Biotech Letter Archives

Steady As She Goes

Today, let’s talk about something that might make dividend enthusiasts a tad uncomfortable — when beloved companies take an axe to dividends. Yeah, it’s a bummer.

Imagine you’re on a steady course, relying on those dividends to keep flowing in, and suddenly, a storm hits. That's what happened when Walgreens Boots Alliance (WBA) rocked the boat by slashing its dividend by a whopping 48%. Ouch, right?

But, let's not dwell on the past. Instead, how about we scout for a stock that’s less likely to leave us in such a pickle?

Spoiler alert: no stock comes with a no-risk guarantee, but sticking with big names sporting robust businesses and hefty moats might just do the trick. And where better to look than the evergreen healthcare sector?

That’s where Johnson & Johnson (JNJ) comes in.

This old-timer isn’t just another name in the pharma game; it’s practically royalty, with a lineage stretching back nearly 140 years.

The year 2023 was a period of change for JNJ, as it waved goodbye to slow movers like Band-Aid and Tylenol by spinning off its consumer health division into Kenvue, netting a cool $13 billion from Kenvue’s (KVUE) market debut.

And yes, JNJ still keeps a watchful eye on Kenvue with a 9.5% stake.

Digging into the numbers, JNJ boasted a hefty $21 billion in sales in the third quarter of 2023 alone, marking a 7% jump from the previous year, with profits tallying up to a cool $4.3 billion.

The pharmaceutical division, with stars like Darzalex and Stelara, brought home the bacon, contributing $14 billion to the total revenue.

Not to be outdone, the medical device division strutted its stuff with a 10% sales hike, raking in $7.5 billion.

Here’s the deal with JNJ: it’s like that reliable old friend you can count on for the long haul. It’s not just resting on its laurels, though.

JNJ has been on the prowl, having acquired Abiomed, known for the world's smallest heart pump, and eyeing Ambrx Biopharma (AMAM) for future innovations.

Plus, with a 60-year streak of not just paying but boosting its dividend, JNJ is like that steady drummer in a rock band, keeping the beat alive and kicking, having increased its dividend by 80% over the last decade.

Still, nothing is perfect. So, let’s not sugarcoat it — JNJ has its share of headaches. The Inflation Reduction Act is looking to play hardball on drug prices, which could mean thinner pie slices for JNJ’s top sellers.

And then there’s the talc saga, a storm JNJ is still navigating with a $700 million settlement not putting a full stop to the legal drama, considering there are still thousands of personal injury lawsuits pending.

Yet, for all the turbulence, JNJ’s resilience is nothing short of legendary. With an AAA credit rating, it stands more solid than many sovereign states. It’s the kind of ship that keeps its course steady, no matter the weather.

So, what’s the takeaway for those hunting for dividends in the healthcare seas?

With its solid track record, including a Dividend King crown for 61 years of dividend increases, JNJ is a ship built for long voyages.

Founded in 1886, it has shown a remarkable ability to adapt and grow, charting a course for future success. It’s not promising a gold rush overnight, but as a steadfast companion on your investment journey, JNJ is as good as it comes.

Investing in JNJ is like joining a voyage with a seasoned captain at the helm. Sure, there might be choppy waters ahead, but with a history of navigating through just about any storm, JNJ is a ship you’d be wise to board.

And who knows? With its commitment to growth and a knack for bouncing back, JNJ could well be the treasure chest you’ve been searching for in the vast investment seas.

January 30, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 30, 2024
Fiat Lux

Featured Trade:

(BRAIN GAINS)

(BIIB), (ESALY) (LLY), (REGN), (ALNY), (MRK), (AMGN), (PFE), (BMY)

Brain Gains

Biotech Letter

Let's talk about a golden opportunity knocking at our doors – the booming market of Alzheimer's disease treatments in biopharma. We're not just talking about a small uptick here. With a slew of new meds on the horizon, this market is gearing up for some serious growth, and you might want to grab a piece of this pie.

The dominant name on our radar is Biogen (BIIB), ticking at $260 per share with a market cap that's flirting with $39 billion.

Now, with a solid $10 billion in sales and trading at a nifty 16 times its 2024 estimated earnings, Biogen's got some serious mojo. I've been eyeing it since last year, but boy, have things changed since then.

A critical game-changer was Chris Viehbacher, the new CEO since November 2022. He's already played a couple of aces – slicing $800 million in costs (which, by the way, could pump up earnings by $5 a share by 2025) and wrapping up the acquisition of Reata Pharmaceuticals in September 2023.

This new addition to Biogen’s portfolio has a hot ticket item, Skyclarys, for treating Friedreich’s ataxia. It's a rare find, but it could add a cool $5 per share in earnings in a few years.

But the most exciting name in Biogen’s arsenal is Leqembi, the company’s Alzheimer’s treatment. They're splitting the pot with Eisai (ESALY), and this drug is a little like turning back the clock on cognitive decline – think a two-year rewind button.

The big bucks talk here: we're eyeballing $2 billion in revenue by 2028 and maybe a whopping $4 billion by 2033. And hey, there might even be more where that came from.

Let's chew on a few things here. Biogen has the potential to snag a 60% market share against Eli Lilly’s (LLY) donanemab – the only worthy opponent in the market so far. And given Leqembi's safety creds, this might be playing it safe.

Aside from Eli Lilly, there’s Roche (RHHBY), with candidates in Phase 2 and Phase 1 trials, but they're not quite hitting the jackpot yet. As for other competitors in the space like Regeneron (REGN) and Alnylam (ALNY)? Well, they're cooking up something different in Phase 1, but it's a bit early to call.

Meanwhile, Biogen's got another trick – a home-use version of Leqembi coming this fall. And get this: doctors are buzzing about nipping Alzheimer’s in the bud, way before it crashes the party. Imagine getting a jab of Leqembi as part of your routine check-up when you're only 50. If this works, then we could be kissing Alzheimer’s goodbye by 2040.

For the longest time, Biogen was like that one-hit wonder with its multiple sclerosis treatments. But now, they're swinging for the fences with the largest unmet health need out there. If Leqembi hits it big, and I mean really big, we could be talking about sales far beyond that $4 billion mark by 2033.

But let's not get ahead of ourselves. The big pharma world is about to hit a few speed bumps with a wave of patent cliffs from 2025 to 2029. That’s a headache for the likes of Merck (MRK), Amgen (AMGN), Pfizer (PFE), and Bristol Myers Squibb (BMY).

Biogen, though, is sitting pretty with two growth products and a pipeline that’s got pizzazz. Plus, they're a hot catch for any big pharma looking for a dance partner without stepping on regulatory toes.

As we roll into the next decade, keep your eyes peeled for investment opportunities popping up like daisies. And don't feel like you've got to jump on the first bandwagon that rolls by. This market's just stretching its legs, and today's champs might just be tomorrow's old news.

So, what's the smart play here? Spread your bets across a few horses in the Alzheimer's race, and make sure they're not one-trick ponies.

Eli Lilly, for instance, is more than just an Alzheimer's bet – they're making waves in diabetes and soon, obesity treatments. Biogen, despite its Alzheimer's experience, is a bit of a gamble, especially after its first drug's rocky start.

Remember, investing in Alzheimer's treatments now is like catching the early wave – it's riskier, sure, but the potential for a big payoff is there. This is an emerging market, and it's revving up for an exciting ride. I suggest you add these names to your watchlist.

January 25, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 25, 2024
Fiat Lux

Featured Trade:

(FROM BIG TO BIGGER)

(UNH), (CI), (ELV), (CVS)

From Big To Bigger

Biotech Letter

Today, let's talk about where the smart money's at in our whirlwind economy – healthcare and insurance.

And who's the king of the hill in this game? None other than UnitedHealth Group (UNH).

It's not just any old company; it's a health insurance juggernaut that's been on a growth tear, doubling its value in just five years. That's definitely something to write home about.

With a market cap closing in at $500 billion and revenues of $372 billion in 2023, it's a force to be reckoned with. If it doubles again, we're looking at a $1 trillion giant. That's uncharted territory for healthcare stocks.

Before anything else, let's hop in our time machine for a sec.

Around 10 years back, UnitedHealth was a mere $75 billion baby. Fast forward to today, and it's ballooned to around half a trillion. We're talking about top-dog status in the healthcare world.

Now, let's get down to brass tacks. UnitedHealth's bottom line might not be the stuff of legends – a 6% profit margin over the past year.

But hold your horses – with over $300 billion in annual revenue, that 6% turns into a cool $18 billion-plus in profit.

And guess what? They've been raking in even more lately – $21.7 billion over four quarters.

"But will it double in value in a year or two?" you ask. Maybe not that fast, but hey, it's done it in five years before.

So, could UnitedHealth hit that mind-boggling $1 trillion mark by 2030? I wouldn't bet against it.

After all, UnitedHealth isn't just playing in the health insurance sandbox. It's the biggest kid in the playground – the largest health insurer in the United States and the biggest healthcare company globally.

For context, its closest peers are Cigna (CI) with $90.44 billion in market cap, Elevance (ELV) with $111.87 billion, and CVS (CVS) with $95.08 billion. You get the picture.

But here's the juicy part – UnitedHealth loves to shop. It's like the Pac-Man of healthcare, gobbling up companies left and right.

Just last year, it bagged Amedisys for a cool $3.3 billion, hot on the heels of its $5.4 billion acquisition of LHC Group. Talk about making moves.

Now, for my fellow investors, here's the sweetener: UnitedHealth also pays dividends, with a 1.4% yield. It might not sound like much, but this company's got a knack for growing dividends. It's like owning a golden goose that keeps laying more golden eggs.

So, what's the secret sauce for UnitedHealth potentially hitting that $1 trillion valuation? Simple – growth, growth, and more growth. It's not just selling insurance; it's into analytics and isn't shy about snapping up companies to beef up its portfolio.

Let's talk numbers. Management is eyeing an annual earnings growth somewhere between 13% and 16%. If UnitedHealth keeps hitting these home runs, its stock value climbing higher isn't just a possibility – it's a likelihood.

"But is it a good buy?" I hear you ask. Well, trading at around 23 times its earnings, it's a bargain compared to the average healthcare stock at 28 times earnings.

Simply put, this baby's got room to grow, and investors might just be willing to pay a premium for this gem.

So, when will it hit $1 trillion? If UnitedHealth sticks to the S&P 500 index's average 10% annual growth, we're looking at 2030 for that milestone.

But knowing UnitedHealth, which often outperforms the market, it could be sooner if it keeps up its projected annual growth rate.

In a nutshell, UnitedHealth Group isn't just a safe bet – it's a potential goldmine. With its continued growth, strategic acquisitions, and reasonable price tag, it's a shining star in any investment portfolio.

Mark my words – this is one stock that could make its investors very, very happy by 2030.

January 23, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 23, 2024
Fiat Lux

Featured Trade:

(PHARMA'S AI PLAY: A MASTERSTROKE OR MISFIRE?)

(AZN), (ILMN), (NVDA), (SDGR), (EXAI), (SNY), (BAIVF), (SNY), (GOOGL), (PFE), (IBM), (NVS), (BAYR), (RHHBY), (VRTX), (JNJ)

Pharma's AI Play: A Masterstroke or Misfire?

Biotech Letter

Faced with an aging blockbuster pipeline and a competitive landscape where some of its rivals are sprinting ahead, AstraZeneca (AZN) is making a bold move - doubling down on Artificial Intelligence (AI).

This isn't just about keeping up with the Joneses (or in this case, their industry rivals); it's a calculated gamble with the potential to redefine drug discovery. The million-dollar question is: will this tech-savvy move send its shares soaring or just keep it in the running?

Let's address the elephants in the room of drug development. It's a long and winding road, with more dead ends than a maze in a horror movie. The usual grind? Spend ages finding a glimmer of hope in therapy targets and molecules, only for a paltry 21% to get the regulatory thumbs up after clinical trials.

So, you can bet your bottom dollar that if there’s a technology promising to up those odds and speed things up, companies will be jumping on the bandwagon faster than you can say "biotech boom."

And AstraZeneca? They are fully committing to AI, making significant waves in the field.

Case in point: their recent team-up with Absci, an AI drug discovery outfit. They're talking about developing a cancer-fighting antibody, with a potential payout of up to $247 million in milestone payments. If this pans out, it could be the first of many high-fives between the two.

But AstraZeneca's history with AI extends beyond this collaboration. Last September, they put up to $840 million on the line with Verge Genomics, aiming to tackle neurodegenerative diseases.

Add to that their work with Illumina (ILMN) and Nvidia (NVDA) in 2021 for some supercomputing firepower, and you've got a company that's serious about its AI game. They’ve even got a couple of AI-bred candidates in their pipeline, though it’s hush-hush on how those are faring.

And before you think it’s all about the new kids on the block, AstraZeneca has been rubbing elbows with Schrodinger (SDGR) since before 2020, working on making their biological medicine modeling sharper than a tack.

However, AstraZeneca is far from being the lone ranger in this new frontier.

Exscientia (EXAI) and Sanofi (SNY) are pairing up to take on COPD with an AI-driven approach. Meanwhile, BenevolentAI (BAIVF) played matchmaker between baricitinib and its new role as a COVID-19 treatment contender.

Over at Google’s (GOOGL) DeepMind, they’ve cooked up AlphaFold, an AI program adept at unraveling protein structures – a feat that’s akin to finding a map to hidden treasure in drug design.

And let's not forget the big guns. Pfizer (PFE) has teamed up with IBM’s (IBM) AI and supercomputing prowess, a partnership that’s been pivotal in accelerating the development of COVID-19 treatments like Paxlovid.

Novartis (NVS) is another key player, wielding AI to shave years off its drug development timeline, a strategy that could redefine the pace of pharmaceutical innovation.

Not to be outdone, Roche (RHHBY) is utilizing AI for a spectrum of tasks, from target identification to the virtual screening of molecules, illustrating the technology’s versatility in the drug discovery process.

Bayer (BAYRY) is also making a significant bet on AI to uncover new therapies, focusing on areas like immuno-oncology and cardiovascular diseases, areas with immense potential for groundbreaking treatments.

Vertex Pharmaceuticals (VRTX) and Johnson & Johnson (JNJ) are part of this evolving landscape as well, leveraging AI to enhance various stages of drug development. Their involvement underscores the widespread adoption of AI across different phases of the pharmaceutical process, from initial research to clinical trials.

Now, let’s go back to AstraZeneca. Best-case scenario? They cut their R&D budget, which was a cool $9.8 billion in 2022 while keeping the pedal to the metal on their clinical trials.

Worst case? Their AI bets don't pay off big time. But let's be real, with AI tech moving faster than a New York minute, that's looking less and less likely.

So, should you invest in AstraZeneca stocks right now? Not so fast. Jumping on the AI bandwagon isn't a golden ticket on its own.

Remember, everyone and their mother in big pharma is chasing the same AI dream. For now, it’s a case of watch, wait, and see how this fusion of AI and pharmaceuticals reshapes the landscape of drug discovery and development. Keep your ears to the ground – this is one race you don't want to miss.

January 18, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 18, 2024
Fiat Lux

Featured Trade:

(A WEIGHTY IMPACT)

(LLY), (NVO), (MRNA), (AAPL), (AMZN), (GOOGL), (MSFT), (META), (NVDA)

A Weighty Impact

Biotech Letter

Today, let's talk about something that's stirring up quite the buzz in the investment community, something that's not just about numbers and charts, but about potentially changing lives.

Now, I'm sure you've heard of Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), Meta Platforms (META), and Nvidia (NVDA). These tech titans aren't just playing around with gadgets and gizmos; they're digging deep into the world of knowledge to uncover stuff we didn't even know was missing. And let's be clear, this isn't just some fancy artificial intelligence show-off; it's bigger, much bigger.

But, recently, other industries aren’t letting tech have all the fun.

The pharma industry, led by stars like Moderna (MRNA), Eli Lilly (LLY), and Novo Nordisk (NVO), is on the brink of what I'd call medical miracles.

We're looking at treatments that might kick some serious diseases to the curb – illnesses that we thought were just part of the unlucky draw in the genetic lottery.

Admittedly, figuring out the real worth of these innovations is a bit like trying to nail jelly to the wall – traditional financial analysis scratches its head at this sort of thing.

But for those of you who don't mind a bit of a rollercoaster ride, investing in these themes could be as rewarding as finding a forgotten winning lottery ticket in your old jeans.

Let's chew on obesity for a second. It's a big deal, literally and figuratively. It's the root of all sorts of nasty stuff like heart disease and diabetes.

Here's where Lilly and Novo Nordisk come in, swinging like heroes with their weight-loss drugs. These aren't just your average diet pills; we're talking about drugs that could turn the tables on major illnesses and even some curveballs like Alzheimer’s and sleep apnea.

Lilly's stock has been on a joyride, up 77% in the past year. Sure, by the bookworms' metrics, it's overvalued, but if you ask me, those numbers are playing catch-up to what these drugs could really do.

For context, imagine if you had bought Amazon or Apple back when they were just a bookstore and a computer company. Looking at their history and trajectory, Lilly and Novo Nordisk could be cooking up something similar.

And with over 20 studies lined up in the next five years, Lilly's stock, hanging around $625, could jump to a cool $840 by 2028 if things go well.

Keep in mind that the obesity treatment market is huge, and I mean, really huge. We're talking over 100 million potential customers in the U.S. alone.

And get this: insurance companies, those penny pinchers, are likely to cover these drugs because they're cheaper than surgeries.

Getting down to the specifics with Lilly, they've been making waves in the weight loss market with Mounjaro, raking in a sweet $2.9 billion in just nine months. And with Zepbound, it's like they've hit the jackpot twice.

Still, it's not a solo race; Novo Nordisk is right there with Wegovy and Ozempic. The demand is so hot that there were shortages last year. Talk about being in high demand!

But here's where Lilly might just have the upper hand. Their molecule, tirzepatide, is like the Usain Bolt of weight loss drugs – up to three times more effective than Novo Nordisk’s semaglutide.

And with the market expected to balloon to $100 billion by 2030, we're just seeing the opening act of what could be a blockbuster show.

With all this obesity talk, it’s important to understand that Lilly is no one-trick pony. They've got a whole stable of drugs treating everything from lymphoma to ulcerative colitis. And with over 20 programs in phase 3 studies, they're not running out of steam anytime soon.

Plus, here's the cherry on top: Lilly isn't just about making money; they're sharing the love with a 15% hike in their dividend.

That means if you jump on the Lilly train by Feb. 15, you're in for a treat in early March.

So, is Lilly a solid bet for the long haul? It sure looks like it. The excitement around their weight loss treatments is just one piece of the puzzle.

With a variety of drugs in their arsenal and an impressive pipeline, Lilly isn't just a flash in the pan. Sure, there are the usual hiccups like patent expiries and pipeline flops, but with their portfolio, they look set to weather any storms and keep the growth party going. I suggest you buy the dip.

January 16, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 16, 2024
Fiat Lux

Featured Trade:

(PHARMA GIANTS HUNTING FOR THE NEXT BIG THING)

(IMCR), (SNDX), (BPMC), (MRK), (JNJ), (HARP), (AMAM), (MDGL), (VKTX)