Mad Hedge Biotech & Healthcare Letter
April 27, 2021
Fiat Lux
FEATURED TRADE:
(THE FUTURE OF MEDICINE)
(CRSP), (VRTX), (EDIT), (NTLA), (PFE), (NVS), (GILD), (RHHBY),
(BMRN), (QURE), (SGMO), (CLLS), (ALLO), (BEAM)
Posts
Winning the Nobel Prize in 2020 provided biotechnology companies more traction on Wall Street.
The victory led to commercializing the 2012 discovery, Crispr-Cas9, at breakneck speed, with gene editing companies like CRISPR Therapeutics (CRSP), Editas Medicine (EDIT), and Intellia Therapeutics (NTLA) gaining considerable boost in their values.
Since then, the total market value for the products of these three has more than doubled in recent months to reach $23 billion.
Basically, Crispr-Cas9 functions like molecular scissors.
What makes this technology incredible is that Crispr-Cas9 can classify a single address out of 3 billion letters within the genome by using only a particular sequence. With this, we can repair thousands of genetic conditions and even offer more potent ways to battle cancer.
The market favorite among the gene editing companies so far is CRISPR Therapeutics, with $8.72 billion in market capitalization.
In comparison, Editas has $2.76 billion while Intellia Therapeutics has $4.15 billion.
CRISPR Therapeutics is currently working on a treatment that would implant tumor-targeting immune cells in cancer patients. The company is also prioritizing therapies that could edit cells to treat diabetes.
So far, it has made significant progress in developing treatments for a genetic disorder called sickle cell.
In the US alone, at least 100,000 people suffer from sickle cell disease, with 4,000 more born every year. Conservatively, we can estimate at least 3,000 patients availing of this one-time treatment at over $1.6 million a pop.
To date, CRISPR Therapeutics has five candidates under clinical trials for diseases like B-thalassemia, sickle cell disease, and other regenerative conditions.
It has four more queued, which target diabetes, cystic fibrosis, and Duchenne muscular dystrophy.
Compared to its rivals in the space, it’s clear that CRISPR Therapeutics is ahead when it comes to product development and trials.
Two of its candidates, transfusion-dependent beta thalassemia treatment CTX001 and sickle cell disease therapy CTX110, have already been submitted for clinical tests for safety and efficacy.
Recently, Vertex (VRTX) boosted its 2015 agreement with CRISPR Therapeutics by 10%, with the deal reaching $900 million upfront to push for quicker results in developing CTX001.
This is a crucial move for Vertex, but more so for CRISPR Therapeutics as CTX001 holds a highly lucrative addressable market.
The additional funding significantly widened the gap between the Vertex-CRISPR team and bluebird bio (BLUE) in the race to launch a new gene editing therapy targeting sickle cell disease and beta thalassemia.
To sustain its growth, CRISPR Therapeutics’ strategy is to develop drugs that only require mid-level complexity but can rake in generous financial rewards.
This is a similar tactic used by bigger and more established biotechnology companies like Pfizer (PFE), Novartis (NVS), and Gilead Sciences (GILD).
Evidently, this strategy is a great way to ensure cash flow.
Aside from its earning from the commercialization of these products, CRISPR Therapeutics can also attract larger companies to buy the intellectual property of their breakthrough treatments.
After all, startups generally get 100% premiums in contracts with Big Pharma.
Good examples of this are Novartis that bought AveXis and Roche’s (RHHBY) purchase of Spark Therapeutics.
The Roche-Spark agreement led to the first-ever FDA-approved treatment since gene therapy trials started in the 1990s. It was for the genetic blindness therapy Luxturna, which received the green light in 2017.
The second approved treatment was a muscle-wasting disease therapy Zolgensma, which was the fruit of the Novartis-Avexis acquisition.
Both conditions are rare, but the financial rewards are impressive.
At $2 million for each treatment, Zolgensma sales reached $1.2 billion annually. At the rate the therapy is selling, Novartis estimates that Zolgensma will surpass the $2 billion mark in 2021.
Novartis and Roche aren’t the only ones partnering with smaller gene editing companies.
Pfizer has been working with biotechnology companies BioMarin Pharmaceutics (BMRN) and UniQure (QURE) to develop a treatment for blood-clotting disorder hemophilia.
The COVID-19 frontrunner is also collaborating with Sarepta Therapeutics (SRPT) to come up with a treatment for Duchenne muscular dystrophy.
Gene editing has also served as the foundation for several biotechnology companies out there today like Sangamo Therapeutics (SGMO), Cellectis (CLLS), and Allogene Therapeutics (ALLO).
The market size for gene editing treatments is estimated to be worth $11.2 billion by 2025, with the number rising between $15.79 billion to $18.1 billion by 2027.
This puts the compounded annual growth rate of this sector to be at least roughly 17%.
While this is already groundbreaking with only a handful of companies knowing how to utilize the technology, the gene editing world has come up with a more advanced technique than Crispr-Cas9.
The technology is founded on the “base editing” or “prime editing” technique, which is the simplest type of gene editing that alters only one DNA letter.
So far, one company holds exclusive rights to this technology: Beam Therapeutics (BEAM).
When the technology became public, Beam stock has increased sixfold since its IPO in February 2020.
This latest development can resolve thousands of genetic diseases. However, it still requires further trials since “base editing” can also trigger damaging responses from the body.
Overall, I think CRISPR Therapeutics is the safest among these high-risk stocks.
The data from two of its candidates, CTX001 and CTX110, are incredibly promising. Plus, the added funding from Vertex boosts the confidence of investors that regulatory approval is well on its way.
The company is also capitalizing on the surging price of its stock and investing aggressively across different rare disease programs.
While the company has yet to be considered a major force in the biotechnology world, the potential multiple successes of its products could generate a company worth hundreds of billions.
This potential alone offers an investing opportunity with a substantial asymmetric advantage for its current share price.
However, bear in mind that the stock is still a risk and should be played as a long-term investment. Hence, you should buy on dips.
Mad Hedge Biotech & Healthcare Letter
April 22, 2021
Fiat Lux
FEATURED TRADE:
(THE PFIZER OF ANIMAL HEALTHCARE IMPRESSES WITH GROWTH DRIVERS)
(ZTS), (PFE), (ELAN), (IDXX)
The World Health Organization has yet to offer definitive proof that animals can infect humans with COVID-19.
However, there had been cases where humans infected the animals, including tigers, minks, lions, and domestic cats and dogs.
This might seem insane to some since we’re not even done vaccinating humans yet, but it definitely presents a large and potentially lucrative market.
Recently, Russia launched the first and only registered COVID-19 vaccine for animals, Carnivac-Cov.
Not to be outshone, Zoetis (ZTS), the leader in animal healthcare in the United States, also started working on its own COVID-19 vaccine.
In fact, Zoetis has already commenced testing its candidate on some great apes at San Diego Zoo earlier this month.
So far, the company administered two vaccine shots to three gorillas, four orangutans, and six bonobos.
Zoetis’ efforts date back to last year when news broke that dogs and cats in Hong Kong were also getting infected with COVID-19.
While the USDA has not yet approved the vaccines for dogs and cats, the organization is leaning towards giving the green light for minks.
As it turns out, minks are extremely susceptible to COVID-19, so vulnerable that Denmark actually ordered a mass culling of millions after an outbreak in November 2020.
To date, several zoos have already reached out to Zoetis to avail of its experimental COVID-19 vaccine.
Considering that all these started with the cross-species transmission, experts are also hoping to learn more about it with the help of the company to prevent future pandemics.
Zoetis is ideally positioned to lead this charge since it’s the frontrunner in the pharmaceutical sector for pets and livestock.
This company used to be a branch of Pfizer (PFE), but was later spun off in 2012 to stand on its own.
In terms of competitors, the two most relatable companies to Zoetis are Elanco Animal Health (ELAN) and IDEXX Laboratories (IDXX).
Both offer virtually the same products, but Zoetis is the biggest among the three with approximately $75 billion in market capitalization.
In comparison, IDXX has roughly $41.55 billion, while ELAN has $13.61 billion.
Knowing that there’s more than a single way to expand its business, Zoetis has been favoring acquisitions as one of its growth options.
In the past years, Zoetis has been on a buying spree, making no less than eight acquisitions so far.
Half of these are geared towards veterinary diagnostics, with the intention of dominating the fastest-growing sector of the animal healthcare industry.
All its recent acquisitions put Zoetis directly in competition with IDEXX, which is currently the undisputed leader in the veterinary diagnostics space.
To show the disparity of their current standing, IDEXX raked in $2.4 billion in revenue from diagnostics in 2020, while Zoetis only generated $305 million.
Needless to say, Zoetis has a lot of catching up to do.
Zoetis initiated its venture with a splashy $2 billion acquisition of Abaxis in 2018, which provided the ex-Pfizer company with a powerful foundation in the diagnostics sector.
This was immediately followed by a $35 million deal to buy ZNLabs in 2019. In that same year, Zoetis bought Phoenix Lab for $150 million and then continued its streak to acquire Ethos Diagnostic Science in 2020.
Apart from its venture in the diagnostics space, Zoetis has been working on bolt-on acquisitions to enhance its operations.
A good example is its $140 million acquisition of Performance Livestock Analytics in 2020, which added a software platform that Zoetis could market to farmers to help them make their farms more efficient.=
Another one is its $20 million deal with Fish Vet Group, which basically created the same platform as Performance Livestock Analytics but modified it for fish producers.
Looking at Zoetis’ acquisitions, the company is clearly building a diverse portfolio of products that go beyond pharmaceuticals.
It’s evident that it aims to enhance its leverage on tangential businesses like diagnostics and even farm management.
While these new revenue sources are definitely interesting, they’re not moving the needle just yet. Zoetis is still primarily relying on its sales of pet and livestock drugs.
Aside from developing a COVID-19 vaccine, Zoetis has been working on a strong drug pipeline.
Despite separating from Pfizer, the strategies it implemented in building its extensive and diverse portfolio of blockbuster products pretty much follow the same path and trajectory as its previous parent company.
For context, “blockbuster” drug is any product that generates a minimum of $100 million in sales annually.
Using this metric, Zoetis holds an impressive lineup of 13 blockbuster products.
In 2020, Zoetis released a “triple threat” product called Simparica Trio, which can protect dogs from heartworms, eliminate ticks and fleas, and treat and prevent hookworms and roundworms.
This is the first-ever product that offers combined protection for all three—fleas, heartworms, and ticks—in a single treatment.
Despite the financial impact of the pandemic, Simparica Trio still raked in an impressive $150 million in its first year.
Reviewing its future product pipelines, Zoetis has two more potential blockbusters slated this year: Librela and Solensia. These two will also be the first-of-a-kind treatments for osteoarthritis in cats and dogs.
Delving deeper, Zoetis holds No. 1 spot in the companion animals or pets, fish, and livestock cattle segments. It ranks No. 2 in the swine market and No. 3 in the poultry sector.
In total, Zoetis has more than 300 product lines launched in the market, and the company still has more lined up for release soon.
Akin to Pfizer’s approach, Zoetis’ style is to dominate in select core markets, developing numerous blockbuster brands that generate billions every year.
Admittedly, the human healthcare market is substantially more profitable than its animal counterpart, but for Zoetis, this also represents significantly less competition from other drug developers.
At this point, Zoetis is not only in a strong position in the animal healthcare industry, but also dominating in a market that still has incredible room for growth.
In 2020, the total pet industry market was estimated to be worth $99 billion in the United States alone.
More importantly, this segment is projected to climb in the mid-single digits in the next few years.
A key approach in Zoetis’ growth is its strategy to develop and sustain a product pipeline with an average lifespan or age of at least 30 years.
The company also constantly launches new drugs and announces enhancements to their current products.
These are seen in the over 1,100 new products and improvements Zoetis has introduced over the past five years.
Judging from the company’s performance and future plans, it’s reasonable to expect a $200 price target for Zoetis over the next 12 months, which would indicate about 26.50% upside potential based on the current trading levels.
Taking into consideration the potential 5% downside risk, shares could pull back to reach $153 before starting to rebound again.
Meanwhile, the highest price target for Zoetis could be $210.
Overall, I believe Zoetis is a stable company with strong upside potential in the next months, and growth investors would be remiss to ignore the achievements of this company.
Mad Hedge Biotech & Healthcare Letter
April 6, 2021
Fiat Lux
FEATURED TRADE:
(HIGH-YIELD STOCK UP FOR GRABS)
(ABBV), (PFE), (BRK.B), (BLK)
Something curious is happening at the FDA, and it’s causing investors to be jittery. Drugs that are sure to gain approval keep encountering roadblocks.
What began as a handful of biotechnology stocks getting trampled is turning out to be a broader pullback caused by fears of a tougher and stricter regulatory environment for drug developers.
Following these changes, the SPDR S&P Biotech (XBI) slid by roughly 12% this month.
The idea that the somewhat predictable regulatory results in the past four or five years may no longer be as predictable obviously ramped up the perceived riskiness of this industry.
One bellwether of this change is AbbVie (ABBV), which submitted an application for the expanded use of rheumatoid arthritis Rinvoq in March. It recently announced that the regulatory board is extending the evaluation for three months.
While this isn’t a cause for alarm, it’s enough to unsettle some investors since Rinvoq is expected to replace AbbVie’s blockbuster drug Humira when the latter loses its patent exclusivity in 2023.
However, the reason behind FDA’s extension is likely because of the safety concerns found in a similar drug, Xeljanz, by Pfizer (PFE).
Considering the similarities of the two, it makes sense for the regulatory board to exercise more caution on AbbVie’s product.
The rise and fall of AbbVie has always centered on Humira, with this top-selling drug raking in $19.8 billion in sales in 2020 alone. That’s actually lower than its usual revenue a few years back.
Humira’s loss of exclusivity is projected to result in medium-term headwind to the company as more and more biosimilars pressure revenue.
However, AbbVie has been working on offsetting the estimated losses by expanding its other programs.
For instance, the revenue for AbbVie’s non-Humira immunology sector, led by Skyrizi and Rinvoq, is projected to double to reach $4.6 billion in 2021.
By 2025, AbbVie expects Rinvoq and Skyrizi sales to reach $15 billion annually.
Meanwhile, a considerable uptick is anticipated from its neuroscience division’s revenue, led by Vraylar, to generate $5.7 billion in 2021.
As for its hematologic oncology franchise, spearheaded by Imbruvica and Venclexta, this sector’s revenue is expected to increase in double digits to reach $7.5 billion this year as well.
On top of these, AbbVie has been busy looking for suitable acquisitions to diversify its revenue stream.
A notable deal it made was in 2015 with Pharmacyclics. This acquisition actually added the mega-blockbuster drug Imbruvica to AbbVie’s portfolio.
In May 2020, AbbVie completed its deal to purchase Allergan. This $63 billion merger is expected to boost the global distribution capacity of AbbVie and bolster its therapeutic sales channels.
By 2023, sales of the products acquired from Allergan’s pipeline are estimated to add at least $2 billion to AbbVie’s annual revenue.
All in all, these sectors are all well-positioned to substantially offset the fall of Humira’s revenue thanks to the rapid growth and aggressive indication expansion efforts of the company.
Nonetheless, the anxiety of the delayed FDA approval for Rinvoq’s expanded use is understandable.
After all, AbbVie expects this particular drug to contribute to doubling the 2021 sales of the franchise from $2.3 billion to $4.6 billion.
Moreover, this is a cornerstone in the company’s post-Humira era in less than two years.
However, the three-month delay will have a minimal impact on the 2021 revenues of the company and a negligible effect when we consider the long term.
Realistically, this would cost AbbVie roughly less than $1 billion in sales, which amounts to less than 2% of the total projected revenues of the company this year.
During times like these, it’s crucial to remember that the pharmaceutical industry is an extremely bumpy road.
There’s no such thing as a linear progression in this line of business, which is why it’s vital to choose companies with established track records and highly capable management teams.
If it helps ease any anxiety, then it might be useful to think that AbbVie is a favored stock by Warren Buffett’s Berkshire Hathaway (BRK.B).
The Oracle of Omaha currently holds 4.27 million shares of this company. Meanwhile, BlackRock (BLK) holds 2.41 million shares, while Ken Griffin’s Citadel Advisors has 786,000 shares.
AbbVie is a mature, larger-cap biopharmaceutical stock that’s selling at an affordable price these days.
Despite the revenue declines and plunges in earnings of countless businesses in 2020, AbbVie still managed to deliver strong operating and financial results—and the company still has a long way to go.
AbbVie is expected to deliver at least 4.8% in annual earnings growth over the course of the next five years—a highly conservative estimate considering that the company reported 21.9% growth in the past five years.
Moreover, AbbVie is safely positioned to deliver 6% long-term annual dividend growth.
AbbVie was able to generate 3.3% growth in its operational revenue in 2020, recording $45.804 billion in net revenues.
In the past weeks, I’ve seen AbbVie shares go down by roughly 6%. However, I think the fear here is exaggerated and the market might be overreacting to the uncertainty caused by stricter FDA guidelines.
Instead of letting the anxiety take control, I believe it’s best to heed the advice of Warren Buffett in this situation: “The market is a device for transferring money from the impatient to the patient.”
Therefore, I think patient investors should take a look at AbbVie stock today.
Mad Hedge Biotech & Healthcare Letter
March 30, 2021
Fiat Lux
FEATURED TRADE:
(A PURE PLAY STOCK SELLING AT A BARGAIN)
(PFE), (BNTX), (MRNA), (AZN), (JNJ), (NVAX), (MRK), (VTRS), (LLY), (REGN)
It’s virtually impossible to find a period in history when drug development gained the unmitigated attention of the whole world.
Yet, this is exactly what happened in 2020 when we all waited with bated breath for the results of COVID-19 trials from the likes of Pfizer (PFE), BioNTech (BNTX), Moderna (MRNA), AstraZeneca (AZN), Johnson & Johnson (JNJ), and Novavax (NVAX).
Despite this, it is astounding that biopharmaceutical stocks are cheaper than they have ever been in the past 20 years.
Given the fact that its collaboration with BioNTech made a central figure in the COVID-19 vaccine race, I think it’s best to put a spotlight on Pfizer today.
Pfizer was the first biopharmaceutical company to successfully market a COVID-19 vaccine, BNT162b2.
Recently, Pfizer received another good news. The FDA is no longer demanding that the company transport BNT162b2 at ultra-low temperatures.
When Pfizer revealed its strong results last year, the world was impressed and no one barely noticed the ultra-cold storage requirement that the achievement entailed.
But with competitors already gaining approvals as well, this particular requirement started to pose noticeable challenges to Pfizer’s vaccine supply chain and made it extremely challenging transporting the much-needed vaccines to remote areas.
These challenges highlight the significance of the recent FDA announcement regarding BNT162b2.
In terms of market share, Pfizer holds a significant advantage over the others.
As of the year-end of 2020, the company supplied 65 million doses to developed markets.
Meanwhile, the 2021 forecast for this product is at nearly 2 billion doses. This is estimated to rake in roughly $15 billion in revenue for Pfizer.
In comparison, Moderna’s advanced purchase deals are estimated to be worth $18 billion.
To sustain immunity, there’s the possibility that the vaccine would be needed annually.
This could lead to substantial demand for doses, with a two-dose vaccine like BNT162b2 projected to reach about 10 billion doses every year.
Realistically, the rising need for doses and the manufacturing requirements will obviously pressure profit margins.
However, if the vaccine does turn out to be an annual necessity, then it could become a valuable asset.
The entire COVID-19 market is estimated at $39 billion in 2021 and $23 billion in 2022.
Pfizer and even Moderna’s first mover advantage can easily help them dominate the market this year.
This means that the competition will heat up by 2022.
To ensure that it keeps the lead, Pfizer has commenced the Phase 1 trial for a COVID-19 pill.
Pfizer’s pill, dubbed PF-07321332, aims to inhibit the enzymes that cause the SARS-CoV-2 virus to replicate. The goal is to create an antiviral drug that works pretty much the same way as the one developed for HIV and Hepatitis C.
If the trials generate positive results, then PF-07321332 could be taken at the first sign of infection.
So far, lab results have shown the pill’s potent capacity to prevent the SARS-CoV-2 virus and other coronaviruses from replicating.
Pfizer isn’t the only one that came up with the idea of a COVID-19 pill. Merck (MRK), Eli Lilly (LLY), and Regeneron (REGN) have been conducting tests for their own version of the antiviral.
However, Pfizer is more than its COVID-19 programs.
In the past, investors wondered about the long-term growth potential of this company. Some questions are linked to its Upjohn unit, which included several products that lost patent exclusivity.
This segment clouded Pfizer’s pure play revenue and even its earnings growth. However, these questions were put to an end last year when Upjohn’s finally separated from Pfizer and formed a new company, Viatris (VTRS), with Mylan.
The effect of this move showed an amplified growth for Pfizer almost immediately.
In the fourth quarter alone of 2020, the company reported $11.68 billion in revenue, indicating a 12% increase year-over-year. If we exclude the sales from the COVID-19 vaccine, Pfizer’s revenue was still up by 8%.
Every key product segment in the company recorded revenue growth, which is remarkable considering the effects of the pandemic.
Revenue for its oncology sector went up 23% to reach $3 billion, with breast cancer treatment Ibrance leading the charge with an 11% boost to its sales to hit $1.4 billion.
To ensure that it corners the market, Pfizer also launched biosimilars Zirabev and Ruxience in the same quarter. Both generated $171 million in total.
Outside its COVID-19 program, other products in Pfizer’s vaccine segment significantly contributed to the 17% increase in revenue to reach $2 billion.
For example, the pneumonia vaccine Prevnar generated $1.8 billion thanks to the 10% boost in its revenue year-over-year.
As for Pfizer’s rare disease unit, revenue went up 24% to reach $865 million.
The segment leader so far is cardiomyopathy treatment Vyndagel, which achieved a jaw dropping 96% year-over-year boost in its revenue to generate $429 million. This product won’t face patent loss until 2026, so Pfizer still has a few more years to take advantage of it.
Pfizer’s revenues in 2020 were up 2% at $41.9 billion. Considering that it still managed to boost sales despite the pandemic, there’s a good chance that 2021 will be a better year for the company.
In fact, Pfizer estimates that it would reach nearly $60 billion in revenue, with an annualized EPS of roughly $3.15 in 2021.
Global sales in the biotechnology and healthcare industry are projected to be worth $1.2 trillion annually. This is a massive market that is all but guaranteed.
The S&P 500 trades at nearly 21.5x forward earnings, with pharmaceutical companies trading at only 13.2x. That’s a whopping 60% discount.
Considering that drug stocks have historically traded at roughly the same level as the S&P 500, the current situation still offers an unmistakable promise even if nothing else happens.
Continuous development in the sector not only advances our quality of life but also offers reasonable returns to investors.
Mad Hedge Biotech & Healthcare Letter
March 25, 2021
Fiat Lux
FEATURED TRADE:
DON’T MISS THE BOAT ON THIS BEST OF BREED BIOTECHNOLOGY STOCK
(AMGN), (MRNA), (PFE), (BNTX), (JNJ), (LLY), (ABBV), (BMY), (FPRX), (BGNE)
The past few weeks have been hectic for the healthcare industry, with Moderna (MRNA), Pfizer (PFE), BioNTech (BNTX), and even Johnson & Johnson (JNJ) working hard to manufacture and distribute their COVID-19 vaccines all over the world.
There’s one major player in the healthcare industry that has been out of the spotlight for quite some time: Amgen (AMGN).
While Amgen has been doing its part from the sidelines by helping out companies like Eli Lilly (LLY) with the manufacturing of their COVID-19 drugs, it looks like investors are flocking towards businesses that allocate more resources toward fighting off the pandemic.
In fact, JNJ recently reached a new high at $170 per share.
Nonetheless, I think investors are missing out on a great opportunity by ignoring Amgen these days.
The biotech world, which basically involves formulating drugs and treatments for living organisms, was somewhat limited back in 1980.
Over the past decades, however, this industry has shifted and managed to successfully launch groundbreaking drugs commercially.
Before, only a handful of legacy companies had occupied this space. Now, so many up-and-coming companies try to conquer the biotech world.
For context, an FDA report in 2019 showed that 64% of drugs approved in the previous year were developed by biotech companies.
Moving forward, it’s reasonable to say that the biotech industry will continue to come up with breakthrough treatments for rare and complex conditions compared to our traditional pharmaceutical companies.
Actually, this sector has been hot in recent years, with companies like AbbVie (ABBV) and Celgene, now with Bristol-Myers Squibb (BMY), coming up with mega-blockbuster treatments, such as Humira and Revlimid, that rake in billions in sales annually.
Among them, Amgen has emerged as one of the most consistent and aggressive players in the biotech world, with competitors still struggling to topple some of its products after decades of being in the market.
This biotech giant has also been busy boosting its pipeline of newly developed treatments. It’s even bolstering its biosimilar lineup to ensure its dominance in the sector.
Last year, Amgen’s revenue rose by 9%, with more growth indicators lighting the way for a brighter future for the company.
While Amgen has been working on many conditions, its portfolio still looks focused on particular diseases.
In 2020 alone, Amgen’s seven blockbusters each generated over $1 billion in revenue. Among these, four managed to rake in more than $2 billion in annual sales.
Amgen’s impressive lineup of drugs includes psoriatic arthritis treatment Enbrel, osteoporosis and bone cancer injection Prolia, and even newcomer heart disease medication Repatha.
With its rivals nipping at the heels of its first-generation blockbusters like Neupogen, Amgen has been hustling to find ways to reinvent itself.
Apart from developing new drugs, the company has been looking into acquisitions to sustain its position at the top.
Recently, Amgen has been doubling down on its newest shining star: Otezla.
Otezla was one of the company’s biggest purchases, with Amgen acquiring this drug for a whopping $13.4 billion from Celgene in August 2019.
In 2019, Otezla sales rose by 25% to reach $1.6 billion. By 2020, the drug generated $2.2 billion in sales, showing off a 36.5% jump.
Over the next few years, Amgen estimates that Otezla sales will climb by over 10% annually.
Riding the momentum of not only Otezla but its entire portfolio and programs in the pipeline, Amgen aims to dominate the immunology sector.
Among the candidates in Amgen’s pipeline, the most promising is its lung cancer medication Sotorasib, which should complete Phase 2 in the first half of 2021.
Meanwhile, Amgen’s latest deal outside its own pipeline is the $1.9 billion acquisition of Five Prime Therapeutics (FPRX), which is a small biotech company developing treatments for stomach cancers. The agreement should be finalized by June 2021.
Five Prime’s experimental treatment, Bemarituzumab, perfectly aligns with the other stomach cancer medications queued in Amgen’s pipeline.
If this proves successful, then Bemarituzumab will be a strong contender against Bristol-Myers Squibb’s blockbuster treatment Opdivo.
While Opdivo has been in the market longer, Five Prime’s candidate has consistently shown stronger and more promising results since the trials started.
Prior to its deal with Prime Five, Amgen acquired a 20% stake in Beijing-based biotech company BeiGene (BGNE). This is a telling move as it indicates the company’s efforts to expand its reach in Asia, particularly in China and Japan.
Another revenue stream that Amgen has been pushing for expansion is its biosimilars sector.
The company released its first-ever blockbuster, Epogen, in 1989. Since then, this anemia drug has been a top seller. However, biosimilar competition eventually caused a decline in its sales starting in 2015.
Learning from the fall of Epogen in the hands of biosimilars, Amgen decided to turn its weakness into its strength.
Since 2015, the company has been expanding its work on biosimilars. In that year alone, Amgen developed 29 biosimilars for its own products and launched 18 more to compete with other companies.
To date, biosimilars have been generating at least $2 billion in revenues, with 10 more queued in Amgen’s pipeline.
Considering the accelerated growth of the biotechnology sector, now is not the time to count out Amgen.
Today, Amgen has transformed itself into one of the leaders in the biotech world, generating over $25 billion in revenue.
Since 1988, the company has only reported a decline in its year-over-year revenue three times: 2009, 2018, and 2019.
This performance shows tangible proof that Amgen is not a “one-hit-wonder” type of biotech stock. Instead, it demonstrates its capacity to generate solid earnings and sustainability.
Currently, Amgen trades at a price-to-earnings multiple that’s actually 40% lower than the average S&P 500 stock. Its EPS is estimated to rise in the high single digits in the next several years.
Simply looking at its 2020 fiscal report, it’s obvious that Amgen delivered an impressive performance considering the recession and the pandemic.
The company also continues to reward its shareholders with double dividend increases plus an aggressive repurchase program, which Amgen plans to spend roughly $3 billion to $4 billion.
Recently, the stock has been trading at a roughly 30% discount. This is a real bargain considering everything Amgen has to offer.
