February 2022

A Healthcare Enigma to Add to Your Watchlist

The top names in the biopharmaceutical world based on their market capitalization include Johnson & Johnson (JNJ), Pfizer (PFE), AbbVie (ABBV), Eli Lilly (LLY), Merck (MRK), Bristol Myers Squibb (BMY), Amgen (AMGN), and Gilead Sciences (GILD).

Among these names, Gilead is often viewed as an enigma, given its history and the challenge in predicting its share price trajectory.

Over the past months, Gilead has been testing the patience of investors. In fact, the company is projected to experience a fall in revenues this year from $27 billion in 2021 to $24.05 billion in 2022.

The latest news that added to their anxiety was the pause on clinical trials for its cancer therapy, Magrolimab.

This came after its short-lived dominance in the Hepatitis C segment.

At that time, the sales of its leading drug Sovaldi skyrocketed from $140 million in 2013 to a jaw-dropping $10.2 billion by 2014.

Meanwhile, another Hepatitis C treatment, Harvoni, single handedly raked in $13.8 billion in sales in 2015, pushing the entire company’s revenues to an impressive $32.6 billion.

Unfortunately for Gilead, it became the victim of its own staggering success.

Its Hepatitis C treatments, Sovaldi and Harvoni, were incredibly effective and managed to cure the patients within months. The demand for these drugs fell because the patient pool gradually ran dry.

By 2019, the Hepatitis C franchise of the company had declined and managed to scrape $2.9 billion in combined sales.

Since then, though, the company has been struggling to regain investors' faith.

Nevertheless, these recent developments are not enough reasons to panic. If anything, Gilead has simply become even more attractively priced due to the fallout.

In 2020, Gilead managed to report its first year-on-year increase in revenues since its glory days in 2015.

As the COVID-19 pandemic started to take hold of the world, it was Gilead’s Veklury (Remdesivir) that secured the first-ever Emergency Use Authorization from the FDA.

While Veklury was eventually overshadowed by COVID-19 vaccines from Pfizer, Moderna (MRNA), JNJ, and AstraZeneca (AZN), as well as other treatments and antibody cocktails from Eli Lilly, Regeneron (REGN), and Merck, Gilead’s candidate managed a comeback by the fourth quarter of 2021 after experts declared it to be effective against the Omicron strain.

In effect, Veklury had a major impact on the company’s 2021 performance, recording $5.6 billion in annual sales.

Although this is not as illustrious or groundbreaking as its Hepatitis C treatments, the reemergence of Gilead as a frontrunner in the pandemic is proof that the company has not lost its knack for discovering and developing a winning formula for blockbuster treatments.

Another avenue that Gilead has been exploring is actively acquiring assets to expand its portfolio.

One notable move in that direction is its $11.9 billion acquisition of Kite Pharma, a leader in the cell therapy space, in 2017. Thus far, this agreement has yielded two drugs: Yescarta and Tecartus.

Since oncology is one of Gilead’s major areas of concentration, the commercialization of these two treatments conveys a promising future.

While both are yet to become blockbusters, the field of cell therapy has been rapidly expanding and turning into a critical therapeutic option for certain patient categories.

Yescarta is projected to rake in $1.5 billion in revenues if it receives the FDA green light for large B-cell lymphoma

Considering that its last trial data showed off a 60% improvement with Yescarta compared to standard of care in terms of halting the disease’s progression or even death, there’s a huge possibility that Gilead will be delivering good news soon.

As for Tecartus, this treatment received approval for acute lymphoblastic leukemia last year and is aiming to expand to cover mantle cell lymphoma by July 2022.

With its list price of $373,000, this CAR-T therapy is projected to reach blockbuster status in the following months as well.

Another oncology drug anticipated to reach blockbuster status soon is metastatic triple-negative breast cancer treatment Trodelvy, which Gilead gained access to following a $21 billion deal with Immunomedics in 2020.

Given its current approved indications and the queued trials to expand its coverage, Trodelvy is projected to reach $4.7 billion in peak sales.

Going back to the 2022 revenue forecast for Gilead, I think the change is from the company’s anticipated decline in Veklury sales.

Since Pfizer, BioNTech (BNTX), Novavax (NVAX), and Moderna have been actively working on Omicron-focused vaccines and treatments, Gilead expects its Veklury revenues to shrink as well.

Overall, Gilead still presents an excellent opportunity for long-term investors.

Despite its setbacks, the company has proven that it still holds the knack of rolling out remarkable and effective best-in-class treatments.

Moreover, its pipeline is filled with promising candidates poised to deliver in the years to come. So, don’t be too quick to write off Gilead just yet.

gilead

Trade Alert - (GOOGL) February 10, 2022 - BUY

Tech 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

February 10, 2022

Bitcoin Letter

Mad Hedge Bitcoin Letter
February 10, 2022
Fiat Lux

Featured Trade:

(BITCOIN SECURITY ON THE UP)
(BTC)

Bitcoin Security on the Up

Bitcoin Letter

Crypto and Bitcoin aren’t a perfect asset class, and it doesn’t pretend to be.

It’s still an emerging currency that still has holes to caulk.

One major item on the list that needs to be taken care of is security.

Bitcoin (BTC) itself is secure, but the exchanges that do business with you and I aren’t and that’s the underlying problem here.

When exchanges aren’t secure, they are ripe for hackers to raid and that is what happened to Bitfinex and Mt. Gox in Japan.

This is why I pound on the table to urge readers to get into the most secure crypto exchanges out there.

The exchange you do business on could go a long way in determining if you keep your crypto fortune in the future.

Just as crypto has boomed in popularity, the Feds have backed up the boom by acting like a good cop and tracking down the bad guys.

The Justice Department announced it seized more than $3.6 billion in allegedly stolen cryptocurrency linked to the 2016 hack of Bitfinex.

As part of the operation, authorities detained a New York couple on allegations they planned to launder the digital goods.

It has been recorded as the largest financial seizure ever by authorities.

The second largest theft came from the Japanese exchange Mt. Gox that got swindled in February 2014.

The exchange lost 850,000 bitcoins, worth about $474 million, but later found 200,000 of those bitcoins.

It still is a mystery as to who stole the coins at Mt. Gox and the exchange is in liquidation proceedings.

Let me also chime in by saying that the easiest way for theft to occur is an inside job in many of these cases as these web engineers know the system inside and out.

Despite the bad press and billions lost, crypto has continued its rise and adoption as a real alternative to the U.S. dollar and equities.

But security breaches are a reminder of the vulnerabilities of cryptocurrency technologies.

Every hack is also an opportunity to learn and grow resilient.

A bitcoin is actually just a secret number or piece of code. To transfer a bitcoin, a person must verify a planned transaction with a private encryption key. But if the private key is stolen, the attacker can steal the bitcoin.

Because all bitcoin transactions are recorded in the public blockchain, it is possible to follow the movement of stolen coins.

Bitcoins are transferred between 34-character alphanumeric addresses, which appear in the blockchain.

Bitcoin addresses don't reveal information about who controls the funds. But stolen funds are often difficult to convert to fiat currency. Exchanges usually have strict identification requirements for account holders to comply with anti-money laundering regulations.

Suddenly cashing out a large quantity of stolen bitcoins at a reputable exchange from a closely watched bitcoin address is unfeasible.

Even though the billions were stolen, the perpetrators' fingerprints were all over this crime as mentioned above, it’s hard to cash out stolen crypto because it can be tracked.

The couple who stole the Bitfinex funds found out this the hard way as Ilya Lichtenstein, 34, and his wife, Heather Morgan, 31 were arrested.

Authorities accuse the pair of trying to launder the proceeds of 119,754 bitcoin that were stolen from Bitfinex’s platform after a hacker breached Bitfinex’s systems and initiated more than 2,000 unauthorized transactions.

Prosecutors allege that the transactions sent the stolen bitcoin to Lichtenstein’s digital wallet.

He should have just given them back since the authorities knew where the coins were sent.

Officials said they were able to seize more than 94,000 bitcoin, which was valued at around $3.6 billion at the time of seizure. In all, the total stolen bitcoin is presently valued at approximately $4.5 billion, according to the agency.

The arrest should deter future hacks because of the unlikelihood of cashing out once the secret bitcoin number is tracked to an individual wallet.

It will be years until hackers can get around this ID problem and as long as the Feds show they are serious about rampant crypto theft, then it should keep the crypto markets in check.

This is an unmitigated win for crypto and the security of it.

The playbook for crypto traders and investors should be to move to higher ground and only buy and sell on the biggest and best exchanges.

Some of the exchanges I might recommend are Coinbase, Kraken, Binance, Robinhood and Webull.

I probably wouldn’t deviate too much from these strong American exchanges that have the rubber stamp of approval from the overall consensus.

Caveat Emptor!

Quote of the Day - February 10, 2022

Bitcoin Letter

“Intelligence is the source of technology. If we can use technology to improve intelligence, that closes the loop and potentially creates a positive feedback cycle.” – Said American Writer Eliezer Yudkowsky

Trade Alert - (TLT) February 10, 2022 -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

February 10, 2022

Diary, Newsletter, Summary

Global Market Comments
February 10, 2022
Fiat Lux

Featured Trades:

(THEY’RE NOT MAKING AMERICANS ANYMORE)

They're Not Making Americans Anymore

Diary, Newsletter, Research

You can count on a bear market hitting some time in 2038, one falling by at least 25%.

Worse, there is almost a guarantee that a financial crisis, severe bear market, and possibly another Great Depression will take place no later than 2058 that would take the major indexes down by 50% or more.

No, I have not taken to using an Ouija board, reading tea leaves, nor examine animal entrails in order to predict the future. It’s much easier than that.

I simply read the data just released from the National Center for Health Statistics, a subsidiary of the federal Centers for Disease Control and Prevention (click here for their link).

The government agency reported that the US birth rate fell to a new all-time low for the third year in a row, to 11.99 births per 1,000 women of child bearing age. A birth rate of 12.5 per 1,000 is necessary for a population to break even. The absolute number of births is the lowest since 1987. In 2017, women had 500,000 fewer babies than in 2007.

These are the lowest number since WWII when 17 million men were away in the military, a crucial part of the equation.

Babies grow up, at least most of them. In 20 years, they become consumers, earning wages, buying things, paying taxes, and generally contributing to economic growth.

In 45 years, they do so quite substantially, becoming the major drivers of the economy. When these numbers fall, recessions and bear markets occur with absolute certainty.

You have long heard me talk about the coming “Golden Age” of the 2020s. That’s when a two-decade-long demographic tailwind ensues because the number of “peak spenders’ in the economy starts to balloon to generational highs. The last time this happened during the 1980s and 1990s, stocks rose 20-fold.

Right now, we are just coming out of two decades of demographic headwind when the number of big spenders in the economy reached a low ebb. This was the cause of the Great Recession, the stock market crash and the anemic 2% annual growth since then.

The reasons for the maternity ward slowdown are many. The great recession certainly blew a hole in the family plans of many Millennials. Falling incomes always lead to lower birth rates, with many Millennial couples delaying children by five years or more. Millennial mothers are now having children later than at any time in history.

Burgeoning student debt, which just topped $1.5 trillion, is another. Many prospective mothers would rather get out from under substantial debt before they add to the population.

The rising education of women is another drag on childbearing and is a global trend. When spouses become serious wage earners, families inevitably shrink. Husbands would rather take the money and improve their lifestyles than have more kids to feed.

Women are also delaying having children to postpone the “pay gaps” that always kick in after they take maternity leave. Many are pegging income targets before they entertain starting families.

As a result of these trends, one in five children last year were born to women over the age of 35, a new high.

This is how Latin Americans moved from eight to two-child families in only one generation. The same is about to take place in Africa, where standards of living are rising rapidly, thanks to the eradication of several serious diseases.

The sharpest falls in the US have been with minorities. Since 2017, the birthrates for Hispanics has dropped by 27% from a very high level, African Americans 11%, whites 5%, and Asian 4%.

Europe has long had the same problem with plunging growth rates but only much worse. Historically, the US has made up for the shortfall with immigration, but that is now falling, thanks to the current administration policies. Restricting immigration now is a guaranty of slowing economic growth in the future. It’s just a numbers game.

So watch that growth rate. When it starts to tick up again, it’s time to buy….in about 20 years. I’ll be there to remind you with this newsletter.

As for me, I’ve been doing my part. I have five kids aged 15-36, and my life is only half over.

Where did you say they keep the Pampers?

I'm Doing My Part

February 9, 2022

Tech Letter

Mad Hedge Technology Letter
February 9, 2022
Fiat Lux

Featured Trade:

(THE TELEHEALTH TRADE GETS CROWDED)
(TDOC), (AMZN)

The Telehealth Trade Gets Crowded

Tech Letter

The last thing anyone should do with their money now — invest in telehealth provider Teladoc (TDOC).

Infringing on Amazon’s (AMZN) moat is equal to a death sentence and TDOC will soon understand how punishing it can be competing with a monopolistic oligarch.

Amazon just announced that Amazon care is now available all over America.

This service offers both virtual care and in-person services.

The Amazon Care model is desperately needed in a country where pharma has gouged the average citizen.

This much-needed health solution from the ecommerce juggernaut is to address shortfalls in current offerings for healthcare and has TDOC squarely in their crosshairs.

The in-person services are rolling out in more than 20 new cities this year and that’s just not the end of it — Amazon says the expansion comes as it continues to invest in growing its clinical care team and its in-person care services.

Remember that TDOC rode the momentum of the hard lockdowns to become one of the few pandemic tech darlings of 2020.

Fast forward to post-2020, TDOCs stock price is down by more than 70% over the past 12 months, and I hope that readers didn’t buy it at the peak!

Obviously, the telehealth company's rising sales serve as a bright spot, but sadly, the company is a one-trick pony like Facebook.

The one-trick ponies of the world are now receiving a discount when they used to receive a premium on their stock price.

The synergies of multi-industry tech firms are evident as shifting resources is way easier to do than hiring from scratch in a tight labor market.

Granted, TDOCs numbers stand up quite nicely for now, in the third quarter, its revenue grew by 81% year over year to $522 million, and investors are likely to see more big growth when it reports on Q4 in February.

In 2020, its total membership topped 73 million people, for whom it facilitated a total of 10.6 million telehealth visits throughout the year.

However, we don’t operate in a vacuum and one’s competitive advantage can be lost in a blink of an eye.

The reality is that incremental growth will never return to its early pandemic pace when millions of people were seeking ways to get medical assistance without going to doctors' offices.

Teladoc is loss-making and margins are getting worse.

When we add AMZN into the mix, margins will most likely get squeezed more and expenses balloon further which is never a great marriage.

Next, insurmountable challenges could be around the corner and TDOC might be in front store window for a bigger company to purchase.

TODCs management is planning to increase its average annual revenue per subscriber by as much as 25% by offering a wider range of services, potentially including remote monitoring of a patient's medical sensors.

But the question is how much of that proposed 25% will be eaten by AMZN with its brand name and army of talented employees?

In addition, TDOC's costs of providing service are dropping, albeit slowly, but I would argue that AMZN can scale better than anyone in corporate America.

Over the past three years, Teladoc's cost of goods sold has fallen as a percentage of its revenue, and its quarterly gross profits have risen by 320%, but profitability is still years off.

If this becomes a battle between two loss-making telehealth companies that are burning cash, AMZN is really the last company I would want to try my luck out against.

This year will be the year where TDOC either sinks or swims and if it sinks, we will all know why.

Avoid TDOC for now.