Mad Hedge Biotech and Healthcare Letter
January 11, 2024
Fiat Lux
Featured Trade:
(HEALTHCARE GIANTS GO SHOPPING)
(JNJ), (MRK), (AMAM), (PFE), (HARP), (NVS), (CYTK)
Mad Hedge Biotech and Healthcare Letter
January 11, 2024
Fiat Lux
Featured Trade:
(HEALTHCARE GIANTS GO SHOPPING)
(JNJ), (MRK), (AMAM), (PFE), (HARP), (NVS), (CYTK)
Ah, San Francisco, the city of fog and fabulous biotech and healthcare feasts. In case you missed it, the J.P. Morgan annual healthcare conference, the biotech Super Bowl, just kicked off this January.
Imagine a bustling downtown San Francisco, where hotels are as jam-packed as a can of sardines, but instead of fish, they're brimming with investors and healthcare execs.
Let's focus on the biotech sector, which, let's be honest, has seen its fair share of ups and downs. The past three years? More like watching paint dry.
But, as if by magic, we've seen a recent upturn. A two-month price surge that’s as unexpected as it is welcome.
The SPDR S&P Biotech ETF (XBI), our financial barometer here, has gone from a nosedive (down over 60% since February 2021) to a rocket ship (up nearly 40%). Interest rate cuts and M&A buzz are like the Red Bull in this energy drink mix.
Now, to the heart of the story: big pharma's shopping spree.
The day of surprise comes when Merck & Co. (MRK) and Johnson & Johnson (JNJ) strut in with deals that leave us wide-eyed.
And these are not just any deals, but the kind where these healthcare giants are practically throwing money like it's going out of style – over 100% premiums over the last prices. It's like offering to pay double for a house just because you love the wallpaper.
Johnson & Johnson swoops in on Ambrx Biopharma (AMAM) for a cool $2 billion. At $28 per share, they're paying a 105.4% premium.
For context, this isn't your run-of-the-mill biopharmaceutical company. Oh no, Ambrx is more like the Elon Musk of the biotech world, innovating like there's no tomorrow.
This biotech is all about cooking up some of the most cutting-edge therapies out there – think antibody-drug conjugates (ADCs) and other engineered marvels that give the immune system a superhero makeover.
On top of that, Ambrx actually has a secret weapon – their expanded genetic code technology platform called Engineered Precision Biologics (EPBs).
This technology isn't just smart; it's Einstein-level genius. It brings together site-specific conjugation with proprietary linkers and payloads. It's like building a custom-made luxury car, except this one's designed to obliterate cancer.
Researchers are raving about Ambrx's ADCs, calling them “guided missiles.” And they're not exaggerating.
These bad boys zero in on cancer cells with the precision of a sniper, taking them out without wreaking havoc on the innocent bystanders – the healthy tissue. It's pretty much like having a Swiss watch in your medical arsenal, sleek, sophisticated, and super effective.
Impressively, Ambrx isn't stopping at just being a one-hit wonder. They're pushing the envelope with enhanced antibody-drug conjugate, immuno-oncology conjugate, and bispecific candidates. These aren't just treatments; they're potential game-changers in the war against cancer.
So, when Johnson & Johnson ponied up $2 billion for Ambrx, they weren't just buying a company; they were investing in a future where cancer might just meet its match.
In fact, Pfizer (PFE) recently grabbed Seagen for $43 billion in 2023, just to get a slice of this ADC pie. It's the latest fashion in cancer treatment, and everyone wants in.
Meanwhile, Merck, not to be outdone, grabs Harpoon Therapeutics (HARP) for $680 million, a 118% premium at $23 per share. It's a biotech-feeding frenzy, and Merck's got its teeth out.
Harpoon is a clinical-stage immunotherapy company that's not just playing in the big leagues, but changing the game. They're all about developing a novel class of T-cell engagers, and let me tell you, this stuff is like the Navy SEALs of cancer treatment.
Imagine these T-cell engagers as tiny, engineered proteins. They're like undercover agents directing a patient’s own T-cells (the body's immune commandos) to seek and destroy cells waving the bad guy flag – specific proteins or antigens carried by those nasty cancer cells.
Basically, it's like having a GPS-guided missile system in your body, targeting only the rogue cells.
And Harpoon isn't just dabbling here, but also innovating with their proprietary Tri-specific T cell Activating Construct (TriTAC) platform.
Picture a pipeline, but instead of oil, it's flowing with novel TriTACs focusing on laying siege to solid tumors and blood malignancies. If successful, they plan to arm the immune system with a whole new arsenal.
Aside from these, Harpoon also whipped up something they call the ProTriTAC platform. Think of it as the James Bond of T-cell engagers – it stays under the radar (inactive) until it gets to the tumor. Once there, it's “license to kill” mode on. This prodrug concept is slick, ensuring that the therapeutic action happens right where the trouble is, and not anywhere else.
And for their third act, Harpoon presents the TriTAC-XR platform. This one's a bit of a tightrope walker, designed to dodge a potential pitfall known as cytokine release syndrome – a sort of overreaction from the immune system. It’s like having a safety net under your high-wire act.
Now, these premiums are not just showing off. They're a sign of desperate love from big pharma for these biotech beauties, a stark contrast to the recent cold shoulder of stock market blues.
Recently, there have also been whispers of Novartis (NVS) eyeing Cytokinetics (CYTK), a biotech belle with a $9.2 billion price tag. It's like the gossip at a high school prom, only with more zeros.
So, what's the takeaway from this biotech bazaar? It's simple: after a snooze-fest of a bear market, biotech's back, and it's hotter than a stolen Ferrari.
For investors, it's like watching a new season of your favorite show, only this time, the plot twists involve billion-dollar deals and cutting-edge cancer drugs. I suggest you buy the dip.
Mad Hedge Biotech & Healthcare Letter
September 3, 2020
Fiat Lux
Featured Trade:
(BRACE YOURSELF FOR ANOTHER PANDEMIC)
(AMGN), (NVS), (CYTK), (GILD), (RHHBY), (LLY), (SNY), (REGN)
“Anything that can go wrong will go wrong.”
It looks like Murphy’s law is about to strike again this year. The number of COVID-19 cases has reached almost 15 million worldwide, with about 4 million found in the US alone. However, the pandemic isn’t showing signs of slowing down.
Now, another deadly virus described to manifest “all the essential hallmarks of a candidate pandemic virus” has been found.
Earlier this month, a team of scientists revealed that there’s a newly discovered influenza strain, which could be a variation of the H1N1 swine flu—the same virus that triggered a global pandemic back in 2009.
That health crisis infected roughly 61 million Americans and more than 700 million people across the globe.
Although there’s still no conclusive evidence, this H1N1 influenza strain also traces its origins in China.
We witnessed how the stock market plummeted as the COVID-19 pandemic broke out. It eventually bounced back, which provided us with insights on how to deal with this potential second deadly virus.
Taking into consideration the uncertainty caused by these health and financial crises, I no longer put all my energy on near-term investments.
Instead, I train my eyes on stable and strong stocks with attractive revenue potential.
One of the companies that meet my criteria is Amgen (AMGN).
Amid the coronavirus pandemonium, Amgen has been aggressive in keeping its stronghold, particularly in its key moneymakers.
The latest win for the company is against Novartis (NVS), which challenged Amgen’s patent rights on the blockbuster anti-inflammatory treatment Enbrel.
This patent victory secured exclusivity for the top-selling rheumatoid arthritis injection, which generated $5.1 billion in sales in 2019 and could rake in at least $4.5 billion in 2020, against low-priced copycats until 2029.
Although Amgen has been struggling with biosimilar competition in the past years, the company’s first quarter earnings reports indicate that things are turning around for them.
Amgen reported an 11% year-over-year increase in revenue for the first quarter of 2020 to reach $6.2 billion, with global product sales jumping by 12%, boosted by a remarkable 15% in volume growth.
The company’s free cash flow for the first quarter also went up to $2 billion compared to the $1.7 billion it recorded in the same period in 2019.
The spike in Amgen’s numbers could be attributed to the new products in its pipeline. Apart from Enbrel, there are several other moneymakers generating solid growth for the company.
An obvious game-changer is severe plaque psoriasis medication Otezla, which Amgen acquired from Celgene for $13.4 billion in November 2019.
In the first 3 months of 2020 alone, Otezla has already raked in $479 million in sales for Amgen.
Sales of high cholesterol drug Repatha jumped by 62%, hitting $229 million.
Meanwhile, osteoporosis treatment Evenity contributed $100 million thanks to its expansion in the US and Japanese markets.
With the improvement in its performance, Amgen reiterated its revenue forecast for 2020 of $25 billion to $25.6 billion, showing off a 9.4% gain compared to 2019.
Aside from its current roster, Amgen is also waiting for regulatory approvals on some of its products this year.
The company is hoping for good news from the FDA on its multiple myeloma drug Kyprolis in November and its Rituxan biosimilar candidate in December.
Its pipeline also features 20 late-stage studies, 15 of which are for expanded indications of the company’s already-approved products.
Next to Otezla, Amgen is eyeing another blockbuster following the Fast Track designation granted to heart failure drug Omecamtiv mecarbil.
The drug, which the company is working in collaboration with Cytokinetics (CYTK), is projected to reach a jaw-dropping valuation of roughly $16 billion by 2026.
If successful, Omecamtiv mecarbil could become a close competitor of Entresto, which raked in $569 million for Novartis in the first quarter of 2020 alone.
Meanwhile, Amgen is not only focused on harnessing its growth drivers. The biotechnology giant has been active in searching for COVID-19 treatment as well.
Following the lead of Gilead Sciences (GILD), which used an already approved drug Remdesivir to come up with a treatment, Amgen is also testing its newly acquired blockbuster Otezla.
In using an anti-inflammatory drug to treat COVID-19 patients, Amgen is taking a similar approach as other biotechnology giants like Roche (RHHBY) with Actemra, Eli Lilly (LLY) with Baricitinib, and Sanofi (SNY) and Regeneron (REGN) with Kevzara.
Amgen investors currently get $1.60 in quarterly dividend payments, receiving $6.40 annually. In comparison, shareholders received $1.45 in 2019, showing off a healthy 10% hike.
With a stock price of roughly $235, this puts the company’s dividend yield to somewhere above 2.7%.
This is better than the 2% of investors earn on average from the S&P 500, indicating that Amgen pays investors with an above-average yield. Over the past 5 years, Amgen has boosted its annual dividend by nearly 103%.
Overall, Amgen is a solid long-term investment with promising growth drivers out in the market and in its pipeline.
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