Mad Hedge Bitcoin Letter
October 14, 2021
Fiat Lux
Featured Trade:
(WHAT’S NEW IN BIOTECH)
(CGTX), (BIIB), (LLY), (ABBV), (NVS), (TAK), (PYXS), (PFE),
(AZN), (GILD), (GSK), (IMGN), (ISO), (TMO), (BIO)
As the biotechnology world is ever-evolving, with several companies going public every few months, let me share some of the most promising names that recently emerged.
The first is Cognition Therapeutics (CGTX), a company working on treatments for Alzheimer’s disease and macular degeneration.
Its most promising candidate is an Alzheimer’s treatment called CT1812, which is currently under Phase 2 trials. Looking at the timeline, CGTX expects to release topline data by 2023.
With the expected growth of the aging population, focusing on treating various forms of Alzheimer’s is a promising direction for Cognition Therapeutics.
In fact, the global market for this neurodegenerative disease is projected to grow from $2.9 billion in 2018 to a whopping $10.5 billion by 2025.
So far, the major competitors of Cognition Therapeutics in this area include Biogen (BIIB), Eli Lilly (LLY), AbbVie (ABBV), Novartis (NVS), and Takeda (TAK).
The second promising biotech company is Pyxis Oncology (PYXS), which is a spinoff from Pfizer (PFE).
Pyxis is focused on developing next-generation treatments targeting difficult-to-treat types of cancer.
Basically, the company’s goal is to create therapies that can directly kill tumor cells. It also wants to get rid of the underlying problems that lead to the uncontrollable spread of tumors and the weakening of the immune system.
To do this, Pyxis has come up with novel antibody drug conjugate (ACT) candidates and other monoclonal antibody (mAb) pipelines.
Its lead candidate is called ADC PYX-201, a potential treatment for non-small cell lung cancer and breast cancer.
The goal of ADC PYX-201 is to target actively multiplying tumors while boosting the immune response of the patient’s body. Pyxis plans to submit it as a non-small cell lung cancer treatment candidate by mid-2022.
If approved, then ADC PYX-201 will be under patent protection until 2037.
This holds great potential for Pyxis’ cashflow, as the market for non-small cell lung cancer worldwide is anticipated to rise from $6.2 billion in 2016 to over $12 billion by 2025.
With this potential of ADC treatments, Pyxis can expect competition from the likes of AstraZeneca (AZN), Gilead Sciences (GILD), GlaxoSmithKline (GSK), and ImmunoGen (IMGN).
The last name on today’s list is IsoPlexis Corporation (ISO).
This company is the first to focus on dynamic proteomics and single-cell biology in an effort to develop “walk-away automation” products that aid in shortening the therapeutic development timelines by acquiring “multiplexed proteomics with very low sample volumes that reflect in vivo biology to clarify lead candidates.”
In layman’s terms, IsoPlexis is working on a technology that aims to identify every protein in the body to speed up the development of new therapies for rare diseases.
This is a lucrative business, with IsoPlexis targeting at least $34 billion in the total addressable market.
Considering that IsoPlexis is a pioneer in this field, it is possible for it to gain the lion’s share of the segment and position itself as an undisputed leader for years.
More importantly, IsoPlexis can use its patented technology, “Proteomic Barcoded,” to expand the use cases to cover other lucrative markets.
For example, IsoPlexis can apply its technology to cancer immunology and targeted oncology by predicting the progression of cancer cells in the body.
Adding cell therapies to the company’s pipeline is also a very realistic possibility since its technology can be utilized to create CAR-T cell therapies as well.
In fact, IsoPlexis’ approach is already being used in developing treatments for leukemia and melanoma.
Another profitable avenue for IsoPlexis’ technology is the vaccines sector.
Since the development of vaccines requires profiling the responses of the respiratory and immune systems, the company’s data would accelerate the entire process.
So far, the major rivals of IsoPlexis in this space include Thermo Fisher Scientific (TMO) and Bio Rad Laboratories (BIO).
While all these biotech companies offer promising products and technologies, they’re all still in the early stages of development.
This makes them high-risk investments and are likely suitable for those who are willing to invest in the long term.
For those who want to see movement faster and sooner, it might be best to watch these stocks from the sidelines.
Mad Hedge Bitcoin Letter
October 12, 2021
Fiat Lux
Featured Trade:
(AN ANTI-BUBBLE HEALTHCARE STOCK TO KEEP YOU SAFE)
(VTRS), (PFE), (SNY), (RHHBY), (REGN)
Some stocks bring red-hot gains. These companies are thrilling. Most investors flock to these businesses like bees to honey. Then, there are stocks such as Viatris (VTRS).
You won’t hear much buzz about Viatris.
After all, this company develops generic drugs—a fairly boring business. At times, it feels like nobody even talks about this stock at all.
However, Wall Street claims that several stocks have more room to expand soon. Interestingly, the names aren’t your usual list of growth stocks that most investors expect to ascend. The largest expected gainers are boring stocks.
This is where Viatris becomes interesting.
One of the possible reasons that Viatris isn’t generating as much buzz is that it was only established in 2020. The company is the product of a spinoff between Pfizer’s (PFE) Upjohn unit and generic drugmaker Mylan.
The spinoff allowed Pfizer to concentrate more on developing its pipeline candidates, while Viatris focused on off-patent and generic drugs.
However, Viatris has been off to a slow start, with the stock down by over 28% this year. In fact, the company has reported net losses for three quarters in a row.
Needless to say, both resulted in having the stock deeply discounted.
While these can cause other investors to shy away from the stock, I look at it as part of the company’s growing pains.
And it looks like things are about to turn around soon.
By the end of this year, Viatris expects to reach cost synergies of roughly $500 million. Through major restructuring, the company anticipates doubling this to more than $1 billion by 2023.
As an early-stage business, Viatris offers a stable long-term investment.
While it recorded a somewhat flat performance at $4.6 billion in sales in June, the company’s lineup of new products signals growth ahead.
For example, Viatris estimates to generate roughly $690 million in revenue for its new products—a highly achievable projection for the company.
Just last July, Viatris scored approval for a biosimilar product called Semglee. This is an insulin biosimilar to the high-selling Lantus of Sanofi (SNY), which peaked at $6.4 billion in sales in 2015 and lost patent exclusivity in 2014.
Semglee is reported to be fully interchangeable with the reference drug, which means that Viatris’ biosimilar is the exact equal of Sanofi’s previous blockbuster.
Moreover, Semglee is priced at about $148 for five pre-filled insulin pens, offering a whopping 65% reduction from Lantus’ cost.
The significant price difference is clearly difficult to ignore, especially at a time when politics has joined the fray in drug pricing.
The ability of Viatris to undercut the prices offered by Big Pharma definitely signals long-term benefits in terms of the company’s bottom line.
Aside from Semglee, Viatris has seven more approved biosimilars on the market.
The list includes Roche’s (RHHBY) breast cancer treatment Herceptin, which peaked at $6 billion in sales, and Regeneron’s (REGN) AMD drug Eylea, which generates an average of $8 billion annually.
It even has AbbVie’s (ABBV) megablockbuster immunology therapy Humira, which averages $20 billion in sales annually.
While Viatris won’t be the only company marketing a biosimilar for Humira, the company has the advantage since its candidate, Hulio, already gained approval in Canada, Europe, and even Japan.
Meanwhile, Viatris’ near-term pipeline candidates hold the potential to generate $57 billion in sales. Adding the rest of its 31 biosimilar candidates could push the figure to $224 billion.
The expansion of the biologics market is anticipated to outpace traditional pharma in the future. From $300 billion in 2020, the biologics segment is projected to reach $690 billion by 2027.
Aside from its biosimilar programs, Viatris has also been working on its internal development plans.
This would mean developing new high-margin brand names as well as diversifying its portfolio to include novel therapies.
Viatris is projected to reach at least $35 per share in the coming months, showing off a promising 155% jump from its current price.
On top of that, investors have been enjoying a juicy payout of 3.2%—higher than the average 1.3% of the S&P 500.
Considering the risks brought by market correction, Viatris emerges as a prime candidate for a safe haven among investors.
That is, they can easily lock in on this relatively anti-bubble business that’s available at practically a bargain bin price.
Mad Hedge Bitcoin Letter
October 7, 2021
Fiat Lux
Featured Trade:
(A RARE BLUE-CHIP STOCK IN DEEP VALUE TERRITORY)
(MRK), (NVAX), (MRNA), (BMY), (XLRN)
Merck (MRK) is facing a huge problem. In roughly seven years, its top-selling megablockbuster cancer treatment Keytruda is set to lose its patent exclusivity.
This is a major concern for the company, considering that Keytruda comprised over a third of the their revenue in 2020.
This impending “doom” appears to have scared off investors, as Merck stock has been trading at at least 12 times the earnings expected within the next 12 months.
However, it looks like Merck is slowly gearing up to reveal the solutions it came up with to address this major problem.
The first sign of a turnaround is Merck’s recent news about releasing an oral antiviral pill for COVID-19.
Immediately after the release of the positive data, the biopharmaceutical giant’s $206 billion market capitalization climbed by $16 billion, showing off an 8.4% in its share price.
In comparison, other COVID-19 vaccine stocks experienced significant selloffs. Novavax (NVAX) fell by 12%, while Moderna (MRNA) slipped by 11%.
Merck’s COVID-19 pill, called Molnupiravir, is expected to be a cheaper, safer, and more effective alternative to the current antiviral treatment available today, which is Remdesivir from Gilead Sciences (GILD).
Molnupiravir has been so promising that the US government already sealed a $1.2 billion contract with Merck to get 1.7 million doses of the drug months before the announcement.
While there’s still no final word on the pricing, the US government’s deal places the drug at $700 per dose.
Given its manufacturing capacity, Merck disclosed that it could easily produce six times that order, with the company targeting roughly 10 million courses by the end of 2021.
Using these numbers, it’s easy to see how Merck can generate $7 billion in sales of Molnupiravir alone this fourth quarter.
Although Molnupiravir’s sales won’t be a game-changer for Merck in the same way Moderna’s COVID-19 vaccine candidate changed its landscape, the $7 billion revenue would still offer a significant boost.
Another 10 million doses of Molnupiravir are slated for release by 2022, indicating higher sales for Merck in the coming months.
Aside from working as an antiviral pill, Molnupiravir is also believed to be effective against other known viruses like influenza.
Considering the surging demand for travel these days, there’s a huge possibility that Merck’s oral drug will be handed out like candy canes as a potential preventive measure.
After all, the efficacy of the COVID-19 vaccines, especially for those who got jabbed earlier than most, would start to wane at this point.
Taking into account the demand for this pill worldwide, it’s realistic to assume that Molnupiravir can generate $35 billion to $70 billion in revenue for Merck.
Even before the news about Molnupiravir broke, Merck already raised its revenue guidance for 2021 to somewhere between $46.4 billion to $47.4 billion, signaling 12% to 14% growth.
Aside from its COVID-19 drug, Merck has been busy expanding its portfolio that already covers oncology, hepatitis, and HPV.
One of its latest moves to achieve this goal is its $10.8 billion acquisition of Acceleron Pharma (XLRN)—a deal Merck snagged right under the nose of the strongest contender in the race, Bristol-Myers Squibb (BMY).
Merck’s acquisition of Acceleron will boost the cardiovascular pipeline of the company, including treatments for life-threatening blood vessel conditions.
These are on top of its growing vaccine business, which still has four queued for Phase 2 clinical trials and another for regulatory review.
These candidates effectively make Merck a critical player in the rapidly expanding vaccine market—a segment that’s projected to rise from $42 billion in 2020 to $74 billion by 2028.
Overall, Merck is one of the unparalleled blue-chip stocks trading in deep-value territory these days.
It’s hitting all cylinders, showing off a stable expansion of its key franchises and an impressive balance sheet to fund its R&D plans.
Merck has become the poster child of a remarkable stock valued at a reasonable price.
Mad Hedge Biotech & Healthcare Letter
October 5, 2021
Fiat Lux
FEATURED TRADE:
(A BIOTECH STOCK THAT LETS YOU SLEEP THROUGH THE NIGHT)
(AMGN), (AZN), (GSK), (REGN), (SNY), (MRK)
Great investors have learned that the critical element when it comes to long-term investing is concentrating on stocks that hold a profound presence in their fields and that will continue to grow in the decades to come.
In terms of trends, the best thing to do is to determine something that will affect the world by generating millions—if not billions—of steady customers.
Among the stocks in the biotech industry today, one stands out to benefit from solid future demand for its products: Amgen (AMGN).
Amgen is one of the biggest biopharmaceutical companies across the globe, holding an equity market capitalization of roughly $127 billion. Despite its size, it simply can’t quite catch a break, with its share price continuing to slide in the past week.
While short-term investors may see this as a weakness, it’s moments like these that distinguish genuine value investors from the rest.
Let’s take a look at a company that has been thrown in the bargain bin for no apparent reason, and understand why this could be our opportunity.
A recent promising addition to Amgen’s pipeline is its experimental asthma drug, Tezepelumab, which it’s co-developing with AstraZeneca (AZN).
There are approximately 2.5 million patients worldwide who suffer from severe, uncontrolled asthma, accounting for almost 50% of all asthma-related expenses in the healthcare system.
This is because the majority of the 439,000 asthma-related hospitalizations, as well as 1.3 million emergency room visits annually in the US alone, are caused by severe, uncontrolled asthma.
Moreover, it was found that 1 in 5 severe asthma patients tend to develop a benign growth called nasal polyps in the sinuses of their noses. These can end up blocking their nasal passages, worsening their breathing problems, and diminishing their sense of smell.
This is the very market that Amgen’s Tezepelumab targets to help.
Tezepelumab is the first and only treatment that focuses on the symptoms of severe, uncontrolled asthma patients.
Considering the positive results of its late-stage trials, Amgen and AstraZeneca are confident that Tezepelumab will receive regulatory approval from the US FDA by the first quarter of 2022.
When that happens, this will mark Amgen’s first-ever foray into the asthma treatment sector—and it’s entering the market with a potential blockbuster to boot.
The global asthma market is projected to grow from $20.6 billion in 2020 to $37.3 billion in revenue by 2030.
So far, the other names aiming to dominate this segment include GlaxoSmithKline (GSK), Regeneron (REGN), and Sanofi (SNY).
Considering the competition, a modest estimate is to expect Tezepelumab to seize at least 5% of the market share following its approval.
That would work out to roughly $1.9 billion in yearly revenue, divided between AstraZeneca and Amgen.
Taking into account that Amgen is forecasting its 2021 revenue to be within the range of $25.8 billion and $26.6 billion, the addition of $1 billion annually would surely move the needle.
Moreover, the cherry on top is that Tezepelumab is a clear indicator of the company’s efforts to diversify its revenue base and enter a market that it has yet to establish its presence.
Apart from Tezepelumab, Amgen has also been working on expanding its blockbuster lung cancer drug Lumakras, which generated $2.5 billion in annual sales.
To date, Lumakras is expected to emerge as a solid contender to unseat Merck’s (MRK) Keytruda in the lung cancer segment.
In addition, the company is studying how to utilize Lumakras as a potential treatment for colorectal cancer.
Amgen has also been expanding its pipeline of biosimilar candidates.
The most exciting candidates include its biologic version of Johnson & Johnson’s (JNJ) psoriatic arthritis and psoriasis medication Stelara, Regeneron’s chronic eye disease drug Eylea, and AstraZeneca’s rare disease treatment Soliris.
Even AbbVie’s (ABBV) impending loss of exclusivity for its top-selling rheumatoid arthritis drug Humira is under the company’s radar, with Amgen already prepared to launch its own biosimilar domestically in the form of Amjevita by 2023.
Getting the regulatory green light for these treatments would allow Amgen to poach on hundreds of millions, if not billions, in annual revenue from its competitors.
Apart from its pipeline candidates and strong performance in niche segments, Amgen has demonstrated a solid track record when it comes to capital returns via share buybacks.
In the second quarter of 2021 alone, the company has splurged on 6.5 million in shares repurchases. Amgen expects to reach a total of $3 billion to $5 billion in total repurchases throughout the year.
This strategy has pushed Amgen in its goal to continuously deliver market-beating returns in the past decade, as shown by its 451% total—overtaking the 384% return of the S&P 500.
Buying shares of a company when it’s declining can be an excellent step to set yourself up for future gains when the stock bounces back.
However, not all struggling stocks can recover.
So, it’s crucial to determine the reason for their fall. If the business itself is stable and solid, a decline in value might just be the opportunity you need to invest.
The truth is, nothing has actually changed when it comes to Amgen’s long-term stock growth prospects. It's still the company with a slew of top-selling products and more pipeline candidates expected to become blockbusters in the coming years.
All told, Amgen holds roughly 20 revenue-generating products in its diverse portfolio, and not a single drug accounts for over 20% of the company’s continuously rising top line.
Overall, I think Amgen is an A-rated company with a reasonable yield and a promising upside.
Mad Hedge Biotech & Healthcare Letter
September 30, 2021
Fiat Lux
FEATURED TRADE:
(THE BIRTH OF A TRUE INNOVATOR IN BIOTECH)
(NVAX), (MRNA), (BNTX), (PFE), (JNJ), (AZN)
Innovation and establishing groundbreaking frontiers are never straightforward. This high-risk, high-reward endeavor is littered with skeletons of failure along the way.
The situation is particularly prevalent in the biotechnology and healthcare sector. However, there are a handful of companies that manage to navigate the risks.
Novavax (NVAX) is one of them.
While the chance to become one of the early investors to buy Novavax at $5 has passed, I think the stock is still a good opportunity.
Right now, we’re at the foothills of its mid-phase potential—a few steps away from its high-growth stage.
At this point, what was previously assumed as a high-risk investment in Novavax can already be perceived as a calculated risk, and the reward can now be seen from a distance.
Simply put, there’s still a chance to invest in Novavax because its story is still being written.
So far, Moderna (MRNA) has a market capitalization of $183.50 billion, while BioNTech (BNTX) has $85.61 billion. In comparison, Novavax comes in positively cheap at $19.16 billion.
The key difference is that Moderna and BioNTech already have their COVID-19 vaccines out in the market.
As for Novavax, the biotech’s candidate, NVX-CoV2373, is still waiting for the green light for its first Emergency Use Authorization.
When government agencies begin letting Novavax distribute its COVID-19 vaccine, though, the stock is projected to soar.
The approval for NVX-CoV2373 is almost inevitable, as the vaccine showed an impressive 96.4% efficacy against the original strain—a higher percentage than Pfizer (PFE) and Moderna’s candidates.
If all goes well, the vaccine could be available by the fourth quarter.
As golfers would say, it’s only a chip and a putt from this point to get Novavax’s COVID-19 vaccine out in the market.
Given this projection, Novavax is expected to be the No. 3 COVID-19 vaccine distributor globally, easing out competitors Johnson & Johnson (JNJ) and AstraZeneca (AZN).
Despite not being a first mover in the COVID-19 vaccine race, Novavax can still seize a considerable market share.
The majority of the global population has yet to be vaccinated, and the company has already secured a deal for 2 billion doses in 2022.
On top of that, biotech has several agreements, including 100 million doses for the United States, 200 million doses for Europe, 150 million doses for Japan, and more than 1 billion doses for some developing countries.
In fact, the United States paid an advance of $1.3 billion for 100 million doses. That puts NVX-CoV2373 at roughly $13 per dose.
Although the purchase agreements are confidential, the prices for Japan and Europe are likely to be higher, while the developing countries will be given discounted rates.
At this rate, it’s possible that Novavax’s revenue in 2022 will be higher than its current market capitalization.
However, Novavax’s prospective path to becoming a high-reward investment will most probably come on the coattails of its COVID-19 vaccine, NVX-CoV2373.
Despite getting overtaken by Pfizer and Moderna in the COVID-19 vaccine race, there’s a critical area where Novavax has a massive headstart from its larger rivals: the COVID-19/influenza vaccine combo.
Not only does Novavax have several candidates well on their way to clinical trials, but the company’s combo vaccines also have the potential to outperform the majority—if not all—of its competitors aiming to market similar products.
So far, Novavax’s flu candidate NanoFlu appears to be a frontrunner as it meets all the primary endpoints set for Phase 3 clinical testing.
If everything falls into place, then Novavax would be able to bring a COVID-19/flu vaccine to market by 2025.
While three to four years may seem like a long time, keep in mind that neither Moderna nor Pfizer has a timeline for any potential product in this segment.
Although we don’t exactly know the future pricing for these combo vaccines, we can use the COVID-19 vaccine earnings of Pfizer and Moderna as guides.
Pfizer and BioNTech anticipate roughly $33 billion in revenue, while Moderna estimates more than $20 billion. Combined, that’s over $50 billion.
It’s evident that a combo vaccine would signify a multi-billion-dollar market, and obviously, more than one player would be taking a crack at it.
Nonetheless, the first to market could end up with the largest share—a fact that Pfizer turned into reality with its weeklong headstart over Moderna in the COVID-19 vaccine race.
While Novavax failed to keep up in this race, the company appears to be ready to seize its second chance to lead the way in the COVID-19/influenza combo vaccine race instead. Needless to say, this potentially blockbuster product could become an absolute game-changer.
