Mad Hedge Biotech & Healthcare Letter
May 20, 2021
Fiat Lux
FEATURED TRADE:
(REGENERATED REGENERON)
(REGN), (PFE), (JNJ), (AMGN), (BMY), (GILD), (MRK), (LLY), (SNY), (BAYRY), (NVS), (RHHBY)
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The biotechnology and healthcare sectors have become attractive investment targets for investors who recognize the value and essence of these industries along with the possible risks associated with them.
While not all companies in these areas are great investments, some offer remarkable growth opportunities.
One company worth considering is Regeneron (REGN), with its strong and stable investment thesis and steady organic growth.
Regeneron joins the ranks of Pfizer (PFE) and Johnson & Johnson (JNJ) as one of the handful of biopharmaceutical companies to release solid first quarter results this 2021 compared to other big names in the industry, including Amgen (AMGN), Bristol Myers Squibb (BMY), Gilead Sciences (GILD), Merck (MRK), and Eli Lilly (LLY).
The New York-based company reported a 38% boost in its revenue compared to the same period in 2020, reaching $2.5 billion for the first quarter of 2021 alone.
Virtually all of Regeneron’s products generated solid growth during this period, with the company’s COVID-19 antibody cocktail REGEN-COV delivering the highest sales at $262 million.
To underscore just how significant REGEN-COV is to Regeneron this quarter, its absence from the roster would take away 18% from the company’s overall revenue growth.
Riding the momentum of its COVID-19 program, Regeneron has developed Inmazeb, which is a treatment for Ebola virus infection.
Aside from its COVID-19 antibody cocktail, Regeneron also saw an impressive boost in the performance of its atopic dermatitis drug Dupixent.
Dupixent, which Regeneron sells in partnership with Sanofi (SNY), generated $1.26 billion in sales in the first quarter, showing off a notable 48% increase from its 2020 report.
Although Dupixent is a shared product with Sanofi, this dermatitis drug holds incredible promise for Regeneron.
To date, only 6% of eligible patients are being treated with Dupixent. This indicates a massive space that is yet to be explored by both companies.
Taking into consideration the pace at which Dupixent has been growing so far, this drug is projected to peak at roughly $12.5 billion in sales in the coming years.
Another high-selling drug for Regeneron is wet age-related macular degeneration (AMD) treatment Eylea.
Sales for this drug, which was developed in collaboration with Bayer (BAYRY), went up from $1.2 billion in the first quarter of 2020 to $1.3 billion this year.
The increase in sales for Eylea is a welcome surprise for both Regeneron and Bayer, especially since more and more competitors are attempting to topple the drug as the top product in the niche.
Cornering the AMD segment is an attractive venture for any biopharmaceutical company.
After all, Eylea generated $4.9 billion in sales in 2020 from the US market alone.
Thus far, two main competitors have come forward as the strongest.
One is Novartis (NVS), which released Beovu in 2019.
The second, and possibly the stronger competitor between the two, is Roche (RHHBY) with Faricimab.
To ensure its dominance in the AMD market, Regeneron has been expanding the use of Eylea.
The latest development is the drug’s enrollment in the Phase 3 program, which would allow extended periods in between treatments but still deliver the same level of efficacy and safety.
Aside from these, Regeneron is looking into additional revenue streams ahead.
One growth segment is its oncology program, particularly its cancer drug Libtayo, which may soon be marketed to cover a fourth type of cancer.
Regeneron aims to submit Libtayo for review as a treatment for advanced cervical cancer.
On top of this, the drug is also a strong contender in the development of several antibody treatments.
Thus far, the company has 12 oncology antibodies under clinical development.
Overall, Regeneron’s strong results for the first quarter of 2021 highlighted its continuous evolution into a company carrying multiple and diverse portfolios of products and pipeline programs that address an extensive range of serious diseases, from COVID-19 and rare diseases to cancer.
Mad Hedge Biotech & Healthcare Letter
May 13, 2021
Fiat Lux
FEATURED TRADE:
(THE HOLY GRAIL OF DIABETES)
(NVO), (LLY), (SNY), (BNTX), (CRSP), (EDIT), (NTLA)
Diabetes and obesity continue to be two of the major health issues across the globe—and these problems are only getting worse.
There are about 463 million people worldwide afflicted with diabetes, with only half of this number actually diagnosed and even fewer seeking treatment.
This situation is alarming considering that diabetes is a major cause of diseases like heart attacks, stroke, blindness, kidney failure, and even amputation of the lower limb.
The key to handling diabetes for many diabetics is taking insulin, which is a hormone that aids in regulating the amount of glucose in the patient’s blood.
To date, only 16% of diabetics take insulin.
Interestingly, there are only a handful of producers of this drug despite the fact that the global spending for insulin is estimated to reach $28 billion by 2026.
Only three companies practically control over 90% of the insulin market. That dominance, along with the absence of generic competition, allowed them to generously reward their shareholders.
Currently, one company is dominating the insulin market and holds a virtual monopoly of this lucrative industry: Novo Nordisk (NVO).
In fact, Novo Nordisk shares have increased by over 2,500% since 2000—an honest to goodness wealth-building investment.
For years, Novo Nordisk has focused on developing products specifically for diabetes and obesity.
Thanks to its efforts in these sectors, the company has become the undisputed leader with a 44.5% share of the insulin market and a 49.9% share of the blood sugar drug GLP-1 market.
In 2018 alone, Novo Nordisk generated roughly $14.26 billion in revenue from its diabetes lineup.
In comparison, the second largest producer of these products, Eli Lilly (LLY), generated only $9.71 billion.
Meanwhile, the third challenger in this space, Sanofi (SNY), began its exit from the diabetes industry when the pandemic struck last year.
At this point, Novo Nordisk holds 29.2% of the global diabetes market, making the company within arm’s reach of its goal to conquer one-third of the segment by 2025.
Amid its success in the industry, Novo Nordisk refuses to rest on its laurels. The company continues to come up with innovative treatments for diabetes and obesity.
Novo Nordisk’s latest product is Rybelsus, which is an oral medication for blood sugar, particularly for Type 2 diabetes patients.
In an effort to corner the market, Rybelsus is actually a direct competitor of Novo Nordisk’s own products, Ozempic and Victoza, which target the same market. The difference is that the new product can be taken orally while the two older ones need to be injected into the bloodstream.
When Ryblesus was launched in late 2020, it was hailed as the “holy grail” of diabetes treatments and generated $64.5 million in the first six months.
To understand the potential of Rybelsus, it’s good to remember the growth story of Ozempic.
From $264 million in sales in 2018, this drug skyrocketed to rake in $1.7 billion by 2019 and generated $1.1 billion in the first half of 2020.
Although diabetes clearly holds the bulk of Novo Nordisk’s portfolio, it’s not the sole revenue stream for the company.
In the past years, Novo Nordisk has also been developing treatments for chronic obesity—a condition that could lead to serious diseases, including various types of cancer and heart disorders.
Global obesity has roughly tripled since 1975, with the COVID-19 pandemic accelerating this alarming trend.
For context, 1.9 billion adults were diagnosed as overweight in 2016. Of these, 650 million were considered obese.
More alarmingly, only 2% of 650 million people suffering from obesity are receiving any medical treatment.
In relation to Novo Nordisk’s revenue stream, this offers notable potential for future revenues for the segment.
The company’s flagship obesity drug, Saxenda, has shown extremely strong growth in terms of market share as well as total revenue since its launch.
With incredible attention focused on groundbreaking treatments for diabetes like messenger RNA from companies like BioNTech (BNTX), CRISPR Therapeutics (CRSP), Editas Medicines (EDIT), and Intellia Therapeutics (NTLA), it’s understandable to find a company established in the 1920s extremely boring.
However, it’s important to always keep in mind what investing is truly about. It’s distributing your money to businesses that have the capacity and potential to grow over the long term.
This is what sets apart companies like Novo Nordisk.
Historically, Novo Nordisk has been giving back to its shareholders for decades.
Since it debuted in the US market in 1981, the company has returned roughly 22,000% to its investors.
Four decades later, shareholders can rest easy and expect continuous rewards in the years to come. So, take advantage of this opportunity and buy the dips.
Mad Hedge Biotech & Healthcare Letter
March 18, 2021
Fiat Lux
FEATURED TRADE:
(A BLUE CHIP STOCK SELLING AT A DISCOUNT)
(LLY), (GILD), (REGN), (SNY), (AMGN), (TEVA), (NVO), (ABBV), (BMY)
It’s not unheard of in the biotechnology industry to watch the stock prices of small or even mid-cap drug developers rise and fall by 30% following trial results or new drug approval.
However, when the company is Eli Lilly (LLY), which holds a $179 billion market capitalization, then biotech investors need to pay attention.
After all, the only plausible conclusion to draw from this is that there have been some seismic advancements done by the company.
Two potentially breakthrough treatments are the culprit behind the volatility in Eli Lilly stock these days.
The first is Eli Lilly’s COVID-19 program, in which the company is looking into using Bamlanivimab (LY-CoV555) solo or combining it with Etesevimab (LY-CoV016).
What we know so far is that the combo drug can lower the risk of death and hospitalization among high-risk COVID-19 patients by as high as 87%.
In November 2020, the FDA granted Eli Lilly’s Bamlanivimab Emergency Use Authorization.
The solo treatment was also authorized for the same usage in Morocco, Europe, Canada, Rwanda, and some regions of the Middle East, where Eli Lilly is collaborating with the Bill and Melinda Gates Foundation for distribution.
Last February 2021, its combo treatment received the same approval.
To date, Eli Lilly has shipped roughly 1 million doses of Bamlanivimab and is committed to supplying an additional 1 million this quarter.
To meet the demand for the Bamlanivimab-Etesevimab combo, Eli Lilly will be working with pharmaceutical titan Amgen (AMGN).
In the company’s 2020 earnings report, Eli Lilly disclosed that Bamlanivimab accounted for $871 million of their sales.
For 2021, the market for COVID-19 treatments is valued at $27.25 billion.
Taking into consideration the competitors coming up with similar medications, such as Gilead Sciences (GILD), Regeneron (REGN), and Sanofi (SNY), the conservative estimate for the sales for Bamlanivimab alone is estimated to reach roughly $1 billion to $2 billion this year.
The second potential breakthrough that’s affecting Eli Lilly’s prices is its Alzheimer’s disease treatment, Donanemab.
Eli Lilly recently released positive data from the Phase 2 trial of Donanemab, with the treatment slowing down cognitive decline by 32% after 76 weeks.
In fact, a notable decline was already observed among the patients as early as 36 weeks.
This is an impressive result, and there’s talk that Eli Lilly’s plan of possible commercialization of Donanemab by 2024 could be fast-tracked to as early as the first half of 2023.
Interestingly, the positive news was met with negative reactions by the investors.
Eli Lilly fell by 9% following the Donanemab update, sending shares tumbling from $208.18 to $189.16.
This reaction effectively erased almost $20 billion in the company’s market value.
The negative reaction to Eli Lilly’s news may be stemming from the pending application of Biogen’s (BIIB) own Alzheimer’s drug, Aducanumab, which is expected to receive word from the FDA by June.
Investors anticipate that Aducanumab’s performance would be indicative of Donanemab’s future.
Looking at the trial results though, I can say that this shouldn’t be the case. Since the beginning, Donanemab has outperformed Aducanumab in practically every aspect.
Either way, what cannot be denied here is the market opportunity.
When the market thought that Aducanumab would get FDA approval in November 2020, the share price of Biogen saw a whopping 44% jump from $246 to $354 overnight.
Meanwhile, Donanemab’s potential sales volumes have been estimated to reach over $10 billion annually.
Other than Donanemab, Eli Lilly has been developing more contenders to boost its neuroscience division. Right now, this segment generates 6.3% of the company’s total revenues.
One of the promising drugs in the portfolio is migraine treatment Emgality, which recorded a 123% increase in sales last year to hit $362 million.
Thus far, Emgality holds at least 31% of the migraine market and still has room for growth and expansion.
This is a remarkable performance considering that its competitors include Amgen’s Aimovig and Teva’s (TEVA) Ajovy.
Another solid earner is antidepressant treatment Cymbalta, which generated over $768 million in sales last year, up by 5% year-on-year.
Outside its neuroscience efforts, one of Eli Lilly’s strongest growth drivers is its diabetes franchise.
This segment accounts for roughly 47% of its revenues and is led by Trulicity with $5 billion in sales last year, up 23% year-over-year.
Eli Lilly’s diabetes program has grown so much in the past years that it now aggressively competes against Novo Nordisk (NVO), a monopoly-like presence in this space.
In fact, Trulicity has been able to successfully protect its own market share against Novo’s heavily marketed Rybelsus, with data showing that users of Eli Lilly’s diabetes injectable recorded 60% adherence levels compared to Novo’s 43%.
In terms of expansion, Eli Lilly also won a new approval for Trulicity to be used to treat cardiovascular conditions as well.
This additional indication puts Trulicity’s peak sales at roughly $7.43 billion.
In an effort to corner the diabetes market, Eli Lilly also developed Tirzepatide.
Basically, this treatment is a long-term hedge against the pending loss of Trulicity’s patent exclusivity by 2027.
However, Tirzepatide is projected to surpass its predecessor in sales and reach double-digit billions.
Overall, Eli Lilly has positioned itself well in the diabetes market.
While it’s engaged in an aggressive battle for dominance against Novo Nordisk, there’s a lot of room for both.
The diabetes treatment segment is a continuously expanding market, with its value doubling in size from 2015 to 2015. Within this period, this market is projected to grow from $31 billion to $59 billion.
Aside from its diabetes and neuroscience programs, Eli Lilly has also been active in developing its immunology and oncology segments.
This is an ambitious plan, considering that practically all pharmaceutical companies are working on treatments in this space.
After all, the auto-immune market is massive as it’s worth well over $50 billion.
One of the bestsellers in Eli Lilly’s portfolio is plaque psoriasis treatment Taltz, which grew its sales by 31% year-over-year to reach $1.8 billion last year.
Some of the major competitors in this space are Bristol Myers Squibb (BMY) with Zeposia, Sanofi’s Dupixent, and AbbVie’s (ABBV) Skyrizi.
What could be promising news for Eli Lilly is the fact that AbbVie’s ultra-bestseller Humira is going off-patent by 2023.
This means that it could open up the market to allow both Taltz and Olumiant, another top-selling Eli Lilly treatment, to grab part of the lucrative market share.
Ultimately, Eli Lilly is a business that offers a promising commercialized portfolio and a remarkable near-term pipeline, which can reasonably support an annual revenue growth rate of roughly 10% even if we don’t factor in the effects of Donanemab.
Apart from the potential aftermath of the pending Biogen news, the fall in Eli Lilly’s shares could also be attributed to the extremely high expectation of investors.
Alzheimer’s has no approved cure, and there are only a handful of treatments developed from this neurological disease—none of which are even marginally effective.
It’s normal for investors to be wary of positive data results since they’ve been down this road before and are merely attempting to temper their excitement.
Amid the selloff, I believe that Donanemab is far from a lost cause. More importantly, I think the drop in Eli Lilly’s share price presents a rare buying opportunity for investors.
Therefore, I advise buying the dip.
Mad Hedge Biotech & Healthcare Letter
March 16, 2021
Fiat Lux
FEATURED TRADE:
(A BARGAIN BUY STOCK)
(NVAX), (PFE), (MRNA), (JNJ), (SNY)
Biotechnology stocks have been going through a rough patch in the past weeks.
These previously unstoppable stocks have trailed the same path as the market in a sell-off, which has some of their investors fighting to keep calm.
In fact, the iShares Biotech Nasdaq ETF slid over 9% in the past month—a fall that affected some players who experienced all-time highs or enjoyed four-digit gains in 2020.
Inasmuch as all these sound discouraging, the decline might actually offer an opportunity.
Now, investors can snatch up some excellent stocks at pre-pandemic prices.
Among the biotechnology stocks that have dropped more than 28% to date from their latest high points, I find Novavax (NVAX) to be one of the most promising.
Novavax rose to over 2,700% in 2020, with the stock extending its gains well into 2021.
In the first five weeks of the year, Novavax jumped 186% following positive data from the Phase 3 trial of its COVID-19 vaccine, NVX-CoV2373, in the UK.
NVX-CoV2373 is widely anticipated to be the next COVID-19 vaccine candidate to win major regulatory approval.
Its Phase 3 study in the UK showed that NVX-CoV2373 was 96.4% effective against mild, moderate, and even severe cases of COVID-19 caused by the original strain of the coronavirus.
When tested against the “UK variant,” NVX-CoV2373 showed 86.3% efficacy.
Meanwhile, NVX-CoV2373 was found to be 55.4% efficacious against the “South African” variant.
Overall, NVX-CoV2373 proved to be 100% effective in protecting patients from hospitalization and death. More importantly, the vaccine didn’t cause severe side effects.
Despite the promising results released, the biotech stock has slipped 46% since early February.
While some investors fret over the fact that rivals like Pfizer (PFE), Moderna (MRNA), and Johnson & Johnson (JNJ) have already started production and shipment of their vaccines, the developers of NVX-CoV2373 say there’s nothing to worry about.
NVX-CoV2373 doses are readily available and can be shipped as soon as Novavax gains regulatory approval.
More reassuringly, this vaccine candidate can be stored for months without any special handling.
While it hasn’t landed as many orders in the United States as its counterparts, Novavax has been securing its spot in the international markets.
The company has landed orders for roughly 200 million doses of NVX-CoV2373 for Canada, Australia, Switzerland, New Zealand, and the UK. It also has an agreement to supply 1.1 billion doses to the Serum Institute of India.
On top of these, Novavax has signed a deal to supply over 1 billion doses to COVAX, which is a global project initiated to secure fair access to vaccines for all countries.
Novavax has been boosting its manufacturing capacity as well, with the company ramping to produce over 2 billion doses of NVX-CoV2373 every year by mid-2021.
By comparison, Moderna is estimated to produce about 700 million to 1 billion doses this year.
In terms of revenue, Novavax hasn’t definitely discussed its pricing. What we know so far is the price paid by the US, which is $16 per dose.
Back of the napkin math says that brings the total to $4.8 billion for the orders from the US and the other countries so far this year and excluding the COVAX deal since the pricing might be substantially lower.
This is a massive revenue for a biotech company that doesn’t even have a product revenue yet.
Another exciting prospect is Novavax’s pipeline.
Right now, the company has another vaccine that can become a great revenue source: NanoFlu.
Before the pandemic broke, NanoFlu was actually the major reason investors flocked towards Novavax.
With its overwhelming performance against Sanofi’s (SNY) own FluZone Quadrivalent, NanoFlu has been slated for a myriad of commercial possibilities.
These include developing it as a combination vaccine with NVX-CoV2373 as well as with Novavax’s other vaccine candidate, with its experimental respiratory syncytial virus (RSV) vaccine.
Another program is looking into combining all three vaccines together.
Riding the momentum of its success with NVX-CoV2373, Novavax is also planning to develop vaccines for other coronavirus variants.
This could include a bivalent vaccine program, which is expected to commence by June 2021.
All these programs are positioning Novavax as a dominant leader in the vaccine market.
If you haven’t considered Novavax before, then now is a good time to look into the stock. This is a company that has billions in locked-in revenues coming in this year alone.
Basically, buying Novavax stock would get you revenue in the near future, new products that will generate additional sales, and pipelines that offer growth—and if you buy the stock on the dip, you’re getting all these at a bargain.
Mad Hedge Biotech & Healthcare Letter
March 9, 2021
Fiat Lux
FEATURED TRADE:
(AN MRNA STOCK TO CONSIDER)
(BNTX), (MRNA), (PFE), (NVS), (SNY), (AZN), (JNJ), (NVAX), (MRK), (BMY), (REGN), (DNA), (CVAC), (FB), (TSLA), (GOOG)
Mad Hedge Biotech & Healthcare Letter
March 4, 2021
Fiat Lux
FEATURED TRADE:
ARE WE THERE YET: HOW THE JNJ VACCINE COULD BE THE ANSWER
(JNJ), (MRNA), (PFE), (BNTX), (MRK), (SNY)