Biotech Letter Archives

Pitching A No-Hitter

Today, let's look into a player in the biotechnology and healthcare sector that's not just aiming to hit it big; they're looking to knock it out of the park.

Now, what makes a stock a true all-star in beating the market? I'd bet my last dollar it's the potential for some serious earnings growth.

And guess who's up to bat with that? I'm pointing at Vertex Pharmaceuticals (VRTX), and let me tell you, they're not playing small ball. They're looking at 2024 like it's their championship game, ready to trounce the market.

As we all know, these guys are sitting on a goldmine with their cystic fibrosis (CF) drugs, where they have a virtual monopoly of the space. They've been working like mad scientists to expand their labels and get more reimbursement deals. It's like they're on a mission to cover every base.

Take Trikafta, for instance. This drug is a game-changer, making life better for folks with CF. We're talking about a treatment that's in a league of its own, catering to 90% of those battling CF because of its effectiveness.

In 2023 alone, Vertex's CFTR modulators, with Trikafta leading the pack, pulled in a cool $9.8 billion. That's an 11% jump from the previous year.

But hold your applause, because Vertex’s isn’t done yet. The biotech introduced a new product, the "vanza triple."

This up-and-coming contender's stepping up to the plate, showing it can go toe-to-toe with Trikafta, improving lung function and even outperforming the blockbuster drug in reducing sweat chloride levels.

And it's a once-daily pill, which is like hitting a home run for patients who are tired of the twice-daily routine.

Vertex is swinging for the fences, aiming to get regulatory approval for this new heavy hitter by mid-year. And if the trials are any indication, we're looking at another blockbuster in the making.

Now, let's talk numbers, because that's what really scores the runs.

Vertex wrapped up 2023 with product revenue hitting $9.9 billion, up 11% from the year before.

Trikafta/Kaftrio was the MVP, bringing in $8.9 billion. Looking ahead, Vertex is projecting revenues between $10.55 billion and $10.75 billion for this year.

But it's not all about CF with these guys. They're looking to diversify, stepping into the batter's box with treatments outside of CF.

A prime example is their ongoing collaboration with CRISPR Therapeutics (CRSP) on Casgevy, a gene therapy that's just cleared the bases with FDA approval for sickle cell disease and transfusion-dependent beta-thalassemia.

And let's not forget VX-548, their non-opioid pain relief drug that's rounding third base and heading for home with promising trial results.

So, what's the game plan for those who want to get in on the action?

Well, Vertex's PEG ratio is sitting pretty at 0.58, signaling that this team is undervalued given the growth potential they're packing. Sure, their valuation might look high with a P/E ratio north of the healthcare average, but with a lineup like theirs, it's a premium worth paying.

That means if you're willing to play the long game and not just looking for a quick win, Vertex is a team you might want to draft for your portfolio. They've got a solid lineup, from their CF franchise to gene therapy breakthroughs and beyond.

And with their sights set on more than just the next 12 months, those analyst price targets might just be the floor for where this team can go.

In the big league of biotech and healthcare, Vertex is proving that it has what it takes to be a powerhouse. With innovation at the bat and a strategy that covers all bases, they're a team worth watching — and maybe even cheering for.

February 15, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 15, 2024
Fiat Lux

Featured Trade:

(TACKLING THE BIG C)

(PFE), (BNTX), (BMY), (ABBV), (AZN)

Tackling The Big C

Biotech Letter

Super Bowl Sunday: not just a day for football fanatics but a golden opportunity for brands to shine brighter than the halftime show, captivating over 100 million pairs of eyes.

Amid the usual suspects of beers, cars, and fizzy drinks, an unexpected name popped up on the screen: Pfizer (PFE). The Big Pharma titan threw its hat in the ring with a multimillion-dollar message that could be summed up as a toast to science itself.

Here’s how Pfizer’s ad went: animated legends of science — from Newton to Einstein, alongside Rosalind Franklin and Katalin Karikó — belting out an ode to medical milestones to the tune of Queen’s “Don’t Stop Me Now.” Add a dash of whimsy with a cameo from penicillin and a crooning tardigrade, culminating in the heartwarming sight of a young cancer survivor leaving the hospital to applause.

This cinematic piece wasn’t just about selling a product; it was about selling a dream, one where science leads the charge against cancer, underscored by Pfizer’s new rallying cry, "Outdo Yesterday," and a nudge towards LetsOutdoCancer.com.

Shrouded in mystery is the exact price Pfizer paid for this 60-second spectacle — shortened from its original 90-second glory.

But, my sources say that the pharma giant shelled out around $6.5 million to $7 million for half that time, making Pfizer’s splurge no drop in the bucket, especially juxtaposed against a recent $15 million pledge to the American Cancer Society.

This grand gesture comes at an important milestone, marking Pfizer’s 175th year and a concerted push to cast a vibrant, forward-looking shadow across its brand, appealing to the public, investors, and its own ranks alike.

After all, it’s an open secret that Pfizer’s looking to weather a storm, with its COVID-19 vaccine sales dwindling.

Despite riding high on the COVID-19 vaccine wave in partnership with BioNTech (BNTX), raking in roughly $57 billion across 2021 and 2022, Pfizer's financial seas have been anything but calm. The stock’s dramatic descent from its late 2021 peak paints a picture of uncertainty, rooted in the sobering performance of its COVID-19 titans, Comirnaty and Paxlovid.

Yet, as we can see, Pfizer’s narrative isn’t one of gloom. Stripping away the pandemic’s shadow reveals a company in robust health, with a 7% operational growth and a record seven FDA nods in 2023 alone.

Speaking of making it rain, Pfizer's not just throwing its COVID-earned billions around for kicks. For example, they've laid down a cool $43 billion on the table to bring oncology biotech Seagen into the fold.

This acquisition isn't your everyday shopping spree either. It's a move designed to transform Pfizer into the leader of the antibody-drug conjugate (ADC) movement in cancer therapy, potentially beating the likes of Bristol Myers Squibb (BMY), AbbVie (ABBV), and AstraZeneca (AZN).

Think of this move as the biopharma eyeing Seagen's $3 billion in 2023 revenue and saying, "Let's crank this up to $10 billion by 2030." Ambitious? Absolutely. But if anyone's got the blueprint to make it happen, it's Pfizer.

The pivot to cancer isn’t just a strategic shift but a play for the heartstrings of a global audience. With cancer touching lives universally, Pfizer’s Super Bowl gambit seeks to transcend its COVID-19 narrative, aiming for a connection that’s both deeper and more universal. The deliberate omission of its vaccine from the ad speaks volumes, aiming to bridge divides in a viewership as diverse as the Super Bowl’s.

Still, the true measure of its Super Bowl splash — beyond the ad’s immediate sparkle — may lie in subtler indicators, from stock movements to talent retention and a potential surge in interest around its cancer-fighting mission.

Whether this move translates into a long-term win for Big Pharma titan remains to be seen, but for now, the spotlight isn’t just on the Chiefs’ victory but on Pfizer’s leap into the hearts and minds of millions, championed by science and the indomitable spirit of innovation. I suggest you buy the dip.

February 13, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 13, 2024
Fiat Lux

Featured Trade:

(PILL PUSHERS IN PERIL)

(CVS), (WBA), (RADCQ), (SBUX)

Pill Pushers in Peril

Biotech Letter

Once upon a time, in the not-so-distant 1980s, national pharmacy chains sprouted up across the American landscape like mushrooms after a rainstorm.

They nestled into every nook and cranny of our lives, from the bustling urban streets to the tranquil rural towns, becoming as ubiquitous as the local diner.

Fast forward to 2010, and their numbers had climbed from 18,600 to a staggering 22,500.

It was a golden era for these giants. Like a high school jock on prom night, Walgreens (WBA) and CVS Health (CVS) were on top of the world. Their share prices did the financial equivalent of bench pressing 300 pounds, ballooning to about 14 times their original size between 1995 and 2015, while the S&P 500 merely did a respectable fourfold increase.

Walgreens' wallet got a lot thicker, going from a total revenue of $42.2 billion in 2005 to a hefty $103.4 billion a decade later.

CVS wasn't far behind, with its treasure chest growing from $37 billion to an eye-watering $153.3 billion.

But as the saying goes, what goes up must come down. Today, the once invincible giants are feeling the squeeze, like a middle-aged man trying to fit into his high school jeans.

The tale of woe includes Rite Aid's (RADCQ) bankruptcy bow in October 2023, CVS's share price taking a more than 30% nosedive over two years, and pharmacists so fed up they're leaving their posts faster than rats from a sinking ship.

The crux of their dilemma? A dwindling stream of reimbursement rates from the pharmacy benefit managers, akin to trying to drink a milkshake through a cocktail straw.

Walgreens saw its adjusted operating income from its U.S. retail pharmacy division shrink by 31.1%, from $5.4 billion in 2016 to a more modest $3.7 billion in 2023.

In a similar bind, CVS saw its profits dip, leading to a drastic measure: closing up shop on hundreds of stores.

Despite these turbulent times, the enduring importance of chain pharmacies in the U.S. healthcare system cannot be overstated. They continue to play a crucial role, dispensing everything from life-saving medications to the latest in blood pressure tech.

The question now is, what's next for these once mighty titans? So far, we can see that both CVS and Walgreens are attempting a Hail Mary, broadening their healthcare horizons in hopes of justifying their sprawling presence across the nation.

Over the coming years, a significant transformation is expected to happen to Walgreens and CVS, with the brands likely to streamline their presence. With an extensive network of physical outlets, these companies are confronted with the inevitable: the need for a massive workforce and substantial resources, all of which escalate operational costs and complexities.

In an age where efficiency is king — think Starbucks (SBUX) with its pivot to drive-thru exclusives — it stands to reason that Walgreens and CVS might steer in a similar direction.

Actually, Walgreens has already dabbled in new solutions like drone delivery, a venture that aligns perfectly with the future of quick and efficient distribution of essentials, including medicines, to its customer base.

The next thing to consider is how dramatic this downsizing will be. Looking a decade ahead, we can anticipate a considerable shrinkage in their storefronts, possibly with a shift towards more compact, delivery- and pick-up-friendly formats.

As they move forward with these changes, one thing remains clear: the landscape of American healthcare and retail is evolving, and with it, these pharma giants need to adapt or risk being left behind in the annals of history, remembered as nothing more than relics of a bygone era.

The stories of these national pharmacy chains are far from over, but the next chapters promise to be as unpredictable as they are compelling. So grab your popcorn. This is one show you won't want to miss.

February 8, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 8, 2024
Fiat Lux

Featured Trade:

(THE WEIGHT IS OVER)

(REGN), (NVO), (LLY), (RHHBY)

The Weight Is Over

Biotech Letter

Let's look into something that's been buzzing in the healthcare sector, and no, I'm not just talking about the latest diet fad. I’m talking about obesity treatments — specifically, those groundbreaking drugs that are reshaping the market and, quite literally, the patients using them.

Yes, I'm looking at you, GLP-1 agonists. These bad boys have been making waves for their significant role in weight loss, but let's face it, there's always room for a bit of an upgrade, right?

Despite all the cheers and positive vibes around GLP-1 agonists, a little detail has been creeping up that's somewhat less than ideal — muscle loss.

It turns out, up to a whopping 40% of the weight shed isn't just fat saying goodbye, but muscle bidding adieu as well. Not exactly the parting gift patients were hoping for, and frankly, it's stirring up some concerns that could ripple through public health in the not-so-distant future.

This is where Regeneron (REGN) comes in.

This biotechnology company isn’t new to the scene, but it’s taking a fresh angle on the whole ordeal. Their game plan? A dynamic duo approach, combining trevogrumab or garetosmab with the well-known semaglutide (hello, Wegovy), aiming to refine the weight loss journey for those embarking on it.

Regeneron’s goal is clear: let's keep the muscle, lose the fat, and change the narrative on obesity treatments.

Now, for a little context, the obesity treatment arena has been somewhat monopolized by Novo Nordisk (NVO) and Eli Lilly (LLY), with their respective champions, Wegovy and Zepbound, leading the charge.

But here's where Regeneron is looking to carve out its niche, not just in improving the now but in eyeing the future post-treatment landscape. The million-dollar question they're tackling: once the weight's off, how do you keep it from coming back without those weekly jab appointments?

To know the answer to that question, I suggest you mark your calendars for May 2024 because that's when the magic starts. It will commence Phase 2 of the study aiming to test Regeneron’s combo and hopefully offer better results to the weight loss game.

Ultimately, the company aims to preserve, or even boost, muscle mass. Imagine that, weight loss without the unwanted goodbye to your gains.

While it's worth noting that while Regeneron is making waves with its innovative approach, they're not alone in the quest for muscle preservation. Other players are also in the mix, each with their own strategies to combat the side effects of GLP-1 agonists.

Roche (RHHBY), for instance, has set its sights on combining their anti-myostatin antibody with incretin treatments, expanding the battlefield into new territories.

However, Regeneron’s plans don’t end in the weight loss world.

Earlier this month, Regeneron threw another curveball with the acquisition of 2seventy bio's cell therapy pipeline. This move isn't just about expanding their arsenal; it's about integrating and innovating in ways that could redefine cancer treatment as we know it.

By blending Regeneron's antibody expertise with 2seventy's cell therapy prowess, they're transforming into a potential oncology powerhouse.

Now, let's look at the numbers. Regeneron's market cap is flirting with the $100 billion mark, proof of their performance and potential. With revenues dancing around the $13 billion mark for 2023 and a price-to-sales ratio that's eye-catching, to say the least.

Yet, with every high, there's a looming challenge. The patent cliff for Eylea, their golden goose, is on the horizon, threatening to shake up the status quo.

But if there's one thing Regeneron has shown us, it's their knack for innovation. Given everything the company has embarked on over the past months, it’s safe to say that they’ve got this issue covered.

Does that mean it’s time to yell "screaming buy" from the rooftops? I usually keep such big words under lock and key, but Regeneron? They're onto something. They're not just surviving; they're plotting a course to new horizons without putting all their eggs in one basket. That strategy? It's more than just good—it's golden.

So while the cautious among us might wait for the market to blink first, there's something to be said for getting ahead of the curve. After all, in the world of pharma, timing is everything, and Regeneron seems to have its clock set just right.

February 6, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 6, 2024
Fiat Lux

Featured Trade:

(SETTING THE TABLE FOR STEADY GAINS)

(ABBV), (ABT), (PFE), (GILD), (DNA), (MRNA), (AMGN), (LLY)

Setting The Table For Steady Gains

Biotech Letter

Here's a nugget of wisdom from someone who's sailed the investment waters more times than I've had hot dinners: diversification is your best friend. Think of it as the Swiss Army knife in your investment toolkit.

Now, if there's one treasure you'd want aboard your investment ship, it's a dividend stock. Not just any old stock, though. I'm talking about AbbVie (ABBV).

Since it waved goodbye to its parent company, Abbott Laboratories (ABT), in 2013, it has boosted its dividend payouts by an eye-popping 290%. With a yield hanging around 4% and delivering a 130% total return over the past 5 years, long-term investors undoubtedly struck gold.

Unfortunately, 2023 has turned into the kind of year we'd rather forget. The end of Humira's patent was looming like a dark cloud, threatening to rain on AbbVie's parade by letting generics flood the market. The horror, right?

But, plot twist: the anticipated disaster was more of a light drizzle. Despite the competition, Humira still brought in a cool $11.1 billion. Sure, it's a dip, but not the plunge we feared.

Meanwhile, AbbVie's been on a shopping spree, snapping up Immunogen and Cerevel for a combined total that's a smidgen under $19 billion. It's like they're collecting Infinity Stones, diversifying beyond Humira into areas ripe with potential.

And let's not forget their foray into the realm of Antibody Drug Conjugates (ADCs) — the hot ticket in oncology.

While AbbVie’s not throwing around cash like confetti, like some of their peers including Pfizer (PFE), Gilead Sciences (GILD), Genentech (DNA), they're making notable moves. It's a bit like betting on the dark horse; if their ADCs and CNS ventures hit their stride, we're all in for a treat.

Amidst all this innovation and expansion, AbbVie hasn't lost sight of what gets investors' hearts racing — a solid dividend. It's the kind of steady reliability that's as comforting as your favorite cozy blanket.

As if those aren’t enough, the company just threw us a curveball that's got Wall Street buzzing more than my neighbor's annoying leaf blower on a peaceful Sunday morning.

In its recent earnings report, AbbVie not only beat the revenue expectations for its fiscal fourth quarter but decided to sweeten the deal by raising its long-term sales outlook.

Despite the concerns about Humira, AbbVie still posted fourth-quarter earnings that had their investors nodding in approval, even if they were a tad lower than previous years’ glory days. With revenue hitting $14.3 billion, surpassing the street's guess of $14 billion, it's clear the company isn't just hanging in there; it's throwing punches back.

The immunology portfolio, while taking a 12% hit, isn't down for the count, thanks to Skyrizi and Rinvoq. These two rising stars, which are quickly becoming the Batman and Robin of the biopharmaceutical world, are not just filling Humira's big shoes; they're sprinting.

With the duo’s sales surging by 52% and 63%, respectively, it's no wonder AbbVie is adjusting its binoculars and raising its long-term guidance for these drugs to a whopping more than $27 billion by 2027.

That's a $6 billion jump from their previous forecast. If that doesn't scream confidence, I don't know what does.

And just for a bit of perspective, while AbbVie was basking in the glow of success, its peers had a mixed day at the market. Pfizer took a slight tumble, Moderna (MRNA) and Amgen (AMGN) dipped their toes into the red, while Eli Lilly (LLY) floated up, riding a wave of optimism.

So, as we move forward this 2024, you might be wondering, "What's next for AbbVie?"

Well, if I were a betting man (and let's be honest, investing is betting with extra steps), I'd say we're not likely to see AbbVie pulling a rabbit out of a hat.

But, and it's a big but, we're talking about a company that's as expertly managed as a Michelin-starred kitchen. They've got a knack for serving up share price growth and dividends that leave investors coming back for seconds.

So while AbbVie might not be dangling the next blockbuster breakthrough in front of us, their steady march forward is as promising as finding a shortcut on your morning commute. We might not see the stock skyrocket overnight, but a climb to around $180 per share? That's not just possible; it's on the menu. And right now, with its recent earnings report, it's as good a time as any to pull up a chair to the AbbVie table. Bon appétit.

February 1, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 1, 2024
Fiat Lux

Featured Trade:

(STEADY AS SHE GOES)

(JNJ), (WBA), (KVUE)