Mad Hedge Biotech and Healthcare Letter
August 9, 2022
Fiat Lux
Featured Trade:
(A REVIVED BIOTECH GAINING MOMENTUM)
(AMGN), (SEGN), (MRK), (REGN), (GILD), (CCX), (BMY)
Biotechnology stocks have been rallying since mid-June, and it looks like the sector doesn’t have plans of stopping anytime soon.
The SPDR S&P Biotech ETF (XBI), which keeps track of the segment, has been up by 32.5% since the second half of 2022—a period that saw the S&P 500 rise by only 11.4%.
Nonetheless, doubts still linger in terms of how long this sector’s bull run will last. There are also questions on whether the recent shift in market sentiment indicates a substantive change or merely a momentary blip.
News about the biotech industry has been leaning towards the positive in the past months, and hopes for its recovery were bolstered by the much-discussed potential acquisition of Seagen (SEGN) by Merck (MRK).
The strong earnings reports of Regeneron (REGN) and Gilead Sciences (GILD) also added to the overall positivity of the sector.
Meanwhile, another big mover in the biotechnology world appears to be gearing up for a major move soon.
Amgen (AMGN) recently announced its plans to acquire ChemoCentryx (CCXI) for $3.7 billion.
This all-cash acquisition works out to roughly $52 per share and a whopping 115% premium to ChemoCentryx’s price.
ChemoCentryx is mostly known for its autoimmune disorder pipeline. In 2021, the company received FDA approval for Tavneos, which targets a relatively rare autoimmune condition called ANCA-associated vasculitis.
In the first quarter of 2022, Tavneos delivered $5.4 million in sales.
The announcement boosted ChemoCentryx’s shares to skyrocket by 108.4% while Amgen shares remained flat. However, this jump isn’t all too surprising.
The company getting acquired records a jump in stock price after the announcement because the acquirer typically pays a premium for the deal. It’s a strategic move since the higher the premium, the better the chances that the shareholders will approve the acquisition.
If all goes well, this acquisition is expected to be completed by the fourth quarter of 2022.
This move is a good indicator of Amgen’s response to its problem of stagnation. Over the years, this biotech giant has been seemingly left behind in churning out innovative treatments.
Pursuing a promising company like ChemoCentryx is an excellent way to diversify its pipeline and reignite growth.
The deal is especially promising in light of the company’s major setback in 2020 when the Phase 3 clinical trial for its heart failure drug fell short of delivering the promised results.
While issues with new products aren’t exactly new, particularly in the biotechnology sector, Amgen’s failure made investors skittish and led to selloffs.
However, Amgen was not deterred. After all, the setback came following decade-long progress leading up to 2020 when the company’s revenues steadily rose from $15 billion to $23 billion.
In the end, Amgen was still able to surpass its projected revenue to hit the $25 billion mark in 2020 thanks to its strategic move to acquire Otezla from Bristol Myers Squibb (BMY).
By 2021, Amgen shared that its 2020 results were up 9%. Last year, the company ignited some momentum and managed to raise its earnings from the year before to $26.2 billion.
Despite these efforts, the company still struggled with organic growth. This is perhaps why it has been aggressive in pursuing multiple revenue streams via M&A to find more ways for multiple expansions.
Part of this plan is the 2021 acquisition of Five Prime Therapeutics for $1.9 billion and Teneobio for $900 million.
Given the deals last year, investors didn’t truly expect Amgen to deliver more growth in 2022. This is possibly why the company’s shareholders were a bit surprised by the new acquisition.
However, this deal with ChemoCentryx will grant Amgen access to a slew of orally administered treatments not only for autoimmune diseases and inflammatory conditions but also for cancer.
Realistically, Amgen’s near-term outlook is not that groundbreaking. However, the overall valuation and potential of its M&A dealmaking are compelling enough to encourage investors patient enough to wait for the rewards in the long run.
Mad Hedge Bitcoin Letter
August 9, 2022
Fiat Lux
Featured Trade:
(CRYPTO KEYS 101)
(BTC), (ETH)
Cryptography transcends use cases from intelligence agencies — military writing — decoding confidential text messages.
Public and private keys are an important part of Bitcoin (BTC) and other cryptocurrencies.
They allow you to send and receive cryptocurrency without requiring a third party to verify the transactions.
The basic concept behind the two-key system is the following:
- the public key allows you to receive transactions, while the private key is necessary to send transactions.
- Using two different keys (a public and a private key) is called asymmetric cryptography.
What Is a Public Key?
A public key allows you to receive cryptocurrency transactions.
It’s a cryptographic code that’s connected to a private key.
While anyone can send transactions to the public key, one needs the private key to “unlock” it and prove ownership of the cryptocurrency received in the transaction.
Therefore, freely sharing a public key is without risk.
While anyone can send the public key safely, someone would need the private key to unlock and access these sent funds.
What Is a Private Key?
A private key offers the ability to prove ownership or spend the funds associated with a public address. A private key is unique and can take many forms:
- 256 character long binary code
- 64-digit hexadecimal code
- QR code
- Mnemonic phrase
What Does It Mean to “Digitally Sign” a Transaction?
For a transaction on the blockchain to be complete, it needs to be signed. The steps for someone to send a transaction are:
- A transaction is encrypted using a public key. The transaction can only be decrypted by the corresponding private key.
- The transaction is signed using the private key confirming the transaction hasn’t been modified.
- The digital signature is generated by combining the private key with the data being sent in the transaction.
- Lastly, the transaction is verified as authentic using the accompanying public key.
Digitally signing a transaction means to prove the owner of the sent funds. Nodes check and authenticate transactions automatically. Any unauthenticated transactions get rejected by the network.
Where Are My “Private Keys?”
Private keys are in a cryptocurrency wallet, which is usually on a smartphone, desktop software, or a specialized hardware device.
Private keys are not on the cryptocurrency blockchain network.
If crypto assets are held on an exchange, then the exchange is the custodian of these private keys.
How public and private keys work together is essential to understanding how cryptocurrency transacts.
Buying crypto is effectively owning a private key that proves ownership of that cryptocurrency.
Since the record is stored on the blockchain, anyone can verify the individual as the owner with a specific public key.
Just remember that deferring to crypto exchange to hold a private key means a crypt holder trusts them with the security of protecting their crypto assets.
There is always the choice of taking custody of one’s own crypto in a hot or cold wallet.
Depending on the degree of comfort, philosophy, risk-tolerance, and amount, readers can make that decision for themselves.
Private keys are something that should never be shared.
And if one eschews their own private wallet for a custodial solution like an exchange, seek out a time-honored, trusted, dealing in large volume, and highly functional exchange instead of a marginal, half-baked exchange.
“If you like gold, there are many reasons you should like bitcoin.” — Said Founder of Gemini Cryptocurrency Exchange Cameron Winklevoss
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
August 9, 2022
Fiat Lux
Featured Trade:
(THE CROOKS ARE GETTING SMARTER)
(ROM), (THO)
I sent out a trade alert for my Concierge members to buy LEAPS in the ProShares Ultra Technology Fund (ROM) a year ago to catch the yearend rally. Everyone got a great execution except those with a Tastyworks account, which unfortunately got hit with a hack attack that day.
I am passing on their detailed response which could have hit anyone. Unfortunately, the crooks are getting smarter.
“We have had to set a number of symbols to closing trades only due to fraudulent activity that has been taking place in those symbols. The simple answer on why we had to take about 1,500 symbols down only is that the criminals have dialed up their game to a new level.
Let me explain. Back in the day, a criminal would try to gain access to an account by brute force attack, key stroke logging, or buying credentials from other bad actors. They would then go into the account (never accessed by violating our security), liquidate the holdings, and then make losing trades in the compromised account with the winning side being their account at another firm.
It only happened a few times and if I remember correctly, the compromised account contacted us to ask why their account was being liquidated and we were able to stop the action.
Fast forward to today.
They have moved to a new level and that is identity theft. I have talked to friends at other firms, and they have all confirmed that they have seen the same action. They own someone as they have access to their SSN as well as most of the other information needed to open an account (they pass our security checks).
They also have bank information for the person whose identity they have stolen so they ACH money into tastyworks, wait for the funds to settle, and then gut the account within minutes. Look at how wide these markets are in (THO) for example:
The fraudsters would enter an order in their real account to pay $0.10 for the $110 puts and then put a sell order in the bogus account. Then within seconds, they put a sell order at $3.60 in their account, and in the bogus account they buy back at $3.60.
You can see that they have just cleaned $3,500 per 10 lot in seconds. If they do 100 contracts, that is $35,000, and so on. The problem does not end there.
The exchanges hide behind some horrible rules that say we have 30 min to file an obvious error objection and 60 min for catastrophic error. Clearly, it is basically impossible for us to hit either one of those targets. So, they throw their hands up and say not our issue and when the person who is the subject of the identity theft realizes that they have been attacked, they go to the bank and sign paperwork that allows the bank to pull the fund back with no questions asked.
We are left holding the bag and I could not allow that to continue. So, while we are doing a lot of things on the backend to limit someone’s ability to open a fraudulent account, we have to leave these symbols as closing only and ask you to call our desk 888-247-1963 to place a trade.
Please let us know if you have any further questions or concerns. We can be reached at 1-888-247-1963 or online via chat from 7am-5pm CT Monday-Thursday and 7am-4pm CT on Friday. We appreciate your business and happy trading!”
Regards,
Tastyworks
I am noticing an increasing pattern across many accounts. That’s to the rise of Bitcoin, there has been a huge increase in identity theft through phishing attacks. By simply getting access to your email account, they can obtain all the information they need to open a brokerage account in your name and commit the kind of fraud described above.
I’ll show you an example. I get hit with phishing attacks every day now. Today’s looked like this.
Looks pretty convincing, doesn’t it? Your natural instinct is to log in and see what’s going on, isn’t it? If you do, you just gave hackers your PayPal login ID and password. They can now go into your “my account” section and get all of your personal financial information.
One quick way to see if this request is legit is to hover your cursor over the sender’s address. This is what I found with this email:
Notice that the PayPal name shows up nowhere in this address. In fact, I had the FBI trace this address to a server in Russia where most of these attacks originate (it helps if you know the head of the FBI).
Here’s a better solution. Never respond to any email from a financial institution. If your bank is trying to contact you about an important issue, they will do so through their own internal email system. You can only see this message by first logging into your own personal account.
Here’s another tip.
Never access financial accounts through a free hotel WIFI. They don’t offer security anymore because they kept getting sued by guests who were hacked. If it is an emergency, then access your account only through your cell phone, but only through the cell phone network and not through the hotel WIFI. This provides an extra layer of security….for now.
I hope this helps.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
“Rational people don’t risk what they have and need for what they don’t have and don’t need,” said Oracle of Omaha Warren Buffet.
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