Mad Hedge Biotech and Healthcare Letter
April 25, 2024
Fiat Lux
Featured Trade:
(RACING TO SWAP A GOLDEN GOOSE FOR A NEW FLOCK)
(MRK), (NVO), (LLY), (JNJ), (ABBV), (PFE)
Posts
Big pharma usually makes investors smile - fat profits, juicy dividends, and stocks that crush the market.
Lately, though, some of these giants are looking more like grumpy old men. Sure, there are exceptions like Novo Nordisk (NVO) and Eli Lilly (LLY) printing money with their obesity blockbusters.
But what about the rest? Even with Washington breathing down their necks, patent cliffs, and a shaky economy, you'd think these drug titans wouldn't be lagging the market, right? Wrong.
Check out the "Big Eight" top dogs - Johnson & Johnson (JNJ), Merck (MRK), AbbVie (ABBV), Pfizer (PFE), and the rest. Only a few have really delivered the goods in the past five years. AbbVie and Merck have been alright, but the others? They make me want to take a nap.
Now, I'm not saying give up on pharma entirely - there's still money to be made. But you've got to do your homework. Today, let's take a look at Merck.
They raked in $60.1 billion in 2023, making them a heavy hitter. But without their COVID cash machine Lagevrio, growth is...less impressive. Still up, but not setting the world on fire.
The real story is spending - Merck went on a spree, burning through cash on R&D. Why? Their golden goose Keytruda, that $25 billion cancer blockbuster, is facing generic competition soon.
Merck isn't just sitting around waiting for the Keytruda patent cliff either. They're furiously throwing money at new drugs, acquisitions, cancer, heart disease, immune disorders - hoping to find the next Keytruda before the current one fades away. It's like an aging rockstar desperately trying to write another big hit.
But let's be real, finding billion-dollar breakthroughs is a gamble, even for giants like Merck. They've got potential in the pipeline for sure, but it's a long road from the lab to pharmacy shelves. Plenty of drugs flame out along the way.
Looking back, 2023 wasn't a victory parade for Merck. It was more like a mad dash to spend their way out of the looming Keytruda patent cliff. But hey, sometimes you've gotta break a few eggs to make an omelet, right?
Speaking of potential winners, let's talk about those newly approved lung drugs – sotatercept could be a major player.
Merck's vaccine department is looking strong too, with potential blockbusters targeting lung infections and RSV in the pipeline.
Of course, it hasn't all been smooth sailing. That new cough drug, gefapixant, getting rejected by the FDA again? Merck took a hit on that. Still, this biotech’s not giving up. This is a company buying time to build up a whole new arsenal, and the Keytruda cliff might hurt, but they'll come out swinging.
So, let’s forget about that 2023 earnings dip. Merck's forecasting a serious jump in 2024 profits as they dial back the crazy spending. Yes, their balance sheet took a hit, but look at what they're building. They're hunting big deals to bolster that pipeline, and that's a good thing in my book.
Speaking of big moves, Merck's been on a shopping spree. Wall Street might get nervous if they drop another bombshell, but I trust their judgment. These aren't just random buys; this is how they protect their future cash flows. Besides, any short-term drama from a big deal could be a sweet buying opportunity.
And while Merck’s still figuring out which one could be the next big thing, the true star of the show, until that patent cliff arrives, is still Keytruda.
That beast is still growing and could keep going strong for years, especially in early-stage treatments. Plus, that new subcutaneous version of this blockbuster treatment? Talk about extending the gravy train well past the generic competition.
Let's also check out the other horses in this race: sotatercept's early sales numbers, a potential FDA approval for that HER2 drug, the saga of gefapixant's third shot (or not), and the cash potential of V116 and Welireg. Not to mention, juicy updates on that Moderna (MRNA) partnership…Merck’s next months could be packed with surprises.
As for this company’s dividend? Decent track record, but don't expect fireworks after the recent hike. As for buybacks, Merck seems to have...other priorities right now. Those profits are pouring straight into the growth pipeline.
The bottom line: While some of Big Pharma looks pale lately, Merck is still bringing it, share price gains and all. Sure, that gefapixant rejection stings. But Keytruda keeps roaring, and Merck's pipeline is buzzing with potential. I'm not sweating earnings.
Merck's got contingencies lined up for the Keytruda patent apocalypse - new drugs, deals, maybe even extending Keytruda itself. They're playing for the long game here. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
April 18, 2024
Fiat Lux
Featured Trade:
(A RARE OPPORTUNITY OR A PROBLEMATIC DEBT-ACLE?)
(AMGN), (LLY), (NVO)
Remember Gordon Binder and his "Science Lessons?" Well, Amgen (AMGN) seems to be re-reading a few chapters from the book by its legendary former CEO.
Their nearly $28 billion buyout of Horizon Therapeutics (HZNP) screams blockbuster ambition, but it also means they loaded up on debt like it's going out of style. This HAD better work.
Why the gamble? Horizon brings heavyweight rare disease drugs like Tepezza to the table. Sales have been flatlining near $2 billion, but Amgen smells potential. With the indication just expanded and a measly few percent of patients treated, there's room to run...if they can find those patients. That's the tricky part with rare diseases.
Other gems like Uplizna round out the deal. Now, it's all about whether Amgen can make this expensive new portfolio pay.
Let’s take a look at Amgen’s 2024 pipeline. The biotech’s goals this year center on a few key drugs – some acquired, some homegrown.
Tepezza and Uplizna are all about finding those elusive rare disease patients and expanding market access. We're not just talking sales growth here... it's about proving their ability to dominate this niche.
In their "General Medicine" department, there's Olpasiran in Phase 3. A stellar Phase 2 could mean over a BILLION in sales if it gets the green light. But Phase 3, as we know, is where the tough questions get asked.
Over in Oncology, I’m keeping an eye on Tarlatamab, Lumakras, Blincyto, and Nplate. They're the revenue drivers of the future, with Tarlatamab aiming for billions by the 2030s.
Lumakras was supposed to be a star, but it's a bit slow out of the gate. Then there's Blincyto – already raking in the big bucks with nearly 50% year-on-year growth. This one's HOT.
Nplate's a blockbuster with almost $2 billion in sales, but US government orders make it a tad volatile. Tezspire is another potential star, flirting with the billion-dollar mark.
Bottom line? Amgen is hustling to build a diverse portfolio for the long haul.
Crunching the numbers, Amgen's 2024 guidance looks strong, boosted by that Horizon acquisition.
They're projecting about $33 billion in revenue and decent EPS. Tax breaks and low capital expenditures are sweet bonuses.
But...remember that debt. It's over $60 billion on the long-term books. Luckily, Amgen locked in good rates on those bonds, but that interest bill? It's a beast they'll have to tame eventually.
Amgen’s shareholder returns are mostly a chunky 3%+ dividend, not much to write home about. The real magic depends on those high-powered sales teams turning the rare disease business into a cash machine and seeing those other drugs deliver. If it happens, cash flow will surge, and everyone will get fatter payouts.
As for the biggest threat to Amgen’s future? The ever-changing, cash-hungry beast that is the biotech industry.
Amgen's constantly fighting patent expirations, forcing them to pump cash into R&D just to stay ahead. You hit some home runs, like the crazy new weight loss drugs driving skyrocketing revenues as seen in the success of Eli Lilly (LLY) and Novo Nordisk (NVO), but more often, you strike out. This is why long-term investors in Amgen should strap in for a bumpy ride.
Overall, Amgen's got a unique mix of assets. And that Horizon Therapeutics move? Bold but calculated. It gives them a boatload of rare-disease drugs and pairs them with top-notch sales teams.
Plus, there's a bunch of promising candidates in their pipeline. The biotech world is an industry where success is never guaranteed, BUT Amgen's got the potential to keep knocking it out of the park. If they do, those shareholder returns should get a whole lot sweeter. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
April 11, 2024
Fiat Lux
Featured Trade:
(BELLY BUSTERS)
(NVO), (LLY), (JNJ), (AMGN), (RHHBY), (GSK), (VKTX)
Did you know that more Americans are now trying to lose weight than trying to quit smoking? That's a staggering shift, and it has a lot to do with the buzz around those new obesity drugs.
Novo Nordisk (NVO) got the ball rolling in 2021 when they received the green light to market their diabetes drug, Ozempic, as a weight loss miracle called Wegovy.
Not to be outdone, Eli Lilly (LLY) swooped in the fall of 2023 with Mounjaro – also a diabetes drug, sold as Zepbound – that got the FDA nod for weight loss, too.
Then, the whole pharma world, it seems, has started to go all-out on obesity, flooding the market with a whole new generation of weight loss drugs.
To date, there are 124 obesity meds in the works – a mix of 61 Phase 1 hopefuls, 47 in Phase 2, eight in Phase 3, and eight already greeting patients.
Remember that whole fen-phen disaster back in the 90s? That left a bad taste in everyone's mouth when it comes to weight loss drugs.
But things are different this time. These new obesity meds, especially those from Novo Nordisk and Lilly, are a game-changer. They're blowing those old weight loss pills out of the water.
It's not about fitting into those skinny jeans anymore (though that's a nice bonus). The focus is on health.
And while Novo Nordisk and Eli Lilly might be the big names in the obesity drug game, they've got competition. There's a whole crew of pharma companies jumping on the bandwagon, like Currax Pharmaceuticals, Roche (RHHBY), GlaxoSmithKline (GSK) – you get the picture.
But here's the really wild part about these drugs like Mounjaro and Wegovy, which use GLP-1 (Glucagon-like peptide-1) compounds to treat diabetes: They kinda stumbled onto their weight loss powers by accident.
Turns out, while they were busy helping diabetes patients, boom, patients started shedding pounds. Talk about a happy side effect.
As expected, this has created excitement in the market. Now, usually in the drug world, it's baby steps forward. A little better here, a bit less nausea there... yawn.
But with eight of these drugs already in the late stages of development (Phase 3), expect even more surprises as potential breakthroughs could bypass traditional drug trial phases for a faster route to market.
Frankly, I'm shocked at the number of new mystery drugs suddenly popping up in early testing. Even those old-school Big Pharma players are jumping in: AstraZeneca (AZN), Novartis (NVS), Amgen (AMGN), and, heck, even Johnson & Johnson (JNJ) – everyone wants a slice of the obesity pie.
Now, this whole obesity meds craze reminds me of what happened with those PD-1 drugs in cancer treatment.
One good result, and suddenly everyone was scrambling to get their version to market. But like in a reality TV show, not everyone makes it to the finale.
But what's the endgame in this obesity market expansion? Not 124 contenders, that's for sure.
Even right now, with everything in its early stages, you can already see which candidates have the potential. The competition's going to get fierce, and only the strongest drugs will survive.
Viking Therapeutics (VKTX), for example, has a dual GLP-1 and GIP agonist showing serious promise. After just 13 weeks, patients lost an average of 14.7% of their weight.
This data, released in February, proves Viking’s not just chasing the big pharma players; they're running right alongside them.
Now, over at Novo and Lilly, the pace hasn’t slowed down one bit either. Wegovy, which is Novo's contender in the ring, just got a nod in March for something a bit bigger than weight loss.
It’s been approved to tackle some serious heavyweights — cardiovascular deaths, heart attacks, and strokes in adults dealing with obesity or who are overweight. It's like getting a one-two punch for health.
As for Eli Lilly? They’ve been making some noise with tirzepatide, especially around metabolic dysfunction-associated steatohepatitis, or MASH for short.
They’ve got results showing that 74% of adults who were either overweight or obese managed to kick MASH to the curb without any increase in liver scarring after sticking with the treatment for 52 weeks.
Sadly, the biggest roadblock isn't the science, it's the money. It’s not just about making these drugs. It’s about getting them into the hands of those who need them most.
The current scene? A bit of a heartbreaker.
Most US insurance companies are drawing the line at covering Wegovy or Zepbound for obesity. This leaves a hefty bill on the table, putting these potentially life-altering treatments out of reach for many.
Think about it – the people who could benefit the most, maybe those on Medicaid or living paycheck to paycheck, are staring at a closed door. And let’s not even get started on Medicare, which, as of now, can’t even touch these drugs.
It’s a strange paradox, isn’t it? The very treatments that could lift the weight of obesity off society’s shoulders are dangling just out of reach for many.
So, now, the burning question isn’t so much about whether these treatments can make shareholders and companies do a happy dance. It’s more about where we’re heading.
Think about cancer treatment – the sickest patients get the cutting-edge drugs first. What would that even look like in obesity?
Will all these 124 experimental options help level the playing field, finally forcing insurers to step up? Only time will tell.
As of now, the obesity treatment field is going through a revolution. While the market faces challenges like accessibility, I suggest you closely monitor the progress of key players like Novo Nordisk and Eli Lilly.
Consider smaller, innovative companies, such as Viking Therapeutics, for potential high-risk, high-reward investments as well.
Mad Hedge Biotech and Healthcare Letter
March 19, 2024
Fiat Lux
Featured Trade:
(NOT JUST A ONE-TRICK PONY, BUT A BIOTECH THOROUGHBRED)
(LLY), (NVO), (PFE), (AMGN)
I've been around the block a few times when it comes to investing, and let me tell you, I know a thing or two about spotting a winner. And right now, there's one name in the biotechnology and healthcare world that's caught my eye like a shiny new penny: Eli Lilly (LLY).
First off, let's talk about Lilly's recent partnership with Amazon Pharmacy (AMZN). This pair is bringing the future to us, offering direct home delivery of Lilly's medications, including the much-talked-about weight-loss drug Zepbound.
You heard that right. Thanks to this partnership, you can now get your hands on Lilly's weight-loss wonder drug, Zepbound, without ever leaving your couch.
Approved last year for obesity treatment, Zepbound is shaping up to be a blockbuster. And let's not forget about LillyDirect, the platform making all this possible, blending healthcare provision with top-notch delivery service.
Since launching in 2020, Amazon Pharmacy has been on a mission to simplify how we get our prescriptions, and teaming up with Eli Lilly only turbocharges this mission.
Now, let's talk about Lilly’s financials. This biotech’s market cap has ballooned to an eye-watering $700 billion, thanks to a 130% surge over the past year.
The buzz around Zepbound, showing potential for a 27% reduction in body weight, has investors sitting up and taking notice.
But I hear you ask, "Have I missed the boat on Eli Lilly?" My take? Not at all.
In fact, I think this stock could easily double in value and even surpass the trillion-dollar mark within the next five years. It's a bold prediction, but I've been around long enough to know a sure thing when I see it.
With obesity rates tripling since 1975 and more than half of the global population predicted to become obese or overweight by 2035, the demand for effective treatments like these is going to skyrocket.
Actually, the market for weight loss treatments is projected to reach $100 billion by 2030. And Lilly? They're ready to ride that wave all the way to the bank.
To date, Lilly only has one strong competitor in this space: Novo Nordisk (NVO). While other pharma giants, like Pfizer (PFE) and Amgen (AMGN), are trying their best to gain traction, these two are leaps and bounds ahead.
Now, I know what you might be thinking. "Isn't it expensive to develop these cutting-edge treatments?" You bet your bottom dollar it is.
Lilly isn't afraid to put its money where its mouth is. They're investing heavily in manufacturing capacity to keep up with the inevitable surge in demand. It's a bold move, but that's what separates the winners from the also-rans in the biotech race.
That’s not where it ends though. Lilly has another ace up its sleeve: donanemab, their early Alzheimer's treatment. This could also be a potential competitor of Biogen (BIIB) and Tokyo’s Eisai’s (ESALY) lecanemab, currently marketed as Leqembi.
Sure, the FDA might have put a temporary hold on Lilly’s candidate’s approval, but I've seen this rodeo before. It's just a minor bump in the road for this potentially game-changing drug.
If donanemab gets the green light, it could add billions more to Lilly's already impressive revenue streams. For perspective, the market for Alzheimer’s treatments is predicted to reach $6 billion to $8 billion by 2025 and record $15.5 billion by 2031.
Of course, no investment is without risk. But when I look at Eli Lilly, I see a company that's firing on all cylinders.
They're making strategic partnerships, investing boldly in their future, and have a track record of success that's the envy of the industry.
With a pipeline full of promising treatments, I believe Lilly is poised to gallop its way to even greater heights in the years to come.
So if you're looking for a biotech thoroughbred with a pedigree of success and a bright future ahead, I'd say Lilly is a horse worth betting on.
Mad Hedge Biotech and Healthcare Letter
March 14, 2024
Fiat Lux
Featured Trade:
(TIPPING THE SCALE)
(NVO), (LLY), (VKTX), (PFE), (TSLA)
Imagine, if you will, me sitting down for my morning coffee, flipping through the latest in the biotechnology and healthcare world, when I stumble upon a story that's about as juicy as they come in the world of pharmaceuticals.
The headline? Novo Nordisk's (NVO) stock is on a joyride to the moon, courtesy of their latest heavyweight champ in the weight-loss drug arena, Amycretin.
And let me tell you, this isn’t some minor upgrade. This new candidate is like Wegovy's bigger, bolder cousin.
Now, for those of you who've been tracking the pulse of the market with me, you know I've got a soft spot for stories like these. It's not every day you see a drug come out swinging, making Wegovy look like it's been skipping gym sessions.
As for Novo, the stock didn't just jump following the reports about Amycretin’s performance. It practically did a backflip, soaring over 7% in Copenhagen. And Stateside? We're talking an 8.4% leap to a whopping $135.28. Yes, my friends, that's record-breaking territory.
Let me put this into perspective. Novo Nordisk, with this surge, practically eyeballed Tesla's (TSLA) market value and said, "Hold my beer."
We're talking about a market cap north of $560 billion. Makes you wonder if Elon's feeling the heat, doesn't it?
But this isn’t the last time we’ll hear about Wegovy. Novo’s former golden child of weight loss hasn't been kicked to the curb yet. Far from it.
In fact, the US Food and Drug Administration (FDA) recently stamped it with a seal of approval for reducing heart attack and stroke risks.
This is huge. Why? Because it cracks the door wide open for Medicare coverage. And considering more than 40% of American adults are wrestling with obesity, that's no small target market.
Now, I hear you asking, "But isn't Wegovy's price tag a bit... steep?" Sure, at over $16,000 annually, it's not chump change.
Still, this approval could shift the entire healthcare chessboard. Imagine, medications that once were shrugged off by insurers now potentially becoming mainstays in treatment plans. More importantly, this decision could lead to a surge in demand like never before.
Let me explain why. Prior to this FDA approval, insurers were practically turning their noses up at coughing up the cash for these types of meds. Despite that, folks were clamoring for Wegovy like it was the last slice of pizza at a party.
What do you suppose happens now that Wegovy's got the golden ticket for conditions that insurance can't help but cover? I mean, we're about to see demand go from "Please, sir, I want some more" to a full-blown Oliver Twist riot.
Given this demand, it’s no longer surprising that the scene is getting crowded with competitors itching for a piece of the pie.
Eli Lilly's (LLY) not sitting this dance out, with Zepbound and Mounjaro drawing eyes and opening wallets. Actually, analysts are already placing bets, with some forecasts shooting as high as $60 billion by 2030 across various applications.
Aside from the established names in this niche, there are also up-and-comers like Viking Therapeutics (VKTX) with its impressive trial results for VK2735. Then there's Pfizer (PFE), fumbling a bit with orforglipron but not out of the game yet.
For all of us watching all these unfold, this is the kind of narrative we live for. Novo Nordisk's Amycretin and the bustling competition in the obesity drug market are not just stories of medical innovation; they're tales of market intrigue, investment opportunities, and, yes, a bit of drama.
Before getting in the fray, I suggest you wait for the dip. For now, just grab your popcorn (low-cal, of course) and stay tuned. This biotech thriller is just getting started, and something tells me the plot twists are going to be worth the price of admission.
