Mad Hedge Biotech and Healthcare Letter
August 19, 2025
Fiat Lux
Featured Trade:
(THE GRUMPY HUSBAND’S GUIDE TO GETTING RICH)
(NVO), (LLY), (MDGL)
I was having lunch with a buddy in Palo Alto last week when he mentioned that his wife’s doctor just prescribed her Ozempic.
“Cost me eight hundred bucks for a month’s supply,” he grumbled, stabbing his salad.
That’s when it hit me. We’re living through one of those rare moments when an entire industry gets completely reshuffled, and most people are too busy counting calories to notice the real money being made.
The weight loss drug revolution isn’t just changing waistlines, it’s minting fortunes.
Curiously, the Danish company that basically started this whole craze just got absolutely crushed by the market, and nobody seems to care that you can now buy Novo Nordisk (NVO) at fire sale prices.
The story of Novo Nordisk’s recent struggles reads like a perfect storm of competitive pressure and regulatory headaches.
Since the fourth quarter of 2024, the company has been battered by a relentless stream of negative news, while its main competitor, Eli Lilly (LLY), seemingly couldn’t put a foot wrong.
First came the CagriSema phase three results that, while positive, fell short of the street’s lofty expectations.
Then the semaglutide supply issues opened the door for compounders to muscle in on their territory, essentially creating knockoff versions of Ozempic and Wegovy while Novo Nordisk scrambled to meet demand.
Meanwhile, Eli Lilly was busy grabbing market share with their tirzepatide drugs Mounjaro and Zepbound, even publishing head-to-head trial data showing their drug’s superiority over semaglutide.
Add in Eli Lilly’s impressive pipeline advances with orforglipron, their first oral GLP-1 drug, and you had a perfect recipe for investor pessimism around Novo Nordisk.
The company’s stock has dropped 17% since May, and management shocked everyone in late July by cutting their full-year revenue and operating guidance.
But here’s where the narrative gets exciting.
August brought the first real crack in Eli Lilly’s armor when their orforglipron obesity results came in underwhelming, giving Novo Nordisk some much-needed breathing room.
More importantly, the FDA approved semaglutide for MASH treatment just last week, opening up an entirely new revenue stream for Wegovy.
Now, let’s talk about what MASH means in real dollars.
Competitor Madrigal (MDGL) estimates there are 1.5 million diagnosed MASH patients in the United States, but Novo Nordisk believes the actual patient population could be as high as 16 million.
Even if you take the conservative estimate, we’re looking at a multibillion-dollar market opportunity.
Madrigal is already seeing impressive numbers from just 23,000 patients on their MASH drug Rezdiffra, generating over $200 million in quarterly net sales.
Granted, Rezdiffra commands a much higher price than Wegovy, but volume has a way of making up for lower per-unit pricing, especially when you’re talking about treating potentially millions of patients.
The compounder situation, while frustrating, is ultimately a temporary headache.
Novo Nordisk is taking these companies to court, arguing that continued compounding is illegal now that the official shortage has ended. Yes, some compounders are trying to dance around patent protections by claiming “personalized dosing,” but patent law doesn’t typically smile on such creative interpretations.
This legal battle will resolve itself in Novo Nordisk’s favor, it’s just a matter of time.
Looking at the bigger picture, both Novo Nordisk and Eli Lilly are barely scratching the surface in international markets.
The obesity drug expansion has been primarily focused on the United States due to supply constraints, but those days are ending.
International rollout represents massive untapped revenue potential, and Novo Nordisk’s global infrastructure gives it significant advantages in many markets.
The pipeline story remains compelling despite recent setbacks. Beyond CagriSema, which honestly still looks like a solid obesity treatment compared to current semaglutide, the company is advancing high-dose semaglutide that already beat the approved dose in head-to-head trials.
They’re moving oral and subcutaneous amycretin into phase three trials, advancing cagrilintide as monotherapy, and we should see phase one results from their tri-agonist candidate this quarter.
That tri-agonist could potentially rival Eli Lilly’s retatrutide, creating a competitive dynamic that looks very different from today’s narrative.
Perhaps most importantly, Novo Nordisk has a fortress balance sheet with substantial capacity for business development. While their internal pipeline outside obesity and diabetes needs work, their financial resources position them perfectly to acquire promising candidates or entire companies. In biotech, deep pockets often matter more than perfect timing.
The direct-to-consumer angle also deserves attention.
The company just announced a partnership with GoodRx to offer Ozempic and Wegovy at $499 per month for self-paying patients.
While that price point might not drive massive adoption initially, it signals management’s willingness to explore new distribution channels and pricing strategies.
When I look at Novo Nordisk today, I see a company that’s been unfairly punished by a series of unfortunate timing coinciding with a competitor’s hot streak.
The fundamentals remain strong, the addressable markets are enormous, and the recent FDA approval for MASH treatment provides a concrete new growth driver.
This feels like one of those moments where buying the dip makes perfect sense. And who knows? Maybe the next time I’m having lunch in Palo Alto, my buddy will be complaining about how much money he should have made buying Novo Nordisk stock instead of griping about his wife’s prescription costs.
That eight-hundred-dollar monthly bill might just turn into the best investment tip he never took.
Mad Hedge Biotech and Healthcare Letter
August 14, 2025
Fiat Lux
Featured Trade:
(BUILT FOR DROUGHTS)
(ABT)
Let me tell you about my neighbor’s irrigation system. Five years ago, he spent a small fortune installing drip lines throughout his property.
While everyone was comparing rose bushes and lawn ornaments, he was investing in a system that would never make the front page of the HOA newsletter but would save him a fortune.
Fast forward to today, and his water bills are practically nonexistent while his property value has quietly appreciated beyond anything flashy renovations could have delivered.
That’s Abbott Laboratories (ABT) in a nutshell – the kind of investment that compounds wealth while you’re busy living your life.
Abbott works like that irrigation system. It’s not Instagram-worthy, it’s not going to make you rich by Friday, but it’s the kind of strategic infrastructure play that builds generational wealth through steady, unsexy execution.
The company just dropped its Q2 numbers, and honestly, they were about as thrilling as a Tuesday afternoon. Normalized earnings per share came in at $1.26, right on target.
Revenue hit $11.14 billion, barely beating expectations by $84 million. The stock’s up about 31% since June 2024, which sounds impressive until you realize that’s over more than a year of grinding, steady performance.
But here’s where Abbott gets even more interesting to me. The company just declared its third dividend for 2025 at 59 cents per share, marking a 7.2% annual growth rate.
That might not get your pulse racing, but compound that over a decade and you’ll understand why patience pays.
The business itself tells a story that’s both encouraging and sobering.
Their medical device segment grew 13% this quarter, driven by diabetes care and heart failure products. These aren’t exactly cutting-edge AI breakthroughs, but they’re the kind of steady, essential healthcare needs that aren’t going anywhere.
People will always need blood glucose monitors and heart stents, in recession or boom times.
The challenges are real, though, and they’re the kind that test long-term thinking. Abbott is dealing with about $700 million in headwinds from fading COVID-19 test demand and pricing pressure from China’s bulk purchasing programs.
Add another $200 million in potential tariff-related costs, and you’re looking at nearly a billion dollars in near-term pressure.
The Trump administration’s pharmaceutical tariff proposals could push that higher if the industry doesn’t play ball on drug pricing.
As expected, this is where most investors panic and start looking for the exits. But this is exactly when Abbott’s dividend aristocrat status becomes your best friend.
For 52 consecutive years, this company has increased its dividend. Through recessions, wars, pandemics, and every market meltdown you can imagine, Abbott has kept writing bigger checks to shareholders every single year.
The valuation picture looks a bit stretched on traditional metrics.
The price-to-earnings ratio has climbed to about 27, well above the sector median and its own historical average. But if you take a moment to view Abbott from the perspective of a dividend investor, everything changes.
The current dividend yield of 1.76% sits right near the ten-year average of 1.81%. In other words, despite all the price appreciation, you’re still getting paid about the same rate you would have over the past decade.
Staying in the realm of unsexy-but-brilliant home investments, think of Abbott like installing solar panels on your house.
The upfront cost seems substantial, the payback period stretches over years, and your neighbors might question your timing when energy stocks are soaring. But 15 years later, while they’re still writing monthly electric bills, you’re banking the savings.
Abbott works the same way – it’s not about next quarter’s earnings surprise or this year’s breakthrough device.
It’s about owning a piece of infrastructure so fundamentally solid, so deeply woven into essential healthcare, that it’ll still be generating cash and growing dividends when today’s high-flyers are collecting dust.
The company’s pipeline promises new product launches over the coming years, and its core businesses in diagnostics, devices, and pharmaceuticals aren’t going anywhere. These aren’t disruptive technologies.
If anything, they’re the financial equivalent of infrastructure investments. Boring, essential, and quietly profitable year after year.
Abbott won’t turn you into a millionaire by next Tuesday, but check back in 10 years and you might be wondering why you didn’t buy more.
My neighbor with the irrigation system isn’t making speeches about his water bill at the block party, but his grass looks like Augusta National while everyone else’s lawn is auditioning for a Dust Bowl documentary.
In healthcare, excitement is overrated. Boring pays — and Abbott has made boring very, very profitable.
Mad Hedge Biotech and Healthcare Letter
August 12, 2025
Fiat Lux
Featured Trade:
(FROM 365 TO 2)
(GILD)
Did you know that back in 1928, Alexander Fleming discovered penicillin purely by accident when he forgot to clean up his lab before going on vacation?
Sometimes the most revolutionary medical breakthroughs happen when you least expect them.
Fast forward to today, and Gilead Sciences (GILD) just pulled off something that might not be accidental, but it’s certainly revolutionary. They’ve created an HIV prevention shot that you only need twice a year.
Now that’s what I call progress worth paying attention to.
I’ve been dabbling in biotech stocks for a while now, mainly because my doctor keeps reminding me I’m not getting any younger and healthcare is only going to get more important.
But Gilead caught my attention last week when they announced earnings, and buried in all the numbers was this little gem called Yeztugo that could fundamentally change how we prevent HIV infections.
Let me break this down in plain English.
Right now, if you’re at high risk for HIV, you have two main options for prevention. You can take a daily pill – which sounds simple until you realize that means remembering to take a pill every single day for years, possibly decades.
Or you can get an injection every two months, which means regular doctor visits and the inconvenience that comes with that.
Most people who could benefit from this prevention approach – about 1.2 million Americans – simply don’t bother with either option. Only about a third actually stick with the prevention programs.
Enter Yeztugo. Two shots per year. That’s it. The FDA approved it in June, and Gilead is already rolling it out.
If you’re thinking this sounds too good to be true, you’re not alone. But the clinical trials show it works just as well as the daily pills, and the convenience factor could be absolutely massive for getting people to actually use prevention.
This isn’t just about making life easier for patients, though that’s obviously important. This is about Gilead potentially capturing a much larger slice of a market that’s been underserved because the existing options were too inconvenient.
When you make something significantly easier to use, more people use it. It’s not rocket science, but in healthcare, simple solutions like this can translate into serious revenue growth.
Gilead’s HIV franchise is already their cash cow, generating over $5 billion in revenue this past quarter alone.
Their main drug, Biktarvy, is essentially printing money with patent protection until 2033. That’s nearly a decade of predictable cash flow, which in the biotech world is like finding a unicorn wearing a four-leaf clover.
Most biotech companies are constantly worried about patent cliffs and generic competition, but Gilead has this beautiful visibility into their future earnings that most competitors would kill for.
The company’s second quarter numbers came in better than expected, with revenue hitting $7.08 billion, up nearly 2% from last year.
What caught my eye wasn’t just the growth, but the margins. They’re running gross margins above 86%, which tells you they’ve got serious pricing power.
But let’s get back to Yeztugo, because this is where things get interesting from an investment perspective.
The current prevention market is tiny compared to its potential. Right now, only about 400,000 Americans are using any form of HIV prevention, but the target population is three times that size.
If Yeztugo can meaningfully increase adoption rates – and the convenience factor suggests it will – Gilead could be looking at substantial market expansion rather than just stealing share from competitors.
The rollout timeline looks promising, too. They got FDA approval in June, shipped the first doses within 24 hours, and started administering shots within days.
The World Health Organization recommended it in July, and European approval is expected by the second half of next year. This isn’t some distant future opportunity – it’s happening right now.
Beyond HIV, Gilead is building out their oncology business with a drug called Trodelvy, which brought in $364 million last quarter and is being tested for additional cancer types.
Their liver disease treatments are holding steady, and they’re maintaining a dividend yield above 2.8% while all this growth is happening.
From a valuation standpoint, Gilead is trading at about 14 times forward earnings, which is roughly in line with other biotech companies but still below where they’ve historically traded.
The stock has been flat this year while the broader market rallied, which means the Yeztugo opportunity isn’t fully reflected in the price yet.
Wall Street analysts have a consensus target price of $133, about 18% higher than current levels. Given the HIV franchise stability, the Yeztugo launch potential, and the company’s track record of hitting their guidance, that target seems reasonable.
This isn’t a stock that’s going to double overnight, but it’s one that could deliver steady, meaningful returns as these new products gain traction. I can live with that kind of certainty.
Besides, I remember when getting a shot meant the whole day was shot (pun intended).
Now Gilead’s figured out how to turn twice-yearly convenience into what could be a billion-dollar competitive advantage.
Sometimes the best innovations are just making the annoying stuff less annoying.
Mad Hedge Biotech and Healthcare Letter
August 7, 2025
Fiat Lux
Featured Trade:
(WHEN GOOD EARNINGS CAN’T HIDE THE UGLY TRUTH)
(BIIB), (SAGE), (ESALF)
You know that feeling when your favorite restaurant starts serving smaller portions but jacks up the price? That’s Biogen (BIIB) right now.
Sure, they beat Q2 earnings estimates like a drum, pulling in $2.65 billion in revenue against a $2.32 billion consensus, but scratch beneath that shiny surface and you’ll find the same old story that’s been plaguing this company for years.
I’ve been watching Biogen longer than I care to admit, back when their multiple sclerosis franchise was the golden goose of biotech. Those days feel like watching reruns of “The Ed Sullivan Show” now.
The MS portfolio, still their bread and butter at $1.107 billion, dropped 4% year-over-year. That’s actually better than expected, but here’s the kicker: management admitted to about $75 million in favorable timing adjustments that won’t repeat. Strip that out, and we’re looking at closer to 10% decline.
My neighbor Bob, a retired engineer who thinks he’s the next Warren Buffett, keeps asking me about these biotech names. “But John,” he says, “they’ve got all these new drugs coming!”
Sure, Bob. Let’s talk about those shiny new toys.
ZURZUVAE, their postpartum depression treatment, hit $74.1 million in Q2, up from $27.3 million last year. Sounds impressive until you realize they split revenue 50-50 with Sage Therapeutics (SAGE) and analysts peg peak sales at maybe $300 million annually.
In pharma terms, that’s like getting excited about finding a twenty-dollar bill when you’re hemorrhaging hundreds.
Then there’s LEQEMBI, their Alzheimer’s collaboration with Eisai (ESALF).
Revenue quadrupled to $55 million, which sounds fantastic until you remember they’ve poured billions into this thing and it’s moving slower than traffic on the 405 during rush hour.
The reimbursement headaches and infusion requirements make this drug about as convenient as a root canal. Plus, $35 million of that revenue was a one-time shipment to China, so don’t get too excited about sustainable momentum.
The real story here isn’t in the numbers that beat expectations, it’s in what those numbers represent.
Biogen is essentially playing defense against patent cliffs while trying to rebuild their offense with niche products.
SPINRAZA, their spinal muscular atrophy treatment, fell 8.5% to $392.7 million due to inventory drawdowns and competitive pressure. When you’re competing against gene therapies that offer potential cures, being the old reliable treatment is like being the last VHS rental store in town.
Here’s what caught my attention though: management slashed R&D spending from $505 million to $399 million year-over-year.
Now, I’m all for fiscal discipline, but when a pharmaceutical company starts cutting research spending, it’s usually because they’re either very confident in their pipeline or very worried about their cash flow.
Given that their pipeline consists of a few mid-stage trials and some antisense oligonucleotide hopes, I’m leaning toward the latter.
The biosimilars business continues its slow-motion train wreck, down 8% to $182 million. This was always going to be a race to the bottom, and Biogen seems determined to finish last.
Meanwhile, their contract manufacturing revenue surged 124%, but management was quick to temper expectations, essentially saying “don’t get used to this.”
Look, I get the bull case. The stock trades at a 50% discount to healthcare sector peers, sitting on $2.8 billion in cash with manageable debt that doesn’t mature until after 2035.
The valuation screams “cheap for a reason,” and sometimes that reason turns into an opportunity.
But pharma investing isn’t like picking up a beaten-down retailer that can turn things around with better merchandising. Drug development takes years, costs billions, and fails more often than not.
The pipeline offers some hope with felzartamab entering Phase 3 for kidney diseases and salanersen showing promise in spinal muscular atrophy with once-yearly dosing.
But we’ve seen this movie before with Biogen. Remember when Aduhelm was going to save the company? How’d that work out?
My take? Biogen is a decent company in a tough spot, trying to reinvent itself while managing the decline of its legacy products.
The Q2 beat doesn’t change the fundamental math: they’re still searching for the next big thing while their current big things get smaller every quarter.
At these prices, the stock might be worth a speculative position for patient investors, but don’t mistake temporary earnings beats for a sustainable turnaround story.
Sometimes in investing, as in life, you have to accept that not every story has a happy ending.
Biogen might prove me wrong, but until they do, I’m staying neutral and watching from the sidelines.
Mad Hedge Biotech and Healthcare Letter
August 5, 2025
Fiat Lux
Featured Trade:
(BLINK AND YOU MISS IT)
(LLY), (NVO), (ZLDPF), (RHHBY), (AMGN)
Mad Hedge Biotech and Healthcare Letter
July 31, 2025
Fiat Lux
Featured Trade:
(FRENCH BENEFITS)
(SNY), (REGN)
