Mad Hedge Biotech and Healthcare Letter
November 30, 2021
Fiat Lux
Featured Trade:
(BEYOND THE COVID-19 VACCINE)
(AZN), (PFE), (BNTX), (REGN), (GILD), (INCY), (MRNA)
Even altruism has its limits.
Adding to the list of things we didn’t expect to happen in 2021, AstraZeneca (AZN) has followed the footsteps of Pfizer (PFE) and BioNTech (BNTX) and decided to begin making money off its COVID-19 vaccine.
The news is an about-face from the Cambridge-based company’s previous pledge to not profit from this while the pandemic is still ongoing.
Given AstraZeneca’s decision, there’s a possibility that it no longer believes that COVID-19 remains a threat of global proportions—or it at least thinks the issue has become more manageable.
It remains to be seen how the company will react to the emergence of the Omicron variant, and if it plans to push through with this decision.
While AstraZeneca’s agreements with different countries won’t allow it to come right out of the gate and just start slapping massive profits all over the place, the company plans to begin “progressively transitioning” to profitability following its third-quarter call.
Moreover, the company assured that its COVID-19 vaccine would remain reasonably priced for low- to middle-income countries. This means that it plans to jack up the price in wealthier nations instead.
However, AstraZeneca isn’t doing this for purely financial reasons.
According to the company, profits from the vaccine will be allocated to another COVID-19-related effort, its antibody therapy called AZD7442—a treatment that’s expected to compete with therapies from Regeneron (REGN) and Gilead Sciences (GILD).
Regardless of how they spin this recent turn of events, the key takeaway is that they’ll start making money off the vaccine.
Although changing their tune about the COVID-19 vaccine might get them some flak, it’s crucial to bear in mind that AstraZeneca is a for-profit company. This is the natural course for them to take vis-a-vis their products.
Besides its work on COVID-19, AstraZeneca has been pouring money on R&D over the past 12 months to fund different clinical trials for its oncology, cardiovascular, and immunology segments. To date, the company’s spending on research and development has climbed by 27.5% year-over-year to reach $3.54 billion in the first 6 months of 2021.
This move to invest heavily in developing new drugs for severe medical conditions is anticipated to secure a solid future revenue and continuous growth in earnings per share for the company.
Given its pipeline and history, AstraZeneca is actually projected to grow by over 20% annually over the course of the next five years.
One result of this effort is the expansion of the company’s top-selling cancer drug, Imfinzi.
At the moment, Imfinzi is approved as a lung cancer treatment. However, it can soon boost its sales to include biliary tract cancer in its indications.
There are roughly 50,000 individuals diagnosed with biliary tract cancer annually in the United States, Japan, and Europe, with the number hitting 210,000 across the globe.
In terms of profitability, we can look at Incyte’s (INCY) Pemazyre, which was approved in 2020. Sales of the drug grew four-fold in the first 9 months to reach $48 million.
Admittedly, Imfinzi’s market share will rely on its efficacy and safety results.
However, the treatment has a track record of delivering a superior standard of care and guaranteeing that it has the same safety profile as chemotherapy.
Hence, it’s reasonable to say that we can conservatively expect Imfinzi to capture at least 15% of the whole biliary tract cancer market. This would be roughly 30,000 patients worldwide.
Currently, Imfinzi’s price tag is at $180,000 in the US, but the drug might be cheaper in other countries.
Based on the market potential of its biliary tract cancer indication, this additional indication could rake in an additional $600 million annually for AstraZeneca once it gains regulatory approval.
Although this is merely less than 2% of the projected $36.1 billion total revenue for AstraZeneca in 2021, adding $600 million would still be a notable tailwind to the $2.5 billion estimated earnings from Imfinzi.
While its COVID-19 vaccine did not deliver the same outstanding efficacy results as the mRNA vaccines of Moderna (MRNA) and Pfizer / BioNTech, it’s still one of the handfuls of major pharmaceutical companies that managed to develop and distribute an effective product.
Overall, vaccine decisions aside, AstraZeneca appears to be in a great place with a robust oncology portfolio. Therefore, this stock looks like a solid buy with several upcoming price catalysts in 2021 and 2022.
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 Bitcoin Letter
November 30, 2021
Fiat Lux
Featured Trade:
(WE GO HIGHER IN THE SHORT TERM)
(BTC)
I am convinced that Congress will fail to act swiftly to head off the debt ceiling crisis that every trader should circle on their calendar.
December 15 is the day and that gives us only half a month for Congress to raise the federal debt limit, and Senate Majority Leader Charles Schumer and Minority Leader Mitch McConnell are miles apart.
Much of the trading these days is fueled by algorithms that decide on buying and selling based on the market data and this software is about to get bombarded with the U.S. possibly defaulting on their debt obligations.
The scare of a default or the perceived threat of a default, even if nobody thinks it will happen, will lend credibility for alternative assets namely Bitcoin and crypto-assets.
It’s hard for me to see Bitcoin not going up in the next 2 weeks and I believe traders should play from the $58,000 level which is the line of technical support.
Another flashing green indicator is the exploits of CEO of MicroStrategy (MSTR) Michael Saylor who has piled into the digital gold as his predominant strategy.
MSTR spent $414 million in buying 7,002 bitcoins yesterday.
MicroStrategy bought the coins at an average of $59,187 per Bitcoin. He added that following this latest acquisition, MicroStrategy now holds 121,044 bitcoins, and it used $3.57 billion to acquire them.
MicroStrategy is already profitable regarding its cryptocurrency investment. Its 121,044 bitcoins are worth $6.81 billion, a profit level of nearly 100%. There is not a bigger bull out there than Saylor who has staked his existence on the digital gold going higher.
Another positive indicator is the growing margin leverage ratio which shows more borrowed funds that will be bet on the price of bitcoin going up.
Less leverage in the system means less capital flowing to buy crypto.
What’s marinating in Washington?
Democrats insist that Schumer will not waste a week of Senate floor time to use the budget reconciliation process to raise the debt limit with only Democratic votes.
Both leaders hope to circumvent another brutal fight, but McConnell and Republicans are poised to really play hardball for this one.
McConnell was criticized for laying an egg during the last debt ceiling crisis and giving up negotiating leverage.
If McConnell doesn’t extract something on spending out of Democrats, especially when we’re looking at the Build Back Better bill possibly passing the Senate in some form, it’s an abject failure.
The conundrum is fueling predictions within the Senate that Treasury Secretary Janet Yellen will push the deadline for increasing the nation’s borrowing authority until January or February which is a positive event for the price of Bitcoin.
Yellen could find a couple of extra quarters in the cushions and push it to January or February, but it’s not a 2-foot putt.
Also, Democrats are nixing the Republican argument that Yellen has the flexibility to extend the deadline into January or February.
Yellen also warned leaders this month that the passage of the $1 Trillion Infrastructure Investment and Jobs Act gave her less room to maneuver because it requires a $118 billion transfer to the Highway Trust Fund by Dec. 15.
Bitcoin’s function as a rock-solid market hedge has never been more applicable as Congress is behaving almost as if money is unlimited and as if there are no consequences to that assumption.
What we are going to slowly see is that in terms of attractiveness, crypto will be that shiny wrapper compared to stocks and gold.
Even if the odds of a real default are almost zero, there could be some sort of technical default, Bitcoin will be that safe haven if the unthinkable comes to pass.
More and more people are coming to a realization they need a Plan B.
Back on the battlefield, it’s almost impossible in any plausible way that the inflationary genie with be bottled up any time soon unless it’s a nominal Fed speak victory.
The U.S. government is just too far past the point of possible return and whether it is labeled as the omicron variant, supply chain constraints, energy shortages, tight labor market, or however you want to fill in the blank, these events are almost all entered through the narrow prism of politics intersected with politics and the output is inflation.
Inflationary in the sense they add costs to either the national debt or the cost of existing as a human in the modern world and sooner than later, everyone will conclude the only way to counteract these forces are alternative assets or cryptocurrencies
“Virtual Currencies may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.” — Said Ben Bernanke, former Chairman of the Federal Reserve
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
November 30, 2021
Fiat Lux
Featured Trade:
(NEW VIDEO UPDATE ON EXECUTING A VERTICAL BULL CALL DEBIT SPREAD),
(AAPL), (GS)
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