable and profitable biotechnology and healthcare business.
It's a large-cap biopharmaceutical organization and market leader that has been solidly performing well for over 3 decades, with an influential presence in more than 35 countries.
Despite its recent challenges, Gilead Sciences remains an excellent buy, especially on the dip.
