Mad Hedge Biotech and Healthcare Letter
August 29, 2023
Fiat Lux
Featured Trade:
(WEIGHTY RETURNS)
(NVO), (LLY), (SNY), (AMGN), (PFE), (AZN)
Posts
These days, the narrative around transformative weight-loss drugs just got a little juicier. Here's the lowdown: Heart-failure patients are now giving a nod to Novo Nordisk’s (NVO) Wegovy. But, why?
The intel shows that the overweight community, grappling with heart woes, noticed a stamina uptick and weight drop when on Wegovy. The buzz was so compelling that it got its spotlight moment at the European Society of Cardiology Congress in Amsterdam. Plus, the New England Journal of Medicine gave it some ink.
Dive into the numbers, and you'll find that out of about 530 individuals with hearts not really pulling their weight (pun intended), the Wegovy brigade shed 13% of their body weight. That’s in stark contrast to the 3% that the placebo group managed.
More walking, less heart huffing-puffing - Wegovy users clocked in 17 times more steps on the treadmill and showcased fewer heart hiccups. Oh, and fewer side effects? Check.
Rewinding the tape, GLP-1 drugs initially stepped into the arena as the remedy for Type-2 diabetes. But then, surprise! Novo’s Ozempic and Eli Lilly’s (LLY) Mounjaro became the talk of the town. Not just because they were treating diabetes, but because those popping them shed an eye-catching 15% to 20% of their body weight. That's blockbuster material right there.
Eventually, Novo bagged the FDA's green light first for weight loss with Wegovy, and its demand skyrocketed so much so that medical maestros started prescribing Ozempic and Mounjaro to folks with weight woes. Now, all eyes are on the FDA's next move concerning Lilly’s weight-loss contender.
Now, here’s the kicker. This isn’t Wegovy’s first rodeo in the spotlight. Earlier this month, eyebrows were raised when it was revealed that these new kids on the block, known as GLP-1 agonists, might be the next superhero squad against a gamut of diseases.
Yet, GLP-1 might not just stop at obesity and heart diseases. It can also combat a spectrum of illnesses, including Alzheimer's. As expected, Novo and Lilly are doubling down on this potential, exploring these drugs' impact on liver and kidney diseases. As the benefits of GLP-1s unfold, insurers will probably be queuing up to offer coverage.
Let’s paint a clearer picture in terms of market potential.
Nearly 42% of U.S. adults grapple with obesity. The World Obesity Atlas dropped a bombshell—by 2035, over 4 billion global citizens might be tipping the scales, adding an astronomical $4 trillion in health costs.
The repercussions? Beyond the obvious heart diseases, strokes, and type 2 diabetes, they are also prone to mental health challenges, like depression and anxiety.
The economic ripples? Staggering. A drug that can be the silver bullet for such a widespread health epidemic could be the next Wall Street darling.
The next 10 years will likely see the GLP-1 agonists market touching an annual $86 billion. Yet, these figures might be leaning heavily on diabetes and off-label prescriptions.
With the World Health Organization cautioning about a billion obese and 2 billion overweight individuals by 2030, it's clear—this market is about to get a whole lot bigger.
With promises like these, it's no shocker that investors are tossing their coins into the ring. Both Novo and Lilly have seen their valuations triple, and Lilly's net worth now towers over its peers at a staggering $500 billion, crowning it the globe's pharmaceutical kingpin.
However, it’s wise to remember that it's one thing to climb the mountain and another to stay on the summit. Even in this early stage, competitors have started to emerge, including Amgen (AMGN), Sanofi (SNY), AstraZeneca (AZN), and Pfizer (PFE).
By 2025, the biopharma giants could potentially unveil their very own GLP-1-based wonder drugs for obesity, chipping away a quarter of Novo and Lilly's market dominance by 2032.
In the ever-evolving theater of biopharma, GLP-1 agonists, led by stalwarts like Wegovy, are emerging as the new front-runners. While the rewards seem tantalizingly vast, savvy investors know the pharmaceutical landscape is punctuated with highs and inevitable lows.
And here's a golden nugget: in the dynamic world of stock trading, every dip is an opportunity disguised as a setback. So, if you're seeking a stock market mantra for this burgeoning sector, remember to buy on the ebb, not the crest. It's in these valleys that fortunes are made, setting the stage for robust returns. Dive in wisely.
Mad Hedge Biotech and Healthcare Letter
August 24, 2023
Fiat Lux
Featured Trade:
(FUTUREPROOFING BIOTECH)
(REGN), (SNY), (BAYN), (RHHBY)
The financial landscape of 2023 offers a captivating tableau. While stock market giants, such as the S&P 500 and the Nasdaq Composite, have been garnering attention with their respective 18% and 34% gains, the biotechnology and healthcare domain unfolds a more nuanced story.
When I take a look at this sector, I notice certain ETFs, notably the iShares Biotechnology and the SPDR S&P Biotech, in a decellerative phase. However, the industry's canvas is dotted with companies that are scripting their distinct success stories.
Among these trailblazers is Regeneron Pharmaceuticals (REGN).
Contrary to the broader biotech trend, Regeneron has asserted itself with a commendable 7% growth this year. This is complemented by its sturdy revenue and an impressive EPS trajectory showcased in Q2.
For those not completely familiar with the annals of biotech, the name Regeneron is synonymous with pioneering achievements in therapeutic proteins. Their landmark collaboration with Bayer (BAYN) resulted in the creation of Eylea, a beacon in the anti-VEGF drug realm.
Their story doesn't end there.
Together with Sanofi (SNY), they've masterminded treatments that have potentially revolutionized the way we approach cancer, inflammation, and specific respiratory disorders. A testament to this partnership's prowess is Dupixent, which registered a remarkable $8.68 billion in sales during 2022.
Insider chatter hints at the possibility of these figures ascending to an ambitious $20 billion by the end of this decade.
A retrospective look at Regeneron's journey over the past decade reveals a remarkable story of resilience and growth. Their compound annual growth rate (CAGR) stood at an enviable 24.2% from 2012 to 2022.
When contrasted against the S&P 500's relatively modest 16.3% in the same window, it underscores the vast potential that biologic therapies hold. Moreover, it showcases Regeneron's ability to harness this potential effectively.
Yet, as we look ahead, the landscape is not devoid of challenges.
Enter Roche’s (RHHBY) Vabysmo — a new contender that has begun to question Eylea's unchallenged dominion since its 2022 introduction.
Recognizing this, Regeneron has strategically moved towards bolstering Eylea to ensure it maintains its market presence. These evolving dynamics serve as a reminder that the arena of retinal disease treatments is becoming increasingly competitive.
Anticipating the industry's fluid dynamics, Regeneron has exhibited strategic foresight. Their ventures into the realm of immuno-oncology, notably their stalwart, Libtayo, are significant.
They've not stopped there, however.
Their strategic diversification includes incursions into groundbreaking fields like gene therapy, RNA interference, and more. The company's research pipeline, promising an influx of innovative drugs in the near future, showcases its commitment to remaining at the industry's forefront.
A key partnership that's generating interest is Regeneron's association with Intellia Therapeutics (NTLA) in the sphere of gene editing.
This venture is pivotal. Such therapies have the potential to redefine medicine, offering transformative, perhaps even curative, treatments. Their adoption, however, comes with its fair share of challenges.
The industry's somewhat tentative approach towards gene editing, with a preference for licensing and equity stakes rather than outright acquisitions, underscores the nascent and experimental nature of this domain.
In conclusion, Regeneron Pharmaceuticals stands as an epitome of innovation and adaptability in the biotech sector. It amalgamates a rich history of achievements with an ambitious vision for the future.
As the company maneuvers through the intricate maze of opportunities and challenges that the 2020s present, investors ought to approach with both optimism and prudence. In a domain characterized by rapid advancements and uncertainties, Regeneron's journey offers valuable insights.
The upcoming years promise a blend of innovation, challenges, and milestones, and firms like Regeneron are poised to shape this narrative. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
April 13, 2023
Fiat Lux
Featured Trade:
(SMOOTH SAILING THROUGH ROUGH WATERS)
(NVO), (LLY), (SNY)
Even in the toughest of times, some stalwart companies manage to maintain their footing and keep making strides. Novo Nordisk (NVO) has taken this feat to heart by continuing its success despite facing numerous market speed bumps—making it one resilient company worth considering.
Novo Nordisk, a veteran player in the pharmaceutical industry, has been consistently delivering impressive financial results. In 2022, the company's net sales increased by a remarkable 26% year over year, amounting to approximately $25.5 billion. However, it's worth noting that currency exchange rate fluctuations may have played a role in this growth.
The company continues to showcase impressive financial performance, with net sales surging by 26% to $25.5 billion in 2022. Even after accounting for currency exchange rate fluctuations, the pharmaceutical company's revenue still jumped by a commendable 16%. Additionally, Novo Nordisk's net profit increased by 16% to $8 billion, solidifying its position as a top-performing player in the industry.
Moreover, Novo Nordisk remains a prominent contender in the diabetes drug arena, capturing almost a third of the market share as of November 2022.
Novo Nordisk's market dominance in diabetes drugs owes much to its portfolio of effective and innovative products like Rybelsus, Ozempic, and the recently approved Wegovy. This dynamic trio has been instrumental in driving the company's sales growth and maintaining its edge in the competitive pharmaceutical industry.
Ozempic has been a critical player in Novo Nordisk's revenue stream, bringing in over a third of the company's total revenue at just under $8.9 billion last year.
Novo Nordisk's market exclusivity for Rybelsus and Ozempic remains intact, giving the Danish pharmaceutical company a few more years to maximize its potential.
Both drugs are injected weekly and heavily marketed in the U.S. With patent expirations in China in 2026, followed by Europe and Japan in 2031, and the U.S. in 2032, Novo Nordisk is likely to maintain its strong position for a while yet.
As for Wegovy, the newcomer in the obesity care market contributed just 3% of the company's total revenue, with $930 million in sales for 2022. However, with its recent approval for chronic weight management by the FDA and in the UK, the potential for growth and expansion is promising.
In its 2022 annual report, Novo Nordisk announced that it controls over half the global market for GLP-1 drugs, with a market share of 54.9% in 2022, up from 52.7% in 2021. Its primary competitors include Eli Lilly's (LLY) Trulicity and Sanofi-Aventis's (SNY) Adlyxin, which exited the U.S. market at the end of 2022.
Overall, the international diabetes market seems to favor Novo Nordisk, with its market share rising from 29.3% to 31.9% from 2020 to 2022.
The company is projected to continue its success, with sales and operating profits expected to increase in the 13% to 19% range at CER in 2023, according to its annual report. Analysts' average estimate of $30.1 billion in 2023 revenues aligns with this projection, representing a 16.7% increase at CER.
Leveraging this dominance, the company is further strengthening its position in the diabetes market, a disease affecting over 415 million people worldwide, and the numbers continue to grow. According to the Centers for Disease Control and Prevention, there will be over 500 million patients by 2040.
For instance, its recent announcement of the positive results of its Phase 3b Pioneer Plus clinical trial of Rybelsus is a further testament to its ability to innovate and stay ahead in the diabetes treatment arena. The trial showed a statistically significant reduction in blood sugar levels, indicating the potential for a more intense treatment option for type 2 diabetes patients.
Meanwhile, Obesity, a major risk factor for diabetes and other health problems, also presents a significant market opportunity for Novo Nordisk.
In fact, the company's revenue from these treatments doubled in the previous year, propelling its overall sales to an upward trajectory for the past half-decade.
Needless to say, Novo Nordisk is showing no signs of slowing down, and its strong position in the diabetes and obesity treatment market is poised to fuel its growth for the foreseeable future. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
March 28, 2023
Fiat Lux
Featured Trade:
(NOWHERE TO GO BUT UP)
(REGN), (SNY), (RHHBY)
For any biotechnology company, one of the critical elements of success is the capability to create and develop new and innovative treatments.
That is one requirement Regeneron (REGN) has no trouble meeting.
The latest update from this biotech involves its blockbuster asthma medication, Dupixent. The top-selling drug delivered promising results from a study that aims to expand its indication, signifying the potential for additional billions of dollars in revenue.
According to Regeneron and its co-developer, Sanofi (SNY), the Dupixent trial on current or previous smokers displayed a 30% reduction in moderate or severe acute exacerbations of chronic obstructive pulmonary disease (COPD).
COPD is a lung condition that makes it difficult for air to move in and out of the lungs due to the narrowing of the airways. It's is caused by long-term exposure to irritants such as cigarettes, coal, and other pollutants. It can be fatal and life-threatening. There is no cure for COPD, but treatments may help improve symptoms and slow down the progression of the disease.
The market for COPD is estimated to grow significantly over the next five years due to the increasing prevalence of COPD and related comorbidities, such as asthma, cardiovascular diseases, and diabetes.
Additionally, factors such as continuous growth in the elderly population and the introduction of novel therapies are likely to drive the growth of this market during the forecast period. The global COPD market was valued at $27 billion in 2018 and is expected to reach $50 billion by 2025 with a compound annual growth rate of 8.5%.
Considering Dupixent’s positioning in the market and the competitors for this segment, Regeneron is projected to rake in an additional $4 billion in sales from this expanded COPD indication. Taking all its indications together, this blockbuster drug is estimated to contribute a whopping $19.2 billion in the company’s sales.
Aside from Dupixent, Regeneron has also aggressively expanded the indications for another blockbuster drug, Eylea.
In February, the company submitted its application to the Food and Drug Administration to allow them to administer Eylea in 8-milligram doses.
Eylea is a medication used to treat wet age-related macular degeneration (AMD), diabetic retinopathy, and diabetic macular edema. This treatment is typically administered via an injection into the patient’s eye once every two or four weeks, depending on their condition.
In terms of revenue, the wet AMD market is expected to grow significantly over the following years. This growth is driven by the climbing number of cases and the prevalence of associated comorbidities like diabetes and hypertension. In 2018, the global wet AMD market was valued at $17 billion. This number is anticipated to reach $28 billion by 2025.
Going back to Regeneron, the company’s move to increase the formulation of Eylea from 2 mg to 8 mg is critical. This will enable patients to undergo fewer injections of the treatment from 8-week intervals to 12- and even 16-week intervals, which would be a key selling point.
Another excellent reason behind this move is that Eylea’s patent expires in 2023, making it a target for biosimilar competitors. Regeneron’s decision to switch to a higher dosage formulation is a strategic way to sidestep this impending concern.
On top of blockbusters Eylea and Dupixent, Regeneron is also charging headlong on efforts to expand its immune-oncology franchise. Its top treatment in this field, Libtayo, is slated for multiple clinical trials to expand its indication. In addition, Regeneron has seven or so candidates queued in this lucrative but crowded space.
While Roche (RHHBY) has more candidates than the biotech in the immuno-oncology field, Regeneron’s speed in capitalizing on opportunities in this fast-advancing sector is nothing short of breathtaking. Given that immuno-oncology is a relatively new segment, the company’s ability to deliver promising results enables it to stand out in the biotech world.
Regeneron is a beacon of stability in an otherwise unpredictable industry, steadily ascending since its inception. But the stock’s continued success isn't just luck. Their past successes with their treatments and medicines have placed them on solid ground to continue advancing, while further wins through the widening use of approved drugs have only reinforced that position - setting up Regeneron for continued growth into the future.
Mad Hedge Biotech and Healthcare Letter
March 2, 2023
Fiat Lux
Featured Trade:
(AN UNBEATABLE STOCK REFORMING THE SECTOR)
(LLY), (JNJ), (SNY), (NVO)
After starting 2023 with such great promise, practically all major stock indexes in the United States fell last month. Stocks dipped because of the unrelentingly rising inflation, which economists anticipate to lead to another round of seemingly unstoppable interest rate hikes later in the year.
What can stock investors do in this climate?
The ideal stocks in this situation are those defensive in nature because they tend to be less reactive or sensitive to macroeconomic conditions. As a result, defensive stocks deliver relatively solid price performance in bear and bull markets.
Defensive stocks are companies whose products or services are considered essential or necessary, regardless of economic conditions. These companies typically provide products or services that people and businesses cannot easily do without, such as healthcare, utilities, and consumer staples. Because these companies are less susceptible to fluctuations in the economy, they are often viewed as a safe investment option during times of market uncertainty.
Eli Lilly (LLY) stands out as one of the best defensive stocks in the biotechnology and healthcare sector today.
With over 38,000 employees across the globe and products commercially available in at least 120 countries, the company is no doubt a dominant presence in the industry. It is a global pharmaceutical organization that develops, manufactures, and markets drugs for a wide range of medical conditions, including diabetes, cancer, and autoimmune disorders.
The company has been in operation for over 140 years and has a strong reputation for innovation and research. Apart from Johnson & Johnson (JNJ), Eli Lilly’s market capitalization of roughly $327 billion makes it the most prominent pharmaceutical business worldwide.
Meanwhile, Eli Lilly pays out a dividend that yields around 1.1%. Over the trailing decade, this giant drugmaker’s dividend has experienced a consistent increase of about 130%.
Given that Eli Lilly is a healthcare company that produces medicines for life-threatening and chronic conditions, it can be considered a defensive stock.
In 2022, the company’s shares gained approximately 32.4% thanks to its solid organic growth and deep and diverse new treatments and drugs pipeline. Considering its history and track record combined with the market's volatility, Eli Lilly also benefited from its image of being a “safe” stock.
Despite the uncertainties, Eli Lilly looks to be poised for another healthy run in 2023. In terms of growth, the company is projected to climb higher courtesy of its newly approved diabetes and obesity drug, Mounjaro, which shows impressive potential. The company also has a promising pipeline, with several high-value candidates in the immunology and dermatology segments expected to gain approval this year.
Recently, Eli Lilly announced that it would put a cap on the out-of-pocket expenses for insulin at $35 per month for uninsured patients and those covered by commercial insurance. The company also surprised the public by announcing its plan to lower the price of this highly controversial drug by 70%.
After drugmakers jacked up the price of insulin in the past years, this drug became the symbol of out-of-control healthcare costs.
In the US alone, over 30 million people suffer from diabetes. Of these patients, more than 7 million need to take insulin every day. The alarming part of this situation is that 1 in 7 patients who require insulin daily find their budget affected at “catastrophic” levels because of the medication’s cost. These patients allot a minimum of 40% of their disposable income to the treatment alone.
This is why Eli Lilly’s announcement marked a significant development in the sector after months of aggressive lobbying to lower the price of the drug. With the company’s decision, the pressure became more intense for other drugmakers to follow suit. Specifically, major insulin distributors like Sanofi (SNY) and Novo Nordisk (NVO) are urged to apply the same rule.
All in all, Eli Lilly has a virtually recession-proof model and a positive long-term outlook. I suggest you buy the dip.
