“Computers are useless. They can only give you answers.” – Said Artist Pablo Picasso
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Global Market Comments
October 1, 2019
Fiat Lux
Featured Trade:
(LAUNCHING THE NEW MAD HEDGE BIOTECH AND HEALTHCARE LETTER)
(THE NEW AI BOOK THAT INVESTORS ARE SCRAMBLING FOR),
(GOOG), (FB), (AMZN), MSFT), (BABA), (BIDU),
(TENCENT), (TSLA), (NVDA), (AMD), (MU), (LRCX)
Mad Hedge Biotech & Healthcare Letter
October 1, 2019
Fiat Lux
Featured Trade:
(THE PLAYERS GUIDE TO BIOTECH INVESTING)
(AMGN), (PFE), (NOVN), (ABBV), (ABT),
(AGN), (ROG), (GSK), (CELG), (JNJ), (BMY)
You can’t watch a game without a program, and the lineup for biotech and healthcare is truly astonishing. No surprise then that the fields account for more or less than 17% of US GPD.
Here is a listing of the biggest $100 billion plus products you have never heard of. The good news is that you have just stumbled across a sector that will generate no less than a staggering $1.4 trillion in sales over the next five years.
That means it’s certainly worth your time getting to know this field. With this amount at stake, it’s no wonder companies manufacturing these blockbuster drugs are sparing no expense to fight off patent vultures.
A good example is Amgen (AMGN), which recently won its case to extend the patent life of rheumatoid arthritis biological Enbrel against Novartis AG’s (NOVN) biosimilar arm Sandoz. Since each extra hour added to patent life means millions of dollars (and sometimes billions) in sales, the additional 10 years of exclusivity for Enbrel is a massive victory for Amgen.
In a recent study released by Evaluate Pharma, Enbrel was ranked third in the top 10 biggest sellers up to 2024. The forward-looking consensus projection anticipates Amgen’s golden goose to hit roughly $140 billion in total revenues in five years – a truly impressive performance particularly for a drug that has been around for more than 20 years. However, Enbrel’s longevity pales in comparison to the other behemoths in the biopharma realm.
Up until 2018, Pfizer’s (PFE) Lipitor held the title of earning the highest lifetime sales in the industry. Since its launch in 1997, the cholesterol drug has raked in $164.4 billion in revenues so far with the number estimated to reach $180 billion by 2024. Lipitor’s success is highlighted more by the fact that it's under a small molecule status and holds approval for a very narrow indication.
Overtaking Lipitor to take the top spot is AbbVie’s (ABBV) rheumatoid arthritis treatment Humira, which closed with $20 billion in sales in 2018 alone. While some AbbVie investors frown upon the over-reliance of the company on Humira, it appears that the efforts to protect the drug has paid off big time.
With patent protection (132 approved patents!) safeguarding its exclusivity in the market, Humira is projected to reach a total of $240 billion in revenues by 2024. Clearly, the rewards they’ve been reaping show no signs of abating anytime soon.
More importantly, Humira’s robust sales, which makes up almost 70% of the company’s profits, has provided AbbVie with the financial capacity to finally get out of the shadow of parent company Abbott Laboratories (ABT) and come up with its own pipeline. As it happens, AbbVie’s efforts towards this direction have already started with the massive purchase of Allergan (AGN) for $63 billion this year.
Apart from Lipitor, Humira, and Enbrel, there are three more blockbuster products with sales that hit the $100 billion mark as of 2018 -- a figure that would make Ecuador proud to claim as their annual GDP. These are Roche Holding Ltd. Genussscheine’s (ROG) chemotherapy drug Rituxan, Amgen’s anemia treatment Epogen, and GlaxoSmithKline’s (GSK) asthma medication Advair.
One biopharma bestseller that leapfrogged a lot of other drugs in the market is multiple myeloma medication Revlimid -- aka the drug that built Celgene (CELG). With an entry date of 2008, this drug is the newest one on the list. While Revlimid’s sales are impressive, what’s actually quite exciting is the fact that its projected revenues easily outstrip its already notable sales of $53.69 billion.
By 2024, this Celgene blockbuster is estimated to reach $123.64 billion in sales. There’s a caveat to this though as Revlimid’s success in the years to come is dependent on how Celgene plans to deal with generic competition chomping at the bit and ready to attack once the drug reaches its 2022 patent expiration date.
Another big-ticket drug that might see a bit of a decline in sales soon is from Johnson & Johnson (JNJ). While the company has always been aggressive when it comes to dominating the market for its Crohn's Disease drug Remicade, an investigation by the Federal Trade Commission (FTC) might put a damper on things soon. According to recent reports, JNJ has been suspected of contracting payers to ensure market control and stave off competitors.
Meanwhile, the three horsemen of Roche, namely, Rituxan, cancer and eye disease medication Avastin, and breast cancer treatment Herceptin, reached a collective amount of $365 billion in total sales. These three are anticipated to stay put on top of the industry in the next five years as well, thanks to their competitive pricing and aggressive strategies to protect their patents.
Rounding out the list is Amgen’s Epogen, which is expected to add $107.90 billion to the already astounding $115.87 billion it generated for the company. Meanwhile, GSK’s Advair, which brought in $113.61 billion, is expected to pour in an additional $104.20 billion by 2024.
Interestingly, the majority of the top 10 franchise drugs are biologics except for Sanofi’s (SAN) ulcer treatment Zantac, Bristol-Myers Squibb Co’s (BMY) heart medication Plavix, Advair, and of course, Lipitor. In fact, this is considered as the primary reason for their capability to fight off potential copycats for years.
In some cases, their monopoly of the market has allowed them to expand to include various other indications in their coverage. The massive sales of biologics are also rooted in their ability to demand big-ticket reimbursements. Unlike their generic competitors, brand recognition alone makes it more convenient for patients to ask for compensation.
Needless to say, the success stories of these drugs make it quite obvious why these biopharma companies employ a battalion of legal experts to fend off the rise of generics. While the onslaught of biosimilars cannot be helped, these lawyers ensure that patients opting for these versions of the medication would find it incredibly difficult to ask for biosimilar reimbursements.
The Winner So Far
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Global Market Comments
September 30, 2019
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or INTERESTING TIMES ARE UPON US)
(MO), (PM), (FXB), (SPY), ($INDU), (GS), (MTCH), (USO), (UUP)
“May you live in interesting times.” The question is whether this old Chinese proverb is a blessing or a curse.
Our beleaguered lives have certainly been getting more interesting by the day, if not the hour. Trump has been withholding military aid from foreign leaders to fish for dirt on those who may run against him in 2020. The prospects of the Chinese trade negotiations seem to flip flop by the day.
Prospective IPOs for Saudi ARAMCO and WeWork have been stood up against a wall and shot. The Altria (MO) - Philip Morris (PM) merger went up in smoke. Brexit (FXB) has turned into a runaway roller coaster that has lost its brakes. And that was just last week!
All of this is happening with the major indices (SPY), ($INDU) mere inches away from all-time highs, with valuations at the high end of the decade-old band. A worse risk/reward for initiating new positions I can’t imagine. I think I’ll go take a long nap instead.
There are times to trade and there are times to engage in research and this is definitely time for the latter. That means when it is time to strike, you already have a list of short names on which to execute. The worst time to initiate research is when the Dow is down 1,000 points.
I believe the markets are gridlocked until we get a good look at Q3 corporate earnings. If they are as bad as the macro data is suggesting, markets will tank. If they aren’t, we may see a begrudging slow-motion grind up to new highs.
Our launch of the Mad Hedge Biotech and Healthcare Letter was a huge success. Let me tell you, we have some real blockbusters lined up in our newsletter queue. The Tuesday letter will have a link that will enable you to get in at the $997 a year founders’ price. Otherwise, you can find it in our store now for $1,500 a year. Please click here.
The WeWork IPO is on the Rocks, with the CEO soon to be fired for self-dealing. In any case, the company has minimal added value and will not survive the next recession when the bulk of its tenants walk. Don’t touch this one on pain of death, even down three quarters from its original valuation.
Watch out for October, says Goldman Sachs (GS), which will see a volatility (VIX) spike 25%. Shockingly poor Q3 corporate earnings results could be the trigger with almost every company negatively impacted by the trade war. This could set up our next entry point on the long side.
The Saudi ARAMCO IPO is on the skids in the wake of the mass drone attack. Terrorist attacks on your key infrastructure is not a great selling point for new shareholders. It just underlines the high-risk investing in the area. The world’s largest IPO may get cancelled.
A huge killing was made on the Thomas Cook affair. It looks like short sellers raked in $2.7 billion in profits on the collapse. Some 600,000 mostly British travelers were stranded or had future vacations cancelled.
Thomas Cook never figured out the Internet, were destroyed by the collapse of the pound triggered by Brexit and, horror upon horrors, bought an airline. It’s all great news for surviving European tour operators and discount airlines. Airfares are already rising.
The S&P Case Shiller ticked up in July, showing that the National Home Price Index rising 3.2%. It’s the first positive move in more than a year. It’s got to be super-low interest rates finally kicking in. But the real move up won’t start until SALT deductions come back in 18 months.
That went over like a lead balloon. From the moment Trump started speaking at the United Nations, stocks went into free fall, dropping 450 points from top to bottom. It’s trade war against everyone all the time with his withdrawal from globalization. Oh, and if you want to resist America’s incredible military might, we will crush you. It’s not what traders wanted to hear.
In the meantime, the impeachment moved forward, with younger Democrats forcing Pelosi’s hand. The Ukraine scandal, a Trump effort to have candidate Joe Biden arrested, was the stick that broke the camel’s back. Fortunately, the stock market could care less. Stocks rose 20% during the last impeachment in the 1990s.
US Consumer Confidence dove in September from 133 estimated down to 125.1 as trade war concerns take their toll. It’s one of the first September data points to come out and presages worse to come. News fatigue has to be a factor.
Bitcoin Crashed 15% to a new three-month low, hitting $7,944. Other cryptos fell 20%. All of the explanations were technical as they always are with this bogus asset class.
The Vaping Crisis demoed the Altria-Philip Morris merger. Suddenly, the crown jewels are toxic and about to be made illegal. The Juul CEO has resigned and the company may be about to go down the tubes. One of the largest mergers in history that would have created a $200 billion company has been tossed on the dustbin of history.
In a rare positive data point, New Homes Sales soared 7.1% in August to a 713,000 annualized rate. Median sales prices rise by 2.2% YOY to $328,400. Inventories drop from 5.9 to 5.5 months. The big numbers are happening in the south and west. Historically low-interest rates are kicking in big time.
The FTC Slammed Match Group (MTCH), the owner of Tinder and OK Cupid, for security lapses and scamming their own customers. Apparently, that gorgeous six-foot blond who speaks six languages who want to meet me if I only subscribed doesn’t actually exist. Oh well.
Q2 GDP final read came in at 2.0% with no change from the last report. Coming quarters will almost certainly be worse as the chickens come home to roost from a global trade war. We may already be in a recession and not know it. Inventories are building at a tremendous rate. Certainly, Fortune 500 CEOs think so.
Tesla deliveries may hit new high in Q3, topping 100,000, according to last week’s leak. The stock is back in play. It looks like I am going to get a new entertainment package upgrade too.
The Mad Hedge Trader Alert Service has blasted through to yet another new all-time high. My Global Trading Dispatch reached new apex of 336.07% and my year-to-date accelerated to +39.47%. The tricky and volatile month of September closed out +3.08%. at My ten-year average annualized profit bobbed up to +34.53%.
Some 25 out of the last 27 trade alerts have made money, a success rate of 92.59%. Under-promise and over-deliver, that's the business I have been in all my life. It works.
I took profits in my short position in oil (USO) earlier in the week, capturing a 12% decline there. That gives me a rare 100% cash position. I’m itching to get back in, but conditions right now are terrible
The coming week is all about the September jobs reports. It seems like we just went through those.
On Monday, September 30 at 9:45 AM, the Chicago Purchasing Managers Index for September is out.
On Tuesday, October 1 at 10:00 AM, the US Construction Spending for August is published
On Wednesday, October 2, at 8:15 AM, we learn the ADP Private Employment Report is out for September.
On Thursday, October 3 at 8:30 AM, the Weekly Jobless Claims are printed. At 3:00 PM, we get US Vehicle Sales for September.
On Friday, October 4 at 8:30 AM, the September Nonfarm Payroll Report is announced. Last month was a big disappointment so this month could set a new trend.
The Baker Hughes Rig Count is released at 2:00 PM.
As for me, I’ll be camping out with 2,500 Boy Scouts at the Solano Fair Grounds to attend Advance Camp. That’s where scouts have the opportunity to earn any of 50 merit badges in a single day.
I will be teaching the Swimming Merit Badge class. The basic idea is that if you throw a scout in the pool and he doesn’t drown, he passes. Personally, I wanted to take the welding class. The bonus is that we get to ride nearby roller coasters at Six Flags for free.
Good luck and good trading.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
