“If you’re a retail CEO and the tariff announcement comes, you’re on your front porch looking for a cloud of locusts,” said Charlie O’Shea, a retail debt analyst at Moody’s.
Mad Hedge Biotech & Healthcare Letter
May 20, 2021
Fiat Lux
FEATURED TRADE:
(REGENERATED REGENERON)
(REGN), (PFE), (JNJ), (AMGN), (BMY), (GILD), (MRK), (LLY), (SNY), (BAYRY), (NVS), (RHHBY)
The biotechnology and healthcare sectors have become attractive investment targets for investors who recognize the value and essence of these industries along with the possible risks associated with them.
While not all companies in these areas are great investments, some offer remarkable growth opportunities.
One company worth considering is Regeneron (REGN), with its strong and stable investment thesis and steady organic growth.
Regeneron joins the ranks of Pfizer (PFE) and Johnson & Johnson (JNJ) as one of the handful of biopharmaceutical companies to release solid first quarter results this 2021 compared to other big names in the industry, including Amgen (AMGN), Bristol Myers Squibb (BMY), Gilead Sciences (GILD), Merck (MRK), and Eli Lilly (LLY).
The New York-based company reported a 38% boost in its revenue compared to the same period in 2020, reaching $2.5 billion for the first quarter of 2021 alone.
Virtually all of Regeneron’s products generated solid growth during this period, with the company’s COVID-19 antibody cocktail REGEN-COV delivering the highest sales at $262 million.
To underscore just how significant REGEN-COV is to Regeneron this quarter, its absence from the roster would take away 18% from the company’s overall revenue growth.
Riding the momentum of its COVID-19 program, Regeneron has developed Inmazeb, which is a treatment for Ebola virus infection.
Aside from its COVID-19 antibody cocktail, Regeneron also saw an impressive boost in the performance of its atopic dermatitis drug Dupixent.
Dupixent, which Regeneron sells in partnership with Sanofi (SNY), generated $1.26 billion in sales in the first quarter, showing off a notable 48% increase from its 2020 report.
Although Dupixent is a shared product with Sanofi, this dermatitis drug holds incredible promise for Regeneron.
To date, only 6% of eligible patients are being treated with Dupixent. This indicates a massive space that is yet to be explored by both companies.
Taking into consideration the pace at which Dupixent has been growing so far, this drug is projected to peak at roughly $12.5 billion in sales in the coming years.
Another high-selling drug for Regeneron is wet age-related macular degeneration (AMD) treatment Eylea.
Sales for this drug, which was developed in collaboration with Bayer (BAYRY), went up from $1.2 billion in the first quarter of 2020 to $1.3 billion this year.
The increase in sales for Eylea is a welcome surprise for both Regeneron and Bayer, especially since more and more competitors are attempting to topple the drug as the top product in the niche.
Cornering the AMD segment is an attractive venture for any biopharmaceutical company.
After all, Eylea generated $4.9 billion in sales in 2020 from the US market alone.
Thus far, two main competitors have come forward as the strongest.
One is Novartis (NVS), which released Beovu in 2019.
The second, and possibly the stronger competitor between the two, is Roche (RHHBY) with Faricimab.
To ensure its dominance in the AMD market, Regeneron has been expanding the use of Eylea.
The latest development is the drug’s enrollment in the Phase 3 program, which would allow extended periods in between treatments but still deliver the same level of efficacy and safety.
Aside from these, Regeneron is looking into additional revenue streams ahead.
One growth segment is its oncology program, particularly its cancer drug Libtayo, which may soon be marketed to cover a fourth type of cancer.
Regeneron aims to submit Libtayo for review as a treatment for advanced cervical cancer.
On top of this, the drug is also a strong contender in the development of several antibody treatments.
Thus far, the company has 12 oncology antibodies under clinical development.
Overall, Regeneron’s strong results for the first quarter of 2021 highlighted its continuous evolution into a company carrying multiple and diverse portfolios of products and pipeline programs that address an extensive range of serious diseases, from COVID-19 and rare diseases to cancer.
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
Global Market Comments
May 20, 2021
Fiat Lux
Featured Trade:
(A COW-BASED ECONOMICS LESSON)
(ON THE AIR WITH CASEY STUBBS - THE LINK IS NOW WORKING)
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
Mad Hedge Technology Letter
May 19, 2021
Fiat Lux
Featured Trade:
(THE CURRENT STATE OF U.S. ECOMMERCE)
(AMZN), (WMT), (KR), (COST)
Was 2020 a one-hit-wonder for U.S. ecommerce sales?
Hardly so.
US retail ecommerce sales grew 33.6% in 2020, reaching $799.18 billion.
As the public health situation fizzles out, in-store shopping will refresh itself, and a share of consumer spending will revert away from retail and toward services like travel and live entertainment.
Consensus has it that U.S. ecommerce will grow 13.7% this year, reaching $908.73 billion, and although that would be a great year under normal circumstances, annualized growth of 13% appears pitiful compared to the pandemic numbers.
It was only at the beginning of 2020 that ecommerce was expected to grow 13.2% from 2019, but the health crisis ignited ecommerce sales to $799.18 billion.
Ecommerce growth from a much higher base is a hard endeavor as all the low-hanging fruit has been harvested and it’s just harder to push the needle higher.
What does this all mean?
Ecommerce represents a larger piece of the pie than ever before and that comes with greater influence.
I now expect ecommerce sales will account for 15.5% of the $5.856 trillion in total retail sales this year.
Ecommerce sales will surpass $1 trillion next year.
It also means that digital commerce has never been so strong in terms of a percentage growth basis, net total basis, and clout.
However, growth rates will need to moderate first before they can reaccelerate.
Looking at the financial year, look for sales to rise by a low single for the big-box retailer Walmart (WMT) showing that numbers are getting ahead of themselves.
Walmart is an accurate bellwether stock that gives us deep insight into the state of ecommerce, and they said it sees earnings rising by a high single-digit percent.
Guidance aside, Walmart had a great quarter.
Every segment performed well, and I am encouraged by traffic and grocery market share trends.
But customers clearly want to get out and shop which is why growth rates will most likely drop around 13% for ecommerce instead of staying north of 30%.
Walmart’s ecommerce continues to grow and stimulus in the U.S. had an outsized impact, and the second half has more uncertainty than a typical year because the reopening is a once-in-a-lifetime phenomenon and it’s hard to pinpoint the shake out.
Remember, there most likely will not be any broad-based stimulus payments in the 2nd half of 2021 and 2022 that will be rolled into Walmart ecommerce sales.
Walmart is clearly chasing the leader of the pack Amazon.
Amazon is on track to become the largest retailer in the United States within the next four years, followed by the aforementioned Walmart and Kroger.
Kroger has been a fashionable pick amongst hedge fund managers in the beginning of 2021.
Amazon (AMZN) gross merchandise value sales (GMV) will top $631.6 billion by 2025, representing a compound annual growth rate of 14% between 2020 and 2025.
The same report showed us that Walmart’s ecommerce sales are set to grow at a five-year CAGR of 14.9% from $43.6 billion in 2020 to $87.5 billion in 2025, accounting for 16.7% of total retailer sales in 2025.
Ecommerce is the only channel that will grow in the next 5 years, everything else, such as offline retail will contract or go sideways at best.
It’s a death by a thousand cuts type of dilemma for anyone that isn’t in ecommerce.
Costco (COST), the fourth largest U.S. retailer, is expected to invest heavily in its digital business, with its online sales set to increase by 47% over the same period, reaching $15.3bn in 2025.
Over the next few years, Generation Z will age into adulthood and bring with them a digital wallet and firms will need to focus investment online and engage with the digital ecosystem in order to win market share.
Gen Z doesn’t use cash.
Online grocery is set to stay even in healthy times, but the pace of growth for online grocery will level off after the 2020 explosion.
Fresh grocery ecommerce is still expected to grow at 13.3% CAGR between now and 2025 which is why you see many retailers like Walmart investing in the fresh foods’ delivery business.
Habits are hard to break and it’s clear that digital add-ons are here to stay, and brands must cultivate digital platforms to win.
“Our intuition about the future is linear. But the reality of information technology is exponential, and that makes a profound difference. If I take 30 steps linearly, I get to 30. If I take 30 steps exponentially, I get to a billion.” – Said American inventor and futurist Raymond Kurzweil
