2020 Archive - Mad Hedge Fund Trader

Should We Crown Pfizer as COVID-19 Vaccine King Now?

Pfizer (PFE) has never been coy about playing up the potential of its COVID-19 vaccine candidate, BNT162b2, which it co-developed with German biotechnology company BioNTech (BNTX).

Now, it looks like the New York-based biopharmaceutical giant is putting its money where its mouth is.

Pfizer recently announced that it would be able to send BNT162b2 for FDA review as early as October.

More impressively, the company claims that if its COVID-19 vaccine gets approved, then it can start distribution in the US by the end of 2020.

In fact, Pfizer has already started manufacturing hundreds of thousands of doses of the vaccine.

Only a handful, if any, of the companies working on a COVID-19 vaccine are as confident as Pfizer. So far, only Moderna (MRNA) and AstraZeneca (AZN) can claim to be close rivals of the company.

Boosting the claims of Pfizer that it can produce results by October is the company’s decision to expand its Phase 3 vaccine trial. From the originally approved 30,000 participants, Pfizer seeks to add more to reach 44,000.

The expanded patient pool will include participants as young as 16 years old. Those with HIV and Hepatitis B and C will also be added to the list. Pfizer will also recruit more African Americans and Latinos. To date, the list includes 60% white and 40% people of color. Meanwhile, older participants comprise 44% of the group.

Like its fellow vaccine developers, Pfizer has also secured deals with different countries.

In July, the company secured a $1.95 billion contract with the US government. This deal will cover 100 million doses of BNT162b2, which is priced at $19.50 per dose. The contract also offers the government the option to add 500 million doses to its initial order.

BNT162b2 requires two doses, the initial shot and the booster shot. This puts the actual price for the two-dose regimen at $39.

In the same month, Pfizer also reached an agreement with the UK government to supply 30 million vaccine doses. Even Japan’s Ministry of Health reached out to the company and forged an agreement for 120 million doses.

Pfizer and BioNTech estimate that it will need to produce 100 million doses by the end of 2020 and 1.3 billion doses to cover the demand worldwide.

Pfizer expects the sales for BNT162b2 to peak this year and throughout 2021. It might even reach the early months of 2020.

After this period, the vaccine will still be able to provide a steady revenue stream thanks to regular and repeat vaccinations over the next years.

So far, Pfizer accounts for roughly 13% share of the vaccine market across the globe. This competitive advantage would make it quite convenient for the company to leverage this status to capture a minimum of 6% of the COVID-19 vaccine market.

A conservative estimate for this market size would put Pfizer’s annual earnings after the peak sales period of the vaccine at roughly $1.52 billion.

However, Pfizer’s dominance in the COVID-19 vaccine race is not confined to its widely publicized work on BNT162b2.

Unlike its competitors that fielded only one candidate each, Pfizer and BioNTech included four potential messenger RNA-based vaccines in their studies. Ultimately, they chose to move forward with BNT162b2.

While everyone is focused on how the candidate will fare in the trials, Pfizer and BioNTech quietly initiated a Phase 1 clinical study for their fifth and virtually unknown candidate: BNT162b3.

This move by Pfizer and BioNTech echoes the strategy its leaders shared in the beginning.

By having “multiple shots-on-goal,” the companies are in a great position for the “long-term catch-up vaccination, revaccination, and/or pandemic stockpiling markets."

After all, the first wave of COVID-19 vaccines that reach the market will not be the endgame.

Similar to most contagious diseases, follow-up vaccines with higher efficacy and proven to be safer than those released earlier would have the chance to attract a substantial market share.

With the fifth vaccine candidate, it is clear that Pfizer and BioNTech do not simply want to be the first to launch a COVID-19 vaccine. Both companies aim to become the most dominant players in the coronavirus vaccine market over the long run.

Overall, Pfizer has once again chosen a diversified approach in dealing with the tight competition in the COVID-19 race.

This strategic decision could be one of the most compelling reasons to bet on this big biotechnology and healthcare stock today.

Trade Alert - (GLD) September 17, 2020 - SELL-TAKE PROFITS

Trade Alert

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

Trade Alert - (AMZN) September 17, 2020 - SELL-TAKE PROFITS

Trade Alert

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

September 17, 2020 - MDT Pro Tips

MDT Alert

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

September 17, 2020

Diary, Newsletter, Summary

Global Market Comments
September 17, 2020
Fiat Lux

Featured Trade:

(SHOPPING FOR FIRE INSURANCE IN A HURRICANE),
(VIX), (VXX), (XIV),
(THE ABCs OF THE VIX),
(VIX), (VXX), (SVXY)

Trade Alert - (JPM) September 16, 2020 - BUY

Trade Alert

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

September 16, 2020 - MDT Alert (QRVO)

MDT Alert

I am not 100% sold on the rally that QRVO has been experiencing.

As a result, I am going to suggest you close the call side of the straddle I suggested last week.

You should be able to collect $9.80 by selling the October 16th- $125 call and I suggest you book the profit on this position.

Hold the put side for now.

The sale of the October 16th - $125 call will result in a gain of $410 if you traded the suggested one lot.

September 16, 2020

Tech Letter

Mad Hedge Technology Letter
September 16, 2020
Fiat Lux

Featured Trade:

(THE LEGITIMIZING OF DIGITAL FITNESS CONTENT)
(PTON)

The Legitimizing of Digital Fitness Content

Tech Letter

Peloton (PTON) is a tech company I once hated, but that is now undergoing a renaissance because the pandemic has created a surge in demand for home exercise solutions.

In its most recent earnings report, revenue frothed to 172% to $607.1 million, crushing both the consensus estimate of $580 million and the company's own guidance.

Connected Fitness subscribers more than doubled to 1.09 million, and Digital memberships more than tripled to nearly 320,000.

Peloton quite simply is struggling to keep up with demand, like many other winners in the shelter-at-home tech trade.

Peloton has been pedal to the metal expanding manufacturing capacity at third-party contract manufacturers and its in-house manufacturing operations.

Peloton had acquired Tonic, one of its bike manufacturers, a little less than a year ago as part of a vertical integration pivot.

CEO John Foley also noted that the company had to balance the trade-offs with how it allocated capacity.

Peloton recently introduced a new Tread that's more affordable, but it also needed to ramp unit volume.

Foley commented, "While we had hoped to launch our new Tread more quickly and in greater supply, we had to make some tough decisions regarding supply chain resource allocation due to the surge in demand we've been experiencing for our Bike."

Connected Fitness subscriber growth is starting to become constrained at the back half of the quarter, but that was largely due to ongoing supply constraints as opposed to a lack of demand.

The resurgence in coronavirus cases over the summer contributed to another spike in demand for the products so imagine what a winter spike could mean for the company too.

The flip side is that the surge in virus cases has made it challenging to meaningfully reduce order delivery time frames in the US.

Peloton has materially increased production capacity in recent months and continue to grow manufacturing capabilities, but do not expect a normalized order to delivery windows in the U.S. prior to the end of Q2 fiscal '21.

Peloton's financial performance for the rest of 2020 will center around its ability to ramp production in order to satisfy demand.

Conversely, some of the biggest losers in the economy are gyms, and Peloton is feasting on this opportunity.

It’s becoming clearer that connected fitness has a massive runway for growth, especially with over 180 million people around the globe that—prior to the health crisis —belonged to a gym.

Quarterly workouts surged to almost 77 million in the quarter. That’s 25 workouts per connected fitness subscription on average per month.

That is the differentiation that Peloton is myopically focused on because that leads to low churn, that leads to great word of mouth and, frankly, it’s what I believe has changed this category of fitness because there’s finally something that is sustainable and located in the safety of one’s house.

Workouts per subscription have basically doubled from a year ago due to improvements in digital content offerings across non-bike formats like strength training and yoga.

Another tailwind is the accessibility of that content on Roku, Fire TV, Apple TV, Android TV right at the touch screen of the Peloton Bike.

It’s almost as if the coronavirus saved this company and Peloton hasn’t looked back.

Although I was discouraged about Peloton before the pandemic, it appears like a rejuvenated company during the virus era.

Luck sometimes needs to fall on your side and trading pullbacks from the long side makes sense with Peloton right now.

Considering it achieved its first profitable quarter, this exercise-from-home revolution has legs, and incremental revenue gains are highly probable moving forward.

They were just a marginal tech company before, but although not a juggernaut, they have come closer to respectability which is saying a lot for Peloton.

Remember that daily volatility is high in Peloton, I would not hold it until the next crash. Sell for profits and wait for a pullback to get a lower cost basis. Rinse and repeat.

Peloton

September 16, 2020 - Quote of the Day

Tech Letter

“It's simple science: exercising creates endorphins and endorphins make us happy. On the most basic level, Peloton sells happiness.” – Said CEO of Peloton John Foley