(A) Archives - Mad Hedge Fund Trader

The Bright Side Of A Dark Diagnosis

Let's face it. Cancer is still kicking our collective butts.

Despite all the fancy lab coats and high-tech gadgets, cancer remains the second-leading cause of death in the U.S. It's like that annoying party guest who just won't leave, no matter how many hints you drop.

This year alone, more than 2 million Americans are expected to hear those dreaded words: "You have cancer." And sadly, over 600,000 of our fellow citizens will lose their battle with this relentless foe in 2024.

Before you start thinking I'm all doom and gloom, let me flip the script for you. Where there's a problem, there's opportunity. And in this case, we're talking about a massive opportunity to put your investment dollars to work.

Back in 2020, America shelled out a whopping $200 billion on cancer treatments. By 2030, that number is projected to skyrocket to over $245 billion. That's a growth trajectory that’s worth our attention, don’t you think?

So, let's dive into the world of cancer-fighting stocks. There are some heavy hitters in this space that deserve your attention.

First up, we've got Illumina (ILMN), the gene-sequencing giant. These folks are like the Sherlock Holmes of the genetic world, helping researchers crack the cancer code.

With over 21,600 of their systems installed worldwide, Illumina is the go-to company for anyone looking to dive deep into our genetic makeup.

But here's the thing - Illumina isn't just about cancer. Their tech is used in everything from studying infectious diseases to figuring out if your unborn baby is likely to be the next Einstein.

And while they're tight-lipped about their exact market share, word on the street is they're still the big fish in the gene-sequencing pond.

In fact, let me throw some numbers at you. Illumina holds a whopping 80% market share among the seven main pure-play next-generation sequencing companies.

Even if we toss in some non-pure-play heavyweights like Thermo Fisher Scientific (TMO), Agilent Technologies (A), and Qiagen (QGEN), Illumina's still sitting pretty with roughly two-thirds of the global market.

And get this - despite the industry facing some macro headwinds, Illumina's market share has held steady over the past couple of years. Talk about staying power.

Speaking of big fish, Illumina recently spun off Grail (GRAL), but they've still got their fingers in that pie with a 14.5% stake.

Grail is all about liquid biopsy products – fancy talk for finding cancer through a simple blood test. It's a promising field, but Illumina's not the only player in town.

Enter the new kids on the block: Element Biosciences and Ultima Genomics. Backed by venture capital and hungry for a piece of the action, these upstarts are shaking things up. Element's focusing on accuracy, while Ultima's all about high-volume, low-cost sequencing.

While we're on the topic of liquid biopsies, let's talk about Guardant Health (GH). These folks are the pioneers in finding tiny bits of tumor DNA floating around in your blood. Their Guardant360 product was the first FDA-approved liquid biopsy for all advanced solid tumors. That's like hitting a home run in your first major league at-bat.

But Guardant Health isn't resting on its laurels. They've got a whole suite of products, from tissue biopsies to tests that can tell if your cancer treatment is working. And get this – they're looking at a $30 billion annual market just in cancer treatment selection and recurrence monitoring.

But it doesn't end there. Early-stage cancer detection could add another $50 billion to that pot in the U.S. alone.

As if that wasn't enough, Guardant Health just got FDA approval for their Shield blood test for colorectal cancer screening in July 2024. Next stop? Lung cancer. These folks are aiming to create a test that can catch multiple cancers early.

And let's not forget the big boys. Pfizer (PFE), the pharmaceutical giant, is throwing its considerable weight into the cancer fight.

They've already got three blockbuster cancer drugs – Ibrance, Xtandi, and Inlyta – each raking in over a billion dollars a year. And that's just the tip of the iceberg. Pfizer's got about 40 more cancer programs in clinical testing.

Still, Pfizer isn't just relying on its own lab coats. They're not afraid to open up their wallet either. In 2021, they snatched up Trillium Therapeutics to beef up their blood cancer portfolio. And in 2023, they added Seagen to their collection, giving them a leg up in antibody-drug conjugates for cancer treatment.

Now, I know what you're thinking. "But what if the cancer market dries up?" (As if!) Well, Pfizer's got that covered too. They're big players in the vaccine market, with their new respiratory syncytial virus vaccine, Abrysvo, looking set to bring in some serious cash.

So there you have it. The war on cancer is far from over, but these companies are leading the charge. And while they're fighting to save lives, they might just help fatten up your portfolio too. I suggest you add these names to your watchlist and buy the dip.

July 11, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
July 11, 2024
Fiat Lux

Featured Trade:

(FORGET THE CASINO, INVEST IN THE HOUSE)

(TMO), (BIO), (DHR), (A)

Forget The Casino, Invest In The House

Biotech Letter

I've always had a soft spot for healthcare innovation. But let me tell you, picking winners in this sector is trickier than trying to nail jello to a wall. You've got regulatory hurdles, fierce competition, and funding risks that'd make a Vegas bookie sweat.

That's why I'm a big fan of buying the arms dealers in this war on disease. I'm talking about the suppliers. These companies are calmly sitting pretty, ready to cash in on the general need for innovation without getting their hands too dirty.

Enter Thermo Fisher Scientific (TMO), the Waltham, MA-based behemoth that's supplying everyone from big pharma to your local hospital. They're slinging lab equipment faster than a short-order cook at a greasy spoon, and business is booming.

Just look at the numbers. Over the past decade, TMO's delivered a 400% total return. That's not just beating the S&P 500 – it's leaving it in the dust by 170 points.

And recently, Thermo Fisher just got the green light from those sticklers at the UK antitrust office to close a $3.1 billion deal for Olink, a Swedish outfit that's cooking up some serious magic in protein analysis.

We're talking about technology that can analyze hundreds of proteins faster than you can say "proteomics."

Speaking of proteomics, for those of you who slept through biology class, it's the study of proteins in biological systems. These little buggers are the muscle behind everything your body does.

While DNA is the blueprint, proteins are the construction crew that brings that blueprint to life. Figuring out how these microscopic workers operate is the golden ticket to a treasure trove of new drugs and therapies.

It's a growing field, with the global market expected to explode from $32.8 billion in 2023 to a whopping $161.9 billion by 2035. That translates to a compound annual growth rate of 14.2%.

As expected, Thermo Fisher isn't the only player in this game. You've got heavyweights like Bio-Rad Laboratories (BIO), Danaher Corporation (DHR), and Agilent Technologies (A) all jockeying for the top position.

But thanks to this recent Olink acquisition, Thermo Fisher's looking to pull ahead like a thoroughbred at the Kentucky Derby.

For better context, let's break down what this means for TMO's bottom line. Their mass spectrometry business, already a cash cow, could see a 5% bump in market share.

We're talking about an extra $475 million in revenue by 2028, with profit margins that'd make a hedge fund manager blush.

And that's just the tip of the iceberg. Their protein assays and kits business could see a 10% boost in market share, translating to another $450 million in revenue.

Despite these, Thermo Fisher isn't resting on its laurels. They're also partnering up with the likes of Bayer (BAYRY) to develop next-generation sequencing tools.

Next, let's talk dividends. I know, I know, a 0.3% yield isn't going to have you popping champagne. That's barely enough for a value meal at McDonald's. But don't let that fool you.

This company's been growing its dividend faster than a beanstalk on Miracle-Gro, with a five-year CAGR of 15.5%. It's not TMO's fault their stock price keeps outrunning their dividend.

Looking ahead, Thermo Fisher is projected to reach a 12% EPS growth in 2025 and 11% in 2026. It's like watching a rocket take off in slow motion.

Before you jump aboard though, I'll be honest with you.

At a P/E ratio of 26.6x, TMO isn't exactly on the bargain rack. It's priced like a fine wine, not a box of Franzia. But hey, quality costs money, and this is a company that's been delivering returns of 16.7% per year since 2004.

So, what's the takeaway here? Well, it’s clear that Thermo Fisher Scientific is a powerhouse in the healthcare and biotech sectors.

But, it's not going to give you the cheap thrills of a biotech startup that might cure cancer or go belly-up next week.

Instead, it's the steady Eddie that's going to keep chugging along, supplying the tools that make those moonshots possible.

If you're looking for income, well, this ain't your horse. But if you want growth with a side of stability, Thermo Fisher might just be the ticket. It's got more potential than a kid with a 4.0 GPA and a mean fastball.

May 4, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
May 4, 2022
Fiat Lux

Featured Trade:

(A PICK AND SHOVELS BUSINESS POISED TO EXPLODE)
(TMO), (CRSP), (MRNA), (BNTX), (A), (DHR), (ILMN)

A Pick and Shovels Business Poised to Explode

Biotech Letter

There’s never a wrong time to begin investing. In 2021, the markets generated positive buzz when things started to heat up again.

That same optimism has recently transformed into bearishness following the decline in share prices.

Nevertheless, there’s still good news.

Given the lower valuations, investors can now get more bang for their buck.

In the past two years, we’ve experienced so many unprecedented events. Among the most heavily affected by the pandemic is the life sciences sector.

One of the biggest names in this field is Thermo Fisher Scientific (TMO).

With a market capitalization of roughly $200 billion, it’s no longer accurate to describe this as an under-the-radar company. TMO has received minimal fanfare among investors despite its massive size for decades.

A key reason for this is its lowkey steady execution of a well-established or tried-and-tested strategy.

Although it lacks the pizzazz of more exciting companies these days like CRISPR Therapeutics (CRSP), Moderna (MRNA), and BioNTech (BNTX), TMO has rewarded its investors with substantial returns.

Over the last 40 years, TMO has recorded an annual growth rate of 16.5%, hitting a 27,000% return in total by 2021.

In fact, TMO came off a strong 2021.

Its sales grew by 22% from 2020 to report $39.2 billion. While acquisitions played significant roles in the company’s growth, the 17% organic revenue growth of TMO served as its primary growth driver behind its solid numbers in 2021.

Even its COVID-19-related sales, particularly its testing products, contributed to reach $9.2 billion.

Looking at TMO’s business model, it’s evident that the company offers investors great exposure to the entire healthcare field via a single investment only.

That is, TMO is a broad business. It covers practically all life sciences solutions, analytical tools, specialty diagnostics, lab items, and even clinical, biotechnology, and pharmaceutical services.

Spanning the entire industry, such portfolio of products and services allow TMO to confidently go toe-to-toe against industry heavyweights like Agilent Technologies (A), Danaher (DHR), and Illumina (ILMN).

Actually, all of its segments grew last year, with TMO showing off quicker revenue increases than its competitors in the previous five years.

Hence, it is no surprise that TMO expects its numbers to climb in 2022. For this year, the company’s projected revenue is estimated to rise by at least 7% to reach $42 billion.

TMO strategically leveraged more significant acquisitions to build its diverse and deep portfolio today.

In 2011, the company spent $3.5 billion to buy Sweden’s blood-testing firm Phadia and cleverly maneuvered a relatively cheap deal to also grab chromatography company Dionex for only $2.1 billion.

In 2013, TMO bought a fast-growing genetic testing company called Life Tech for $13.6 billion.

At that time, Life Tech was the leader in this field and already possessed the technology to become a front-runner in the personalized medicine space.

In 2016, it shelled out $4.2 billion for electron microscopy company FEI and dropped another $7.2 billion in 2017 to buy pharmaceutical contract manufacturer Patheon.

To date, TMO’s most substantial deal is its $17.4 billion acquisition of contract research business Wilmington’s PPD.

This particular deal created a gateway between the biopharma giant and other drug developers, with TMO boosting its services segment focused on its biotechnology and pharmaceutical clients.

Between 2019 and 2021, the pharmaceutical and biotechnology market has experienced a promising over 20% growth.

This field is expected to grow to an additional $20 billion in 2022, following the growing interest in the industry in this post-pandemic era.

There is another emerging sector within the pharmaceutical and biotechnology market: the precision medicine and gene sequencing field.

Taking into consideration the growing demand for the products and services from this space, this market is estimated to reach roughly $1.6 trillion by 2030.

This makes TMO’s PPD acquisition timely, as it would allow the company to gain a bigger market share and expand its reach across the globe.

Furthermore, the previous acquisitions would bolster the company’s hold on the current market and ensure its position as a first-mover in potential groundbreaking innovations in the biotech and pharma sector.

Considering its expansion strategies and growth history, TMO doesn’t seem to be stopping anytime soon.

While the environment for mergers and acquisitions did become a bit more restrictive these days, there are still several potential buyout targets that could deliver favorable returns. So, we might hear about another TMO-linked acquisition sometime soon.

Overall, TMO is a healthcare stock offering robust and stable growth and a promising future regardless of economic downturns.

Moreover, its pick-and-shovels play makes it an excellent stock that looks poised to sustain its momentum and is well-positioned for global expansion. Hence, it would be wise to buy the dip.

March 22, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
March 22, 2022
Fiat Lux

Featured Trade:

(THE 800-POUND GORILLA IN THE GENE-SEQUENCING SECTOR)
(ILMN), (A), (TMO), (MRK), (RHHBY)

The 800-Pound Gorilla in Gene-Sequencing Sector

Biotech Letter

I’m a huge fan of the "razor and blades" business strategy, where the pricing and marketing model is designed to generate recurring, dependable income by ensuring that a customer is locked in onto a product or service for a long time.

The COVID-19 pandemic underscored the significance of DNA sequencing in improving and monitoring global health.

Thanks to DNA sequencing, we were able to identify the novel coronavirus and eventually developed vaccines and PCR-based tests. This also played a crucial role in detecting new strains and even transmission tracking.

To date, the top name in the DNA sequencing community is Illumina (ILMN).

In terms of competitors, the closest to Illumina’s dominance are Agilent Technologies (A) and Thermo Fisher Scientific (TMO). However, neither have developed their platforms enough to be directly comparable to Illumina.

Illumina has a notable installed base comprising approximately 20,000 machines owned by roughly 7,300 clients.

With the rising popularity of DNA sequencing, the demand for the company’s installation base is estimated to continue growing and along with it is the sale of consumables.

This is where the razor and blades business model comes in.

The consumables form a major part of Illumina’s strategy, with the instruments serving as “razors” and consumables as “blades.”

The cost of instruments can fall within the range of $20,000 to $1 million and are essential elements of expanding the company’s portfolio and locking in clients into long-term commitments.

Consumables typically represent 50% or more of the revenue of any DNA sequencing company. For Illumina, the number climbs to 80%.

Considering that the consumables also need repairs, this segment is expected to continue generating profits in services and contracts.

Evidently, 80% recurring revenue is highly indicative of a rock-solid business.

While the business model isn’t unique to Illumina, the company has attracted attention in Wall Street due to its exponential growth over the past years.

In the last five years, Illumina has practically doubled its revenue. During the COVID-induced economic slowdown, the company quickly recovered from a brief slump and accelerated its revenue growth at an even faster pace.

In the fourth quarter report for 2021, Illumina reported about $1.9 billion in revenue or an impressive 25% increase year-over-year.

As for 2022, the company is conservatively anticipating a 14% to 16% growth in its revenue.

Another step towards securing dominance in this field is Illumina’s decision to launch the TruSight Oncology Comprehensive test in Europe.

This is basically a cancer test that uses a single tissue sample to test for a broad range of tumor genes and biomarkers.

The goal is to create a “tumor profile” of patients with rare conditions to find a matching treatment option via precision technology. This doesn’t only cover available cancer therapies in the market but also clinical trials.

While this test focuses on the oncology sector, Illumina and its competitors are presumably working on more sophisticated genetic profile-based diagnostic tools for other conditions.

Although this has yet to be launched on a larger scale, Illumina is reported to seek collaborations with leading oncology treatment providers like Merck (MRK), Bayer (BAYN), and Roche (RHHBY).

Illumina has invested in seven new startups to further expand its pipeline: 4SR Biosciences; B4X; Cache DNA; CRISP-HR Therapeutics; NonExomics; Purpose Health; and Rethink Bio.

These focus on breakthrough therapies, DNA storage, mental wellness, sustainable food, and diagnostics.

Illumina has invested in 68 startups to date. This is a brilliant scheme to continue company growth and pipeline expansion for decades.

The DNA sequencing market was valued at $6.243 million in 2017 and is projected to hit $25.470 million by 2025.

Illumina’s remarkable execution of the razor and blades model, strong profit margins, and proactive profitability initiatives catapulted it to the top of the DNA sequencing sector.

Needless to say, Illumina is the 800-pound gorilla in the gene-sequencing sector—a dominance that is expected to go on for years.

Tag Archive for: (A)