Mad Hedge Biotech & Healthcare Letter
September 1, 2020
Fiat Lux
Featured Trade:
(RACE TO THE FINISH LINE)
(PFE), (BNTX), (MRNA), (AZN), (INO), (ZTS), (MYL)
Mad Hedge Biotech & Healthcare Letter
September 1, 2020
Fiat Lux
Featured Trade:
(RACE TO THE FINISH LINE)
(PFE), (BNTX), (MRNA), (AZN), (INO), (ZTS), (MYL)
One of the leading companies in the COVID-19 vaccine race is getting closer to the finish line.
Pfizer (PFE) shocked the scientific community when it announced that it would be ready to submit its COVID-19 vaccine candidate, BNT162b2, for FDA approval by October.
The company said that it is now more than 50% done with the recruitment for its Phase 3 clinical trial, which requires 30,000 volunteers.
Earlier this year, Pfizer and its vaccine partner BioNTech (BNTX) were included in the US government’s Operation Warp Speed project. Although the two rejected government funding, their candidate is still included in the fast-track priority list of the FDA.
To date, the US government already secured a contract with Pfizer and BioNTech for 600 million doses of their vaccine, with the initial payment of $1.95 billion for the first 100 million doses.
Other countries across the globe have also shown faith in the science of Pfizer.
The UK government completed a deal with Pfizer for 30 million doses, while Japan ordered 120 million doses.
Since it has been preparing its manufacturing facilities while also conducting its trials, Pfizer is confident that it can produce 1.3 billion doses of BNT162b2 in 2021.
Given this timeline, it is possible for the company to launch its COVID-19 vaccine to the market by the fourth quarter of 2020, with peak sales of the product reaching $1.7 billion in 2021.
Revenue for BNT162b2 is expected to slide to $850 million by 2023, with the vaccine raking in an average of $500 million to $600 million in annual sales by then.
However, there is no such thing as a perfect solution.
A potential competitive disadvantage of Pfizer’s vaccine candidate lies in its storage requirements, which entail a storage temperature of −94°F.
While tertiary hospitals and laboratories can meet this requirement, it would make it difficult for traditional offices or pharmacies to store the product.
This shortcoming might prompt other governments and private institutions to consider other vaccine candidates with simpler storage requirements.
Although the results have yet to be released, early data show that competitors like Moderna (MRNA), AstraZeneca (AZN), and Inovio Pharmaceutical (INO) might offer less complicated solutions.
Outside its widely publicized COVID-19 vaccine efforts, Pfizer has been working on additional spinoffs to boost and diversify its revenue stream.
Investors of the company would agree that Pfizer is the kingpin of spinoffs.
A prime example of this is its animal healthcare Zoetis (ZTS) spinoff, which was established in 2013. Since then, the investors have experienced impressive returns with over 289% yields.
Now, Pfizer is aiming to replicate this feat with the $195 billion merger of its own off-patent and generic drugs unit Upjohn with Pennsylvania-based company Mylan (MYL).
The two companies are slated to form a mega-company, called Viatris, where Pfizer stakeholders will also receive shares.
Looking at its portfolio and pipeline candidates, Viatris is projected to generate approximately $19 billion to $20 billion in annual revenue and record $4 billion in free cash flow.
On top of the Viatris spinoff, Pfizer is also working on the Nasdaq IPO of Cerevel Therapeutics.
This is an interesting move from Pfizer since Cerevel is a neuroscience company, which focuses on diseases of the central nervous system like Alzheimer’s, Parkinson’s, and epilepsy.
Pfizer owns 25% stake of the neuro company while Bain Capital holds 75%. The two established Cerevel in 2018.
Just last July, Cerevel announced its merger with Arya Sciences Acquisition Corp II.
When the merger is finalized, the new company will be called Cerevel Therapeutics Holdings and will be under the ticker symbol “CERE” in Nasdaq. The deal is expected to be completed by the fourth quarter of 2020.
Although it will be a relatively unknown and new company, Cerevel is expected to receive at least $445 million to use for its growth by the end of the year.
Needless to say, this is expected to be another “Zoetis-in-the-making” strategy from Pfizer.
For 2020, Pfizer raised its revenue guidance and estimates that it can generate somewhere between $48.6 billion and $50.6 billion while recording an earnings per share of roughly $2.85 and $2.95.
Looking at its balance sheet, Pfizer has proven itself capable of weathering one of the most debilitating downturns since The Great Depression.
In fact, the company amassed revenue of $12 billion and showed off a respectable 12% operational growth in its biopharma unit in the first three months of this year.
In its second quarter earnings report, when the COVID-19 pandemic was already well underway, Pfizer raked in $11.8 billion in revenue.
With all the publicity surrounding the COVID-19 vaccine efforts, it is understandable that investors are buying at artificially high prices. However, Pfizer remains incredibly undervalued.
Pfizer’s star power would inevitably surge if BNT162b2 proves to be safe and effective. Even without the vaccine though, the company’s diverse portfolio and impressive acquisition strategies already make it a great buy.
Plus, its healthy dividend, which yields approximately 3.9%, is no doubt the icing on the cake for this incredibly undervalued stock.
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
September 1, 2020
Fiat Lux
Featured Trade:
Mad Hedge Technology Letter
August 31, 2020
Fiat Lux
Featured Trade:
(WALMART’S QUEST TO BECOME THE NEXT AMAZON)
(WMT), (MSFT), (ORCL), (GOOGL), (AMZN)
U.S. tech is about to hit a 10-bagger when TikTok is set to choose between the Microsoft (MSFT)-Walmart hybrid offer or one from Oracle (ORCL) in the next 48 hours.
The network effect that will result from this purchase will be staggering and still underhyped in the mainstream media.
I am on record saying that Walmart is the new Fang, and their ambitions prove it.
Walmart (WMT) wanted to be the majority owner of TikTok, but the U.S. government wanted a technology company to be the lead investor.
I am not sure how that makes sense in an age where every company is a tech company.
Walmart was originally in a consortium with Google (GOOGL) before moving over in recent days to partner with Microsoft (MSFT) when it became clear the retailer would not be able to lead the deal.
Walmart is validating my thesis that it is a hybrid ecommerce company with its last earnings report 2 weeks ago.
In the company’s Q2 earnings, Walmart reported its U.S. ecommerce sales were up 97% — an increase attributed to more customers shopping online during the pandemic, stocking up on household supplies and shopping for grocery items online.
The TikTok deal first started with Walmart negotiating with SoftBank Chief Operating Officer Marcelo Claure.
SoftBank’s Claure believed Walmart’s all-American image and Google’s cloud computing infrastructure backbone could be a way in for the Japanese technology company.
The deal structure would have had Walmart as the lead buyer, with SoftBank and Alphabet acquiring minority stakes. One or two other minority holders held talks to join too but this ultimately was nixed by the U.S. government.
Walmart’s goal is to become the exclusive e-commerce and payments provider for TikTok and have access to user data to enhance those capabilities.
U.S. national security hawks need to save face by having a thoroughbred U.S. tech company lead the deal to show that this isn’t just about underhanded economic mercantilism.
Google could face significant antitrust opposition if it acquired TikTok’s U.S. assets.
Amazon is out of the picture too for anti-trust worries.
These concerns caused the consortium to crumble last week and led Walmart, which had become increasingly convinced that TikTok fits into its strategy, to partner with Microsoft on a bid instead.
TikTok is pondering which way to go – either the Microsoft-Walmart bid or a rival offer from Oracle. A deal, which is set to value TikTok’s U.S. operations in the $20 billion to $30 billion range, could be completed in the next 48 hours.
What does this mean for Walmart?
Walmart is hellbent on directly competing with Amazon prime for that same ecommerce market.
Walmart ecommerce sales now total more than $10 billion in quarterly U.S. ecommerce sales, exceeding 11.4% of the retail giant’s overall U.S. net sales for the first time.
The achievement reflects the ongoing shift toward online shopping amid the pandemic, and the increasingly fuzzy line between online and physical retail sales. It is also an example of the pandemic accelerating the shift to digital commerce at traditional brick-and-mortar retailers.
The timing isn’t a coincidence with Walmart on the verge of rolling out its own Amazon Prime service dubbed Walmart+.
Walmart’s new membership program is expected to cost $98/year, competing with Amazon’s $119/year Prime membership.
Amazon’s global online sales are 4.5X larger than Walmart’s at $45.9 billion for the quarter, up nearly 50%, and its physical retail sales were $3.8 billion, down 13% from the same period a year ago.
Walmart has significant headway to make before it comes close to Amazon Prime but there are fertile pastures in front of them, meaning I believe Walmart is a conviction buy at these levels.
At the bare minimum, this is a conspicuous sign of intent for Walmart that has successfully turned around the titanic and is a real time player in ecommerce.
They will be on the prowl for other tech purchases in the future as well as they certainly have the cash flow to pull the trigger on adding more tech talent to the lineup.
If Walmart reels in TikTok, I recommend long-term investors to buy Walmart as a tech growth asset and it is easily a $200 stock.
“The tailwinds we’re experiencing are accelerating our progress to build a healthier eCommerce busines as we add new brands, improve product mix, grow the marketplace and achieve more fixed-cost leverage.” – Said CEO of Walmart Doug McMillon
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
August 31, 2020
Fiat Lux
Featured Trade:
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