“Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.” – Said Hungarian American billionaire investor George Soros
Mad Hedge Biotech and Healthcare Letter
November 9, 2021
Fiat Lux
Featured Trade:
(A SAFE BET FOR MRNA TECHNOLOGY ENTHUSIASTS)
(BNTX), (PFE), (MRNA), (REGN), (SNY), (NVAX)
It was a case of being in the right place at the right time.
BioNTech (BNTX) has always been focused on mRNA technology, so when Big Pharma player Pfizer (PFE) knocked on its doors for a collaboration, this up-and-coming biotech company was more than ready to go.
We all know what happened after that. BioNTech and Pfizer became the first to bring a COVID-19 vaccine to the public.
And just like how the pandemic changed the fortune of Moderna (MRNA), the COVID-19 situation also served as proof of concept of BioNTech’s technology.
Looking at BioNTech’s history and recent performance, I can see several reasons to buy the stock.
Short term, one of the primary reasons to buy BioNTech is obvious: its overwhelming success in creating a COVID-19 vaccine.
BioNTech expects approximately $18.4 billion in revenue from its COVID-19 vaccine in 2021.
In its second-quarter earnings report, BioNTech and Pfizer disclosed that they already crossed the 1 billion mark in terms of the vaccine doses delivered globally.
In fact, BioNTech’s revenues beat the projected $2.35 billion, with the company generating $6.4 billion in sales for the second quarter of 2021 alone.
This is an impressive jump from the $47.54 million it recorded during the same period in 2020.
Considering the consistently high demand for the BioNTech-Pfizer vaccine, it’s reasonable to expect that the momentum will be sustained.
To date, an additional 200 million doses have been ordered by the US government. This is on top of the 500 million doses it initially bought under the current supply agreement.
Meanwhile, the EU’s orders for 2021 reached 660 million doses plus 900 million more for 2022 to 2023.
Depending on the situation, another 900 million doses might be added to these initial agreements.
Just between the US and the EU, BioNTech has already received orders for over 1 billion doses of COVID-19 vaccines for 2022 onward—a number that’s widely expected to go up when other nations place their orders as well.
So far, the two companies have sealed an agreement with a South African biopharmaceutical company, Biovac, to collaborate on the manufacture and distribution of the vaccine across the 55 member states of the African Union.
As for the South American area, the partners have recently signed a deal with a Brazilian biopharma company, Eurofarma Laboratorios, to cover the Latin American regions.
Moving with the long-term reasons to invest in BioNTech, one of the most convincing aspects is the company’s promising pipeline.
BioNTech is realistic enough that the demand for its COVID-19 vaccine will eventually plateau. That has been the expectation since the beginning, which is why the company has been leveraging the incredible cash flow through expanding its pipeline.
Actually, BioNTech is allocating roughly $1.05 billion for R&D expenses in 2021.
Some of the segments that BioNTech has been working on are regenerative treatments and products for infectious diseases, inflammatory conditions, and allergies.
The company is also developing potential cancer therapies. After all, curing cancer is considered the Holy Grail of mRNA-centered companies—an achievement that would undoubtedly catapult BioNTech’s stock to the top of the Big Pharma list.
One of the telltale indicators of BioNTech’s plan to focus on oncology treatments is its July 2021 acquisition of Kite’s R&D platform on TCR Cell solid tumor neoantigen T-cell receptor (TCR) along with its manufacturing plant in Maryland.
The driving force behind that deal is BioNTech’s desire to become a first-mover in the cell therapy space.
Basically, the company added ammunition to its pipeline to come up with individualized cancer therapies.
BioNTech also has a couple of mRNA-based solutions queued for Phase 2 trials this year.
One is FixVac BNT111, which is developed for melanoma and a collaborative effort with Regeneron (REGN). This candidate has shown promising results, with the possibility of being available for use to over 90% of melanoma patients.
Others include FixVac BNT113, which targets head and neck cancer, and FixVac BNT112 for prostate cancer.
Another promising candidate is its cancer vaccine, INeST BNT122, which BioNTech is working on with Genentech.
Apart from these, BioNTech is also looking at developing treatments for infectious diseases as another potential long-term growth pillar—a direction taken by its biggest competitor in mRNA-based solutions, Moderna.
Checking its pipeline, it looks like BioNTech plans to target malaria as its first project. It also has candidates for HIV, tuberculosis, and influenza.
BioNTech’s goal is to launch the first-ever mRNA vaccine against malaria. If all goes according to plan, the company plans to conduct clinical trials by 2022.
Meanwhile, its influenza vaccine program, which faces serious competition against Sanofi (SNY) and Novavax (NVAX), will be another collaborative work with Pfizer. The two companies plan to initiate human trials before the end of 2021.
Pretty much like Moderna, I look at BioNTech as a long-term play. Investing in this company requires patience and belief in the burgeoning mRNA space.
Overall, I think BioNTech is a safe bet for investors looking to dip their toes in the rapidly expanding mRNA world.
Mad Hedge Bitcoin Letter
November 9, 2021
Fiat Lux
Featured Trade:
(THE METAVERSE IS THE ULTIMATE CRYPTO CATALYST)
(BTC), (ETH)
Lately, the chatter of the “metaverse” has run riot even some coining it as the “Internet 3.0.”
Partaking in this upgrade of the internet are ostensibly the prodigious firms of the West Coast which many of you already know.
Many of those stalwarts have nothing to do with crypto, but I must bring them up because there is an uncanny correlation between the future project of the metaverse that intersects with the fortunes of crypto.
The metaverse will deliver an augmented reality experience that is habitually billed as an experience exceeding physical reality.
In this realm, digital borders most likely won’t exist.
It will be absent of free-flowing US dollars and be replaced by a currency that doesn’t pertain to a sovereign nation.
A digital currency must embed in a way that facilitates the smooth functioning of the metaverse and it is highly likely that currency will be a cryptocurrency or various types of cryptocurrencies.
The rules of the realm aren’t written up yet, but I firmly visualize a deep intersection between cryptocurrencies and the business of the metaverse.
For example, instead of visiting the official NFL website and clicking on their official shop, I’ll be able to walk over to a 3D NFL shop in the metaverse and view the apparel myself then pay directly in crypto.
The goods will then be shipped to my physical address in the real world. No more flipping up a mobile or computer screen and entering www dot blah blah blah.
Another transformative issue, if you believed that personal data and the protection of it was a do or die issue now, then wait until the metaverse exists and we are represented in avatar form inside of it.
Virtual reality has gotten miles better in the last 10 years and it's all part and parcel of priming this technology to insert it into the metaverse.
For information to be secure and decentralized, we will need to harness the power of blockchain technology which cryptocurrencies run on.
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.
There is no protection of personal or financial data on a virtual reality platform if there is no blockchain technology.
Engaging with other people in a virtual environment is going to open a can of worms and expose people to hackers and it’s the developer’s responsibility to create a secure environment.
People will not partake if it’s the status quo of modern-day data breaches and minimal punitive fines followed up by little legislation to prevent this from occurring again.
Blockchain enables not only instantaneously confirmed information but also enables these transactions to be cryptographically secured and protected.
Compared to the future of money, our antiquated system of wire transfers, paper checks, and “know your customer” forms seem idiotic when we have the technology for so much more.
Crypto transactions are the panacea to all these questions.
Even with price volatility that has been engulfed by bitcoin and other decentralized cryptocurrencies, the rise of stable coins and central bank digital currencies (CBDCs) means that the ability to conduct transactions via crypto has never been simpler.
I can easily envision some sort of metaverse stable coin partially pegged to a basket of fiat currencies.
Clearly, technology and cryptocurrency are at a fork in the road where major Silicon Valleys are going to move mountains to make this work as they see fit.
Moving mountains means pouring gobs of capital into improving the technology of cryptocurrency and the ecosystem that integrates with it.
The investments coincide with major capital earmarked for metaverse structural development with several companies spending $5 billion per year.
As we receive each incremental upgrade from Ethereum, Bitcoin, and the other alternative coins, it’s literally a fight to the top to see who will be the fittest to first deploy itself into the metaverse and carve out a massive role in the future of the digital money.
If you believe that these headliner cryptocurrencies are part of the metaverse formula, they are highly likely to appreciate 10X by the time the metaverse is ready to rock and roll.
“The Federal Reserve simply does not have authority to supervise or regulate Bitcoin in any way.” – Said the United States Secretary of the Treasury Janet Yellen
Global Market Comments
November 9, 2021
Fiat Lux
Featured Trade:
(THE LAZY MAN’S GUIDE TO TRADING),
(ROM), (UXI), (BIB), (UYG),
(TESTIMONIAL)
Mad Hedge Technology Letter
November 8, 2021
Fiat Lux
Featured Trade:
(HOW SOFTBANK GOT GLOBALIZATION ALL WRONG)
(SFTBY), (DIDI), (BABA), (CPANG)
Softbank’s Vision Fund, a technology-biased venture capitalist fund, is basically a leveraged massive bet on synchronized bullish behavior on the future earnings of global tech companies.
It assumes that technology is one of the critical underpinnings to global business and it's more or less a wager on an increased rate of harmonic globalization.
I get what they are trying to do, but in 2021, globalization is far from harmonic, and there are many in the camp that the world is wrought by a current phase of deglobalization.
This past quarter, Softbank presided over a precipitous drop in the Net Asset Value of their technology investments from $244 billion to $187 billion.
The -24.6% return and the pain from it were mainly induced from Softbank’s vast array of Chinese investments specifically dreadful performance from its bellwether leader Alibaba (BABA) whose stock has halved since the crackdown started.
CEO of Softbank Masayoshi Son, an ethnic Korean with a Japanese passport, described its current predicament as being “right in the middle of a storm.”
The problem with that is not being in a storm per se, but the timeline into transitioning into sunnier climate because just 1-2 quarters out from now, prospects appear bleak.
If one might remember, DiDi Global Inc. (DIDI), the Chinese ride-sharing platform, was the big shebang going public at a valuation that pegged the company at $68 billion.
Since then, not much has gone right as it was later found out that (DIDI) went public without the tacit approval of the Chinese Communist Party.
Falling out with the good graces of their overlords has meant a halving of the stock and Softbank has taken a loss of $6.1 billion on DiDi.
Even worse for the firm, there appears to be no savior or “next DiDi” IPO to save their Net Asset Value in the upcoming quarters.
That means we could be staring at the high-water mark which occurred 2 quarters ago.
Thank God for the outperformance in Europe and the United States that, in effect, accomplished some damage control for the bottom line.
And their recent short-term track record has been overwhelmingly poor.
Let’s take a glimpse into the other investments that have been chop blocked at the knees.
The losses keep rolling off the tongue with Uber-like trucking startup Full Truck Alliance Co. down $1.2 billion.
KE Holdings Inc., which runs the Beike online property service, lost $2.2 billion of value — the stock is down more than 70% from its peak and is trading below the IPO price.
And the failings weren’t just in China, take a stock that I have extensively bashed on — the biggest ecommerce company in South Kora — Coupang (CPANG).
Their poor past quarter’s performance meant that Softbank booked a quarter performance of a horrific -$6.7 billion.
I told readers to stay away from this one not because it is a bad company.
It was crystal clear in the underlying data that its business was saturated in Seoul, and there are no other big cities in South Korea, and I couldn’t see where the next phase of incremental growth would come from.
The idea was to grow abroad but everywhere else in Asia has been monopolized by local or brand-named ecommerce companies.
That was the bad news, and the silver lining is that ex-China, particularly the United States, they have been doing well and are highly profitable.
Slippage from this Vision Fund is quite notorious, from its misallocation of funds of shared office space company WeWork to overpaying for many other companies with a vanilla idea that technology will overcome any obstacle.
I would say that at a management level, not a lot is well thought out at Softbank.
I would like to remind readers that many of these new China investments by Softbank have just plain out ignored the geopolitical tensions.
They have nobody to blame but themselves because they certainly had time to divest from China and take profits which would have been the right move to do at that time.
Softbank’s parent company’s stock is basically half of what it was in March 2020 thanks to China and the Vision Fund will need to rely on its ex-China investments to pull itself out of this “storm.”
Another big plus is that the China losses are unrealized, but China has offered zero indication that their monumental crackdown on private business is over, and no amount of kowtowing will sway them from their lofty perch.
This could just be the start of their reign of terror over private business and that’s a scary thought right there.
Honestly, I opt for the more conservative stance of never buying Chinese stocks.
Why invest in Chinese tech when United States tech is so much better?
Not enough growth for you?
Then use options.
Softbank should and could have just poured all their investments into Silicon Valley, or just one company like Google, or even the digital gold of Bitcoin.
Good thing there is no ETF that tracks the performance of Softbank!
Invest at your own peril.
“Almost everything is like a machine.” – Said Hedge fund Manager Ray Dalio
