Biotech Letter Archives

The Five Frontrunners in the Race for a COVID-19 VACCINE

Mad Hedge Biotech & Healthcare Letter
April 28, 2020
Fiat Lux

Featured Trade:

(THE FIVE FRONTRUNNERS IN THE RACE FOR A COVID-19 VACCINE)
(GSK), (SNY), (REGN), (TBIO), (VIR)

We’re finally pulling out the big guns.

Almost five months into this debilitating global pandemic, GlaxoSmithKline (GSK) and Sanofi (SNY) announced a collaboration to come up with a coronavirus disease (COVID-19) vaccine.

These vaccine heavy-hitters not only assured that the product would be ready by the second half of 2021 but also that they would be able to manufacture hundreds of millions of doses every year.

This is actually pretty impressive considering that the typical timeline for a vaccine takes at least a decade.

What we know so far is that Sanofi will conduct tests on its experimental vaccine using GSK’s adjuvants.

Adjuvants are added to improve the efficacy of some vaccines. These can also lower the amount of vaccine protein needed for every dose, boosting the likelihood of creating a shot that can be manufactured in large quantities.

According to GSK and Sanofi, human trials will begin in the second half of 2020.

GSK’s coronavirus adjuvant already demonstrated its value during the H1N1 influenza pandemic back in 2009 when this technology played a major role in the success of the Shingrix shingles vaccine.

As for Sanofi, the giant biotech company will be using a previously approved influenza vaccine for this joint effort.

GSK shares rose by 2% following the announcement while Sanofi got a 4.1% increase.

While both companies shared that they don’t really expect much profit from this COVID-19 vaccine, they plan to reinvest any short-term earnings in preparatory measures to better handle future pandemics.

Aside from this joint effort, GSK and Sanofi are also taking multiple shots in the hopes of solving this COVID-19 health crisis.

Sanofi is testing its malaria drug which contains hydroxychloroquine.

If you recall, this is the same drug that Donald Trump hailed as a “miracle” coronavirus cure earlier this year. Days following the president’s announcement, Sanofi offered to donate 100 million doses of hydroxychloroquine to 50 countries.

On top of that, Sanofi is also working with Regeneron (REGN) to assess whether its existing arthritis treatment Kevzara can work as a coronavirus medication.

It also has an ongoing collaboration with Translate Bio (TBIO) to come up with another COVID-19 vaccine using messenger RNA.

Outside its coronavirus efforts, Sanofi has been looking into streamlining the company’s focus to improve margins and shift into more lucrative growth areas. So far, so good.

One of the more drastic measures is eliminating diabetes and cardiovascular research sector of the company.

Funding for these was reallocated, with the acquisition of cancer and auto-immune biotechnology company Synthorx serving as a strong indication of the direction the company plans to take.

Apart from growing its immuno-oncology department, Sanofi is also betting on eczema treatment Dupixent -- a move that saw them rewarded almost immediately.

The company’s recent earnings report showed that Dupixent sales jumped 135% in the fourth quarter of 2019, with annual sales soaring to an impressive $2.3 billion. This indicates a 152% increase from the year prior.

Riding this momentum, Sanofi received FDA approval to expand the use of multiple myeloma drug Sarclisa in April.

This marks another significant win for the company.

Multiple myeloma ranks second in the list of most common blood cancer types, with the disease affecting roughly 32,000 Americans annually. It cannot be cured as well, which means that treatments are needed throughout the patients’ lives.

Needless to say, Sanofi has several platforms to contribute to finding the cure and even a vaccine for COVID-19. More importantly, the company has managed to transform itself into a more streamlined and innovative business.

Sanofi would be a wise choice for investors interested in a stock to hold for the long term. This company doesn’t only hold a starring role in the search for a coronavirus vaccine but also offers more opportunities beyond the current pandemic.

Meanwhile, GSK is also not limiting its adjuvant technology to Sanofi but to other companies developing COVID-19 vaccines as well. The list includes Vir Biotechnology (VIR) and even Chinese biotech company Clover Biopharmaceuticals.

Despite its active participation in the coronavirus vaccine race, GSK tumbled down to over its 10-year low in March.

Although the pandemic’s negative impact looks discouraging, I think the overreaction is good news for value and dividend traders as the stock now trades at bargain-bin valuations.

Hence, investors could enjoy GSK’s lucrative 5.8% dividend at relatively cheap costs.

It also doesn’t hurt that GSK offers a diversified portfolio that all but guarantees minimal losses for its investors.

Its biggest revenue driver is the pharmaceutical arm of the business, which raked in total revenue of roughly $21.68 billion in 2019.

GSK’s vaccine segment contributed 8.87 billion while the consumer healthcare sector brought in over 11 billion.

Although smaller than its pharmaceutical arm, both segments are quickly catching up to GSK’s biggest moneymaker. In fact, its vaccine segment recorded revenue growth of 21% while its consumer healthcare arm jumped by 17%.

Overall, GSK is a compelling addition to any investor’s portfolio. Its impressive dividend combined with its diversified business makes this biotechnology company a wise choice as well.

The collaboration of GSK and Sanofi is considered as the most significant and promising COVID-19 vaccine effort to date.

This partnership not only maximizes the expertise of the two leading vaccine makers in the world but take advantage of their manufacturing capacity as well, which is a critical concern given that a COVID-19 vaccine would have to be distributed to millions, if not billions, of individuals across the globe.

May 7, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
May 7, 2020
Fiat Lux

Featured Trade:

(HOW CVS IS BASKING IN THE CORONA SUNLIGHT)
(CVS), (UPS)

How CVS is Basking in the Corona Sunlight

Biotech Letter

Including a brand-name business to your stock investing portfolio is a wise way to handle even the steepest downturn in the history of trading.

Despite these recent catastrophic losses, history also reminds us that bear markets present buying opportunities -- with two pretty self-explanatory caveats.

One is that investors must only shell out cash to buy into high-quality businesses. The second warning is that investors should be patient in waiting for their investments to make money in the long run.

Those checking out the healthcare sector now have the opportunity to add a large-cap stock and the biggest pharmacy chain operator in the country: CVS Health (CVS).

Most of us are familiar with CVS Health since it's a widely popular retail pharmacy. Actually, CVS fulfills 1 of every 4 retail pharmacy prescriptions in the US. That’s roughly 26.6% of the entire population.

Now, my primary reason for suggesting CVS is that it’s the go-to place for customers during and even in the absence of the COVID-19 pandemic.

In a regular buying climate, the company is set to rake in long-term gains, thanks to the daily essentials in its catalog ranging from toothpaste to lifesaving prescriptions.

During this ongoing health crisis, CVS proved to be even more valuable to consumers. In fact, the company is expected to explore a new market once the country returns to its normal state.

With the spectrum of services offered by the company, CVS manages to cater to practically all the needs expected from the healthcare system.

Apart from its retail pharmacies and clinics, it also has a dedicated senior pharmacy sector that takes care of over 1 million patients every year.

CVS serves more than 37 million in terms of traditional healthcare insurance offerings while its pharmacy benefit manager operation looks after roughly 105 million individuals -- that’s nearly a third of the country’s population.

It was in late 2018 when CVS made a meaningful transaction courtesy of the acquisition of health insurer Aetna. The deal, which amounted to approximately $70 billion, was hailed as a game-changer for the retail giant.

Although it can be unusual to regard an insurance company as a fast-growing business, the addition of Aetna played a key role in CVS’ organic growth rate. This acquisition is estimated to provide a boost in the company’s sales, with the full impact of the deal expected to be realized sometime between 2020 and 2021.

In terms of revenue growth, CVS saw a 32% growth from its 2018 earnings to reach a total of $256.7 billion in 2019. Realistically though, this may not be the typical growth pace for the company. The jump may be primarily due to the Aetna deal.

CVS Health’s largest segment is still its pharmacy services division, which generated $141.5 billion in sales, recording a net income of $5.1 billion. Its retail sector raked in $86.6 billion while its healthcare benefits sector brought in $69.6 billion.

For 2020, CVS is anticipated to have a cash flow somewhere between $10.5 billion and $11 billion.

Although its business has been doing quite well despite the pandemic, with the company adding 50,000 positions just last March, CVS remains on the lookout for interesting business ventures.

One of its recent experiments is working with UPS (UPS) in the latter’s drone service called UPS Flight Forward. Basically, the two companies joined forces to fly prescription drugs to the customers in a Florida retirement community.

The “test” community is the biggest retirement community in the US called The Villages. This is located near Orlando, which is home to more than 135,000 residents.

This joint effort is anticipated to bolster the demand in nearby areas as well, with CVS and UPS eyeing the expansion of their operations in a month or so.

With almost 9,900 retail branches, 1,100 walk-in clinics across the country, and the addition of this new partnership with UPS, CVS has definitely earned its title as the “trust front door to healthcare.”

Pharmacies are not considered exciting businesses. Basically, these are convenience stores that just happen to offer prescription drugs as well.

Although that might be true, CVS Health is not your run-of-the-mill pharmacy. Truth be told, the chain’s terrifying efficiency is gradually replacing your doctor.

At the moment, CVS pays its shareholders $0.50 in dividends every quarter. While the payouts have not increased since 2017, the dividend still yields a decent 3.2% annually. It’s a respectable payout and one that’s not in any imminent danger despite the ongoing crisis.

Taking into consideration its valuation, CVS Health can be purchased for roughly over 7 times its Wall Street profit estimate for 2021.

No company of this caliber has been this cheap in the past decade.

May 5, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
May 5, 2020
Fiat Lux

Featured Trade:

(THE MAD HEDGE BIOTECH & HEALTHCARE MODEL PORTFOLIO)

The Mad Hedge Biotech & Healthcare Model Portfolio

Biotech Letter

Many investors have asked me to put together a list of my favorite Biotech & Healthcare companies. So, I have created the model portfolio below made up of firms with the best earnings growth for the next decade. It includes a primary list of 19 high quality names, all of which are highly investable. I follow up with a secondary watch list of 18 names.

Good Luck and Good Trading
John Thomas
CEO & Publisher
The Mad Hedge Biotech & Healthcare Letter

April 30, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
April 30, 2020
Fiat Lux

Featured Trade:

(GILEAD SCIENCES GOES BALLISTIC ON REMDESIVIR TRIAL)
(GILD), (PFE), (JNJ)

Gilead Sciences Goes Ballistic on Remdesivir Trial

Biotech Letter

Gilead Sciences (GILD) is aggressively pushing to bring the coronavirus disease (COVID-19) to its proverbial knees before this year ends.

The ongoing coronavirus disease (COVID-19) pandemic has brought about substantial disruptions to the world economy, not to mention the devastating losses it caused families watching their loved ones succumb to this deadly virus.

Apart from Gilead, other biotech giants like Pfizer (PFE) and Johnson & Johnson (JNJ) are also hard at work looking for a COVID-19 cure.

Luckily, reports indicate that they may finally see a light at the end of the tunnel as one experimental treatment showed promising efficacy for fighting the health crisis.

Based on the contextual analysis of the leaked information on the clinical trials conducted by Gilead, the biotech company’s decision to bet on Remdesivir as a probable COVID-19 treatment could pay off soon.

At this point, Remdesivir is still under investigation in several Phase 3 clinical trials. These involve more than 2,400 participants scattered in 152 clinical sites.

One of these locations is the University of Chicago Medical Center, where 125 patients who tested positive for COVID-19 are treated every day with infusions of Remdesivir. Out of these individuals, only two deaths were reported with the majority already discharged.

Based on this subgroup alone, the fatality rate among the tested subjects is 1.6%.

Although Remesivir’s results still need further validation particularly in terms of adding a placebo arm in the clinical tests, the initial findings are already quite impressive. For context, data from John Hopkins University revealed that the fatality rate in the entire United States is roughly 4.69%.

Apart from that, another key detail points to the high probability of Remdesivir’s efficacy against COVID-19.

Among the 125 patients who underwent the treatment, 113 of them experienced severe symptoms.

As explained by the World Health Organization, the vast majority of those classified as severe cases involve the elderly and the immunocompromised. In one study, the infection death rate of individuals in this category fall somewhere between 1.93% up to 7.8%

Reassessing Remdesivir’s results from this perspective, we finally understand the excitement surrounding the drug’s efficacy despite the lack of a placebo trial.

In terms of questions on Remdesivir’s economic potential, we can take a look at past respiratory outbreaks like the H1N1 in 2009 and the 1918 Spanish flu for guidance.

Despite “flattening the curve,” at the time, both diseases had resurgences that reached second and third waves after the initial outbreaks were contained.

Combined, the H1N1 and the Spanish flu infected roughly 24% to 33% of the entire global population prior to subsiding for good.

Hence, high demand for Remdesivir will be expected even after the world manages to contain the first COVID-19 outbreak.

What does this mean for Gilead investors?

Remdesivir results are expected to come back positive by the end of April. With the FDA’s Coronavirus Treatment Acceleration Program, the drug is estimated to gain approval in a few months' time.

If successful, Remdesivir is projected to rake in more than $1 billion in sales throughout the coronavirus outbreak period. This estimate is based on the sheer number of people infected and are potentially at risk.

The estimated sales figure is also based on the assumption that Gilead can produce enough Remdesivir supply to treat up to 500,000 patients and that the drug will cost roughly $2,000 for a single-course treatment.

Adding Remdesivir in its lineup, Gilead has adjusted its 2020 revenue guidance to surpass $22 billion with sales growing by more than 4%, thanks to this potential COVID-19 drug alone.

However, Gilead offers more than a promising COVID-19 treatment.

The biotech giant prides itself of a strong lineup, showing off a particular dominance as the market leader for HIV treatments.

Its top HIV drug Biktarvy saw a whopping 300% increase in its sales last year, reaching $4.7 billion in 2019 alone -- and it still hasn’t reached its peak.

Analysts noted that Biktarvy has more room to grow in the next years, with the HIV drug anticipated to continue serving as Gilead’s significant growth driver until 2033.

Another HIV market leader is Descovy, which is set to be the preferred choice among 40% to 45% of patients by the end of 2020.

Despite these promising developments, Gilead stock is still pretty cheap.

To date, this biotechnology company is trading at 13.2 times forward earnings with a measly PEG ratio of 0.3.

At this price -- and considering the company’s strong portfolio and pipeline candidates -- investors on the lookout for biotech exposure but are worried about the consequences of the COVID-19 pandemic should definitely add Gilead into their core holdings.

April 28, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
April 28, 2020
Fiat Lux

Featured Trade:

(THE FIVE FRONTRUNNERS IN THE RACE FOR A COVID-19 VACCINE)
(GSK), (SNY), (REGN), (TBIO), (VIR)

The Five Frontrunner in the Race for COVID-19 Vaccine

Biotech Letter

We’re finally pulling out the big guns.

Almost five months into this debilitating global pandemic, GlaxoSmithKline (GSK) and Sanofi (SNY) announced a collaboration to come up with a coronavirus disease (COVID-19) vaccine.

These vaccine heavy-hitters not only assured that the product would be ready by the second half of 2021 but also that they would be able to manufacture hundreds of millions of doses every year.

This is actually pretty impressive considering that the typical timeline for a vaccine takes at least a decade.

What we know so far is that Sanofi will conduct tests on its experimental vaccine using GSK’s adjuvants.

Adjuvants are added to improve the efficacy of some vaccines. These can also lower the amount of vaccine protein needed for every dose, boosting the likelihood of creating a shot that can be manufactured in large quantities.

According to GSK and Sanofi, human trials will begin in the second half of 2020.

GSK’s coronavirus adjuvant already demonstrated its value during the H1N1 influenza pandemic back in 2009 when this technology played a major role in the success of the Shingrix shingles vaccine.

As for Sanofi, the giant biotech company will be using a previously approved influenza vaccine for this joint effort.

GSK shares rose by 2% following the announcement while Sanofi got a 4.1% increase.

While both companies shared that they don’t really expect much profit from this COVID-19 vaccine, they plan to reinvest any short-term earnings in preparatory measures to better handle future pandemics.

Aside from this joint effort, GSK and Sanofi are also taking multiple shots in the hopes of solving this COVID-19 health crisis.

Sanofi is testing its malaria drug which contains hydroxychloroquine.

If you recall, this is the same drug that Donald Trump hailed as a “miracle” coronavirus cure earlier this year. Days following the president’s announcement, Sanofi offered to donate 100 million doses of hydroxychloroquine to 50 countries.

On top of that, Sanofi is also working with Regeneron (REGN) to assess whether its existing arthritis treatment Kevzara can work as a coronavirus medication.

It also has an ongoing collaboration with Translate Bio (TBIO) to come up with another COVID-19 vaccine using messenger RNA.

Outside its coronavirus efforts, Sanofi has been looking into streamlining the company’s focus to improve margins and shift into more lucrative growth areas. So far, so good.

One of the more drastic measures is eliminating diabetes and cardiovascular research sector of the company.

Funding for these was reallocated, with the acquisition of cancer and auto-immune biotechnology company Synthorx serving as a strong indication of the direction the company plans to take.

Apart from growing its immuno-oncology department, Sanofi is also betting on eczema treatment Dupixent -- a move that saw them rewarded almost immediately.

The company’s recent earnings report showed that Dupixent sales jumped 135% in the fourth quarter of 2019, with annual sales soaring to an impressive $2.3 billion. This indicates a 152% increase from the year prior.

Riding this momentum, Sanofi received FDA approval to expand the use of multiple myeloma drug Sarclisa in April.