Mad Hedge Biotech and Healthcare Letter
September 4, 2025
Fiat Lux
Featured Trade:
(SHEAR GENIUS)
(INCY), (NVS), (SNY), (MRK)
My barber Charlie has this uncanny ability to diagnose which of his clients are making money in the market just by watching how they tip.
Last Thursday, while he was working his magic on what's left of my hairline, he mentioned how his pharmaceutical rep clients have been tipping like oil sheiks lately.
"Something big is brewing in biotech," he said. That conversation got me thinking about Incyte Corporation (INCY).
You see, Charlie's pharmaceutical reps understand something most Wall Street analysts miss most of the time, and that’s the difference between flashy breakthrough drugs that grab headlines and the workhorses that generate consistent cash flow quarter after quarter.
Incyte falls squarely into that second category, except their "workhorse" just delivered Q2 2025 numbers that would make a racehorse jealous.
Digging deeper, I found where things get exciting, and why my neighbor's dermatologist probably drives a Porsche.
Incyte's Opzelura cream isn't just another skincare product - it's the first and only FDA-approved treatment for vitiligo in the United States. Think about that for a moment.
When you own the sole solution to a visible medical condition that affects millions, you've essentially discovered a legal monopoly that patients will pay for without batting an eye.
Revenue from this little tube of magic hit $164.5 million in Q2, climbing 38.6% quarter-over-quarter and 35.2% year-over-year.
But the real treasure lies in their emerging drug Niktimvo, which just posted sales of $36.2 million with a staggering 166% quarterly growth.
Meanwhile, the clinical data backing this drug shows 86% of patients with essential thrombocythemia achieving normalized blood counts.
For a condition affecting roughly 60,000 Americans, those efficacy rates suggest Incyte has another blockbuster hiding behind the boring medical terminology.
More impressively, the financial architecture of this company reads like a masterclass in pharmaceutical economics.
Their gross margin expanded to 55.9% while operating income margin hit 25.6%, a three-year high. On top of that, their total debt sits at just $42.4 million against EBITDA of $334.5 million.
That debt-to-EBITDA ratio of 0.04x is like having a mortgage payment of fifty bucks on a million-dollar mansion.
Now here's where Wall Street's myopia creates opportunity.
Everyone obsesses over Jakafi's patent cliff coming in 2028, treating it like some inevitable catastrophe. What they're missing is the patent protection story that extends well beyond that timeline.
Opzelura's patents don't expire until 2040, essentially giving Incyte a guaranteed revenue stream for the next 15 years.
The May settlement with Novartis (NVS) also cut their royalty payments in half, dropping cost of goods sold guidance to just 8-9% of revenues.
Every percentage point of margin expansion in a billion-dollar revenue company translates to serious money hitting shareholders' pockets.
The acquisition angle makes this story even more compelling.
Remember when Sanofi (SNY) swooped in and bought Blueprint Medicines for $9.5 billion in June?
Incyte trades at 13.8x forward earnings, roughly 24% below the sector median, with minimal debt, growing cash flows, and a diversified pipeline that includes povorcitinib and INCB123667.
They're essentially gift-wrapped for a strategic buyer. Those November 2024 rumors about Merck (MRK) sniffing around weren't idle gossip - they were reconnaissance missions.
What really seals this investment thesis is the momentum building behind their numbers.
Non-GAAP earnings per share hit $1.57, beating expectations by a nickel, while management raised Jakafi guidance from $2.95-3 billion to $3-3.05 billion for 2025.
The beauty of Incyte's transformation reminds me of watching a small-town hardware store evolve into a regional empire. They're systematically building a franchise that compounds value over time.
Trading at $84.61 with multiple growth catalysts, patent protection extending into the 2040s, and a strong balance sheet, this represents exactly the kind of overlooked opportunity that creates generational wealth.
My barber may think he's just cutting hair and making conversation, but his pharmaceutical rep theory just validated what decades of investing has taught me: find companies that solve real problems for real people, then hold on tight.
My next visit to Charlie's chair just might coincide with a very good mood and an even better tip.
Mad Hedge Biotech and Healthcare Letter
June 10, 2025
Fiat Lux
Featured Trade:
(THIS BIOTECH'S OBITUARY WAS PREMATURE)
(AMGN)
Last Tuesday, while stuck in airport security behind a family debating whether insulin syringes count as "liquids," I had an epiphany about Wall Street's chronic inability to see past quarterly earnings reports.
Here was life-saving biotechnology reduced to a TSA checkbox, while across the terminal, CNBC was breathlessly explaining why Amgen's (AMGN) "patent cliff" makes it uninvestable. Sometimes the best opportunities hide in plain sight, disguised as disasters.
That absurd little scene reminded me of another moment burned into my biotech brain: Tokyo, 1970s, a smoky coffee shop. I once watched a businessman inject insulin with the calm precision of someone adjusting their tie.
It wasn’t dramatic. It was routine. And that’s what made it profound.
That image — cutting-edge science seamlessly woven into daily life — stayed with me. It’s also why Amgen, trading around $289, has me as intrigued today as I was back when calculators were a luxury.
Fast-forward to now: Wall Street is acting like Amgen is headed for biotech hospice care. Nearly 30% of its revenue base is tiptoeing toward patent expirations.
Prolia and Xgeva lost exclusivity in February, and biosimilar vultures are already circling. Enbrel, once a $3.3 billion cash cow, just took a 47% haircut on net pricing, dragging sales down 10% year-over-year.
The numbers look brutal…on paper. But investing based on spreadsheets alone is like judging a Michelin meal by the grocery receipt.
Here’s what the Street is missing: Amgen isn’t waiting for a mercy kill. It’s executing what might be biotech’s most impressive strategic pivot since Genentech discovered you could print money with recombinant DNA.
This is where MariTide comes in. Amgen’s obesity moonshot has been generating buzz since its trials started, and it’s starting to prove that it isn’t just another GLP-1 bandwagon play.
MariTide combines GLP-1 agonism with GIP antagonism into a once-monthly shot. This is a dramatic upgrade from Novo Nordisk’s (NVO) blockbuster, Ozempic, which requires weekly injections.
Think of it as rent once a year instead of weekly: same effect, way less hassle. Analysts are quietly penciling in $5 billion in peak sales.
Then there's olpasiran, which is a small interfering RNA therapy targeting lipoprotein(a) — a heart disease culprit with no current treatments. One in five people carry this risk, and olpasiran showed significant efficacy in the New England Journal of Medicine. This could be a multibillion-dollar market, rivaling the $9.3 billion PCSK9 inhibitor space.
And the delicious irony? Amgen’s discounted cash flow suggests the market expects the company to shrink. Negative 0.4% growth is priced in. But even 2.5% annual growth could yield a 27% upside.
Now, its first quarter results tell a different story. Revenue surged 9% to $8.1 billion. Operating margins improved despite brutal pricing pressure. Management projects 2025 revenue of up to $35.7 billion.
That doesn’t sound like a company preparing for its own funeral.
Smart money agrees. Amgen’s $27.8 billion Horizon acquisition brought Tepezza, a $1.9 billion play for Thyroid Eye Disease, into the fold.
Meanwhile, biosimilar Wezlana, aka the first Stelara lookalike with FDA approval, generated $150 million in its first quarter. These aren’t Hail Marys. They’re calculated, long-term bets.
What makes Amgen irresistible is the combo platter: steady cash flow (a healthy 33.3% free cash margin), ongoing shareholder returns, and moonshot optionality in MariTide and olpasiran.
It's the kind of setup that rewards patience, especially when the market is too distracted to notice the obvious.
It brings to mind something my old biochemistry professors used to say: the most elegant solutions often masquerade as problems until their brilliance clicks into place.
Amgen’s strategy, replacing aging blockbusters with next-gen therapies addressing massive unmet needs, is exactly that kind of misjudged genius. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
May 20, 2025
Fiat Lux
Featured Trade:
(HEALTHCARE’S FALLING KNIFE)
(UNH), (CI), (CVS), (LLY), (VRTX), (SGRY), (AAPL), (AMZN)
Mad Hedge Biotech and Healthcare Letter
May 8, 2025
Fiat Lux
Featured Trade:
(A DOUBLE HELIX OF OPPORTUNITY)
(CRSP), (NTLA)
I never fully appreciated the potential of gene therapy until last fall when my college friend Eric called with surprising news. His 14-year-old daughter Sophie, who'd struggled with sickle cell disease her whole life, had undergone treatment with Casgevy, a CRISPR-based gene therapy developed by CRISPR Therapeutics (CRSP) and Vertex (VRTX). Six months later, she hasn't needed a single blood transfusion or hospitalization—a transformative outcome for a girl accustomed to spending more weeks in hospital rooms than classrooms.
"The doctors keep using phrases like 'functionally cured,'" Eric told me. "I just know she's planning her first summer camp experience. That's miracle enough for me."
Eric's story prompted me to dive deeper into gene-editing therapies and the companies working on them. What struck me the most is that despite groundbreaking science, market volatility has created a disconnect between technological progress and stock valuations.
Gene therapy stocks like CRISPR Therapeutics and Intellia Therapeutics (NTLA) had a rocky first quarter of 2025, with shares dropping 2.82% and 24.19%, respectively. The broader market mirrored this instability, with the S&P 500 down nearly 3%. Yet, beneath these headline fluctuations lies an intriguing opportunity for patient long-term investors.
CRISPR is particularly interesting. It's sitting pretty with $1.9 billion in cash and equivalents as of the end of 2024. That's enough runway to keep the scientists doing what they do best for years without financial pressure.
More importantly, they're expecting their flagship product Casgevy to be accretive from late 2025, meaning actual revenue is on the horizon – not just the promise of future miracles.
Casgevy's approval for sickle cell disease and beta-thalassemia underscores CRISPR Therapeutics' tangible progress. With a cost of $2.2 million per patient, the price seems steep until compared against lifetime management costs of these conditions. Additionally, their pipeline extends beyond blood disorders into cardiovascular treatments like CTX-310 and CTX-320. These therapies aim to permanently eliminate the need for daily medications—a seismic shift in a market projected to grow from $156 billion in 2025 to nearly $215 billion by 2034.
CRISPR Therapeutics' strategic advantage is further enhanced by their U.S.-based manufacturing facility, strategically positioned to mitigate risks from reshoring trends and global supply chain disruptions.
On the other hand, Intellia faces a tighter financial outlook. With $861.73 million in cash and equivalents, they project operations funding through the first half of 2027. However, this timeline feels restrictive, especially since their first products aren't anticipated until at least 2027.
Although their financial runway is limited, Intellia's therapeutic breakthroughs still command attention. Their treatments NTLA-2002 for hereditary angioedema and Nex-z for transthyretin amyloidosis have shown extraordinary results. I remember a conversation with a trial participant who shared, "I went from planning my life around my disease to barely remembering I have it." Such transformative experiences underline the real-world potential of Intellia's science.
However, Intellia must dramatically reduce its annual cash burn from $592 million to around $345 million to ensure survival until commercialization. This aggressive belt-tightening could jeopardize their momentum.
Both companies currently trade at attractive valuations given their prospects. CRISPR Therapeutics holds a price-to-book ratio below the sector median, with cash comprising 57% of its market cap. Intellia's cash reserves represent an astounding 94% of its market cap, suggesting significant market undervaluation of its intellectual property and promising pipeline.
For investors able to tolerate short-term volatility, this disconnect offers a potentially lucrative entry point, particularly with CRISPR Therapeutics’ imminent commercial revenue.
As I told Eric, the market currently undervalues these revolutionary companies despite proven science. Eventually, stock prices will reflect this reality. I'm cautiously building positions during these dips, anticipating the long-term transformative impact of these therapies.
Just ask Sophie, who’s packing for summer camp instead of preparing for another hospital stay.
Mad Hedge Biotech and Healthcare Letter
May 6, 2025
Fiat Lux
Featured Trade:
(AN OLD, BORING DOG WITH NEW TRICKS)
(GSK)
GSK (GSK) isn’t the name that makes your inbox light up or your broker call in a frenzy. No breaking news banner, no meme-stock frenzy. Just a 15% YTD climb while the rest of the healthcare sector stayed in bed.
It’s the kind of move that doesn’t come with fanfare — but it does make you sit up and ask, wait a minute, what’s going on here?
I was at a biotech conference in Basel once, back when I was helping Swiss Bank sort out its Japanese equity derivatives book. Sitting across from me was a pharma strategist with a pension for skepticism and a wine list habit to match. We were trading war stories about the market’s favorite pastime: chasing biotech rocket ships.
He shook his head and said, "The flash fades. The cash sticks." I laughed, nodded, and promptly forgot about it. But seeing GSK quietly tack on 15% YTD while the rest of the healthcare sector has been napping? That line just came roaring back.
That stuck with me. GSK — the British pharma mainstay formerly known as GlaxoSmithKline — isn’t anyone’s idea of a moonshot. No one’s quitting their day job because of a GSK short squeeze. But what it lacks in fireworks, it makes up for in fundamentals, and frankly, that’s more useful in a market like this one.
Let’s get right into it: Q1 2025 numbers just dropped, and they did not disappoint. Revenue was up 4% year-over-year, and earnings per share beat analyst expectations by a comfortable 15.6%. Not the kind of thing that gets retail investors frothing, but real, tangible outperformance in a quarter when much of the healthcare sector has been flatlining.
GSK’s guidance for the year calls for 3–5% revenue growth and 6–8% EPS growth. These aren't blockbuster figures, but they’re dependable. And in a year where the S&P 500 has had more mood swings than a caffeinated options trader, boring might just be beautiful.
Now let’s talk valuation. GSK’s forward non-GAAP price-to-earnings ratio is currently sitting at 8.8x. That’s well below its five-year average of 12.3x, which implies around 40% upside if the market decides to re-rate the stock closer to historical norms.
Even if it doesn’t, that low P/E means you’re not paying up for growth that may or may not materialize. You're buying earnings now, and at a discount.
The dividend doesn’t hurt either. At 4.4%, it’s comfortably above the sector median of 1.6%. And this isn’t a fly-by-night payout either. GSK has shelled out dividends for 23 straight years, with a payout ratio of just 19%.
There’s also the buyback angle. Management has approved $1.33 billion in repurchases for Q2 2025, which is roughly 3.4% of the company’s market cap. That’s not nothing, and it signals a level of confidence from inside the house that’s worth noting.
Of course, it’s not all sunshine and roses. GSK expects its long-term revenue growth to slow post-2026, projecting a CAGR of 3.5% through 2031. That’s down from the 7% they’re targeting through 2026.
Some might see that as a red flag. I see it as realism. Pharma is cyclical. Patent cliffs are real. And growth eventually slows — even in biotech land.
But margins tell another story. GSK’s core operating margin hit 33.7% in Q1, already above their 2026 target of 31%. If that holds, or improves, the impact on profit leverage over the next couple of years could be meaningful.
In plain English: they’re squeezing more out of every pound they earn.
On a longer timeline, the math still works. Assuming steady margins and modest revenue expansion, GSK’s forward P/E could drop to 6.7x by 2031. At that level, it’s almost unreasonably cheap for a company still growing, still paying a dividend, and still buying back its own stock.
In the late 1990s, I was running one of the first global hedge funds with exposure to Japanese equity derivatives — a market that made GSK look like a thrill ride. What I learned back then was that patience, paired with a good entry point, often beats flash and momentum.
GSK right now feels a lot like that. Quietly undervalued. Misunderstood. But building.
No one’s getting rich overnight with this stock. But if you get a dip, it’s worth stepping into. Not for drama. Not for headlines. But for the sort of predictable, well-capitalized earnings stream that keeps the portfolio steady when the rest of the market forgets what a balance sheet looks like.
Mad Hedge Biotech and Healthcare Letter
May 1, 2025
Fiat Lux
Featured Trade:
(TELEHEALTH'S NEW WEIGHT CLASS)
(HIMS), (NVO)
