Biotech Letter - John Thomas - Mad Hedge Fund Trader

From Bland To Bold

So, Gilead Sciences (GILD) dropped their Q4 2023 bombshell earlier this month, and it was kind of like expecting a gourmet meal and getting airplane food instead. Their product sales were underwhelming, not budging an inch year-on-year, and even took a tiny step back quarter-to-quarter.

Now, if you're like me, hoping for some spicy growth forecasts for 2024, you'd be left with a bland taste in your mouth. The market seemed to agree, with Gilead's shares taking a nearly 10% nosedive post-announcement. But, let's not judge a book by its cover just yet.

Peeking under the hood, Gilead's story gets a bit more colorful. Looking closer feels like discovering a hidden layer of nougat in a seemingly plain chocolate bar.

Sure, Veklury, their COVID-19 therapy, didn't get a standing ovation this time around, but let's not forget how it was the belle of the ball when the pandemic hit. Fast forward, and it has turned into that party guest who overstayed their welcome, with Gilead's top-line growth itching for the door.

Nevertheless, all's not gloomy in Gilead's kingdom. Their HIV franchise, led by the star, Biktarvy, is hogging the limelight with a 47% market share in the U.S. That's nearly half the patients on HIV meds swearing by Biktarvy.

Meanwhile, their oncology lineup is also stepping up its game, and with 61 programs in the pipeline, including 19 in phase 3 studies, it's like Gilead's got a magic potion brewing.

Now, for dividend lovers, Gilead's continues to be that reliable friend who always shows up. Despite the pandemic's chaos, they've been upping their dividend game by 19% since 2019, boasting a comfy 3.9% yield. Talk about a silver lining.

That’s not all, though. Just when you thought Gilead would take their ball and go home, they pull a $4.3 billion rabbit out of their hat, announcing they're buying CymaBay Therapeutics (CBAY) and aiming to seal the deal by Q3 2024.

Why? Because CymaBay's working on seladelpar, a potential game-changer for liver disease. And the cherry on top? Seladelpar got a VIP pass from the FDA for a priority review for Primary Biliary Cholangitis (PBC), with the red carpet rollout set for August 14.

Meanwhile, seladelpar's revenue is projected to hit the sweet spot of around $768 million by 2028. Needless to say, this could be the new blockbuster Gilead's been looking for.

In terms of competitors in this field, Gilead would most likely go head-to-head against giants like Madrigal Pharmaceuticals (MDGL) and Akero Therapeutics (AKRO). Both are also making waves with their NASH (non-alcoholic steatohepatitis) fighters, scoring double-digit gains.

Aside from these more widely recognized names, Inventiva (IVA), 89bio (ETNB), Genfit (GNFT), Sagimet Biosciences (SGMT), and the underdog CohBar (CWBR) are all in the race as well, turning heads with their own NASH breakthroughs.

Despite all the excitement, Gilead had a couple of stumbling blocks with their other drugs, which might have contributed to their stock's slip n' slide. Yet, the company’s leadership seems unfazed, especially about the concerns surrounding their cancer drug, Trodelvy. It's like they’re saying, "Keep calm and carry on," betting big on its future.

Overall, Gilead's multi-billion bet on CymaBay and seladelpar is a bold move, aiming to beef up their liver disease creds. With a market cap lounging at $91.80 billion and eyes set on a steady climb to $28.71 billion by 2026, this biotech is no longer just looking to play the game; they're trying to change the rules.

So, what's my take? Pour yourself a glass of whatever you fancy, and let's watch how this unfolds before making any moves. Gilead's foray into new territories with seladelpar is a mix of high stakes and high hopes. It's a bit of a rollercoaster, but hey, that's what makes the market so thrilling, right?

February 20, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
February 20, 2024
Fiat Lux

Featured Trade:

(PITCHING A NO-HITTER)

(VRTX), (CRSP)

Pitching A No-Hitter

Biotech Letter

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)