Mad Hedge Biotech & Healthcare Letter
July 9, 2020
Fiat Lux
Featured Trade:
(DOUBLING UP AGAIN ON BIOTECH),
(BMRN), (VRTX), (GILD), (MRNA), (CRSP)
If the volatility of the stock market lately has been making you sick, then it might be time to add more biotechnology and healthcare stocks to your portfolio. They’re all having the effect of dragging each other up in this superheated environment.
Investors looking for these businesses can find a safe haven in rare diseases big player BioMarin Pharmaceutical (BMRN), which has $16.5 billion in market capitalization.
While most businesses languished since the pandemic broke this 2020, this biotechnology company’s shares rose by 12% this year. That’s not where it ends, though.
BioMarin could still pick up even more momentum despite the second wave of COVID-19.
The company currently has an extensive pipeline aimed at rare genetic diseases, with seven already approved and marketed in over 75 countries across the globe.
Looking at BioMarin’s first quarter earnings report for 2020, the company recorded a revenue of $502.1 million. This shows a 25% increase from the $400.7 million it raked in during the same period in 2019. It also handily beat the analysts’ estimate of $468.8 million.
Among BioMarin’s products, genetic metabolic disorder infusion Naglazyme is considered the top-selling treatment.
Sales of this product climbed 32% year over year in the first quarter to hit $27.4 million, with the jump primarily attributed to an increase in sales in Russia and Brazil.
However, the rising stars of BioMarin are two enzyme replacement treatments.
One is genetic blood disorder treatment Palynziq, which skyrocketed by 181% year over year to reach $22.3 million.
The other is Batten disease treatment Brineura, which soared by a whopping 97% to rake in $24 million.
Three of BioMarin’s drugs also performed well during this quarter.
Phenylketonuria drug Kuvan recorded $15.1 million in sales, up by 14% from the same period in 2019.
Meanwhile, Morquio A syndrome medication Vimizim generated $11.4 million in sales, showing off a 9% year over year jump as well. As for Aldurazyme, this Hurler syndrome drug’s sales rose by 23% to reach 10.4 million.
Now, the company is looking into another rare-disease treatment, which could cover Hemophilia A therapies via its experimental gene therapy Roctavian. This can open up a huge market for BioMarin, with over 20,000 Americans suffering from this disease.
Roctavian is expected to receive the FDA green light earlier than its August 21 decision date, possibly marking another blockbuster drug added to BioMarin’s pipeline.
Needless to say, the steady sales growth of these products served as the major driver of the company’s improving bottom line.
Over the past 10 years, the annual revenue of BioMarin has consistently climbed and beat analysts’ expectations -- a trend that’s likely to go on in the next decade as well.
Another company that built its name on rare diseases treatments is Vertex Pharmaceuticals (VRTX).
While most stocks struggle to deal with black swan situations like the COVID-19 pandemic, Vertex is poised to enter the $100 billion market cap club soon.
In fact, the company recently updated its 2020 guidance, increasing its initial estimate from $5.1 billion and $5.3 billion to $5.3 billion to $5.6 billion.
In sum, Vertex is poised to continue its upward trajectory despite the current economic landscape.
The confidence in its growth is bolstered by its recent earnings report for the first quarter of 2020, which indicated an impressive 77% year over year to reach a net revenue of $1.5 billion.
At the moment, Vertex has $61.7 billion in market capitalization, with the company transforming into the most dominant player in the cystic fibrosis (CF) space. Actually, Vertex holds the monopoly on the approved drugs used to treat CF, namely, Kalydeco, Orkambi, and Symdeko.
Apart from its efforts to continuously dominate the CF sector, Vertex also has several moonshots that can eventually turn into major catalysts.
Among those is its partnership with CRISPR Therapeutics (CRSP).
The two biotechnology companies are developing a gene therapy called CTX001 which can cure rare genetic blood diseases. Specifically, CTX001 is designed to cure beta-thalassemia and sickle cell disease.
Apart from its partnership with CRISPR Therapeutics, Vertex also acquired Semma Therapeutics in 2019 with the goal of coming up with a cure for Type 1 diabetes. If things go as planned, a gene therapy for this genetic disease will advance to clinical testing by early 2021.
While the world is mired in crisis, the biotechnology sector has been fueled with excitement particularly because of the potential COVID-19 vaccines and cures from companies like Gilead Sciences (GILD) and Moderna (MRNA).
With insistent whispers that a second wave of the deadly COVID-19 is well on its way, opportunistic investors are actively seeking defensive stocks with businesses that can withstand the second wave of infections.
Both BioMarin and Vertex offer safe bets in this increasingly unpredictable world. Aside from proving their capacity to expand, both also have incredible room for growth.
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
July 9, 2020
Fiat Lux
SPECIAL EARLY RETIREMENT ISSUE
Featured Trade:
(HOW TO JOIN THE EARLY RETIREMENT STAMPEDE)
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
Mad Hedge Technology Letter
July 8, 2020
Fiat Lux
Featured Trade:
(THE ONLY RETAIL PLAY YOU WANT TO KNOW)
(OSTK), (W)
As U.S. virus cases explode, the shelter-in-home trade is back in full force, meaning investors need to look at Overstock.com, Inc. (OSTK).
We are talking about parabolic action in a stock price with shares up 16% yesterday alone and even doubling in the last 40 days.
The U.S. is now hugging that 50,000 cases per day mark and it is only a matter of time until the health crisis spirals so far out of control that everybody will be back inside online shopping again on their touchpads.
And if it doesn’t get that bad, it certainly will trend in that direction which is why Overstock.com will be back in vogue.
The short-term performance validates my thesis that Overstock.com is going through a renaissance as it goes from the edge of the periphery to a tech darling.
Revenue in April and May were up 120% year-over-year as the company expects to see continued momentum in the near-term, Overstock CEO Jonathan Johnson remarked during a Fox Business interview.
Consumers "still aren't ready" to return to furnishing stores to test couches, beds, and other furniture due to the coronavirus pandemic, Johnson said. The online venue clearly remains "the place" to buy home furnishing items.
Overstock.com wholeheartedly believes they will experience "strong" double-digit growth rate through the summer.
The mother of all tailwinds has legs and you might think of Overstock as a smaller e-commerce store in the mold of Amazon.com, but they have really taken the business model up a notch.
Overstock started out as a pure play on online retail operations, based on a low-cost business model that involves the selling of excess inventory from factories and other retailers at discounted prices.
Overstock.com Inc. became a household name as an e-commerce pioneer, but in recent years, excitement in the investment community was focused more on the company’s blockchain efforts.
The pandemic changed the world and the company is dusting off its e-commerce playbook.
Mushrooming sales at Overstock’s retail business have helped transform a timid stock to one of the Covid-era’s best performers, an irony for a division that had long been considered for sale.
Overstock shares have gained nearly 11-fold since closing at a record low on March 16, and this is just the beginning as the administration hopes to convince the population that the virus doesn’t need any managing.
Sweeping the carnage of the virus under the carpet makes no sense, and with the internet disseminating information and disinformation, will Americans be inclined to believe the virus has no teeth?
It’s hard to wrap our heads around the US government’s response to a global health crisis and the bountiful harvest the tech sector is collecting.
They hardly needed it.
Tech was crushing it before the pandemic.
If you strip out the earnings of the Big 6 of Facebook, Amazon, Apple, Microsoft, Netflix, and Google, there is no earnings growth for the last five years in any sector.
Stocks went up purely based on excess liquidity and a monstrous corporate tax break.
Then the administration’s disregard of the health crisis gifted accelerating revenue to the tech sector while every other sector was cruelly pillaged.
Granted, the U.S. administration had no intention to hammer non-tech businesses, but that is exactly what is playing out.
So now this is what you get – a once sluggish tech stock like Overstock.com turning into an e-commerce pandemic play on steroids overnight.
The stock is frantically gapping up almost every day and it was just a few years ago when the company was really grasping at straws by jumping on the cryptocurrency bandwagon.
The U-turn by CEO Jonathan Johnson says it all as he has “no interest” in selling the e-commerce business which he was desperate to sell last month.
And just based on the news that Johnson didn’t sell the e-commerce unit last month, the stock doubled.
It’s unfathomable times in the tech sector.
The decor and home improvement market could end up benefiting from a total of $200 billion in an annual tailwind because of the pandemic’s effect on consumers.
If consumers are looking for a similar e-commerce play, then Wayfair (W) should fit the bill.
It’s getting to the point where if the late first wave or early second wave hits harder than the initial wave in March, there might be nowhere else to buy home furnishings and décor but at e-commerce stores.
I am bullish Overstock.com
“Success in creating AI would be the biggest event in human history. Unfortunately, it might also be the last, unless we learn how to avoid the risks.” – Said English theoretical physicist Stephen Hawking
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
July 8, 2020
Fiat Lux
Featured Trade:
(TRADING THE BLUE WAVE STOCK MARKET),
(FB), (AAPL), (MSFT), (AMZN), (ADBE), (SQ), (PYPL), (CRM), (SGEN), (REGN), (ILMN) (FEYE), (PANW), (AMD), (MU), (NVDA), (TSLA), (LEN), (PHM), (KBH), (XOM), (CVX), (XOM), (RTN), (NOC), (LMT), (KOL), (X), (GE)
