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)
Posts
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.
Mad Hedge Biotech and Healthcare Letter
November 2, 2021
Fiat Lux
Featured Trade:
(IS THIS THE BEST BUY AMONG THE VACCINE STOCKS)
(NVAX), (MRNA), (PFE), (BNTX), (SNY), (JNJ)
Many investors have amassed a fortune since the pandemic started in the early months of 2020 by betting on COVID-19 vaccine candidates. Moderna (MRNA), for example, has skyrocketed to over 1,500% since last year.
However, there was an even bigger winner: Novavax (NVAX).
Novavax shares actually rose by a jaw-dropping 4,000% since the COVID-19 pandemic began, with the company’s wild rollercoaster ride still not reaching its end anytime soon.
In fact, Novavax has been quite volatile in 2021, rising by more than 180% in early February only to have most of those gains practically wiped out a mere three months after.
Then, the stock managed to show off a strong rebound over the following months. Since early September, though, Novavax’s share price has fallen by over 35%.
While these can be discouraging for some investors, I think that the befuddling gyrations that had us reeling in the past months tell a different story: We might have just discovered the biggest bargain among the leading COVID-19 vaccine stocks in the market today.
There are two possible reasons for the Novavax selloff recently.
The first is the company’s delayed filing of its own COVID-19 vaccine candidate, NVX-CoV2373. This is particularly frustrating considering that Novavax has failed to meet its deadlines multiple times now.
Nonetheless, I prefer to look at these delays as mere speed bumps than actual roadblocks that hinder the company from achieving its goal.
After all, the issue is not on the vaccine’s safety and efficacy—the results have been proven to be highly compelling—but on manufacturing concerns, which can eventually be resolved.
The second reason is the recent update from Merck (MRK) and its partner, Ridgeback Biotherapeutics, on their COVID-19 pill. Of the two, I find this reason to be an overreaction by the market.
None of the vaccine developers should ever be negatively affected by Merck’s oral treatment. While some people might choose not to get the vaccine if and when the pills become available, practically all governments worldwide are still committed to vaccinating their citizens.
Moreover, the COVID-19 vaccines will probably be necessary every year.
When Novavax gets the required authorizations, the company is set to generate a boatload of cash. The biotechnology company is anticipating to supply up to 200 million doses in the European Union alone.
The entire COVID-10 vaccine market is projected to be worth $115 billion by the end of 2021. Moderna is estimated to deliver up to 3 billion doses, while Novavax is expected to produce up to 2 billion doses by 2022.
The rest of the anticipated 14 billion doses will be divided among the other vaccine makers.
Among them, though, Novavax is expected to be the stand-out.
For one, its vaccine candidate appears to be the most robust and affordable at $16 per dose compared to Moderna’s $25.50 and Pfizer-BioNTech’s $22.80.
The growing number of reports on the side effects of mRNA vaccines, which are said to be of a higher rate than Johnson & Johnson’s (JNJ) candidate, can also be a turnoff for many people.
Since Novavax uses a more traditional and familiar vaccine technology—the same one used for the flu, HPV, and Hepatitis B—it causes lower side effects rates.
More importantly, these are mild symptoms like muscle pain and fatigue compared to the heart inflammation concerns raised among those jabbed with Moderna or Pfizer vaccines.
While the side effects from the other two occur in relatively small populations, Novavax is anticipated to be perceived as the more reassuring option, especially for people who are still uneasy with the new technology of mRNA vaccines.
More importantly, Novavax can offer a solution to the global problem of vaccine hesitancy for COVID-19.
To offer a context on how important this is, 48% of Russians and 27% of Americans refuse to take the vaccines.
As of September, only 181.2 million individuals in the US, or 55.1% of the country’s population, have agreed to be fully vaccinated. Needless to say, overcoming this hesitancy would be a massive relief for everyone.
Apart from its COVID-19 vaccine, Novavax has also been working on an influenza vaccine candidate, NanoFlu.
Recently, results from the NanoFlu clinical trials showed that it’s way more effective than the leading brand today, Sanofi’s (SNY) Fluzone Quadrivalent.
If NanoFlu gains approval, this will be another huge growth driver for Novavax.
To put it in perspective, Sanofi’s Fluzone generated $2.9 billion in sales in 2020—a market that Novavax can also tap into and might even dominate.
Meanwhile, the flu vaccine market in the US alone continues to expand.
From 2020 to 2021, the number of flu vaccines administered rose by 11% year over year to reach 193.8 million doses. That’s roughly 59% of the US population—a country that’s only 7th place in terms of the global rates of flu vaccination.
That signifies a colossal market opportunity worldwide for Novavax to capitalize.
At this point, Novavax has yet to secure any approval or official authorization for NVX-CoV2373 or NanoFlu—and that’s the best reason to add this stock to your portfolio.
Investors are given a chance to seize shares of the stock while it’s still in the stage where its most lucrative catalysts are just lurking around the corner.
Mad Hedge Biotech and Healthcare Letter
October 21, 2021
Fiat Lux
Featured Trade:
(A DIVIDEND ARISTOCRAT THAT DELIVERS LIKE CLOCKWORK)
(JNJ), (PFE), (MRNA), (BNTX), (NVS), (RHHBY), (MGTX)
There have been two narratives as far as COVID-19 vaccine developers go. One story centers on companies with fortunes essentially built and exploding thanks to their COVID-19 vaccines, like Moderna (MRNA), Novavax (NVAX), and BioNTech (BNTX).
The second story involves larger biopharmaceutical companies, such as Johnson & Johnson (JNJ) and BioNTech’s partner, Pfizer (PFE), which barely felt their shares move in the past 18 months.
While it’s easy to understand the excitement over the achievements of the likes of Moderna, is it reasonable for Pfizer and JNJ investors to feel bad over the lack of movement in their shares?
Not at all, especially in the case of JNJ.
After all, these huge companies have decided to sell their vaccines on a not-for-profit basis until the major wave of the pandemic ends—a move that can be seen as a sound strategy for JNJ to rebuild some goodwill especially following the recent scandals involving the company.
Nevertheless, JNJ might still get a boost (pun intended) from its COVID-19 vaccine booster shots.
Just last week, a prominent advisory committee to the US FDA unanimously voted to recommend the booster shots, which likely means that the 15 million people who got jabbed with JNJ’s candidate will get a second shot as well.
If the FDA agrees with this recommendation, then the boosters could be available within the month. This comes after the agency also approved booster shots from Pfizer-BioNTech and Moderna.
Last month, the US government decided to provide Pfizer booster shots to the older population and high-risk groups, with Moderna following suit almost immediately.
So far, there have been 8 million people who have already received their Pfizer booster doses, while 1.6 million got the third dose for Moderna.
This is another lucrative market for vaccine makers, considering that to date, there are over 104 million people vaccinated with Pfizer, roughly 69 million with Moderna, and approximately 15 million with JNJ.
Amid the talks about the boosters, JNJ stands firm that its vaccine’s potency increases over time and doesn’t wane, unlike Pfizer’s candidate. This means there’s no urgency for a booster shot when it comes to JNJ’s candidate.
Nevertheless, considering that JNJ isn’t exactly attempting to earn from its COVID-19 vaccine aggressively, there’s no point in investors worrying about this issue too much.
The fundamental aspects that will impact the stock price can be found elsewhere.
One of the more exciting projects of JNJ lately is its move to become more active in the gene-editing field.
Following the buzz from the multi-billion dollar acquisitions of companies like Novartis (NVS) and Roche (RHHBY) several years ago, it looks like JNJ might be the next big name to enter the fray.
Since 2018, JNJ has been working closely with a small-cap gene-therapy company called MeiraGTx Holdings (MGTX).
While highly secretive of the details, MeiraGTX, which has a market capitalization of just below $600 million, has been developing a gene-regulation technology—an innovation that could revolutionize gene therapy.
For context, this kind of innovation was applied to Novartis’ Zolgensma, a one-time treatment for spinal muscular atrophy worth a whopping $2.1 million—the most expensive medication in the world.
In terms of MeiraGTX’s work with JNJ, the two companies are focusing on creating therapies for various eye diseases. Looking at their timeline, the first candidate should be ready by 2023.
While there remain questions about its COVID-19 vaccine candidate, their earnings are expected to reach roughly $2.5 billion or merely 2.65% of JNJ’s total revenue. This would barely make a dent in the overall performance of the company.
What comes clear in the performance reports from the company is that its core business remains the primary moneymakers.
In the second quarter of 2021, JNJ recorded $23.3 billion in sales, reporting a notable 27.1% from the $18.3 billion revenue it generated from the same quarter in 2020.
Its gross profit also climbed from $11.7 billion to $15.7 billion, showing a 33.8% improvement. As for its EPS, it skyrocketed by 72.8% year-over-year from $1.36 to $2.35.
Meanwhile, JNJ’s guidance for 2021 has been updated to reflect its expected 13.% to 14.% year-over-year increase between the range of $93.8 billion and $94.6 billion.
Its pipeline and current portfolio also all but guarantee that JNJ will deliver mid to high single-digit earnings in the years to come.
Another indicator of the stock’s quality is its dividend record, with JNJ priding itself on a 59-year streak—making it an undisputed dividend aristocrat.
Overall, I see JNJ as an impressive $433 billion behemoth in the biopharmaceutical sector. The company has been consistent in delivering remarkable top and bottom lines every quarter.
Mad Hedge Bitcoin Letter
October 19, 2021
Fiat Lux
Featured Trade:
(TRANSCENDING ITS COVID-19 VACCINE POTENTIAL)
(SNY), (PFE), (BNTX), (MRNA), (JNJ), (GSK)
Another day. Another COVID-19 vaccine could be out on the market.
Although hundreds of millions of individuals across the globe have already received their shots from approved vaccines of Pfizer (PFE) - BioNTech (BNTX), Moderna (MRNA), and Johnson & Johnson (JNJ), there are still several COVID-19 vaccine candidates undergoing late-stage testing.
This is important news for the companies.
After all, the COVID-19 vaccine market is projected to become a fundamental driver of share price growth.
From what we know about the virus so far, there is a huge possibility that people will need to be vaccinated annually at the very least.
If that’s the case, then the demand for COVID-19 vaccines yearly would reach roughly 8 to 10 billion doses. This could translate to sales between $80 billion and $100 billion.
The latest to potentially join the list is the joint candidate of Sanofi (SNY) and GlaxoSmithKline (GSK), which is anticipated for approval by the fourth quarter of 2021.
While Sanofi and GSK are practically a year behind their competitors, the high efficacy of their vaccine candidate—roughly 95% to 100%—makes them potential frontrunners in the near future.
Given that we can expect many competitors to enter the fray in the coming months, we can conservatively assume that Sanofi takes at least 3% to 5% of the market.
That would generate approximately $2.4 billion to $5 billion in annual revenue.
Since Sanofi holds a number of competitive advantages, such as solid experience in manufacturing and development and a strong geographical presence across critical markets, the company can ease out the competition.
Riding the momentum of the COVID-19 vaccines, particularly the mRNA candidates, Sanofi has been working with Seqirus to develop flu vaccines as well.
As the world struggles to deal with the effects of COVID-19, the more common flu isn’t receiving that much attention these days.
However, the impact of this disease worldwide is shocking: 3 million to 5 million people suffer from severe cases annually, with up to 650,000 individuals dying from the flu.
More alarmingly, a new flu strain spreads from animals and causes a pandemic every few decades.
The death toll associated with the flu becomes even more staggering when you think about the fact that we’ve been working on vaccines to get rid of its for eight decades now.
Despite the ongoing and long-term efforts, all flu vaccines available in the market are mediocre at best.
In fact, a flu shot is only effective within a single flu season. Moreover, its effectiveness is only within the range of 40% and 60%. There were even years when the number was as low as 10%.
Now, though, we might have a better shot at developing more effective flu vaccines thanks to the emergence of mRNA technology.
In theory, mRNA vaccines can trigger a stronger response from patients' immune system compared to the traditional flu vaccines.
To date, two companies are working on mRNA-based flu vaccines: Moderna and Sanofi.
Sanofi is collaborating with England-based vaccine developer Seqirus, with the two companies aiming for another mRNA flu test by early 2022. This will be in addition to the four flu vaccine candidates they have in the pipeline.
While the results for Sanofi’s flu vaccine efforts remain to be seen, experts are optimistic that it can drastically lower the number of deaths and severe cases annually.
For context, the most popular flu vaccine in 2018-19 flu season only had an efficacy rate of 29%.
Even with such low effectiveness, this vaccine prevents roughly 4.4 million flu cases in the United States alone. It also prevented 58,000 hospitalizations and 3,500 deaths.
Now, imagine how many lives a stronger candidate can save.
Although Sanofi appears to be late to the party in terms of its COVID-19 vaccine, the sheer efficacy of the company’s promising candidate with GSK makes it a powerful future contender as the leader of the pack.
Moreover, Sanofi is on the verge of resolving a pain point in the healthcare sector: the absence of a robust flu vaccine.
With its lineup of mRNA-based flu vaccine candidates, Sanofi is poised to discover potential game-changers in the industry and save millions of lives in the process.
Overall, Sanofi is a promising company sold at a reasonable price. More importantly, it prides itself on remarkable dividend history, paying and increasing dividends for 27 consecutive years.
Therefore, this dividend aristocrat is a good addition for investors on the lookout for quality and dependable stocks.
Mad Hedge Biotech & Healthcare Letter
September 30, 2021
Fiat Lux
FEATURED TRADE:
(THE BIRTH OF A TRUE INNOVATOR IN BIOTECH)
(NVAX), (MRNA), (BNTX), (PFE), (JNJ), (AZN)
Innovation and establishing groundbreaking frontiers are never straightforward. This high-risk, high-reward endeavor is littered with skeletons of failure along the way.
The situation is particularly prevalent in the biotechnology and healthcare sector. However, there are a handful of companies that manage to navigate the risks.
Novavax (NVAX) is one of them.
While the chance to become one of the early investors to buy Novavax at $5 has passed, I think the stock is still a good opportunity.
Right now, we’re at the foothills of its mid-phase potential—a few steps away from its high-growth stage.
At this point, what was previously assumed as a high-risk investment in Novavax can already be perceived as a calculated risk, and the reward can now be seen from a distance.
Simply put, there’s still a chance to invest in Novavax because its story is still being written.
So far, Moderna (MRNA) has a market capitalization of $183.50 billion, while BioNTech (BNTX) has $85.61 billion. In comparison, Novavax comes in positively cheap at $19.16 billion.
The key difference is that Moderna and BioNTech already have their COVID-19 vaccines out in the market.
As for Novavax, the biotech’s candidate, NVX-CoV2373, is still waiting for the green light for its first Emergency Use Authorization.
When government agencies begin letting Novavax distribute its COVID-19 vaccine, though, the stock is projected to soar.
The approval for NVX-CoV2373 is almost inevitable, as the vaccine showed an impressive 96.4% efficacy against the original strain—a higher percentage than Pfizer (PFE) and Moderna’s candidates.
If all goes well, the vaccine could be available by the fourth quarter.
As golfers would say, it’s only a chip and a putt from this point to get Novavax’s COVID-19 vaccine out in the market.
Given this projection, Novavax is expected to be the No. 3 COVID-19 vaccine distributor globally, easing out competitors Johnson & Johnson (JNJ) and AstraZeneca (AZN).
Despite not being a first mover in the COVID-19 vaccine race, Novavax can still seize a considerable market share.
The majority of the global population has yet to be vaccinated, and the company has already secured a deal for 2 billion doses in 2022.
On top of that, biotech has several agreements, including 100 million doses for the United States, 200 million doses for Europe, 150 million doses for Japan, and more than 1 billion doses for some developing countries.
In fact, the United States paid an advance of $1.3 billion for 100 million doses. That puts NVX-CoV2373 at roughly $13 per dose.
Although the purchase agreements are confidential, the prices for Japan and Europe are likely to be higher, while the developing countries will be given discounted rates.
At this rate, it’s possible that Novavax’s revenue in 2022 will be higher than its current market capitalization.
However, Novavax’s prospective path to becoming a high-reward investment will most probably come on the coattails of its COVID-19 vaccine, NVX-CoV2373.
Despite getting overtaken by Pfizer and Moderna in the COVID-19 vaccine race, there’s a critical area where Novavax has a massive headstart from its larger rivals: the COVID-19/influenza vaccine combo.
Not only does Novavax have several candidates well on their way to clinical trials, but the company’s combo vaccines also have the potential to outperform the majority—if not all—of its competitors aiming to market similar products.
So far, Novavax’s flu candidate NanoFlu appears to be a frontrunner as it meets all the primary endpoints set for Phase 3 clinical testing.
If everything falls into place, then Novavax would be able to bring a COVID-19/flu vaccine to market by 2025.
While three to four years may seem like a long time, keep in mind that neither Moderna nor Pfizer has a timeline for any potential product in this segment.
Although we don’t exactly know the future pricing for these combo vaccines, we can use the COVID-19 vaccine earnings of Pfizer and Moderna as guides.
Pfizer and BioNTech anticipate roughly $33 billion in revenue, while Moderna estimates more than $20 billion. Combined, that’s over $50 billion.
It’s evident that a combo vaccine would signify a multi-billion-dollar market, and obviously, more than one player would be taking a crack at it.
Nonetheless, the first to market could end up with the largest share—a fact that Pfizer turned into reality with its weeklong headstart over Moderna in the COVID-19 vaccine race.
While Novavax failed to keep up in this race, the company appears to be ready to seize its second chance to lead the way in the COVID-19/influenza combo vaccine race instead. Needless to say, this potentially blockbuster product could become an absolute game-changer.
