Mad Hedge Biotech & Healthcare Letter
June 10, 2021
Fiat Lux
FEATURED TRADE:
(IN THE RIGHT PLACE AT THE RIGHT TIME)
(MRNA), (PFE), (BNTX), (NVAX), (CVAC), (SNY), (TMO), (CTLT), (BAX), (INO)
Posts
Before the COVID-19 pandemic, only a handful of people had actually heard of messenger RNA (mRNA).
Now, this technology has become a household term thanks to the success of the COVID-19 vaccine programs of Pfizer (PFE), BioNTech (BNTX), and Moderna (MRNA).
Aside from these three names, other players in the mRNA arena include Novavax (NVAX) and an under-the-radar stock called CureVac (CVAC), which has been collaborating with Bayer (BAYRY).
Even Sanofi joined the list recently with its acquisition of mRNA-focused biotechnology company Tidal Therapeutics.
Amid the growing number of mRNA-focused companies, however, the world has come to associate the technology most with Moderna.
This is apparent in the increasing demand for Moderna’s COVID-19 vaccine, which has been pushing the biotech company to quickly expand its manufacturing capacity.
One of the steps it took to meet the supply expectations is to partner with Thermo Fisher (TMO), specifically for fill-finish, labeling, and packaging.
For orders outside the United States, Moderna established a partnership with South Korea’s renowned Samsung Biologics (KRX: 207940) to keep up with the demand.
While TMO and Samsung Biologics are the two major forces helping Moderna in its manufacturing concerns, other companies are also pitching in, including Catalent (CTLT), Sanofi, and Baxter BioPharma Solutions (BAX).
With the assistance of these companies, along with the major expansion of its own manufacturing site, Moderna anticipates that it can supply at least 3 billion doses of its COVID-19 vaccine annually by 2022.
This is promising news, particularly in light of another massive market that Moderna can conquer next: India.
While the United States has managed to turn the corner in the COVID-19 battle, India has been struggling to fight back against the virus. To this day, the country continues to grapple with the increasing number of COVID-19 cases.
Low and sluggish vaccination rates are considered the major contributing factor to this problem, with a measly 3.3% of India’s citizens getting fully vaccinated so far.
With a population of approximately 1.39 billion, this offers a massive opportunity for vaccine developers.
Thus far, only 228 million doses of the COVID-19 vaccines have been shipped to India. That leaves about 1.16 billion people in this huge country to receive a vaccine.
Since India is a developing nation, vaccine makers are expected to charge the low end of their range.
For Moderna, that would be roughly $25 per dose, while Pfizer would probably charge $19.50 per dose.
However, these prices could still go lower depending on the contract negotiated by the Indian government.
Even at the low end of the price point though, the Indian market represents approximately $28 billion in revenue for COVID-19 vaccine developers.
Taking advantage of this momentum, Moderna has been working on booster candidates for its COVID-19 vaccine. In fact, one candidate may be ready by fall.
Of course, competitors are looking into the new variants as well. Aside from Pfizer, smaller companies like Inovio Pharmaceuticals (INO) have started with clinical trials this year.
Moderna is also investing heavily in artificial intelligence (AI) in an effort to become a step ahead of future diseases.
Through AI and machine learning, Moderna aims to predict strains that evade protection provided by their roster of vaccines.
Based on the data, the company will be able to develop next-generation vaccines and boosters before the situation becomes as critical as what happened in 2020.
These efforts are essential for Moderna to sustain its position as the leader in mRNA technology.
Despite its earlier issues with production, Moderna is still set to generate roughly $19.2 billion in revenue for its COVID-19 vaccine thanks to advance purchase agreements.
The potential availability of a booster this year would definitely get the ball rolling in terms of handling newer variants.
The biotechnology industry is favored among investors on the lookout for companies with incredibly strong growth potential.
While it’s a risky environment filled with businesses flaming out practically year after year, winners in this field can come out with extremely impressive results.
In recent months, Moderna has become one of the most successful examples that demonstrated the potential of a biotech when it finds itself with cutting-edge technology at an ideal time.
Global Market Comments
November 27, 2020
Fiat Lux
FEATURED TRADE:
(NOVEMBER 25 BIWEEKLY STRATEGY WEBINAR Q&A),
(TSLA), (CRM), (CRSP), (CVS), (SQ), (CRSP), (LUV), (GLD). (SLV), (SPY), (TMO), (UUP), (TAN), (FXA), (FXE), (FXY), (FXB), (CYB)
Below please find subscribers’ Q&A for the November 25 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis.
Q: Is gold (GLD) still a hold?
A: Long term yes; short term no. Short term, cash is being drained out of gold in order to buy Bitcoin, just like silver. And once Bitcoin peaks, which could be today or tomorrow when it hits 20,000, then you could get a round of profit-taking and a nice little pop in gold. So, it's basically moving totally counter-cyclically to Bitcoin and the other cryptocurrencies right now.
(Note: since this webinar, Bitcoin has crashed by $3,000)
Q: A competitor of yours claims that asymptomatic transmission of COVID does not occur.
A: I would bet money that person does not have a medical degree. Asymptomatic transmission occurs in almost all diseases, so why COVID would be an exception is beyond me. I suggest that somebody is trying to sell newsletters at your expense with zero knowledge about the topic. Ask him to kiss a Covid victim. This is common in my industry where 99% of the people are crooks. This is also an example of the vast amounts of information that have been spread during an election year.
Q: Will you take a vaccine when it’s out or will you let others try it first?
A: Actually, by the time the public gets the vaccine, more than a million people will have already tried it, so I think it will be fairly safe. I am probably already the most vaccinated person on the planet; I've had flu shots every year for 40 years, so I will happily try it out. At my age, I have little to lose. And I would like to travel again, and that’s going to be a requirement for international travel. I am worried there could be long term side effects that we’ve seen with other drugs in the past, like all future children being born without arms and legs, which is what happened in the 1950s with Thalidomide.
Q: If the Senate flips to the Democrats, how do you see it affecting the market?
A: It doesn’t really affect the market overall; what it will do is affect sector reallocation. Solar, alternative energy and ESG companies do a lot better in A Democratic Senate, and energy oil companies do a lot worse. All you do is short the losers and buy the winners; it really makes no difference who wins. Most of the big conflicts over issues these days are social ones that don’t affect the market.
Q: Where do you see Tesla (TSLA) by the end of the year?
A: Well, this morning, it’s at an all-time high of $565. It looks like it wants to take a run at $600, and then we will be up 50% from where the news was announced that it was joining the S&P 500. That seems to me like a heck of a move on no real fundamental news. During this news, the market completely ignores a Model X recall and a Model Y pan from Consumer Reports. I would be inclined to take profits there or at least roll the strikes up on my options positions.
Q: What’s a good stock to play a commodity recovery?
A: You can’t do any better than Freeport-McMoRan (FCX), which I’ve been following for almost 50 years since I covered it for the Australian Financial Review newspapers.
Q: Will Salesforce (CRM) hold?
A: Yes, it’s just a matter of time before we break out to substantial new highs, and this is a stock that could double next year.
Q: What brokers do you suggest?
A: I would pick tastyworks, owned by my friend Tom Sosnoff who will be speaking at the Mad Hedge Traders & Investors Summit next week and will be answering all your questions. Click here for their site. To register for the summit, click here.
Q: Is CVS (CVS) a good buy?
A: I would say yes; a billion Covid-19 vaccine doses will need to be distributed next year. You can't do that without all the drug companies participating big time.
Q: Does Trump have a chance to win in his lawsuits?
A: It’s more likely that I will be elected the next Miss America; so, I wouldn’t place any bets on that. Some 30 consecutive Republican judges ruling against him does not augur well for his future.
Q: Would you buy any LEAPS here (Long Term Equity Participation Securities)?
A: Only in special one-off situations in the domestic stocks that haven’t moved in ten years. There are a lot of those out there now that I have been recommending. Those are all fertile territory for LEAPs, especially going out 2 years where you get the maximum bang for the buck and a 1,000% return. Don’t touch LEAPs in technology stocks here, and don’t touch Tesla in LEAPs.
Q: What’s your outlook on Southwest Air (LUV)?
A: I like it; it’s one of the healthiest domestic airlines most likely to come back.
Q: Are you going to update your long-term portfolio?
A: Yes, but I only update it twice a year and my next turn is on January 22. If you bought the last update on July 22, you made a fortune getting into Freeport McMoRan at $12 (it’s now $23), CRISPER Therapeutics at $80 (CRSP) (it’s now $110), and Square (SQ) at $110 (the current is $212). You can find it by logging into www.madhedgefundtrader.com, going to My Account, clicking on Global Trading Dispatch, on the drop-down menu, click on the Long-Term Portfolio tab and then clicking on the red tab for the Long-Term Portfolio. That lets you download an excel spreadsheet.
Q: Do you have any LEAPS to suggest now?
A: I only put out portfolios of LEAPS at giant market bottoms like we had in March. Then I put out lists and lists of LEAPS. At all-time highs, it’s not good LEAPS territory, except for specific names. So, if you want to get involved in that on a regular basis, I suggest you sign up for our Mad Hedge Concierge Service. There they are making millions of dollars a week right now.
Q: Where does the US dollar (UUP) go from here?
A: Straight down; the outlook for the buck couldn't be worse. I would be selling short the US dollar like crazy right now except that there are much better trades in US equities.
Q: Just to be clear, there’s no voter fraud?
A: There’s probably never been an election in US history without voter fraud on all sides; it’s just a question of who’s better at it. In the 1948 Texas Democratic Party runoff, back when the party owned Texas, Lyndon Johnson won by 87 votes out of 988,295 cast. It was later found that in five Hispanic-dominated counties that bordered Mexico, everyone had voted 100% for Johnson ….in alphabetical order. Johnson then took the seat with a 66% margin and went on to dominate the US Senate. I remember in the 1960 election, all the military absentee votes were sent flying around in circles over the Atlantic so Kennedy would win; that’s a story that’s been out there for a long time.
Q: You said stay away from other EVs except for Tesla?
A: A few have gone crazy this week, but that doesn’t mean they can actually make a car. So, you might get lucky on a quick trade on some of these, but long term, I don’t think any of the other non-Tesla EV companies are going to make it except for General Motors, which is plowing $27 billion into the sector. Even if (GM) may be able to put out a lot of cars, but they won’t be able to make very much money at it because they’re nowhere near the neighborhood of Tesla with the software where all the money is made.
Q: As the dollar gets weaker, will you expand your international stock picks?
A: Yes, we put out the first one in a long time, Ali Baba (BABA), on Monday, and we’ll be adding to that a bunch. I think the dollar could be weak for 5 or 10 years, a lot like it was in the 1970s.
Q: What’s your outlook for silver (SLV)?
A: Same as for gold (GLD). Quiet for the short term, double for the long term.
Q: Favorite names in biotech?
A: For that, you really need to subscribe to the biotech letter; we’re giving you two names a week there and all of them have done great. But another one might be Thermo Fisher (TMO), which seems to double every time I recommend it. It’s a great takeover target too.
Q: Is there any possibility of a 30% dip in the market (SPY) in 2021?
A: No, I don’t see more than a 10% dip in 2021. The tailwinds now are gale-force, generational, and will run for a decade.
Q: How do you sell the US dollar rally?
A: You buy all the ETFs that we cover in our foreign exchange sections. Those are the Australian dollar (FXA), the Euro (FXE), the Japanese Yen (FXY), the British pound (FXB), and the Chinese Yuan (CYB). Those are five ETFs that will do well on a weak dollar for the next several years.
Q: What about the Invesco Solar ETF TAN?
A: We have been recommending (TAN) for many years and it has done spectacularly well. I still love it long term, but it’s had one heck of a run; it’s up 300% from the March low. I think the entire country is about to have a solar explosion because the costs are now quite simply less than for oil. It’s an economic question. We are going to an all-Electric America.
Q: What do you think about LEAPS on gold?
A: It’s not really LEAPs territory yet, but on a two-year view, you’d have to do well on gold LEAPs.
Q: Is the Invesco DB US Dollar Index Bullish Fund (UUP) good to buy?
A: You should be looking to short the UUP. It’s a long dollar basket which we think will do terribly.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Mad Hedge Biotech & Healthcare Letter
March 17, 2020
Fiat Lux
Featured Trade:
(THERMO FISHER SCIENTIFIC BECOMES A MAJOR CORONA PLAYER),
(TMO), (QGEN)
Thermo Fisher Scientific (TMO) recently executed a strategic move that effectively transformed itself into a major coronavirus disease (COVID-19) player overnight.
The lab tools giant opened the month of March with a bang as it announced an $11.5 billion acquisition deal with Dutch company Qiagen (QGEN).
The transaction also includes Thermo Fisher’s assumption of Qiagen’s debts worth $1.4 billion, with the US biotechnology company paying roughly $43 per share. The deal is anticipated to be closed by the first half of 2021.
And just like that, Thermo Fisher has positioned itself at the forefront of the potential pandemic threatening to push the global economy to a recession.
What does this transaction mean to the race to solve the looming coronavirus pandemic?
Thermo Fisher and Qiagen make quite a good pair. The Massachusetts giant is a major manufacturer and developer of the CDC-approved scientific equipment used to detect Covid-19 in the US.
Meanwhile, Qiagen provided the equipment used during the SARS and swine flu outbreaks years ago.
In the past weeks since the Covid-19 outbreak, the company has been quietly working on tests for the Wuhan coronavirus as well. The latest update on this front is that Qiagen already shipped test kits for evaluation for the deadly epidemic to four hospitals in China.
Although it’s highly unlikely that Thermo Fisher splurged on an 11-figure deal for the sole purpose of getting ahead in finding the cure for the latest virus epidemic, Qiagen’s promising progress on that particular endeavor possibly nudged the big biotechnology company’s decision along.
Obviously, coronavirus test kits would eventually be huge sellers in the months and even years ahead. However, Thermo Fisher’s interest in this deal goes deeper than that.
Qiagen is a strategic addition to Thermo Fisher and could be a steady revenue source, and one of the key reasons for this collaboration is the complementary nature of both businesses.
Geographically speaking, Thermo Fisher and Qiagen can also conveniently cross-sell from each other’s existing lineups.
The Dutch company’s life sciences and molecular diagnostics solutions are expected to boost Thermo Fisher’s broader set of diagnostic offerings. Hence, this consolidation could potentially amount to approximately $200 million in savings every year in the next few years.
This isn’t the first time that Thermo Fisher wielded its huge cash flow to expand its growth segments.
In 2014, Thermo Fisher executed a $13.6 billion acquisition of genetic testing company Life Technologies. Working hand in hand, the two companies managed to contribute a 44% boost in revenue from $16.9 billion that year to $24.4 billion by 2018.
Just last year, Thermo Fisher snapped up one of the newest and most promising players in the gene therapy sector. Paying $1.7 billion to acquire Brammer Bio, the biotechnology giant secured the expansion of its cell and gene therapy pipeline.
With a free cash flow of roughly $3.9 billion in the past 12 months, the company still has room for additional acquisitions.
Amid all the major moves Thermo Fisher executed in the past five years though, the company has remained consistent in producing a strong bottom line.
Since the deal with Qiagen was announced, Thermo Fisher disclosed that it plans a 16% increase to its quarterly dividend to reach 22 cents per share compared to its current 19 cents. Moreover, the company expects a 14% growth in the next five years and projects to keep up its strong segmental performance.
Although the company’s growth level may not be as enticing for growth investors, its impressive diversification makes it an attractive investment.
Its broad mix of income from numerous segments combined with steady profits allows Thermo Fisher to provide investors the much-needed predictability and stability.
Mad Hedge Biotech & Healthcare Letter
January 16, 2020
Fiat Lux
Featured Trade:
(THE FUTURE OF PRECISION MEDICINE),
(ILMN), (PACB), (RHHBY), (TMO), (QGEN)
Hyper-personalized treatments, otherwise known as precision medicine, have been hailed as one the hallmarks of the healthcare revolution in the past decade.
Although a lot of people don’t see the need for such personalized treatments, a 2017 study by Boston medicine professor Jason Vassy indicated otherwise.
In his paper, titled “Annals of Internal Medicine,” Vassy discussed how his team performed whole-genome sequencing to 100 perfectly healthy adults.
To give you a better picture of how big this project was, whole-genome sequencing involves the analysis of the entire body’s DNA -- yes, all 3 billion pairs of letters found in every individual’s body.
So, you can imagine how tedious and complicated Vassy’s process was and why a lot of people found that to be incredibly pointless, especially since the adults in the study are all “healthy.” More importantly, the naysayers believed that this process would only bring unnecessary panic and anxiety to the subjects.
However, the results shocked them as 20% of the people tested positive for rare, life-threatening conditions that required immediate medical attention.
This prompted more experts to delve deeper into gathering genetic data sets in an effort to bolster the preventive power of genomics. This movement was supported by the National Institutes of Health in 2018 via their “All of Us” project, investing $27 million.
Meanwhile, a Harvard geneticist named George Church founded a similar organization called Nebula Genomics.
Basically, the idea behind precision medicine is very simple: Understanding how your genome works means knowing exactly how to “optimize” your body.
That means health professionals will be able to determine the perfect diet, perfect exercise routine, and of course, the perfect drugs for every patient. You’ll even learn the diseases your body is most susceptible to and how to prevent those.
At the moment, the biotechnology world only has a handful of companies focusing on precision medicine.
One of the leading biotechnology companies in this field is Illumina (ILMN), which focuses on DNA sequencing.
Utilizing its advanced machines, Illumina has been designing treatments to target specific cells in the human body -- and its efforts have been rewarded in recent years.
So far, Illumina stock has been up by 5,791% since its initial public offering back in 2000.
At the moment, Illumina practically controls approximately 80% of the next-generation sequencing space geared towards human genome analysis.
The key to its success is the company’s move to zero in on short-read data sequencing, which has been known as the cheapest, quickest, and most accurate service available in the market.
Since Illumina is one of the top movers in this field, it has easily become the top dog with a long waiting list of clients willing to pay tons of cash for the biotechnology firm’s machines.
While the machines definitely cost a lot upon purchase, Illumina actually earns more from the follow-up revenues generated from all the instances that a biotechnology or research laboratory uses the company’s technology to sequence a genome.
In 2019, Illumina earned $390 million in instrument revenue and $1.73 billion in consumables profit in the first three quarters alone.
Unfortunately, one of Illumina’s efforts to broaden its hold of the market failed.
The company opened 2020 to bad news as regulatory pressures pushed Illumina to shut down its plan to acquire its rival, Pacific Biosciences (PACB), for $1.2 billion.
While no particular reason was officially given by the reviewing bodies, reports indicate that the merger had been delayed due to fears of creating a monopoly.
Nonetheless, many consider this an odd excuse considering that Illumina’s supposed “monopoly” would actually compete directly with Roche (RHHBY).
For comparison, Roche’s market capitalization is $275 billion while Illumina is at $49 billion. In terms of revenue, Illumina earns $3.5 billion annually while Roche rakes in $56.8 billion.
Nevertheless, Illumina has decided to shrug off the rejection and move on to another potentially lucrative deal -- a 15-year partnership with another up and coming next-generation sequencing company: Qiagen (QGEN).
Initially thought to be a surefire acquisition candidate by Thermo Fisher Scientific (TMO) to the tune of $8 billion, Qiagen opted to reject the offer.
Instead, the smaller biotechnology firm has decided to focus on expanding its product portfolio. In the next five years, Qiagen estimates an earnings growth rate of roughly 9.1%.
Between Qiagen and Illumina, the former focuses more on individually customized treatments or “N-of-1 medicine.”
This has become even more pronounced following Qiagen’s acquisition of N-of-One, which raised $12.4 million in funding at the time, in January 2019.
N-of-One provides precision cancer care services. It offers clinical solutions like molecular interpretation to doctors and other healthcare professionals.
Apart from its partnership with Illumina, Qiagen also collaborates closely with NeoGenomics for cancer genetic testing services and DiaSorin for automated TB testing.
We’re in an era of remarkably personalized medical care.
With more and more genetic data made available for analysis, the rare diseases that boggled the minds of the healthcare industry are gradually becoming a thing of the past.
Now, we have access to tools that help with preventive measures to save us from the rare conditions that plagued our predecessors. If you really stop to think about it, targeted medicine just might be the key to immortality -- or at least to a significantly less disease-laden life.
If you’re looking to invest in Illumina or Qiagen stock (or both), the best thing to do is to take advantage of the next price drop.
Global Market Comments
February 28, 2019
Fiat Lux
Featured Trade:
(GOLD IS BREAKING OUT ALL OVER),
(GLD), (GDX), (NEM),
(THE STEM CELLS IN YOUR INVESTMENT FUTURE)
(CELG), (TMO), (REGN)
Global Market Comments
November 2, 2018
Fiat Lux
Featured Trade:
(OCTOBER 31 BIWEEKLY STRATEGY WEBINAR Q&A),
(EDIT), (TMO), (OVAS), (GE), (GLD), (AMZN), (SQ), (VIX), (VXX), (GS), (MSFT), (PIN), (UUP), (XRT), (AMD), (TLT)
