Mad Hedge Biotech and Healthcare Letter
February 20, 2025
Fiat Lux
Featured Trade:
(PORTFOLIO MANAGEMENT DURING PAIN MANAGEMENT)
(VRTX), (DSNKY), (AZN), (GILD), (SNY), (GSK), (JNJ), (BMY), (LLY)
Posts
Mad Hedge Biotech and Healthcare Letter
February 11, 2025
Fiat Lux
Featured Trade:
(SPLICING THROUGH SKEPTICISM)
(CSRP), (VRTX), (AMZN), (TSLA)
When I pioneered fracking technology in Texas years ago, skeptics said we were crazy. Today's skeptics are saying the same thing about CRISPR Therapeutics (CRSP), and they're just as wrong.
Here's a company sitting on a $1.9 billion cash fortress, burning through a mere $100 million per quarter – giving them enough runway to circle the Earth 19 times – and yet the stock has drifted down to $40, shedding 15% since my last analysis when it was perched at $48.
Talk about the market missing the forest for the trees.
Remember when everyone thought Amazon (AMZN) was just a bookstore? Well, CRISPR Therapeutics isn't just another biotech company – it's the Tesla (TSLA) of gene editing, with Vertex Pharmaceuticals (VRTX) riding shotgun.
And just like Tesla wasn't just about making electric cars, CRISPR isn't just about Casgevy, their FDA-approved treatment for Sickle Cell Disease (SCD) and Transfusion-Dependent Beta Thalassemia (TDT).
Speaking of Casgevy, let's tackle the elephant in the room. Yes, patient enrollment has been slower than a government committee deciding on lunch options. They've collected cells from over 50 patients by year-end, up from 20 in mid-October.
Not exactly setting speed records, but here's what the market is missing: the Centers for Medicare and Medicaid Services just inked a deal with Vertex/CRISPR that could be a game-changer.
Why? Because 50-60% of SCD patients are on Medicaid.
But wait, there's more happening behind the scenes. The company has been quietly building an empire across 5 clinical programs and 10 preclinical programs.
Let's break down what's cooking in their kitchen.
The Casgevy rollout has expanded from 35 treatment centers in October to over 50 by year-end.
Eight jurisdictions have given them the green light, including Saudi Arabia – a market where SCD is about as common as sand.
The UK just signed on for reimbursement, first for TDT in August 2024, and now for SCD.
Their CAR-T program isn't just targeting blood cancers anymore. They've expanded into autoimmune diseases like Systemic sclerosis (SSc) and Idiopathic inflammatory myopathy (IIM).
We're talking about potential treatments for 2.5 million SSc patients globally (125,000 in the US) and 1 million IIM patients (50,000 in the US).
That's not just a market – it's an ocean.
They're even taking shots at liver cancer and cardiovascular diseases. Their latest trial for Heterozygous familial hypercholesterolemia could be a lifeline for patients with this genetic cholesterol disorder.
And speaking of cash runways, their $1.9 billion war chest means they can keep this scientific symphony playing for 19 quarters without passing around the collection plate.
In biotech terms, that's like having enough food to last through three winters.
Institutions are noticing, too. Cathie Wood just backed up the truck, dropping $10 million more into CRISPR, making it her 9th largest holding at $350 million. Her ARK funds now own over 9% of the company.
When smart money moves like this, I pay attention.
Here's the kicker: While most analysts raise their ratings as speculative stocks climb (a strategy that makes as much sense as buying umbrella futures during a drought), I'm doing the opposite.
After all, the fundamentals are stronger than ever, but the price is lower.
Looking ahead to 2025, we've got more potential catalysts than a chemistry textbook. Phase 1/2 trial data for CTX 112 is coming in Q2/Q3, CTX 131 in Q3/Q4, and updates on their Type 1 Diabetes program in the second half of the year.
Remember, this is the same company that has Vertex Pharmaceuticals – the biotech equivalent of having Warren Buffett as your investment advisor – as a partner.
They're not just getting financial support; they're getting a masterclass in how to commercialize breakthrough treatments.
The verdict? Load up on shares while the market gives us this gift wrapped in fear and uncertainty.
Twenty years ago, they called us crazy for thinking we could extract oil from solid rock. Today, they're just as skeptical about editing genes.
History has a funny way of repeating itself.
Mad Hedge Biotech and Healthcare Letter
January 30, 2025
Fiat Lux
Featured Trade:
(A CRITICAL PAIN POINT)
(VRTX), (AMZN)
Last week, while having dinner with an old friend who's an emergency room physician in San Francisco, I heard a story that stopped me cold. She had just lost another patient to an opioid overdose - the fourth one that month.
"We desperately need alternatives," she said, pushing away her plate. "Something that works without killing people."
She's not wrong. More than 80,000 Americans died from opioid overdoses in 2022 alone - that's about 75% of all drug overdose deaths in the country.
To put that in perspective, that's more than double the number of people who die in car accidents each year. In New York alone, opioid-related deaths have quadrupled between 2010 and 2020.
You can see where this is going. There's a massive market opportunity here for any company that can crack the code of non-addictive pain management.
We're talking about a potential market worth tens of billions of dollars. The holy grail? A drug that works as well as opioids without the devastating addiction potential.
Enter Vertex Pharmaceuticals (VRTX) and their sodium channel inhibitor VX-548, now known as suzetrigine. The company has been quietly plugging away at this problem, and I've been watching them like a hawk.
For those who've been following my previous coverage, you'll remember I wrote about their interesting (though modest) results in post-surgical patients a few months ago.
And here's where it gets fascinating. Vertex has been running multiple trials because - as any doctor will tell you - pain isn't just pain.
It comes in more flavors than Ben & Jerry's ice cream: acute, chronic, neuropathic, cancer-related, post-surgical, and don't even get me started on phantom limb pain.
Just before the holiday break, they dropped their latest results for suzetrigine in sciatica patients.
Now, I have to tell you something that might sting a bit. The drug worked - but so did the placebo. Both groups saw their pain decrease by statistically similar amounts.
Vertex argues the placebo response was unusually high and that a larger Phase III trial should smooth things out.
Maybe they're right - but I've seen enough clinical trials to know that placebo effects in pain studies can be trickier than a Wall Street hedge fund manager.
The FDA is expected to make a decision by the end of this month on suzetrigine for moderate-to-severe acute pain.
Despite the recent speed bump in the sciatica trial, I'm still keeping my eye on the bigger picture here. Vertex isn't a one-trick pony.
Their cystic fibrosis (CF) portfolio is absolutely crushing it. They just got FDA approval for Alyftrek ahead of schedule.
They've expanded Trikafta's approval down to patients as young as two years old, which is huge for their market potential. Plus, they’ve been aggressively pushing into international markets over the past months.
Now, let's talk numbers. Suzetrigine revenue is projected to hit $5 billion by 2035. That's not chump change, even if we hit some bumps along the way.
Trading at a P/S multiple of almost 10, Vertex isn't cheap - but then again, neither was Amazon (AMZN) in 1997.
Still, this biotech’s pipeline goes beyond pain management. We're looking at treatments for diabetic peripheral neuropathy, IgA nephropathy, type 1 diabetes, and even gene editing therapy.
So, here's the bottom line: Yes, the market got spooked by the Phase II data. Yes, there are risks. But remember - the FDA is under enormous pressure to approve non-opioid painkillers.
With 80,000 Americans dying yearly from opioid overdoses, they need solutions more than my trader friends need their morning coffee.
I'll keep watching this one closely. The pain management market is like a sleeping giant, and despite the recent hiccup, Vertex might just have the alarm clock.
or long-term investors, this could be one of those "I wish I bought it back then" moments.
Watch this space. The opioid crisis isn't going anywhere, but neither is Vertex's determination to solve it.
Sometimes the biggest opportunities come disguised as disappointments.
Mad Hedge Biotech and Healthcare Letter
August 13, 2024
Fiat Lux
Featured Trade:
(THE RISE OF THE STEADY EDDIES)
(CNC), (UNH), (PFE), (JNJ), (ABBV), (LLY), (BIO), (UHS), (WAT), (AMGN), (REGN), (VRTX), (CRSP), (MRNA)
Think of the market as a body fighting off an infection. Tech stocks might be the flashy antibodies, but healthcare is the steady, reliable immune system, keeping things stable when the going gets tough. And right now, that immune system is looking stronger than ever.
Skeptical? I get it. We've heard the hype about healthcare before. But this time, it's different.
The Healthcare Select Sector SPDR ETF (XLV) has been on a tear, up 9.3% this year as of Thursday's close. That's nearly keeping pace with the broader S&P 500's 12% gain - a remarkable feat in a market that's been anything but stable.
But what's even more impressive is the turnaround. Back in mid-July, XLV was lagging behind like a three-legged horse in the Kentucky Derby, up only 8.3% while the S&P 500 was showing off with an 18% gain.
In fact, out of the 63 healthcare stocks in the S&P 500, only a dozen have been slacking off since July. The rest? They've been outperforming like it's going out of style.
So what changed?
Well, it wasn't so much that healthcare stocks suddenly discovered the fountain of youth. No, my friends, it was more like the rest of the market decided to take a swan dive off the high board.
You see, while tech stocks were busy doing their best Icarus impression – flying too close to the sun and then plummeting back to earth – healthcare stocks were steady as she goes. It's like the old tortoise and hare story, except in this version, the hare got distracted by shiny objects and ran off a cliff.
Now, let's shine the spotlight on some of the key players driving this healthcare rally.
Remember those health insurers everyone was worried about back in spring? The ones that had investors biting their nails over the future of Medicare Advantage? Well, they've made a comeback.
The S&P 500 Managed Health Care index was down 12% in mid-April, looking about as healthy as a chain smoker with a Big Mac habit. But now? It's up 4.5% since the start of the year.
Companies like Centene (CNC) and UnitedHealth Group (UNH) have bounced back faster than a rubber band on steroids.
And it's not just the insurers. Big Pharma's been flexing, too.
Pfizer (PFE), the company that became a household name faster than you can say "vaccine," is holding steady. Johnson & Johnson (JNJ) is up 2.2%, probably thanks to all that baby powder they're not selling anymore.
Meanwhile, AbbVie’s (ABBV) up 11% since July. These guys are like the Energizer Bunny of the pharma world – they just keep going and going.
But the real showstopper? Eli Lilly (LLY). This biopharma has been on a tear since the beginning of 2024. Up 45% on the year at one point, they've been climbing faster than a squirrel up a tree with a dog in hot pursuit.
Then, there are companies like Bio-Rad Laboratories (BIO), up 20% since July. Universal Health Services (UHS)? Up 18% since July. Waters (WAT), the life sciences tools folks? Up 15%.
Even the biotechs are out to impress.
Amgen (AMGN), the granddaddy of biotech, is up 10% year-to-date. They're selling drugs like Prolia and Enbrel faster than hotcakes at a lumberjack convention.
And Amgen’s pipeline? It’s packed with potential blockbusters, setting the stage for further expansion in the future.
Gilead Sciences (GILD)? Up 15% year-to-date. Turns out, their COVID-19 treatment, Remdesivir, is back in vogue like bell-bottom jeans. And their HIV and hepatitis C drugs? They're still growing stronger.
But the real rock star of biotech? That'd be Regeneron Pharmaceuticals (REGN). These guys are up over 30% year-to-date. They're treating everything from eye diseases to cancer to inflammation.
Vertex Pharmaceuticals (VRTX) is another one to watch. Up 12% this year, they've got the cystic fibrosis market cornered. And they're not stopping there – they're expanding faster thanks to their collaboration with the likes of Crispr Therapeutics (CRSP).
Now that I’ve mentioned gene therapy, I know you're wondering about Moderna (MRNA). After all, weren’t they the darlings of the COVID era? Well, yes and no.
Their stock's down about 35% year-to-date, but don't count them out just yet. Their mRNA technology is hotter than a jalapeño popper fresh out of the fryer. They might be down, but they're definitely not out.
So, what's the takeaway here? I suggest you keep your eyes peeled on the biotechnology and healthcare sectors. After all, in this market, the best offense might just be a good defense – and what's more defensive than betting on the sector that keeps us all alive and kicking?
Mad Hedge Biotech and Healthcare Letter
July 16, 2024
Fiat Lux
Featured Trade:
(SMALL GIANTS RISING)
(GMAB), (OPHLY), (VRTX), (INCY), (BIIB), (AHKSY), (ALNY), (ARGX), (BGNE), (MRNA), (NBIX), (BNTX), (IPSEY), (CTLT), (NVO), (LLY), (JNJ), (GILD), (ABBV), (MRK), (SNY), (BMY), (GSK)
Remember when David took down Goliath? Well, history's repeating itself in the biotech arena, and this time, David's got deep pockets and a Ph.D.
Since April, I've been watching a trend on the so-called "next-generation" players in biotech and healthcare world. It reminds me of the massive changes I witnessed in Asian markets back in the '70s.
Over the past months, companies like Genmab (GMAB), Ono Pharmaceutical (OPHLY), Vertex (VRTX), Incyte (INCY), Biogen (BIIB), and Asahi Kasei (AHKSY) have been making waves that would impress even the most seasoned surfer. And these next-gen dealmakers aren't just dipping their toes in the M&A pool - they're doing cannonballs.
With cash reserves that would make Scrooge McDuck blush, these companies are overturning industry norms, already joining the prestigious $100 billion market cap club. At this celebration, the champagne flows freely.
So, what’s the play here?
With IPOs cooling down like day-old coffee, companies eyeing public debuts are now ripe targets for acquisition, more tempting than a juicy peach.
This fresh class of biotechs, unphased by the FTC's scrutiny that acts like kryptonite to pharma giants, are acting more like rocket fuel for these agile consolidators.
They slide through regulatory gaps faster than a greased pig at a county fair, grabbing six out of ten biopharma M&A deals in the second quarter alone. They’re not just taking a slice of the pie—they’re rewriting the recipe.
And if we're talking about firepower? These newcomers boast an average of $3.8 billion in pro forma adjusted cash, which isn't just walking-around money — that's "buy a small country" money.
But don't think for a second that this cash is just sitting pretty in their coffers. These upstarts are putting their money where their mouth is.
Take Incyte, for instance. They flexed their financial muscle with a $2 billion buyback in May 2024, sending a clear message to the market: "We're here to play, and we're playing to win."
And that's just the tip of the iceberg. The industry as a whole is lounging on a cool $1.5 trillion. That's enough liquidity to stretch the imagination — perhaps even to purchase a small planet. Mars, anyone? Elon might give us a discount.
But this financial might isn't just about buying power – it's about survival. As I said before, Big Pharma is teetering on a patent cliff that threatens to erode their revenue streams. To stay competitive, they're scrambling to replenish their pipelines, acquiring promising assets and gobbling up innovative technologies with the voracity of Pac-Man on steroids. And it's not just the usual suspects making moves.
This sense of urgency has created a fertile ground for an emerging cohort of aggressive dealmakers. Companies like Alnylam (ALNY), argenx (ARGX), BeiGene (BGNE), Moderna (MRNA), Neurocrine Biosciences (NBIX), BioNTech (BNTX), and Ipsen (IPSEY) are biting off more than the market expected them to chew, and they're coming to the table hungry.
And these companies aren't just nibbling around the edges. They're making bold moves, acquiring cutting-edge biotech firms with promising pipelines. We're talking oncology, epilepsy, kidney diseases, cardiovascular plays – it's like someone turned a medical textbook into a shopping catalog.
In fact, even the big boys are flexing their muscles.
Novo Holdings (NVO) dropped a jaw-dropping $16.5 billion on Catalent (CTLT). That's not even for a drug - it's for manufacturing. Talk about betting on the picks and shovels in this biotech gold rush.
Eli Lilly (LLY) just plunked down $3.2 billion on Morphic Therapeutic (MORF), betting big on inflammation, immunity, and oncology.
Johnson & Johnson's (JNJ) been on a shopping spree, too, snagging Numab's Yellow Jersey for $1.25 billion and Proteologix for $850 million. Both plays in inflammation and immunity - clearly, they've found their sweet spot.
Biogen's not twiddling its thumbs either, striking a deal with HI-Bio worth up to $1.8 billion.
Not to be outdone, Gilead (GILD) shook hands with CymaBay Therapeutics to the tune of $4.3 billion. Even AbbVie (ABBV), playing it cooler, still dropped a cool $250 million on Celsius.
Meanwhile, Merck's (MRK) set its sights on EyeBio for up to $3 billion, focusing on ophthalmology.
Sanofi (SNY), Bristol Myers Squibb (BMY), GSK (GSK) - they're all in, placing their chips on everything from rare diseases to generics to asthma. Clearly, the Big Pharma giants are also trying to keep up with this shift.
As the biotech field evolves, watching these underdogs will be like watching history in the making — where today's Davids become tomorrow's Goliaths. I suggest you keep a close eye on the names above. Adding them to your portfolio would mean you’re not just watching the giants rise — you’ll be a part of the story.
Mad Hedge Biotech and Healthcare Letter
June 27, 2024
Fiat Lux
Featured Trade:
(THE BIOTECH LEATHERNECK THAT WON’T STAND DOWN)
(VRTX), (CRSP), (ABBV)
