Mad Hedge Biotech & Healthcare Letter
June 18, 2020
Fiat Lux
Featured Trade:
(ABBVIE JOINS THE CORONA FRAY),
(ABBV), (REGN), (LLY), (GMAB), (RHHBY), (AMGN), (JNJ), (NVS), (GSK), (MRK), (AZN), (SNY), (AGN), (PFE)
Although late to the party, giant biopharmaceutical company AbbVie (ABBV) is now going all-out on its coronavirus disease (COVID-19) treatment program.
The Illinois-based company, which has a market capitalization of $162.95 billion, aims to come up with a treatment that can block the SARS-CoV-2 coronavirus that causes COVID-19. The drug is currently dubbed 47D11.
AbbVie is working on this cure alongside Netherlands’ Erasmus Medical Center and Utrecht University as well as China’s bio-therapeutics developer Harbour BioMed.
It’s worth noting that AbbVie isn’t the first company to use this approach.
Earlier this year, Regeneron (REGN) announced a similar strategy to beat COVID-19. Its experimental cure, called REGN-COV2, is an antibody cocktail composed of two to three proteins working together to fight off the virus. The company plans to start clinical trials sometime this month.
Aside from AbbVie and Regeneron, Eli Lilly (LLY) is also utilizing the same technology.
In fact, the Indiana-based biotechnology leader already started dosing actual patients with COVID-19 with its experimental treatment, LY-CoV555.
Eli Lilly’s drug was actually developed using the antibodies collected from one of the first patients in the US to recover from the disease.
Using the same approach to find a COVID-19 cure isn’t the only thing Regeneron and AbbVie have in common, though.
To bulk up its oncology pipeline, AbbVie forged a partnership with Danish biotechnology company Genmab (GMAB) earlier this month.
Interestingly, Genmab is the same company behind the clinical progress of the bispecific antibody treatments of both Regeneron and Roche Holding (RHHBY).
AbbVie and Genmab agreed to collaborate on bispecific antibody development to come up with treatments that can target cancer cells and strengthen immune cells. The three drugs included in the deal are epcoritamab (DuoBody-CD3xCD20), DuoHexaBody-CD37, and DuoBody-CD3x5T4.
Aside from the three candidates already lined up, the two companies are also ironing out details on four additional cancer treatments.
The deal is estimated to be worth almost $4 billion, with AbbVie paying $750 million upfront.
On top of that, Genmab will also be entitled to get potential payments of up to $3.15 billion in milestone payments. The four potential cancer treatments could also entitle Genmab with an additional $2 billion.
Since bispecific antibodies are hailed as the “next-generation cancer therapy,” this market continues to attract big names in the industry.
So far, the list of companies working on bispecific antibodies includes Amgen (AMGN), Johnson & Johnson (JNJ), Novartis (NVS), GlaxoSmithKline (GSK), Merck (MRK), AstraZeneca (AZN), and Sanofi (SNY).
Aside from improving its oncology lineup, Abbvie has shown more creativity in diversifying its products.
Throughout the years, AbbVie had been considered as a strictly pharmaceutical company in the past. However, its recent purchase of Allergan set off a series of decisions that showcased the company’s plan to expand its portfolio.
With AbbVie’s revenue reaching $33.3 billion in 2019, several experts disagreed with the company’s decision to buy Allergan (AGN).
However, the move is estimated to add roughly $50 billion to the company’s annual revenue and help AbbVie’s bottom line.
One of the biggest products added to AbbVie’s portfolio is Botox, which has been long-regarded as Allergan’s prized cash cow.
In fact, this widely popular injectible raked in $1.02 billion in sales for Allergan in the fourth quarter of 2019 alone. Another promising product is the dermal filler Juvederm, which brought in $347.3 million in the same period.
Despite the excitement from the newly formed partnerships, a lot of investors remain apprehensive over AbbVie’s future.
These fears are rooted in the doomsday countdown for the company’s blockbuster rheumatoid arthritis drug Humira — and for good reason.
In its 2020 first quarter report, AbbVie recorded $8.6 billion in revenue, indicating a 10.1% jump year over year.
From this, Humira contributed nearly 58% despite the growing number of biosimilar rivals in Europe. In fact, Humira sales reached $4.7 billion, showing a 14.5% climb from the same period last year.
In 2019, experts predicted that Humira is poised to overtake Pfizer’s (PFE) Lipitor as the top-selling drug of all time by 2024.
AbbVie’s rheumatoid arthritis drug is estimated to reach a whopping $240 billion in sales in the next four years.
As expected, biosimilar competition, led by Amgen, has been licking their chops to get a piece of the action for years now, and they would do everything to dethrone AbbVie from its top spot in the autoimmune diseases sector.
Hence, AbbVie implemented two strategies to address this issue.
The first is forestalling the inevitable. In a recent court victory, AbbVie secured patent exclusivity for Humira until 2023.
Although this only leaves AbbVie with three short years to deal with the problem, it’s sufficient period for the company to execute its second plan: “Humira on steroids.”
Since Humira’s patent exclusivity has been a sore issue for AbbVie for years, the company decided to solve it by creating a stronger version of the drug.
The new antibody treatment, called ABBV-3373, is said to be more effective than Humira.
If all goes well in its clinical trials, then this “new Humira” can very well be AbbVie’s next megablockbuster and main moneymaker after 2023.
Humira isn’t the only big seller in AbbVie’s lineup.
Other blockbusters include cancer drug Imbruvica, which recorded $1.2 billion in revenue in the first quarter, up by 20.6% compared to the same period last year. Another cancer drug, Venclexta, is also performing well, bringing in $317 million in net revenue.
AbbVie has been boosting its next-generation treatments as well.
So far, two more Humira-like drugs stand out --severe plaque psoriasis medication Skyrizi and rheumatoid arthritis treatment Rinvoq.
Skyrizi’s annual sales are projected to grow from $1 billion to hit $4.4 billion by 2025, with the numbers going higher than $7.4 billion in the following years.
Rinvoq is expected to bring in $3.7 billion in sales by 2025 and increasing to reach $5.9 billion after that.
Right now, AbbVie appears to be oddly cheap as its shares are trading at only 9 times its expected earnings this year. This is possibly due to the anxiety over the loss of Humira’s patent exclusivity by 2023.
As AbbVie has shown in the past months, it has solid plans on how to deal with the impending loss. Its acquisition of Allergan, partnership with Genmab, and development of the “next Humira” all prove that claim.
Mad Hedge Biotech & Healthcare Letter
June 16, 2020
Fiat Lux
Featured Trade:
(THE ONE BRIGHT STAR IN THE HEALTHCARE INDUSTRY),
(ANTM), (TDOC), (CVS), (HUM), (CNC), (UNH)
The COVID-19 crisis has yanked the rug from under companies across all industries, and among the businesses that experienced a completely altered landscape these days is the health insurance industry. Imagine a business where sales increase fourfold overnight, but the customers can’t pay.
With the unemployment rate rising to historic levels since the pandemic hit, more people are dropping off commercial coverage rolls. Visits to the doctors and other elective procedures have been postponed indefinitely. Even political talks on healthcare reforms appear to be tabled until 2021.
Overnight, some doctors at country hospitals have seen workloads double and the suicide rate soar, while those in private practice are essentially unemployed.
While healthcare stocks are understandably struggling to survive, there are standouts that managed to take the blow without crumbling to ruins.
One of them is Anthem (ANTM).
With a market capitalization of $75.78 billion, Anthem is one of the biggest health insurers in the United States today.
Recently, the company wielded its power to offer $2.5 billion worth of premium credits as a form of financial assistance to its members during the pandemic.
This comes in the form of cost-share waivers, extensions for their virtual care coverage, and even assistance for struggling employers to help in maintaining the healthcare of their own employees.
While a lot of companies have been rapidly downgrading 2020 guidance due to the pandemic, Anthem updated its 2020 forecasts to reflect an increase in its adjusted net income from $19.44 per share to an eye-popping $22.30.
This indicates that Anthem has extra bandwidth for growth primarily thanks to its stable revenue stream, increasing membership, and solid earnings.
In its first quarter report for 2020, Anthem’s operating revenues jumped by 20.7% year over year to reach $29.4 billion, with profits from its IngenioRx launch.
As for its net income in the said period, Anthem raked in $1.52 billion or roughly $5.94 per share compared to $5.91 per share in 2019.
Anthem even increased its dividend by 19% in January.
However, it’s Anthem’s cash flow that continues to impress. From 2019 up until the first quarter of this year, Anthem’s cash flow surged by 58% year over year.
One of the main factors that boost the growth of a health insurance company is membership, and Anthem managed to tick off that box as well in the first quarter.
Anthem’s medical enrollment climbed to 42.1 million members, showing off a 3.2% increase year over year. With backing from government business enrollment as well as commercial and specialty businesses, this number is expected to climb higher this year.
Even Anthem’s inorganic growth ventures promise great results, with acquisitions and collaborations continuously boosting the Medicare Advantage growth of the company.
A good example is its acquisition of the Medicaid members in Missouri and Nebraska via WellCare Health at the beginning of 2020. This led to 849,000 lives added to its government business enrollment since 2019.
Meanwhile, its acquisition of AmeriBen added 452,000 members to its commercial and specialty business sector.
Anthem’s takeover of Beacon Health, which is the biggest independent behavioral health firm in the US, serves to further strengthen its position in this sector. This move added roughly 300,000 Medicaid members under Anthem’s coverage.
In terms of adapting to the needs of its members during the pandemic, Anthem is making more aggressive moves to promote its telehealth services.
Although this sector is currently widely associated with Teladoc Health (TDOC), which has a market capitalization of $12.93 billion, the rest of the league is catching up quick.
Since the average cost per telehealth session is roughly $100 less compared to fees paid in visits to the doctor’s office, this is definitely a platform-managed care providers are looking into.
According to Anthem, its telehealth app recorded over 170,000 new downloads since the COVID-19 crisis started.
It also reported a 250% surge in the demand for its virtual care services.
Anthem isn’t the only health insurer joining the telehealth fray. CVS Health (CVS), Humana (HUM), Centene (CNC), and even industry leader UnitedHealth Group (UNH) has been looking into the service.
In this period of uncertainty, choosing a stable company with a robust outlook and sold at a reasonable price is always a wise investment.
With Anthem’s profits projected to grow by roughly 47% over the next years, this company’s future offers security to its investors. Its impressive cash flow also plays a significant role in its higher share valuation.
Mad Hedge Biotech & Healthcare Letter
June 11, 2020
Fiat Lux
Featured Trade:
(THE BIOTECH MERGER BOOM ACCELERATES)
(AZN), (GILD), (BMY), (ABBV), (AGN), (TAK), (CI), (SNY), (JNJ), (UNH), (RHHBY), (LLY)
Nothing can ever be absolutely shocking in the biotechnology and healthcare world.
I’ll admit though that the reports on AstraZeneca’s (AZN) interest in acquiring Gilead Sciences (GILD) surprised me.
The two companies touched base last month on a potential acquisition deal.
If this rumor turns into a reality, then we’re looking at what could be the biggest healthcare deal to date.
That’s saying something considering the massive mergers we’ve seen in the past years.
So far, the biggest biotechnology and healthcare deal is the $87.6 billion acquisition of Celgene (CELG) by Bristol-Myers Squibb (BMY) in 2019.
In the same year, AbbVie (ABBV) acquired Allergan (AGN) for a whopping $83.8 billion, making it the third biggest deal in the healthcare sector to date.
The year 2018 paved the way for two more massive deals in the form of Takeda’s (TAK) $81 billion acquisition of Shire, which ranks fourth overall, and Cigna’s (CI) $68.4 billion deal with Express Scripts (ESRX) in seventh place.
Fifth on the list is by Sanofi’s (SNY) $73.5 billion deal with Aventis in 2004.
Although it has been two decades since it happened, the $72.5 billion merger of Glaxo and SmithKline Beecham in 2000 still counts as one of the biggest deals in the industry. This agreement gave birth to GlaxoSmithKline (GSK).
Prior to Bristol-Myers Squibb and Celgene deal, it was Pfizer’s (PFE) $87.3 billion acquisition of Warner-Lambert in 1999 that topped the list.
AstraZeneca’s current market capitalization is roughly $140 billion. Meanwhile, Gilead Science’s market cap stands at approximately $96 billion.
With all these in mind, the AstraZeneca-Gilead Sciences merger is estimated to reach roughly $250 billion on top of the significant synergies expected throughout the years.
If these two health industry heavyweights merge, then their newly formed company would become the third biggest healthcare company in the world behind Johnson & Johnson (JNJ), which has a market cap of $384.55 billion, and UnitedHealth Group (UNH) with $293.85 billion.
Looking at this potential merger in the context of the coronavirus race, it’s safe to say that the combined efforts of AstraZeneca and Gilead would create a COVID-19 titan.
AstraZeneca’s partnership with the University of Oxford resulted in a COVID-19 vaccine candidate that was recently selected as one of the top five candidates worthy of US government support through Trump’s Operation Warp Speed program.
Meanwhile, Gilead’s antiviral medication Remdesivir has been constantly hailed as the standard of care for COVID-19 treatment since the pandemic broke.
The drug which was previously marketed as an HIV medication is now expected to generate $2 billion in sales as a COVID-19 treatment in 2020 alone.
In 2022, Remdesivir is estimated to rake in roughly $7.7 billion in sales. After that, the antiviral drug is projected to generate annual sales somewhere between $6 billion and $7 billion.
Although everything is hypothetical, let’s take a quick look at where each company stands at the moment outside their COVID-19 efforts.
AstraZeneca has been a consistent strong stock market performer throughout the years.
In the first quarter of 2020, sales improved in practically all of AstraZeneca’s territories. Although it has a diversified portfolio of drugs and a robust pipeline, the company’s hottest segment is its oncology business.
A good example of this is non-small cell lung cancer treatment Tagrisso, which is starting to live up to expectations as the next mega-blockbuster for AstraZeneca.
The cancer drug’s first quarter sales reached an impressive $982 million, showing off a 56% jump year over year.
This is promising considering that its competitors include Roche’s (RHHBY) Tarceva and Eli Lilly’s (LLY) Cyramza.
As for its 2020 revenue forecast, AstraZeneca is reported to rake in $25 billion, from which it will generate approximately $7.5 billion in operating profit.
On the other hand, Gilead also has an impressive portfolio that it can bring to the table.
In the first quarter of 2020, the company earned $5.47 billion in revenue compared to the $5.20 billion it generated in the same period last year.
Despite the decline in its hepatitis products from $790 million in the first quarter of 2019 to $729 in the same period of 2020, Gilead’s HIV line made up for the loss by bringing in over $4 billion in sales compared to the $3.6 billion it earned last year.
Not only that, some of Gilead’s other candidates are exciting.
For example, rheumatoid arthritis drug Filgotinib is expected to become another blockbuster and generate $5 billion in revenue annually.
Meanwhile, the anti-tumor treatment Magrolimab is estimated to rake in $3 billion in peak sales.
With the company’s older drugs still capable of generating strong revenue and its new candidates showing their potential for revenue expansion, Gilead can be assured of a continued cash flow well into the 2030s.
Regardless of whether this rumored mega-merger pushes through, both Gilead and AstraZeneca are attractive stocks worthy of their premium valuations.
Mad Hedge Biotech & Healthcare Letter
June 9, 2020
Fiat Lux
Featured Trade:
(HERE ARE FIVE VACCINE FRONTRUNNERS TO BUY NOW)
(MRNA), (AZN), (JNJ), (MRK), (PFE), (GSK), (SNY), (NVAX), (INO), (MYL)
Among hundreds of companies working on a coronavirus disease (COVID-19) vaccine, the US Government has picked five companies as the most likely candidates to develop the much-needed immunization shot soon.
This is a part of a process that usually takes years and even decades to complete. The goal is to have a COVID-19 vaccine available for Americans by January 2021.
The decision to winnow the field even before final results are out is the administration’s way of focusing its energy and resources on the most promising vaccine candidates, thereby coming up with a solution faster.
Four of the five companies are based in the United States and one is from the United Kingdom.
The list includes Massachusetts-based biotechnology firm Moderna (MRNA), which has a market capitalization of $22.63 billion.
It also features biotechnology and healthcare giants Johnson & Johnson (JNJ), with its $388.08 billion market cap; Merck & Co. (MRK), which has $207.63 billion in market cap, and Pfizer (PFE), with a market cap of $199.92 billion.
Cambridge-based pharmaceutical and biopharmaceutical company AstraZeneca rounds up the list.
Both Moderna and AstraZeneca are already in Phase 2 trials, which means the companies are testing their candidates on human subjects.
Looking at their timeline, the two would most likely move forward to Phase 3, which involves large-scale human trials, in July.
The Phase 3 trials will require roughly 30,000 participants for each vaccine candidate. If all five vaccine candidates reach Phase 3, then that means 150,000 people will be asked to participate as test subjects.
What we do know so far is that the agreements involve commitments from the biotechnology companies regarding intellectual property, the number of doses expected, and the estimated price limits.
Here’s a brief background of the top five companies under Trump’s COVID-19 vaccine radar today.
Moderna (MRNA)
Moderna’s vaccine, called mRNA1273, is undergoing Phase 2 trials. When news broke about Moderna’s progress with the COVID-19 vaccine, shares of the company exploded by more than 200% year-to-date.
For its Phase 2 trial, Moderna seeks to enroll 600 healthy individuals to test mRNA-1273 administered 28 days apart.
Throughout the COVID-19 crisis, Moderna has been a clear favorite of NIH’s Dr. Anthony Fauci.
He called the vaccine “quite promising” and described the results of the Phase 1 study to be “better than we thought.” What we know about the vaccine is that it can “neutralize” the virus in patients.
In terms of its release, Moderna is projected to deploy mRNA-1273 by the end of 2020.
AstraZeneca (AZN)
AstraZeneca joined forces with Oxford University to develop AZD1222, which is now undergoing clinical trials in many sites in the UK.
Although the two have yet to complete its trials, AstraZeneca already agreed to supply 400 million vaccine doses to both the US and the UK in May.
Earlier this month, the company again completed a $750 million agreement with the Coalition for Epidemic Preparedness Innovations (CEPI), Gavi the Vaccine Alliance, and the Serum Institute of India (SII) to provide 1 billion vaccine doses to low and middle-income patients.
Johnson & Johnson (JNJ)
Johnson & Johnson aims to begin its Phase 1 clinical trial by September, with the ultimate goal to supply over 1 billion doses of COVID-19 vaccine across the globe.
Although Moderna and AstraZeneca are ahead in terms of vaccine development, JNJ has been impressing investors with its efforts outside COVID-19.
In the first quarter of 2020, the healthcare giant showed off a 3.3% year-over-year jump in its sales and a 54.6% increase in its net earnings.
The revenue of its pharmaceutical division rose by 8.7% while its health division saw a 9.2% increase.
Dubbed as the “Dividend King” in the industry, JNJ stayed true to its title as it continues its 58-year streak of raising its quarterly dividend.
Reports show that the company raised its quarterly dividend by 6.3% to reach $1.01 per share, reaping a solid yield of 2.73%.
Regardless of its performance in the vaccine race, JNJ has proven its resilience not only in the COVID-19 crisis but also in past crises like the dot-com bubble and the collapse of the housing market.
Merck (MRK)
Merck’s strategy is to build on the technology of its successful Ebola vaccine and establish partnerships with non-profit research groups.
Like JNJ, Merck is also a stable dividend stock that investors can buy and hold for years. In the past 10 years, this biotechnology leader has posted a profit, even managing to hit double-digits the majority of the time.
This is a trend Merck once again showcased in the first quarter of 2020.
In its latest report, the company showed off $3.2 billion in profit in sales worth $12.1 billion — demonstrating a decent profit margin of 27%.
Sales increased by 11% year over year, with cancer drug Keytruda heading the charge with its 45% revenue growth from the same period in 2019.
Pfizer (PFE)
Pfizer has been collaborating with German drugmaker BioNTech (BNTX) to develop BNT162.
The pharma giant is expected to have the vaccine candidate ready by October this year and be able to produce “hundreds of millions” of COVID-19 doses by 2021.
Although Pfizer and BioNTech joined the race later than Moderna, the big healthcare company’s edge is that it’s actually working on four vaccines simultaneously.
Simply put, this strategy offers them more than a single change of winning.
Along with the other three big biotechnology companies, Pfizer is a safe bet for those looking to invest in cutting-edge vaccine efforts but don’t feel comfortable risking it with a clinical-stage firm.
Like JNJ and Merck, Pfizer’s vaccine work sounds promising, but even if its COVID-19 program falters, the healthcare giant can still make a strong case as an excellent investment.
In its first-quarter report for 2020, Pfizer’s biopharma arm indicated an 11% jump, thanks to top performers like blood clot treatment Eliquis whose sales climbed by 29% to reach $1.3 billion.
Breast cancer medication Ibrance also contributed $1.2 billion, showing off a 10% year-over-year growth while Xtandi sales increased by 25% year over year to record $209 million.
Aside from these, Pfizer is hard at work in spinning off its Upjohn unit to combine with Mylan (MYL). This deal will guarantee Pfizer shareholders with 57% share of the new company called Viatris.
Just a few weeks ago, Trump compared Operation Warp Speed to the Manhattan Project, which was a government-initiated program that led to the development of nuclear weapons in World War II.
However, critics say that the “Skunk Works” initiative in California is a more fitting comparison for this COVID-19 effort. That is, the government could simply be wasting its resources on candidates that might never be able to leave the design stage.
Regardless of where you stand on Trump’s Operation Warp Speed, the fact remains that countless biotechnology and healthcare companies — big and small — are working on a COVID-19 vaccine.
Outside the five companies chosen by the Trump administration, the list of strong contenders includes GlaxoSmithKline (GSK) and Sanofi (SNY).
Even smaller biotechnology companies like Inovio (INO) and Novavax (NVAX) are going all out on this.
Of course, it would also be foolish to completely disregard CanSino Biologics, which has been giving Moderna a run for its money since Day 1.
Despite not making the cut, these biotechnology and healthcare companies are still in hot pursuit and it’s still very much a neck-to-neck race.
Mad Hedge Biotech & Healthcare Letter
June 4, 2020
Fiat Lux
Featured Trade:
(MERCK’S BIG COVID-19 EXPANSION)
(MRK), (PFE), (GSK), (AZN), (MRNA)
Leading biotechnology and healthcare giant Merck (MRK), with a market capitalization of $203.75 billion, has been a low-key player during the pandemic.
Now, it finally reveals its grand plans via three major initiatives that aim to create a vaccine and design a novel antiviral against the coronavirus disease (COVID-19).
While Merck has been slow to take part in the COVID-19 war, it’s definitely making up for the lost time by announcing a promising acquisition and two collaborative projects in the works.
The first of the three deals is Merck’s acquisition of Vienna-based biotechnology company called Themis Bioscience. This small-cap biotech develops a range of vaccines and other therapies for infectious diseases.
One of Themis Bioscience’s pipeline candidates is a COVID-19 vaccine, which is a collaborative effort with the Institut Pasteur. Another promising candidate in Themis Bioscience’s pipeline is its late-stage work on a Chikungunya.
Through the acquisition, Merck will be able to access these works and hasten the development of the vaccine.
The second deal is Merck’s collaboration with a nonprofit scientific research group called International AIDS Vaccine Initiative (IAVI). This partnership aims to create a COVID-19 vaccine as well.
This will be a powerful collaboration since IAVI also received $38 million in funding from the US Health Department’s Biomedical Advanced Research and Development Authority (BARDA) to help them with their vaccine development initiatives.
Apart from IAVI, BARDA also awarded over $2 billion in funding to other vaccine developers like AstraZeneca (AZN), Phlow, and Moderna (MRNA).
Together, IAVI and Merck aim to optimize the latter’s recombinant vesicular stomatitis virus (rVSV) technology which has been used for Merck’s Ebola vaccine called Ervebo.
The third deal is Merck’s partnership with privately held Ridgeback Biotherapeutics, a Miami-based biotechnology company founded in 2018.
The collaboration intends to develop an oral antiviral treatment, dubbed as EIDD-2801, which can be used for COVID-19.
So far, this developmental drug had been proven safe in a trial with healthy volunteers. Clinical testing for COVID-19 patients has already commenced.
Under the terms of the deal, Merck will own exclusive global rights to EIDD-2801.
The giant biopharma will take charge of the clinical development, manufacturing, and regulatory procedures. In exchange, Ridgeback received an undisclosed amount in upfront payment and milestones. The smaller biotechnology company will also be entitled to a share of net proceeds from the COVID-19 treatment.
Prior to these deals, investors have been curious as to why Merck was missing in action amid the government’s “Operation Warp Speed” for COVID-19 treatments and vaccines.
With this triple play, Merck has signaled that it’s also going all-in on this pandemic and will pull out all the stops to be on the same level as the efforts from other major biotechnology and healthcare players like GlaxoSmithKline (GSK), Pfizer (PFE), and AstraZeneca (AZN).
The strategic moves from this healthcare giant clearly underscore the incredible demand for any vaccine that actually survives the R&D gamut, as every nation across the globe frantically looks for a vaccine to boost their people’s immunity.
While companies such as CanSino (HKG:6185) and Moderna go neck to neck to take the lead in the clinical race, we all know that two companies cannot handle the production of a vaccine for the entire world -- offering Merck a slot at a place in these chosen group of companies.
Outside its COVID-19 efforts, Merck recently chalked up another win for its blockbuster melanoma drug Keytruda. This time, the top-selling medication expanded its use to advanced colon cancers.
Based on key findings, Keytruda lowered the risk of the disease’s progression or even death by 40% compared to chemotherapy.
Results show that the tumors of patients given Keytruda did not grow for 16.5 months. In comparison, chemotherapy patients experienced tumor growth in 8.2 months.
Even prior to the expansion of its indications, Keytruda sales have continued to make headway.
In the first quarter of 2020, sales of this cancer drug reached $3.3 billion, showing off a whopping 45% year-over-year jump.
With this new addition to Keytruda’s indications, sales of this drug is expected to climb even higher this year.
Apart from that, Merck’s HPV vaccines, called Gardasil and Gardasil 9, performed well in the first quarter as well as sales of both HPV vaccines increased by 31% to reach $1.1 billion.
Another strategic effort for Merck is delving into drug development focused on neurodegenerative diseases like Alzheimer’s, Parkinson’s, and Huntington’s disease.
This initiative was kicked off by Merck’s move to buy a GSK startup, called Calporta Therapeutics, for $576 million in 2019.
It was followed by forging a two-year partnership with Almac Discovery this year. Apart from neuro-related diseases, the two companies are looking into developing therapies for cancer and viral diseases as well.
To further boost its pipeline, Merck completed a deal with Taiho Pharmaceuticals and Astex Pharmaceuticals worth $50 million in upfront payment plus incentive payments of up to $2.5 billion.
The company is also working on spinning off its "Women's Health, Trusted Legacy Brands, and Biosimilars” products into a brand new company with a focus on oncology and vaccines as well as animal health. If things go smoothly, the spinoff should be done by the first half of 2021.
Overall, Merck has proven itself as a stable dividend stock that investors can simply buy and hold for years.
The biotechnology company has managed to post a profit every year for the past decade, actually hitting double-digits most of the time within that period.
This is a trend observed in Merck’s first quarter report as well. The company posted $3.2 billion in profit on sales worth $12.1 billion. This represents a respectable 27% profit margin.
