Mad Hedge Biotech & Healthcare Letter
June 30, 2020
Fiat Lux
Featured Trade:
(MODERNA’S BIG CORONA PLAY FOR A SMALL COMPANY)
(MRNA), (INO), (NVAX), (JNJ), (PFE), (BNTX), (LZAGF), (REGN), (AZN), (LLY), (MRK)
Credit where credit is due.
Tiny Moderna Inc (MRNA) has been at the forefront ever since this pandemic broke, with its vaccine program growing in leaps and bounds compared to competitors, like Novavax (NVAX), which has $3.02 billion in market capitalization, and Inovio (INO), which has $2.20 billion.
The latest report on Moderna’s progress pushes it much further ahead of its competitors.
Looking at its timeline, Moderna could have efficacy data on its COVID-19 vaccine, called mRNA-1273, by Thanksgiving.
Moderna’s vaccine, which is similar to the work of Pfizer’s German collaborator BioNTech (BNTX), utilizes a novel approach that inserts small doses of genetic instructions into the cells of humans.
These then trigger the production of harmless proteins, which mimic the SARS-CoV-2 virus. The proteins subsequently alert the body to produce antibodies, making the vaccine a proactive measure that protects people from infection by the actual virus.
Right now, Moderna is in the second stage of the trials. The final stage involving 30,000 people is expected to begin in July.
With the vaccine program well underway, Moderna secured manufacturing capabilities through a strategic collaboration with Swiss biotechnology company Lonza (LZAGF).
This partnership with a manufacturing site ensures that Moderna is on track to deliver approximately 500 million doses of the mRNA-1273 vaccine every year and could handle up to 1 billion doses annually starting from 2021.
With such massive competitors like Pfizer (PFE) and Johnson & Johnson (JNJ) but also other healthcare heavyweights, such as Regeneron (REGN), AstraZeneca (AZN), Eli Lilly (LLY), and Merck (MRK), the best-case scenario for Moderna is to launch its COVID-19 vaccine before its peers.
Considering the progress it has made so far and the 208% jump in Moderna’s shares this year, it looks like investors anticipate that the company can win the COVID-19 vaccine race and capitalize on its future cash-making machine.
After all, no other biotechnology stock has taken more advantage of this health crisis than Moderna. The company exploded from having the biggest IPO in biotechnology history to now being celebrated as the COVID-19 vaccine leader.
Moderna grew from being a biotechnology company worth roughly $4 billion to $5 billion to an impressive $25 billion frontrunner in a few months’ time.
This is especially impressive since Moderna commanded this kind of valuation without having any approved product in the market. In fact, this clinical stage biotechnology company is valued more than several companies with marketed treatments.
While it has no product in the market today, Moderna actually has a robust pipeline that boasts 22 mRNA candidates, with 12 of these already in clinical studies. The lineup includes potential vaccines for the Zika virus along with a promising oncology pipeline.
Prior to the COVID-19 pandemic, Moderna’s lead candidate was its cytomegalovirus (CMV) vaccine called mRNA-1647. CMV, which affects almost 80% of adults in the US alone, is caused by a virus related to those that cause chickenpox and mononucleosis.
Moderna expects the Phase 2 study analysis for mRNA-1647 to be completed by the third quarter of 2020, with Phase 3 set to start by early 2021.
The company is also working with fellow biotechnology companies on potential cancer vaccines.
So far, Moderna has been focusing on two candidates which are also currently undergoing Phase 2 testing.
The first candidate is called mRNA-4157, which is a personalized cancer vaccine developed for melanoma patients.
Moderna is evaluating the combination of this vaccine with Merck’s top-selling cancer treatment Keytruda. This could turn out to be a potent combination considering Keytruda’s track record.
The second candidate is a collaboration with AstraZeneca. The latter licensed the rights to one of Moderna’s heart disease drug candidate called AZD8601. If successful, this drug will be marketed to patients in need of coronary artery bypass grafting (CABG) surgery.
Riding the momentum of its COVID-19 vaccine program, Moderna conducted a secondary stock offering last May. With $1.34 billion in gross proceeds from that sale alone, the company ensured that it’s well-capitalized to fund its development programs.
While its $25 billion market capitalization is pennies compared to fellow COVID-19 vaccine leaders JNJ and Pfizer, the smaller biotechnology company is definitely giving these behemoths a run for their money.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Global Market Comments
June 30, 2020
Fiat Lux
Featured Trade:
(STORAGE WARS),
(MSFT), (IBM), (CSCO), (SWCH),
(THE MAD HEDGE JUNE 4 TRADERS & INVESTORS SUMMIT RECORDING IS UP),
Today, I would like to make one more suggestion.
I am going to suggest you collect call premium on the DXC Technology Co. (DXC) position.
DXC is trading at $15.84 as I write this.
Here is my suggestion.
Sell to Open (1) July 17th- $17 call for every 100 share you buy.
The July 17th - $17 calls can be sold for $0.65.
Total premium collected on this position will now be $1.20 per share.
As I mentioned in this mornings update, I wanted to collect some call premium on the CLVS position.
In order to do that, I am going to suggest you sell the series that expires on July 10th.
Here is the trade:
Sell to Open (1) July 10th - $7.50 Call for every 100 shares you own.
You should be able to sell them for $.30 per every option you sell.
This will bring the call premium collected on this position to 85 cents per share.
If the calls are assigned next Friday, the return will be 14.2% for a little more than a month.
Of course, this alert only applies to you if you own shares in CLVS.
Mad Hedge Technology Letter
June 29, 2020
Fiat Lux
Featured Trade:
(TIME TO DO SOME SHOPPING AT ETSY)
(ETSY), (AMZN)
The ecommerce story just keeps getting brighter and Etsy (ETSY) is one of those companies that are at the leading edge of the movement.
Out of the same vein of Amazon (AMZN), I am increasingly optimistic about Etsy’s long-term prospects aided by monstrous secular tailwinds.
Heralded for its vintage and handmade goods, I have upped my targets to $150 which is a no brainer for a company that grows revenue more than 30% and one I believe will grow 80% in 2021.
The growing pie of ecommerce tells just part of the story.
In the throes of a hysterical once-in-a-century multi-faceted crisis, consumers have gravitated towards trusted and reliable retailers.
As a result, we can expect the top 10 ecommerce retail businesses to expand at above-average rates of 21.8% in 2020.
Amazon will gain even more US ecommerce market share this year, while Walmart's accelerating ecommerce success will put it directly behind Amazon for the first time.
Even though Etsy is no Walmart or Amazon, they are a known commodity with a growing number of repeat and loyal buyers which goes a long way in today’s ecommerce climate.
They have effectively elbowed their way clearing out a niche in personalized handicrafts that cannot be copied on a large scale.
In the U.S. alone, ecommerce will account for 19% of retail by 2024, up from 11% of domestic sales last year, totaling some $1.1 trillion.
Simply put, the bronco is out of the barn, and many consumers are not inclined to return to the physical store experience.
Ecommerce has also validated themselves as models that work as good as the in-store experience or better.
Before the sushi hit the fan in March, most ecommerce outfits were projecting unspectacular ecommerce growth of 2-3% to $6 trillion in total US retail sales by the end of 2020.
After updating models, we now expect there's to be a 10.5% decline in total retail spend, with a 14.0% drop in brick-and-mortar.
Ecommerce has performed admirably and is poised to grow 18% following a 14.9% gain in 2019, further signaling the pivot towards digital.
Consumers have downloaded Etsy’s app at rapid rates further hinting that this boost in revenue has staying power.
Shares of Etsy have more than tripled from a March low and are trading at record levels. The stock is up more than 130% this year easily outperforming the broader Nasdaq index.
Etsy's quarterly revenue grew 32% year over year to $1.4 billion and when The Centers for Disease Control recommended the use of face masks to thwart the spread of the coronavirus, masks flew off the digital shelves.
CEO Josh Silverman aptly described the situation in Etsy's Q1 earnings call saying, “It was like waking up and discovering that it was Cyber Monday.”
Even excluding face masks, April sales were still up 79% from April 2019. All told, the company expects upcoming Q2 results to show an 80% to 100% year-over-year gain for gross merchandise sales. And it anticipates revenue growth of 70% to 90%.
As masks become mandated by state governments because of record coronavirus cases, Etsy is the go-to platform for personalized masks.
It goes to show that a native digital strategy might be the best of the bunch in 2020 and as masks are mandated by state governments, Etsy will harvest the low-hanging fruit with its army of personalized mask sellers on its platform.
This will truly be a year Etsy will never forget tattooing them firmly in the digital realm as a legitimate ecommerce juggernaut.
