Mad Hedge Biotech and Healthcare Letter
March 11, 2025
Fiat Lux
Featured Trade:
(WHEN INSIDERS GO SHOPPING, PAY ATTENTION)
(MRNA), (MRK)
Posts
In 1815, Nathan Rothschild made his legendary fortune buying British securities when they were deeply discounted after Waterloo. “Buy when there's blood in the streets,” he allegedly said. That kind of contrarian wisdom has made fortunes across centuries.
Two centuries later, I find myself applying this timeless principle to Moderna (MRNA). The biotech darling has shed over 90% of its value since the pandemic peak, plummeting from $400+ to under $30. And now, insiders are quietly loading up.
The shift in insider activity at Moderna has been striking. Over the past year, insiders unloaded more than 602,000 shares, with the heaviest selling in 2024 when the stock was trading above $120.
One director alone offloaded 202,832 shares in a single transaction, pocketing $30 million. But as Moderna’s share price took a nosedive, insider selling slowed to a trickle. By the time the stock fell below $100, most trades involved fewer than 1,000 shares.
Then, on March 3, the narrative took a dramatic turn: two insiders — including CEO Stéphane Bancel — scooped up nearly 200,000 shares, investing about $6 million. Bancel accounted for $5 million of that sum.
This move is telling. Bancel already controls over 21 million shares. You don’t drop another $5 million into a stock unless you believe you're buying Manhattan for beads and trinkets. The contrast is stark: when prices were high, executives couldn’t sell fast enough. Now, they’re buying.
The timing of these insider purchases is even more intriguing. Moderna had just slashed its 2025 revenue target by $1 billion, bringing guidance down to $2.5 to $3.5 billion. Yet, insiders chose that precise moment to buy, signaling confidence that sales will bottom out this year.
The company's drug pipeline isn't barren, either. Ten drugs are expected to receive FDA approvals by 2027, including a skin cancer vaccine developed with Merck (MRK) slated for a 2027 launch, pending Phase 3 data.
These ten anticipated drugs collectively target a market exceeding $30 billion, with analysts projecting Moderna's revenue to climb to $3.3 billion in 2027 and $4.77 billion by 2028.
On their Q4 '24 earnings call, President Stephen Hoge underscored the cancer vaccine’s potential: "As for INT, obviously, we're all looking forward to the melanoma -- adjuvant melanoma Phase 3 readout. As you know, and as I mentioned, there are additional Phase 3s as well as two randomized Phase 2s, including bladder cancer, renal cell carcinoma, which, depending on the rate of approval of events, could have readouts that we would be updating on as well in the coming years."
Still, the road ahead isn’t without challenges. Moderna expects to burn up to $3.5 billion in cash during 2025, reducing its cash position to $6 billion. Estimated cash costs for 2025 stand at $5.5 billion, projected to decline to $5 billion in 2026.
To reach breakeven by 2028, the company needs to generate $6+ billion in sales at 80% gross margins or implement further cost-cutting measures.
Despite these financial hurdles, Moderna's market cap is a mere $14 billion — practically pocket change for a company with multiple promising vaccine candidates.
There's undeniable risk in buying Moderna at these levels, but historically, the most profitable investments come before the financials improve. The company has effectively announced that its numbers will likely deteriorate further before rebounding — and yet, insiders are still buying.
Speaking of gathering valuable insights from industry leaders, I’ve been preparing for our Mad Hedge Traders & Investors Summit on March 11-13.
After decades in the markets, I’ve learned there’s something uniquely valuable about getting multiple perspectives in one place. It reminds me of my time in Tokyo during the '70s, where real opportunities often emerged from late-night conversations between veteran traders.
Even in today’s volatile environment, the wisdom of those who’ve navigated every market cycle remains invaluable.
In the end, Moderna presents a textbook contrarian opportunity. The stock is deeply out of favor, yet insider buying suggests a potential shift in sentiment as shares hover around $30.
The real question isn’t whether Moderna will recover but whether investors have the stomach to buy when others are still heading for the exits.
As for me, I’m keeping Moderna firmly on my watchlist, right next to my dog-eared copy of "Extraordinary Popular Delusions and the Madness of Crowds."
Some things never change.
Mad Hedge Biotech and Healthcare Letter
February 4, 2025
Fiat Lux
Featured Trade:
(TOO RICH TO FAIL, TOO EXPENSIVE TO SUCCEED)
(MRNA), (TSLA), (NVS), (SNY), (JNJ), (BNTX), (RHHBY), (REPL), (CRSP), (ORCL)
Last weekend, while organizing my home office, I stumbled across an old COVID vaccination card. Remember those? It got me thinking about Moderna (MRNA), the biotech darling that went from relatively unknown to household name faster than you can say "messenger RNA."
Now, in early 2025, this once up-and-coming company is already facing what my grandmother would call "champagne problems" - too much cash to be broke, but burning through it faster than a Tesla (TSLA) on Ludicrous mode.
First, let's talk about this biotech's cash burn. In just nine months of 2024, Moderna torched through over $4 billion - that's the same amount they burned in all of 2023, suggesting their cash cremation rate is actually accelerating.
This acceleration in spending wouldn't be as worrying if they had endless reserves, but their current position shows $7 billion in cash and $2 billion in non-current investments.
The math isn't complex: at this burn rate, their runway is shorter than many investors realize.
The recent Health and Human Services (HHS) grant of $176 million in July 2024 for bird flu research barely registers on their financial statements.
While we've seen about 70 bird flu cases in the U.S. with one fatality in an elderly patient with underlying conditions, this isn't going to be another COVID-style revenue stream.
I've analyzed enough pharmaceutical companies to know that betting on another pandemic windfall is like expecting lightning to strike twice in the same spot.
What really interests me is Moderna's position in the competitive landscape. I spent last week analyzing patent data and geographic reach metrics across the industry.
First, you've got the old-guard pharma giants like Novartis (NVS), Sanofi (SNY), and Johnson & Johnson (JNJ), who have been at this game since before mRNA was a gleam in a scientist's eye.
Then, there are companies like BioNTech (BNTX) and Roche (RHHBY) with significantly higher geographic reach, while Replimune Group (REPL) and CRISPR Therapeutics (CRSP) demonstrate superior application diversity.
In comparison, Moderna's position in this landscape shows relatively low scores on both metrics - not exactly what you want to see from a company burning cash at this rate.
Stéphane Bancel, Moderna's CEO, recently outlined their pipeline: 2 approved medicines, 7 Phase 3 trials, and 45 candidates in development. They're also targeting $1.1 billion in annual R&D cost reductions by 2027.
But here's what keeps bothering me: their SG&A expenses have ballooned to nearly 10 times their pre-COVID levels, yet management is focusing on R&D cuts instead of addressing this administrative bloat.
The insider trading patterns since early 2024 haven't exactly inspired confidence either.
When I see heavy selling from insiders while a company is promising future breakthroughs, I can't help but remember all the biotech stories I've covered where the promise didn't match the reality.
Speaking of promises, Oracle's (ORCL) Larry Ellison recently made headlines talking about 48-hour personalized cancer vaccines using AI and robots.
While the technology sounds promising, I'm more interested in the practical path to profitability. Moderna isn't alone in this race, and their well-capitalized competitors have the luxury of funding similar development programs while maintaining positive cash flow.
Given Moderna's cash burn trajectory, their next three quarters will be telling.
I'll be watching that $4 billion nine-month burn rate closely, along with their progress on cost reductions - particularly those inflated SG&A expenses that management seems reluctant to address.
I'm keeping my old vaccination card as a reminder of Moderna's impressive COVID-19 achievement, but I'm not ready to bet on lightning striking twice.
Sometimes the hardest part of investing is knowing when to appreciate history without banking on its repeat performance.
Mad Hedge Biotech and Healthcare Letter
September 17, 2024
Fiat Lux
Featured Trade:
(A JAB WELL DONE OR A SHOT IN THE DARK)
(MRNA), (RHHBY), (NVS), (BMY)
Moderna (MRNA), the wunderkind of the COVID vaccine era, is facing a bit of a hangover. Remember when this biotech darling was riding high on vaccine sales? Well, those days are looking as distant as your last booster shot.
The company's stock had a decent first half, climbing about 20%. They even scored a win with their new RSV vaccine approval. But hold your horses, because things are getting a bit dicey.
Last month, Moderna had to revise its COVID vaccine revenue downward. Translation: people aren't lining up for jabs like they used to.
And just last week? They dropped another bombshell: Moderna's planning to slash its annual R&D spending by over $1 billion starting in 2027. On top of that, they're also pulling the plug on five programs.
But wait, there's more. Remember when Moderna was supposed to break even in 2026? Well, now they're saying it'll be 2028. That's like telling your date you'll be there in 5 minutes, then showing up two hours later.
Now, let's talk numbers. The consensus for 2025 sales was sitting pretty at $3.9 billion. Moderna's new projection? A potential downside of $2.5 billion, with a best-case scenario of $3.5 billion. As for 2024, they're looking at $3 to $3.5 billion.
And here's another head-scratcher: Despite 800,000 people over 65 in the U.S. being hospitalized last season, only 41% of this population has the COVID vaccine. Compare that to 74% with the flu vaccine. It looks like people trust the old-school flu shot more than the new kid on the block.
So, what's Moderna's game plan? They're focusing on delivering 10 products over the next three years. That's down from their previous bold claim of 15 new products in five years.
Here’s what CEO Stéphane Bancel has to say about this: "The size of our late-stage pipeline combined with the challenge of launching products means we must now focus on delivering these 10 products to patients, slow down the pace of new R&D investment, and build our commercial business."
In other words, they bit off more than they could chew and now they're trying to swallow.
Moderna's slashing its R&D investment for 2025 through 2028 by 20%, down to $16 billion. That's a $4 billion haircut.
But here's the twist - they're actually increasing investment in oncology, presumably to hopefully build a portfolio that could rival the likes of Roche (RHHBY), Novartis (NVS), and Bristol Myers Squibb (BMY).
Now, before you start thinking it's all doom and gloom, let's look at the silver lining.
Moderna expects its respiratory vaccines to be profitable this year and beyond. They're also aiming to file for approval of three new products by year-end: a next-gen COVID vaccine, a combo flu/COVID vaccine, and an RSV vaccine for younger high-risk adults.
Now, is Moderna a buy or a sell? Well, that really depends on your investment style.
Moderna's in a tight spot, but it's not game over. They're trimming the fat, focusing on what works, and betting big on oncology.
Plus, they actually have the cash to see this strategy through. So, they won't need to pass around the collection plate to reach their break-even goal. Their current situation is admittedly not pretty, but it's not a death spiral either.
For most of us, this is where the rubber meets the road. If you're up on Moderna, consider taking some profits, but don't bail completely. This could be a classic "buy the dip" opportunity for the bold.
Remembert, biotech is boom or bust, and Moderna's loaded pipeline needs just one hit to soar. Their combo vaccines could be game-changers if they pan out. And let's not forget, they cracked the mRNA code - that's not small potatoes in the world of drug development.
Bottom line: If you're risk-averse, look elsewhere. But for those with iron stomachs and long-term vision, this might be your chance to snag a potential biotech giant on sale.
Mad Hedge Biotech and Healthcare Letter
August 20, 2024
Fiat Lux
Featured Trade:
(POX POPULI)
(BVNRY), (EBS), (GOVX), (SIGA), (CMRX), (TNXP), (TMO), (ABT), (MRNA), (PFE)
Hold onto your hazmat suits because the world of infectious diseases just got a lot more interesting. And if you're someone with a stomach for volatility, you might want to pay attention.
Mpox is back, and it's brought a nasty new cousin to the party. The World Health Organization (WHO) just hit the big red button, declaring the mpox outbreak a public health emergency of international concern (PHEIC). That's fancy talk for "this is serious, people."
Let's break it down. We're not dealing with your garden-variety mpox here. This is a new strain, dubbed Clade Ib, and it's tearing through central Africa like a bull in a china shop.
The Democratic Republic of Congo (DRC) has seen over 15,600 cases so far this year, more than all of last year. And it's not staying put.
Kenya, Burundi, Rwanda, and Uganda are all reporting their first-ever mpox cases. It's like watching a virus go on a world tour, minus the t-shirts and overpriced concessions.
Now, before you start panic-buying toilet paper again, the Centers for Disease Control and Prevention (CDC) says the risk to the U.S. is very low.
But they're still telling healthcare providers to keep their eyes peeled for any funky rashes on patients who've been globe-trotting lately.
So, what do we do with this information? Well, let's talk vaccines.
Bavarian Nordic (BVNRY), the company behind the most widely used mpox vaccine, has seen its stock jump more than 30% since the WHO's announcement. It's like they won the pharmaceutical lottery.
And Uncle Sam's not shy about showing them some love – the U.S. Department of Health and Human Services just placed a $156.8 million order for a bulk vaccine product.
But they're not the only player in town.
Emergent Biosolutions (EBS), another vaccine manufacturer, also saw its stock surge when the news broke.
Even GeoVax Labs (GOVX) saw its stock shoot up 40% yesterday morning. Not bad for a company most people had never heard of last week. They're working on an MVA vaccine – that's Modified Vaccinia Ankara for you science nerds out there. It's the go-to choice for folks with weakened immune systems.
But it's not all sunshine and rainbows in vaccine land.
Siga Technologies (SIGA) released some disappointing trial data for their antiviral drug TPOXX. Turns out, it's not much better than a sugar pill for treating mpox.
Other companies are also jockeying for position.
Chimerix (CMRX) is developing brincidofovir, an antiviral that could potentially treat mpox. Tonix Pharmaceuticals (TNXP) is working on TNX-801, a live-virus vaccine candidate.
And let's not forget the diagnostic giants like Thermo Fisher Scientific (TMO) and Abbott Laboratories (ABT). After all, in the world of infectious diseases, being able to spot the bad guy quickly is half the battle.
Even the big guns of the COVID-19 vaccine world, Moderna (MRNA) and Pfizer (PFE), might decide to flex their mRNA muscles in the mpox arena. And with their track record, who's going to bet against them?
But here's the million-dollar question: Is this a golden opportunity for investors, or a potential minefield? The answer, as always in the stock market, is "it depends."
On one hand, companies directly involved in mpox vaccines, treatments, and diagnostics could see their stocks soar if the outbreak worsens.
On the other hand, the biotech sector is about as stable as a jenga tower in an earthquake. Today's miracle drug could be tomorrow's cautionary tale.
The smart money isn't putting all its eggs in the mpox basket. Diversification is still the name of the game. Remember, this outbreak could fizzle out as quickly as it started, leaving one-trick ponies high and dry.
Plus, let's always keep in mind the wild card in all this: government contracts.
In the world of infectious diseases, Uncle Sam often holds the purse strings. Keep your ear to the ground for any whispers of government funding or contracts. That kind of news can send stocks into the stratosphere faster than you can say "public health emergency."
So, what's the bottom line? The mpox outbreak is creating some intriguing opportunities in the biotech sector. But as with any investment, don't let the fear of missing out cloud your judgment.
And remember, in the stock market, as in epidemiology, it's all about managing risk.
In the meantime, maybe skip that bushmeat sandwich on your next African safari. Just a thought.
Mad Hedge Biotech and Healthcare Letter
August 13, 2024
Fiat Lux
Featured Trade:
(THE RISE OF THE STEADY EDDIES)
(CNC), (UNH), (PFE), (JNJ), (ABBV), (LLY), (BIO), (UHS), (WAT), (AMGN), (REGN), (VRTX), (CRSP), (MRNA)
Think of the market as a body fighting off an infection. Tech stocks might be the flashy antibodies, but healthcare is the steady, reliable immune system, keeping things stable when the going gets tough. And right now, that immune system is looking stronger than ever.
Skeptical? I get it. We've heard the hype about healthcare before. But this time, it's different.
The Healthcare Select Sector SPDR ETF (XLV) has been on a tear, up 9.3% this year as of Thursday's close. That's nearly keeping pace with the broader S&P 500's 12% gain - a remarkable feat in a market that's been anything but stable.
But what's even more impressive is the turnaround. Back in mid-July, XLV was lagging behind like a three-legged horse in the Kentucky Derby, up only 8.3% while the S&P 500 was showing off with an 18% gain.
In fact, out of the 63 healthcare stocks in the S&P 500, only a dozen have been slacking off since July. The rest? They've been outperforming like it's going out of style.
So what changed?
Well, it wasn't so much that healthcare stocks suddenly discovered the fountain of youth. No, my friends, it was more like the rest of the market decided to take a swan dive off the high board.
You see, while tech stocks were busy doing their best Icarus impression – flying too close to the sun and then plummeting back to earth – healthcare stocks were steady as she goes. It's like the old tortoise and hare story, except in this version, the hare got distracted by shiny objects and ran off a cliff.
Now, let's shine the spotlight on some of the key players driving this healthcare rally.
Remember those health insurers everyone was worried about back in spring? The ones that had investors biting their nails over the future of Medicare Advantage? Well, they've made a comeback.
The S&P 500 Managed Health Care index was down 12% in mid-April, looking about as healthy as a chain smoker with a Big Mac habit. But now? It's up 4.5% since the start of the year.
Companies like Centene (CNC) and UnitedHealth Group (UNH) have bounced back faster than a rubber band on steroids.
And it's not just the insurers. Big Pharma's been flexing, too.
Pfizer (PFE), the company that became a household name faster than you can say "vaccine," is holding steady. Johnson & Johnson (JNJ) is up 2.2%, probably thanks to all that baby powder they're not selling anymore.
Meanwhile, AbbVie’s (ABBV) up 11% since July. These guys are like the Energizer Bunny of the pharma world – they just keep going and going.
But the real showstopper? Eli Lilly (LLY). This biopharma has been on a tear since the beginning of 2024. Up 45% on the year at one point, they've been climbing faster than a squirrel up a tree with a dog in hot pursuit.
Then, there are companies like Bio-Rad Laboratories (BIO), up 20% since July. Universal Health Services (UHS)? Up 18% since July. Waters (WAT), the life sciences tools folks? Up 15%.
Even the biotechs are out to impress.
Amgen (AMGN), the granddaddy of biotech, is up 10% year-to-date. They're selling drugs like Prolia and Enbrel faster than hotcakes at a lumberjack convention.
And Amgen’s pipeline? It’s packed with potential blockbusters, setting the stage for further expansion in the future.
Gilead Sciences (GILD)? Up 15% year-to-date. Turns out, their COVID-19 treatment, Remdesivir, is back in vogue like bell-bottom jeans. And their HIV and hepatitis C drugs? They're still growing stronger.
But the real rock star of biotech? That'd be Regeneron Pharmaceuticals (REGN). These guys are up over 30% year-to-date. They're treating everything from eye diseases to cancer to inflammation.
Vertex Pharmaceuticals (VRTX) is another one to watch. Up 12% this year, they've got the cystic fibrosis market cornered. And they're not stopping there – they're expanding faster thanks to their collaboration with the likes of Crispr Therapeutics (CRSP).
Now that I’ve mentioned gene therapy, I know you're wondering about Moderna (MRNA). After all, weren’t they the darlings of the COVID era? Well, yes and no.
Their stock's down about 35% year-to-date, but don't count them out just yet. Their mRNA technology is hotter than a jalapeño popper fresh out of the fryer. They might be down, but they're definitely not out.
So, what's the takeaway here? I suggest you keep your eyes peeled on the biotechnology and healthcare sectors. After all, in this market, the best offense might just be a good defense – and what's more defensive than betting on the sector that keeps us all alive and kicking?
