Mad Hedge Biotech & Healthcare Letter
May 28, 2020
Fiat Lux
Featured Trade:
(ASTRAZENECA’S WASHINGTON FREEBIE)
(AZN), (MRK), (PFE), (JNJ)
Posts
The coronavirus disease (COVID-19) has pushed people to gamble on unproven and untested products for as long as these can offer even just a shred of hope.
Call it the grasping for straws strategy.
The latest biotechnology company granted this kind of confidence is AstraZeneca (AZN).
The U.S. Department of Health and Human Services (HHS) recently announced its decision to provide the cardiovascular heavyweight up to $1.2 billion in funding to speed up the company’s progress on AZD1222. The problem is that the vaccine has not been proven to work.
You would think that if the US government was going to blow $1.2 billion on an unproven vaccine at least it would be on an American company. That is not the case. Pre pandemic, a drug at this stage of development would not have earned the time of day.
The experimental vaccine is a gene therapy that AstraZeneca has been working on alongside Oxford University. Aside from the funding, HHS also committed to supporting the clinical trial for this vaccine which would involve 30,000 participants.
In return, the biopharmaceutical company has agreed to send up to 300 million doses of the vaccine to the US, with the first shipment expected to be sent before 2020 ends. AstraZeneca will also provide 100 million doses to Great Britain.
Before getting too excited on this news though, it’s critical to note that AZD1222 is not yet proven effective against COVID-19.
This proposed vaccine from Oxford is created from a weakened version of a common cold virus. It was then genetically altered to disable it from growing in humans. So far, over 1,000 individuals already received this vaccine during an early stage test that started in April.
The plan is for the two companies to use the same technique that the Oxford University researchers applied to fight the Middle East Respiratory Syndrome (MERS).
Based on the results of a small clinical trial, this approach managed to prevent the transmission of MER-CoV among the patients. The goal is to replicate this success and halt the spread of COVID-19.
With AstraZeneca securing a manufacturing capacity of 1 billion doses, the first deliveries of the vaccine are estimated to start by September.
Apart from the US and the UK, AstraZeneca is also tapping the Serum Institute of India along with other potential collaborators to boost the production of the COVID-19 vaccine.
While all these updates sound promising, it’s undeniable that choosing which stock to invest in this chaotic market is not for the faint of heart.
The pandemic has clouded the earnings landscape of practically all companies across the board for at least the rest of 2020, with the uncertainty possibly spilling into 2021.
So far, several vital members of various industries have already sought unprecedented levels of aid from the state. A glaring example of this is the ailing airline industry, which has been receiving the most help from governments across the globe.
Meanwhile, AstraZeneca’s shares are up nearly double from the March bottom.
Looking at its financial history, it can be said that AstraZeneca’s ability to swim against the current is due in large part to its top-quality clinical pipeline.
In 2018 alone, the company received a whopping 23 regulatory approvals in various fields including oncology, cardiovascular, and kidney disorders.
The latest product to boost AstraZeneca’s already potent pipeline is its collaboration drug with Merck (MRK) called Lynparza.
Previously approved as a treatment for ovarian and breast cancer, Lynparza is now approved as medication for prostate cancer as well.
This label expansion allows AstraZeneca and Merck to go head to head against Johnson & Johnson’s (JNJ) Zytiga and even Pfizer (PFE) and Astellas Pharma’s Xtandi.
In 2019, Lynparza’s annual sales increased by 85% primarily because of label expansions. The drug is anticipated to show a surge in its 2020 sales as well thanks to this recent approval.
However, the best is yet to come for AstraZeneca.
While the company has put on hold a couple of its clinical trials, reports show that it has many late-stage data readouts up its sleeve. Hence, investors should be on the lookout for these announcements in the next 24 months.
Due to all the new growth products and label expansions, AstraZeneca’s top line is projected to jump by 13.7% in 2021, making it one of the fastest forecasted growth rates in the industry at this point.
For even more good news, this biopharmaceutical powerhouse disclosed that it has no intention of revising its annual guidance despite the pandemic. This announcement is tangible proof of the economic staying power of AstraZeneca’s portfolio.
AstraZeneca stock is not exactly cheap though. With its recent developments and track record, the company has definitely gained a following in the biotechnology and healthcare sector. Nonetheless, AstraZeneca has proven that it deserves its top-shelf valuation.
Mad Hedge Biotech & Healthcare Letter
May 14, 2020
Fiat Lux
Featured Trade:
(JOHNSON & JOHNSON’S BIG CORONA PLAY)
(JNJ), (MRNA)
One of the world’s biggest biotechnology and healthcare companies did not reach this status by betting on unproven strategies, but Johnson & Johnson (JNJ) recently made a huge gamble on an experimental vaccine for the deadly coronavirus disease (COVID-19).
Going all-in on this bet, JNJ committed to co-fund with Biomedical Advanced Research and Development Authority (BARDA) the development of a coronavirus vaccine. The two companies pledged over $1 billion for the manufacture of this experimental treatment.
Why is this a big deal?
Drugmakers typically wait to receive positive results before they even consider breaking ground on facilities designed to mass-produce any potential drug.
JNJ and BARDA’s move means there will be warehouses full of this coronavirus vaccine candidate even before we find out whether or not it can successfully prevent COVID-19.
Simply put, Johnson & Johnson decided to mass-produce a vaccine without any proof that it could even be effective.
The company is so confident about this that it believes it could hit the market by 2021 -- a stunning claim considering that it generally takes three to seven years, and at times even longer, to push a vaccine from the initial stage to market launch.
Although claiming such an incredibly short timeline is generally laughable, the FDA has been quite flexible when it comes to efforts to fight the pandemic.
Realistically speaking though, JNJ is unlikely to win this race.
While the giant drugmaker is obviously one of the most promising companies to join this fight, several companies are already further along in their efforts to find a COVID-19 vaccine.
A good example is Moderna (MRNA), which recently started Phase 1 of its clinical trials for a potential COVID-19 vaccine.
The company, which is working with the National Institutes of Health, will determine the safety and ability of its vaccine to trigger an immune response in the patient’s body. To date, there are 45 volunteers involved in this trial. Each of them will receive two doses of Moderna’s experimental vaccine.
Even if JNJ fails to make a fortune from its COVID-19 vaccine candidate, the company still has what it takes to ride out the pandemic and subsequent economic crisis. Actually, it has the ability to come out practically unscathed.
Throughout its 133-year history, (JNJ) has been a steady company that managed to survive six significant recessions so far.
A good example of its resilience was demonstrated during the Great Recession in 2008 up to 2009.
While the S&P 500 Index dropped by as much as 57%, (JNJ)’s shares fell by a maximum of 35%. With firm leaders and adjusted operational earnings growth, the company actually recorded an average earning-per-share growth of 7% from 2007 to 2009.
The company has also consistently paid and even continuously raised its dividend for the past 57 consecutive years -- a track record that can reassure even the most skittish investor.
A huge part of its success is the diversity of its portfolio, with several segments ready to pick up the slack if one sector begins to falter. (JNJ) has its hands on various segments including pharmaceuticals, medical equipment, and of course, consumer goods.
(JNJ) staples like Tylenol, Visine, Band-Aid, Neutrogena, and its line of baby products are the types of purchases that people need in good and bad times. These company brands offer a strong foundation for JNJ even in a recession. If you think about it, consumers rarely go about their days without using at least one JNJ product.
A review of (JNJ)’s performance in the rough years in the past paints a picture of a company strong enough to overcome this looming recession. In fact, it’s easy to believe the company’s fiscal guidance for 2020 which projects a 5.5% growth in sales and expanding margins.
Only a handful of companies can be considered “recession-proof,” and (JNJ) is definitely a part of that select few. Investing in this dependable business is a solid choice.
For more about (JNJ), please visit their website at https://www.jnj.com. For more about Corona vaccine winners, please click here.
Mad Hedge Biotech & Healthcare Letter
April 30, 2020
Fiat Lux
Featured Trade:
(GILEAD SCIENCES GOES BALLISTIC ON REMDESIVIR TRIAL)
(GILD), (PFE), (JNJ)
Gilead Sciences (GILD) is aggressively pushing to bring the coronavirus disease (COVID-19) to its proverbial knees before this year ends.
The ongoing coronavirus disease (COVID-19) pandemic has brought about substantial disruptions to the world economy, not to mention the devastating losses it caused families watching their loved ones succumb to this deadly virus.
Apart from Gilead, other biotech giants like Pfizer (PFE) and Johnson & Johnson (JNJ) are also hard at work looking for a COVID-19 cure.
Luckily, reports indicate that they may finally see a light at the end of the tunnel as one experimental treatment showed promising efficacy for fighting the health crisis.
Based on the contextual analysis of the leaked information on the clinical trials conducted by Gilead, the biotech company’s decision to bet on Remdesivir as a probable COVID-19 treatment could pay off soon.
At this point, Remdesivir is still under investigation in several Phase 3 clinical trials. These involve more than 2,400 participants scattered in 152 clinical sites.
One of these locations is the University of Chicago Medical Center, where 125 patients who tested positive for COVID-19 are treated every day with infusions of Remdesivir. Out of these individuals, only two deaths were reported with the majority already discharged.
Based on this subgroup alone, the fatality rate among the tested subjects is 1.6%.
Although Remesivir’s results still need further validation particularly in terms of adding a placebo arm in the clinical tests, the initial findings are already quite impressive. For context, data from John Hopkins University revealed that the fatality rate in the entire United States is roughly 4.69%.
Apart from that, another key detail points to the high probability of Remdesivir’s efficacy against COVID-19.
Among the 125 patients who underwent the treatment, 113 of them experienced severe symptoms.
As explained by the World Health Organization, the vast majority of those classified as severe cases involve the elderly and the immunocompromised. In one study, the infection death rate of individuals in this category fall somewhere between 1.93% up to 7.8%
Reassessing Remdesivir’s results from this perspective, we finally understand the excitement surrounding the drug’s efficacy despite the lack of a placebo trial.
In terms of questions on Remdesivir’s economic potential, we can take a look at past respiratory outbreaks like the H1N1 in 2009 and the 1918 Spanish flu for guidance.
Despite “flattening the curve,” at the time, both diseases had resurgences that reached second and third waves after the initial outbreaks were contained.
Combined, the H1N1 and the Spanish flu infected roughly 24% to 33% of the entire global population prior to subsiding for good.
Hence, high demand for Remdesivir will be expected even after the world manages to contain the first COVID-19 outbreak.
What does this mean for Gilead investors?
Remdesivir results are expected to come back positive by the end of April. With the FDA’s Coronavirus Treatment Acceleration Program, the drug is estimated to gain approval in a few months' time.
If successful, Remdesivir is projected to rake in more than $1 billion in sales throughout the coronavirus outbreak period. This estimate is based on the sheer number of people infected and are potentially at risk.
The estimated sales figure is also based on the assumption that Gilead can produce enough Remdesivir supply to treat up to 500,000 patients and that the drug will cost roughly $2,000 for a single-course treatment.
Adding Remdesivir in its lineup, Gilead has adjusted its 2020 revenue guidance to surpass $22 billion with sales growing by more than 4%, thanks to this potential COVID-19 drug alone.
However, Gilead offers more than a promising COVID-19 treatment.
The biotech giant prides itself of a strong lineup, showing off a particular dominance as the market leader for HIV treatments.
Its top HIV drug Biktarvy saw a whopping 300% increase in its sales last year, reaching $4.7 billion in 2019 alone -- and it still hasn’t reached its peak.
Analysts noted that Biktarvy has more room to grow in the next years, with the HIV drug anticipated to continue serving as Gilead’s significant growth driver until 2033.
Another HIV market leader is Descovy, which is set to be the preferred choice among 40% to 45% of patients by the end of 2020.
Despite these promising developments, Gilead stock is still pretty cheap.
To date, this biotechnology company is trading at 13.2 times forward earnings with a measly PEG ratio of 0.3.
At this price -- and considering the company’s strong portfolio and pipeline candidates -- investors on the lookout for biotech exposure but are worried about the consequences of the COVID-19 pandemic should definitely add Gilead into their core holdings.
Global Market Comments
March 31, 2020
Fiat Lux
Featured Trade:
(MORE PLAYERS ENTER THE RACE FOR A CORONA CURE)
(MRNA), (ARCT), (JNJ), (SNY), (GOVX), (ALT), (NVAX), (GSK), (GNBT), (VXL.V), (INO), (APDN), (CADILAHC)
Mad Hedge Biotech & Healthcare Letter
March 31, 2020
Fiat Lux
Featured Trade:
(MORE PLAYERS ENTER THE RACE FOR A CORONA CURE)
(MRNA), (ARCT), (JNJ), (SNY), (GOVX), (ALT), (NVAX), (GSK), (GNBT), (VXL.V), (INO), (APDN), (CADILAHC)
Special issue on COVID-19 vaccines: Moderna Inc (MRNA), Arcturus (ARCT), Johnson & Johnson (JNJ), Sanofi (SNY), GeoVax (GOVX), Altimmune (ALT), Novavax (NVAX), GlaxoSmithKline (GSK), Generex (GNBT), Vaxil Bio (VXL.V), Inovio Pharmaceuticals (INO), Applied DNA Sciences (APDN), Zydus Cadila (CADILAHC)
The hunt is definitely underway for potential treatments to fight COVID-19 but coming up with vaccines will take a much longer time.
Since we already have the genetic code of the novel coronavirus (click here for the link), researchers can now use the complete blueprint to come up with ways to defeat this disease.
With code in hand, it takes a supercomputer just three hours to create model vaccines. Then it is just a question of how fast you can make them, if at all. Many proposed models are far beyond our existing technology.
To date, there are roughly 35 companies and academic organizations actively seeking ways to come up with a COVID-19 vaccine. While the process will still take time, there are several promising prospects.
Among the companies working on this, Moderna Inc (MRNA) has been recognized as the first biotechnology company to conduct human trials to test its COVID-19 vaccine in March. The trial includes 45 males and non-pregnant females aged 18 to 55.
Moderna’s vaccine utilizes the genetic sequence of the novel coronavirus. Basically, the goal is to build a vaccine out of messenger RNA.
Aside from Moderna, another biotech company called Curevac has been at the forefront of this cutting-edge technology.
In China, RNACure Biopharma has been working with Fudan University and Shanghai JiaoTong University on using the same technique to come up with a vaccine as well.
China’s CDC along with Tongji University and Stermina as well as Duke-NUS in partnership with Arcturus (ARCT) are also using a similar approach.
Although Moderna’s vaccine reached Phase 1 in record time, authorities cautioned that the development time frame is somewhere between 12 and 18 months — and this is even dubbed as an “overly optimistic” timeline.
Meanwhile, there are companies like Sanofi Pasteur (SNY) elected to use previously deployed vaccine platforms in earlier epidemics like SARS.
Johnson & Johnson (JNJ) also decided to employ the same strategy using its Ebola vaccine platform. In fact, JNJ shared that it’ll be ready to conduct human testing of its non-replicating viral vector by November.
Aside from JNJ, another biotechnology company in China called CanSino Biologics (HKG: 6185) in collaboration with the Academy of Military Medical Sciences is utilizing the same technology.
Just last week, Chinese authorities approved CanSino’s Phase 1 clinical trials.
Apart from JNJ and CanSino, other biotechnology companies are also working on a vaccine using the same non-replicating viral vector technology.
The list includes Wuhan’s BravoVax along with GeoVax (GOVX), Altimmune (ALT), Vaxart (VXRT), Greffex, and the University of Oxford.
Another strategy is employed by Novavax (NVAX), which is to construct a “recombinant” vaccine.
In a nutshell, this strategy entails extraction of the genetic code for the protein found on the Sars-CoV-2. This is a part of the virus that can trigger the immune system. This will then be pasted into the genome of a bacterium or yeast.
In effect, this vaccine will force the microorganisms to produce huge quantities of the protein to be able to fight off the virus.
Big biotechnology companies like Sanofi and GlaxoSmithKline (GSK) are following the same technique.
Smaller firms are also in on the action including Generex Biotechnology Corporation (GNBT), Vaxil Bio (VXL.V), EpiVax, and Clover Biopharmaceuticals.
The University of Georgia, Baylor College of Medicine, and the University of Miami are pursuing the same lead as well.
On top of these, several biotechnology companies use a DNA-based approach to come up with a vaccine.
Last March 12, the Bill & Melinda Gates Foundation provided a $5 million grant to Pennsylvania-based biotech firm Inovio Pharmaceuticals (INO) to help the company speed up the tests needed for its DNA vaccine called INO-4800.
This is on top of the roughly $9 million in funding it received from the Coalition for Epidemic Preparedness Innovations earlier.
At the moment, INO-4800 is in preclinical studies with plans to push it to Phase 1 clinical trials by April.
Aside from Inovio, Applied DNA Sciences (APDN), Zydus Cadila (CADILAHC), Takis, and Evivax are also pursuing the same strategy.
Despite implementing the most effective and even draconian measures to contain COVID-19, these tactics only managed to slow down the spread of the virus.
With the World Health Organization tagging this situation as a pandemic, everyone has become more desperate in the search for a vaccine because only a vaccine can stop people from getting sick.
However, even the unprecedented speeds afforded, the biotechnology companies couldn’t change the fact that developing a vaccine requires at least a year. It’s crucial to not make mistakes along the way especially since the product could potentially be injected into most of the world’s population.
After all, there’s only a single thing that can be considered worse than a bad virus — and that is a bad vaccine.
Mad Hedge Technology Letter
March 9, 2020
Fiat Lux
Featured Trade:
(WHY ZOOM HAS BEEN ZOOMING)
(ZM), (VMW), (JNJ), ($COMPQ)
