Mad Hedge Biotech and Healthcare Letter
February 20, 2025
Fiat Lux
Featured Trade:
(PORTFOLIO MANAGEMENT DURING PAIN MANAGEMENT)
(VRTX), (DSNKY), (AZN), (GILD), (SNY), (GSK), (JNJ), (BMY), (LLY)
Posts
Mad Hedge Biotech and Healthcare Letter
February 18, 2025
Fiat Lux
Featured Trade:
(A TALE OF TWO SHOTS)
(GILD), (MSFT)
The smell of antiseptic and sounds of beeping monitors filled the air as I walked through a Tokyo hospital ward back in 1975.
As a fresh UCLA biochemistry graduate working in Japan, I was visiting a friend who had contracted hepatitis B - a common affliction in Asia at the time.
Little did I know that decades later, I'd be analyzing a company that would revolutionize not just hepatitis treatment, but potentially end the AIDS epidemic as we know it.
That company is Gilead Sciences (GILD), and they just delivered a knockout Q4 that has Wall Street's attention.
But the real story here isn't in the numbers - though believe me, we'll get to those. It's about what's coming next.
Last week, Gilead reported Q4 revenue of $7.57 billion, beating estimates by $420 million. Not too shabby for a company some analysts had written off as past its prime.
And here’s another thing that got my attention: their new HIV prevention treatment, lenacapavir, achieved something I've rarely seen in four decades of following biotech - a standing ovation at the AIDS 2024 conference.
Why? Because it worked. Not just worked - it was 100% effective in one trial and 99.9% in another.
For perspective, that's like pitching a perfect game in the World Series, twice. And instead of daily pills, we're talking about two shots per year.
The FDA is expected to weigh in by summer 2025, and after seeing results like these, I'd bet my vintage Japanese sake collection on approval.
The numbers tell quite a story. Gilead's HIV franchise grew 16% year-over-year, with their flagship drug Biktarvy now commanding over 50% market share.
Even with Medicare Part D changes taking a $1 billion bite out of 2025 revenues (thanks, IRA), management still guided for $28.2-28.6 billion in revenue.
That's not just maintaining course - that's sailing straight through a hurricane without spilling your coffee.
Their oncology business isn't sleeping either. Trodelvy hit $1.3 billion in 2024 sales, up 19% from last year.
Their cell therapies Yescarta and Tecartus are performing like seasoned kabuki actors, bringing in $390 million and $98 million respectively in Q4.
On top of these, Gilead has over 50 clinical programs running simultaneously.
For those keeping score at home, that's more shots on goal than a World Cup final. And they don't face any major patent cliffs until late 2033 - practically an eternity in biotech years.
Speaking of shots on goal, let's talk about that stock price.
Shares have climbed from $71 to around $100 since my last recommendation. Not bad, but given what's in the pipeline, I think we're still in the early innings here.
The company's latest breakthrough, Livdelzi for liver disease, already pulled in $30 million in its first quarter.
Some analysts are talking about $2 billion in peak sales - and having seen my share of liver disease cases during my time in Asia, I wouldn't be surprised if they're being conservative.
Looking ahead to 2025, Gilead has several potential catalysts.
Two major Trodelvy trial readouts, potential lenacapavir approvals worldwide, and expansion into new markets.
They've come a long way since their Harvoni glory days of 2015, transforming from a one-hit wonder into a diversified powerhouse.
Is the stock cheap? Not as cheap as when I first recommended it. But with lenacapavir looking like it could change the game in HIV prevention, this feels like watching Microsoft (MSFT) in the early days of Windows - you know something big is coming, even if you can't quite see the whole picture yet.
The last time I saw scientific results this promising was during China's opening up in the late 1970s, when decades of isolated research suddenly became available to the world.
As for my friend from that Tokyo hospital? He recovered fully, thanks to medical advances that seemed impossible at the time.
Today's impossibilities have a funny way of becoming tomorrow's breakthroughs - and that's exactly why I'm rating Gilead a strong buy on any dips.
Mad Hedge Biotech and Healthcare Letter
December 24, 2024
Fiat Lux
Featured Trade:
(THE LAB RESULTS ARE IN)
(GILD), (TSLA), (WVE), (EDIT), (CRSP), (LLY), (NVO), (WMT), (CVS), (CCCC), (RHHBY)
I found myself gridlocked in Bay Area traffic a few days ago, inching past Gilead's (GILD) sprawling Foster City headquarters, when my phone lit up with a call from an old friend at Goldman.
“Alright, tell me—what’s the real story with biotech this year?” she asked, her tone hovering somewhere between curiosity and exasperation. “Half my portfolio feels like a masterstroke, the other half... well, let’s just say it’s testing my patience.”
As I watched a Tesla (TSLA) weave through traffic like it was auditioning for a Fast & Furious reboot, I smiled.
Biotech has always been a bit of a high-stakes chess game—brilliance in one corner, chaos in another, and always a few surprises lurking behind the next move.
“Let me break it down for you,” I said, steering the conversation as carefully as I did my car through the bumper-to-bumper maze.
First, the winners are crushing it, and I mean crushing it. Gilead (GILD) finally cracked the code on HIV treatment, developing what's essentially a vaccine that doesn't require popping pills like they're Tic Tacs.
My contacts in clinical development tell me the Phase 3 data in cisgender women is nothing short of spectacular. With a $6 billion annual market potential by 2028, this isn't just another incremental advance - it's the kind of breakthrough that makes everyone in biotech salivate.
Then there's Wave Life Sciences (WVE) and their RNA editing technology. Remember when we thought CRISPR was the only game in town? Well, Wave just showed us there's more than one way to edit a gene.
Their liver-targeting therapy is the first successful RNA editing in humans - think of it as spell-check for your DNA, but reversible. The market's currently at $1.1 billion, but with 35% CAGR through 2030, this train is just leaving the station.
Speaking of trains leaving stations, molecular glue developers like C4 Therapeutics (CCCC) are watching Big Pharma back up the Brink's truck.
We're talking $8 billion in licensing deals this year alone. After all, when Roche (RHHBY) drops $300 million upfront - not milestone payments, mind you, but cold hard cash - you know they've seen something special in the data room.
But here's where it gets interesting, and I had to pull over at this point in the conversation because my friend wasn't going to like what came next.
CRISPR stocks? Down 20%. Editas (EDIT) and CRISPR Therapeutics (CRSP) are learning that revolutionary science doesn't always translate to revolutionary returns.
My friend Janet at the Fed might be talking about higher rates, but these companies are bleeding cash faster than a Silicon Valley startup's WeWork budget.
The obesity market? Unless your name is Eli Lilly (LLY) or Novo Nordisk (NVO), you're probably not having a great time.
Only three startups cleared $100 million in funding this year. In biotech terms, that's like trying to build a house with pocket change.
The global market's sitting at $4.1 billion, but it's more crowded than a San Francisco coffee shop during a tech conference.
And don't get me started on Walmart (WMT) and CVS (CVS) trying to play doctor. They thought they could disrupt traditional healthcare with their “get your physical next to the garden tools” model.
The result? A combined loss of $250 million and a wave of clinic closures.
The lesson here is clear: just because you can sell lightbulbs and Band-Aids in the same aisle doesn’t mean you should try to diagnose strep throat next to the automotive department.
A kid in a modded Subaru WRX cut me off as I wrapped up the call, but I left my friend with this: In biotech, timing is everything.
Gilead and Wave are showing us that patience pays off when the science is solid. Meanwhile, CRISPR stocks remind us that even the most promising technology needs good timing and deep pockets.
So, watch those clinical trial results like a hawk, and keep an eye on where the venture money's flowing.
But most importantly, remember what my old mentor used to say: "In biotech, you're not just betting on the science - you're betting on the scientist, the CFO, and sometimes, just sometimes, on whether people are ready to get their flu shot next to the garden center."
Now, where's that highway patrol when you need them?
Mad Hedge Biotech and Healthcare Letter
December 17, 2024
Fiat Lux
Featured Trade:
(THE BIG BATCH THEORY)
(CTLT), (DHR), (RGEN), (AVTR), (NVO), (PFE), (LLY), (MRK)
Mad Hedge Biotech and Healthcare Letter
December 12, 2024
Fiat Lux
Featured Trade:
(BREAKING THE MOLD)
(MRK), (PFE), (GILD), (AZN), (DSNKY), (JNJ)
Did you know that in the 1890s, scientists tried to cure cancer by injecting patients with... bread mold? (Spoiler alert: it didn't work.)
Fast forward to 2024, and Merck just announced something that makes moldy bread look like, well, moldy bread: their new cancer drug achieved a 100% complete response rate in its Phase 3 trial.
That's doctor-speak for "the cancer completely disappeared in every single patient." Not 99%. Not 99.9%. One hundred percent.
The drug in question is zilovertamab vedotin, and it belongs to a fascinating family of medications called antibody-drug conjugates, or ADCs.
These drugs are essentially molecular delivery trucks - the antibody part knows exactly where to go, while the drug part carries the cancer-fighting payload.
It's a bit like having a microscopic postal service that only delivers to cancer cells, except instead of Amazon packages, it's delivering something more lethal.
The story of how Merck got their hands on this drug is equally interesting.
In 2020, they wrote a check for $2.75 billion to acquire a company called VelosBio. To put that number in perspective, that's enough money to fund a small space program, or if you're feeling particularly eccentric, to buy 5.5 million laboratory mice (a purchase that would probably raise some eyebrows at the bank).
The global market for ADCs hit $7.72 billion in 2023, and some analysts predict it could reach $44 billion by 2029. I asked three different economists to explain these projections and got four different answers, but they all agreed on one thing: it's a lot of zeros.
And, as expected, the competition in this field is intense. Pfizer (PFE) bought Seagen for $43 billion. AstraZeneca (AZN) and Daiichi Sankyo (DSNKY) partnered up for Enhertu, while Gilead Sciences (GILD) nabbed Immunomedics and their wonderfully named drug Trodelvy.
Even Johnson & Johnson (JNJ), which most people associate with baby shampoo and that bottle of Band-Aids in their medicine cabinet, jumped into the fray by buying Ambrx Biopharma.
Then there's Mersana Therapeutics, partnered with Merck. They're smaller than the pharmaceutical giants, but in biotech, size isn't everything. (I once visited a lab where groundbreaking cancer research was happening in a space roughly the size of my kitchen.)
What makes Merck's achievement particularly remarkable is its rarity. In the world of cancer research, getting a 100% response rate is about as common as finding a unanimous decision on social media. It represents a fundamental shift in how we treat cancer, moving from traditional chemotherapy to these precisely targeted treatments.
For investors wanting a piece of this molecular magic, here's the thing: success in biotech isn't like picking a winning racehorse (though both can make your palms equally sweaty).
It's about finding companies that have mastered the three-ring circus of innovation, partnerships, and research pipelines. And yes, I've spent enough time in research facilities to know that "pipeline" is just a fancy word for "stuff we hope works but haven't broken yet."
Merck's perfect score suggests they've cracked one particular code, but companies like Seagen (now part of Pfizer), AstraZeneca, and Daiichi Sankyo are all pushing boundaries in their own ways.
Despite the competition, Merck's recent achievements still look the most promising. The company's breakthrough with zilovertamab vedotin suggests they're not just throwing darts at a laboratory wall - they're onto something big. So when their stock dips, smart money takes notice.
Similarly, Seagen, now under Pfizer's umbrella, looks particularly promising, especially given their established track record in the ADC space and Pfizer's deep pockets. Add them to your watchlist, too.
AstraZeneca and Pfizer, meanwhile, merit a steady "hold" position in your portfolio - like that reliable sourdough starter that keeps producing even if it's not particularly exciting at the moment.
Both companies have proven ADC programs and the resources to weather market volatility, even if they're not currently serving up the kind of headline-grabbing results that Merck just delivered.
Remember those 19th-century scientists with their bread mold? Turns out, they were onto something, even if their execution was a bit... moldy.
And while I wouldn't recommend their treatment methods today (please don't raid your fridge for experimental purposes), their spirit of innovation lives on in every precisely-targeted ADC molecule. After all these years, I guess you could say cancer treatment has finally risen above its moldy beginnings.
Mad Hedge Biotech and Healthcare Letter
December 10, 2024
Fiat Lux
Featured Trade:
(THE INSURANCE COMPANY ALWAYS RINGS TWICE)
(UNH), (CI), (CVS), (HUM), (AMGN), (BIIB), (GILD)
Mad Hedge Biotech and Healthcare Letter
September 5, 2024
Fiat Lux
Featured Trade:
(A VERY STRONG CELL-ING POINT)
(TXG), (NSTG), (BRKR), (ILMN), (BMY), (GILD), (BIO)