(ABBV) Archives

A Safe Stock for Your Peace of Mind

No matter how you look at it, the stock market is definitely facing serious volatility these days. How long this uncertainty will last and whether it’s a sign of a looming market crash or correction is anybody’s guess.

On a positive note, the current situation will not cause panic to long-term investors. After all, it’s not right to base stock-buying decisions on the market’s behavior over the course of a few days, weeks, or even months.

Meanwhile, if a major bear market is on the horizon, then this could present a good opportunity to add resilient and recession-proof stocks to your portfolio.

In the biotechnology and healthcare sector, one stock comfortably fits the mold, and that's Johnson & Johnson, JNJ.

In terms of market capitalization, JNJ is one of the biggest—if not the biggest—pharma companies in the world, weighing in at roughly $450 billion.

It also holds an undisputed status as a Dividend King, which is a title granted to those companies that increase their payouts annually and consistently over the course of 50 years.

Actually, JNJ’s dividend-hiking streak has stretched to 59 straight years—and it doesn’t seem to be ending anytime soon.

To date, its quarterly dividend per share jumped by 5% from $1.01 to reach $1.06.

That’s why it comes as no surprise that it’s one of the stocks that investors come running to for safety and stability during periods of volatility.

In its first quarter earnings report in 2021, JNJ showed off by outperforming revenue expectations of $21.98 billion to record $22.32 billion instead.

Its EPS also beat estimates of $2.34 and instead reported $2.59. Despite the less-than-stellar condition of the US economy in the past months, JNJ still managed to boost its sales in the first quarter and increased its sales by 7.9% year-over-year.

All of JNJ’s core business segments also expanded their revenues this quarter.

For instance, its Janssen pharmaceutical arm, which was in charge of its COVID-19 vaccine, saw a 9.6% year over year increase in sales to reach $12.19 billion.

Even its medical devices segment experienced an improved performance with a 7.9% bump to record $6.57 billion for this quarter alone.

Looking at the programs in its pharmaceutical division, it’s clear that JNJ has a strong focus on six areas: cardiovascular, pulmonary hypertension, immunology, neuroscience, metabolism, and, of course, oncology.

In fact, three of JNJ’s pharmaceutical treatments raked in more than $4 billion in sales in 2020.

The list was topped by Stelara, which is a drug for Crohn’s disease, psoriasis, ulcerative colitis, and psoriatic arthritis, at $7.7 billion.

It was followed by multiple myeloma treatment Darzalex at $4.2 billion.

The product of its collaborative work with AbbVie (ABBV), blood cancer drug Imbruvica, rounds up the list at $4.1 billion.

The sheer size and financial power of JNJ offer the company extensive M&A opportunities—and it’s definitely taking advantage of that to continue boosting its revenue streams.

In August 2020, amid the COVID-19 pandemic, JNJ acquired Momenta Pharmaceuticals for $6.5 billion. This all-cash transaction added a slew of drug candidates that enhanced JNJ’s immune-mediated and rare disease pipeline programs.

Jumping into the telehealth bandwagon, JNJ has invested in Madison Thirty around the same time last year as well.

Much like Teladoc (TDOC), this small telehealth company has also attracted attention since it started and thus far raised $70 million in funding.

Boosting its presence in the merging world of technology and medicine, JNJ recently revealed its six-armed robotic surgical assistant, Ottava.

Basically, Ottava will be a high-tech guidance system and assistant to surgeons in operating rooms.

Throughout its history, JnJ has proven itself to be a top biopharmaceutical stock —full stop.

A global leader in the healthcare industry, JNJ is one of only two corporations that hold an AAA credit rating from Standard & Poor. The other company is Microsoft (MSFT).

It has been generating record profits and boosting its dividends. More importantly, investors can expect JNJ stock to serve as a healthy long-term wealth generator.

It prides itself on a strong triad of business segments that continuously drive growth: consumer health, pharmaceuticals, and medical devices.

May 18, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
May 18, 2021
Fiat Lux

FEATURED TRADE:

(AN UP-AND-COMER BIOPHARMA STOCK)
(ABBV), (ABT), (JNJ), (PFE)

An Up-and-Comer Biopharma Stock

Biotech Letter

AbbVie (ABBV) is the seventh biggest biopharmaceutical company worldwide in terms of revenue.

If you’re on the lookout for stocks that also offer juicy dividends, then this is a good company to add to your list alongside Dividend Aristocrats like Johnson & Johnson (JNJ) and Pfizer (PFE).

Since its split from Abbott Labs (ABT) back in 2013, AbbVie has increased its revenue by roughly 2.5 times.

In just a few years post-spin-off, its profits have grown from $18.8 billion to an impressive $46 billion in the last fiscal year.

A huge chunk of AbbVie’s growth is attributed to its blockbuster drug Humira, which is the number one selling drug in 2020 with a whopping $19.8 billion in net revenue.

That’s why it comes as no surprise that the drug’s impending loss of patent exclusivity in the US in 2023 is a major pain point for AbbVie investors.

However, it looks like AbbVie has positioned itself well into a future without Humira.

Although Humira does lead AbbVie’s immunology portfolio, the company’s other products in this lineup are also promising.

Up-and-coming drugs Skyrizi and Rinvoq both reported doubled annual sales from 2019 to 2020, with the two expected to bring in $15 billion by 2025.

Actually, Rinvoq is slated as the successor to Humira and is groomed as a “key growth driver” through 2026.

Putting money where its mouth is, AbbVie has performed notably in the first quarter of 2021 with a 50% increase from its 2020 net revenue to hit over $12.94 billion.

Its net profit also saw a double-digit bump of 18% to reach $3.55 billion.

Despite off-patent woes, Humira still enjoyed a 3.5% uptick in sales to rake in $4.9 billion for the quarter.

Meanwhile, AbbVie’s aesthetic product line showed off an impressive 35% jump during the period, adding over $1.1 billion to revenue.

Reflecting the good news this quarter, AbbVie boosted its profitability guidance for 2021.

From an adjusted per-share net profit in the range of $12.32 to $12.52, the company now estimates it to be somewhere between $12.37 and $12.57.

Diversification has also been explored, with AbbVie veering from immunology and venturing into other segments like oncology, eye care, neuroscience, and even aesthetics.

One way AbbVie has been filling the Humira revenue gap is via acquisitions.

In 2015, the company acquired Pharmacyclics. This deal added a blockbuster drug, Imbruvica, in AbbVie’s lineup.

In 2020, Imbruvica generated roughly $4.7 billion in sales.

With an estimated compound annual growth rate of 26.5%, Imbruvica is projected to reach approximately $31.8 billion in sales through 2025.

On top of that, AbbVie has filed a slew of patents to restrict generic competition against Imbruvica until at least 2035.

Another major acquisition is Allergan, which added roughly 120 new products under AbbVie’s banner following the deal’s completion in May 2020.

Collectively, these products brought in $16 billion in sales in 2019 for Allergan—a noteworthy performance that translated to AbbVie’s 2020 revenue, which grew from $33 billion in 2019 to $45.8 billion a year later.

Perhaps the most notable addition from the Allergan acquisition is Botox.

In 2019, this drug raked in roughly $2.7 billion in sales. Similar to Imbruvica’s potential, Botox also presents a powerful growth runway.

In fact, this Allergan blockbuster is estimated to generate more than $13.4 billion in revenue by 2026.

Apart from the additional 120 products it injected into AbbVie’s portfolio, Allergan also queued 60 more development programs, which could generate at least $2 billion in sales by 2023.

AbbVie is one of the more innovative and newer biopharmaceutical companies to take the biotechnology and healthcare market by storm. Given the company’s strong pipeline programs, it’s definitely poised for more robust growth.

Spun off from Abbott Labs in 2013, this company currently sits at a massive market capitalization of roughly $205 billion.

If its portfolio, pipeline programs, acquisitions, and recent first-quarter earnings reports can tell us anything, it’s that AbbVie still has a lot of room to grow. Hence, it’s good to buy the dip.

May 11, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
May 11, 2021
Fiat Lux

FEATURED TRADE:

(A FALLEN BIOTECH OUTPERFORMING THE MARKET)
(VRTX), (ABBV), (CRSP), (BLUE)

A Fallen Biotech is Outperforming the Market

Biotech Letter

Despite the exceptional performance of a handful of biotechnology companies, many healthcare stocks have languished over the course of the last 12 months due to the extra costs and added uncertainty brought by the COVID-19 pandemic.

Amid its continuous success for almost a decade, with shares climbing by over 800% from 2012 to mid-2020 and outpacing the S&P 500 nearly four times over, Vertex Pharmaceuticals (VRTX) stock was not spared during this turbulent period.

In fact, shares of the company fell by roughly 25% in mid-October following their decision to cancel the development of VX-814.

This once-promising drug, which was initially expected to treat a genetic disorder affecting the liver and kidney, showed disappointing results in its trials last year.

Despite falling out of favor with investors, I think this $55.66 billion-by-market-capitalization biotechnology company holds a strong track record and remains a compelling buy—a fact proven by its first quarter earnings report.

Vertex recorded $1.72 billion in revenue for the first quarter of 2021, showing off a 14% year-over-year jump and topping the projected estimate from analysts of $1.66 billion.

The company also reported a notable improvement on its bottom line, with an adjusted net income of $781 million or $2.98 per share.

In comparison, Vertex recorded $674 million in earnings or $2.56 per share during the same period in 2020.

This embattled biotechnology company marked the end of the first quarter with a total of $6.9 billion in cash, cash equivalents, and marketable securities, exhibiting a $265 million increase from the end of 2020.

Although Vertex anticipates a slowdown in its revenue growth this year, it still projects a full-year sale in the range of $6.7 billion and $6.9 billion.

To see if this is realistic, let’s take a look at the company’s current drug portfolio.

The core of Vertex’s business is its cystic fibrosis (CF) lineup. Without treatment, this disease could lead to the early death of patients.

At the moment, Vertex has four approved CF drugs out in the market: Kalydeco, Orkambi, Symdeko, and Trikafta.

With the extent of patient profiles that these four drugs cover, Vertex has virtually cornered the CF market and established a monopoly.

To date, roughly 50% of cystic patients in the US, Australia, Canada, and Europe are treated using Vertex drugs.

Among the four, Trikafta appears to have the potential to become a blockbuster.

Trikafta is forecasted to take the lion’s share in the CF market in the next few years, with its revenue rising from $3.8 billion to $8.9 billion by 2026. This would translate to a growth in Vertex’s CF program from $6.2 billion to $9.6 billion.

While skeptics might assume that the growth projection is too high, it’s important to remember the trajectory of the Trikafta-Kaftrio drug.

The revenue of this combo grew from $420 million in 2019 to a whopping $3.86 billion in 2020.

Given that CF has become a lucrative market, it no longer comes as a surprise that competitors are starting to swarm the space.

Vertex’s biggest rival in the space so far is AbbVie (ABBV), which has been working on triple combinations of its own drugs.

Apart from its CF programs, Vertex’s pipelines also serve as catalysts for its growth.

Although VX-814 failed and caused the company’s shares to fall in 2020, Vertex has another candidate, VX-864, which has been showing more promising results as of late.

You might be wondering why Vertex insists on working on this drug despite the backlash it suffered last year. This is primarily rooted in the potential of the product.

VX-864, if successful, could be the next CF-like moneymaker for Vertex. By 2026, sales for this drug are estimated to reach $640 million and will peak by 2030 at $1.1 billion.

On top of these, Vertex has collaborated with CRISPR Therapeutics (CRSP) to develop gene therapy for sickle cell disease. So far, the treatment has received a fast-track designation from the FDA.

If approved, their drug, CTX-001, will directly compete with bluebird bio’s (BLUE) LentiGlobin.

The current pricing for bluebird’s therapy is $1.2 million.

To date, there are roughly 250,000 patients suffering from sickle cell disease in the US and Europe. Among them, 25% are diagnosed to be in the severe stages. This is the market that CTX-001 aims to target.

Using the pricing of LentiGlobin as the basis, CTX-001 has the potential to reach $1.6 billion in sales in 2026 and peak at $2 billion in 2029.

If the two companies succeed in this, then CTX-001 is another blockbuster drug added to Vertex’s portfolio.

Overall, Vertex is a good long-term investment stock. It has a proven track record and a healthy pipeline filled with promising candidates. I say you should take advantage and buy the dips.

vertex

April 6, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
April 6, 2021
Fiat Lux

FEATURED TRADE:

(HIGH-YIELD STOCK UP FOR GRABS)
(ABBV), (PFE), (BRK.B), (BLK)

High-Yield Stock Up for Grabs

Biotech Letter

Something curious is happening at the FDA, and it’s causing investors to be jittery. Drugs that are sure to gain approval keep encountering roadblocks.

What began as a handful of biotechnology stocks getting trampled is turning out to be a broader pullback caused by fears of a tougher and stricter regulatory environment for drug developers.

Following these changes, the SPDR S&P Biotech (XBI) slid by roughly 12% this month.

The idea that the somewhat predictable regulatory results in the past four or five years may no longer be as predictable obviously ramped up the perceived riskiness of this industry.

One bellwether of this change is AbbVie (ABBV), which submitted an application for the expanded use of rheumatoid arthritis Rinvoq in March. It recently announced that the regulatory board is extending the evaluation for three months.

While this isn’t a cause for alarm, it’s enough to unsettle some investors since Rinvoq is expected to replace AbbVie’s blockbuster drug Humira when the latter loses its patent exclusivity in 2023.

However, the reason behind FDA’s extension is likely because of the safety concerns found in a similar drug, Xeljanz, by Pfizer (PFE).

Considering the similarities of the two, it makes sense for the regulatory board to exercise more caution on AbbVie’s product.

The rise and fall of AbbVie has always centered on Humira, with this top-selling drug raking in $19.8 billion in sales in 2020 alone. That’s actually lower than its usual revenue a few years back.

Humira’s loss of exclusivity is projected to result in medium-term headwind to the company as more and more biosimilars pressure revenue.

However, AbbVie has been working on offsetting the estimated losses by expanding its other programs.

For instance, the revenue for AbbVie’s non-Humira immunology sector, led by Skyrizi and Rinvoq, is projected to double to reach $4.6 billion in 2021.

By 2025, AbbVie expects Rinvoq and Skyrizi sales to reach $15 billion annually.

Meanwhile, a considerable uptick is anticipated from its neuroscience division’s revenue, led by Vraylar, to generate $5.7 billion in 2021.

As for its hematologic oncology franchise, spearheaded by Imbruvica and Venclexta, this sector’s revenue is expected to increase in double digits to reach $7.5 billion this year as well.

On top of these, AbbVie has been busy looking for suitable acquisitions to diversify its revenue stream.

A notable deal it made was in 2015 with Pharmacyclics. This acquisition actually added the mega-blockbuster drug Imbruvica to AbbVie’s portfolio.

In May 2020, AbbVie completed its deal to purchase Allergan. This $63 billion merger is expected to boost the global distribution capacity of AbbVie and bolster its therapeutic sales channels.

By 2023, sales of the products acquired from Allergan’s pipeline are estimated to add at least $2 billion to AbbVie’s annual revenue.

All in all, these sectors are all well-positioned to substantially offset the fall of Humira’s revenue thanks to the rapid growth and aggressive indication expansion efforts of the company.

Nonetheless, the anxiety of the delayed FDA approval for Rinvoq’s expanded use is understandable.

After all, AbbVie expects this particular drug to contribute to doubling the 2021 sales of the franchise from $2.3 billion to $4.6 billion.

Moreover, this is a cornerstone in the company’s post-Humira era in less than two years.

However, the three-month delay will have a minimal impact on the 2021 revenues of the company and a negligible effect when we consider the long term.

Realistically, this would cost AbbVie roughly less than $1 billion in sales, which amounts to less than 2% of the total projected revenues of the company this year.

During times like these, it’s crucial to remember that the pharmaceutical industry is an extremely bumpy road.

There’s no such thing as a linear progression in this line of business, which is why it’s vital to choose companies with established track records and highly capable management teams.

If it helps ease any anxiety, then it might be useful to think that AbbVie is a favored stock by Warren Buffett’s Berkshire Hathaway (BRK.B).

The Oracle of Omaha currently holds 4.27 million shares of this company. Meanwhile, BlackRock (BLK) holds 2.41 million shares, while Ken Griffin’s Citadel Advisors has 786,000 shares.

AbbVie is a mature, larger-cap biopharmaceutical stock that’s selling at an affordable price these days.

Despite the revenue declines and plunges in earnings of countless businesses in 2020, AbbVie still managed to deliver strong operating and financial results—and the company still has a long way to go.

AbbVie is expected to deliver at least 4.8% in annual earnings growth over the course of the next five years—a highly conservative estimate considering that the company reported 21.9% growth in the past five years.

Moreover, AbbVie is safely positioned to deliver 6% long-term annual dividend growth.

AbbVie was able to generate 3.3% growth in its operational revenue in 2020, recording $45.804 billion in net revenues.

In the past weeks, I’ve seen AbbVie shares go down by roughly 6%. However, I think the fear here is exaggerated and the market might be overreacting to the uncertainty caused by stricter FDA guidelines.

Instead of letting the anxiety take control, I believe it’s best to heed the advice of Warren Buffett in this situation: “The market is a device for transferring money from the impatient to the patient.”

Therefore, I think patient investors should take a look at AbbVie stock today.

March 25, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
March 25, 2021
Fiat Lux

FEATURED TRADE:

DON’T MISS THE BOAT ON THIS BEST OF BREED BIOTECHNOLOGY STOCK
(AMGN), (MRNA), (PFE), (BNTX), (JNJ), (LLY), (ABBV), (BMY), (FPRX), (BGNE)

Don't Miss the Boat on This Best of Breed Biotechnology Stock

Biotech Letter

The past few weeks have been hectic for the healthcare industry, with Moderna (MRNA), Pfizer (PFE), BioNTech (BNTX), and even Johnson & Johnson (JNJ) working hard to manufacture and distribute their COVID-19 vaccines all over the world.

There’s one major player in the healthcare industry that has been out of the spotlight for quite some time: Amgen (AMGN).

While Amgen has been doing its part from the sidelines by helping out companies like Eli Lilly (LLY) with the manufacturing of their COVID-19 drugs, it looks like investors are flocking towards businesses that allocate more resources toward fighting off the pandemic.

In fact, JNJ recently reached a new high at $170 per share.

Nonetheless, I think investors are missing out on a great opportunity by ignoring Amgen these days.

The biotech world, which basically involves formulating drugs and treatments for living organisms, was somewhat limited back in 1980.

Over the past decades, however, this industry has shifted and managed to successfully launch groundbreaking drugs commercially.

Before, only a handful of legacy companies had occupied this space. Now, so many up-and-coming companies try to conquer the biotech world.

For context, an FDA report in 2019 showed that 64% of drugs approved in the previous year were developed by biotech companies.

Moving forward, it’s reasonable to say that the biotech industry will continue to come up with breakthrough treatments for rare and complex conditions compared to our traditional pharmaceutical companies.

Actually, this sector has been hot in recent years, with companies like AbbVie (ABBV) and Celgene, now with Bristol-Myers Squibb (BMY), coming up with mega-blockbuster treatments, such as Humira and Revlimid, that rake in billions in sales annually.

Among them, Amgen has emerged as one of the most consistent and aggressive players in the biotech world, with competitors still struggling to topple some of its products after decades of being in the market.

This biotech giant has also been busy boosting its pipeline of newly developed treatments. It’s even bolstering its biosimilar lineup to ensure its dominance in the sector.

Last year, Amgen’s revenue rose by 9%, with more growth indicators lighting the way for a brighter future for the company.

While Amgen has been working on many conditions, its portfolio still looks focused on particular diseases.

In 2020 alone, Amgen’s seven blockbusters each generated over $1 billion in revenue. Among these, four managed to rake in more than $2 billion in annual sales.

Amgen’s impressive lineup of drugs includes psoriatic arthritis treatment Enbrel, osteoporosis and bone cancer injection Prolia, and even newcomer heart disease medication Repatha.

With its rivals nipping at the heels of its first-generation blockbusters like Neupogen, Amgen has been hustling to find ways to reinvent itself.

Apart from developing new drugs, the company has been looking into acquisitions to sustain its position at the top.

Recently, Amgen has been doubling down on its newest shining star: Otezla.

Otezla was one of the company’s biggest purchases, with Amgen acquiring this drug for a whopping $13.4 billion from Celgene in August 2019.

In 2019, Otezla sales rose by 25% to reach $1.6 billion. By 2020, the drug generated $2.2 billion in sales, showing off a 36.5% jump.

Over the next few years, Amgen estimates that Otezla sales will climb by over 10% annually.

Riding the momentum of not only Otezla but its entire portfolio and programs in the pipeline, Amgen aims to dominate the immunology sector.

Among the candidates in Amgen’s pipeline, the most promising is its lung cancer medication Sotorasib, which should complete Phase 2 in the first half of 2021.

Meanwhile, Amgen’s latest deal outside its own pipeline is the $1.9 billion acquisition of Five Prime Therapeutics (FPRX), which is a small biotech company developing treatments for stomach cancers. The agreement should be finalized by June 2021.

Five Prime’s experimental treatment, Bemarituzumab, perfectly aligns with the other stomach cancer medications queued in Amgen’s pipeline.

If this proves successful, then Bemarituzumab will be a strong contender against Bristol-Myers Squibb’s blockbuster treatment Opdivo.

While Opdivo has been in the market longer, Five Prime’s candidate has consistently shown stronger and more promising results since the trials started.

Prior to its deal with Prime Five, Amgen acquired a 20% stake in Beijing-based biotech company BeiGene (BGNE). This is a telling move as it indicates the company’s efforts to expand its reach in Asia, particularly in China and Japan.

Another revenue stream that Amgen has been pushing for expansion is its biosimilars sector.

The company released its first-ever blockbuster, Epogen, in 1989. Since then, this anemia drug has been a top seller. However, biosimilar competition eventually caused a decline in its sales starting in 2015.

Learning from the fall of Epogen in the hands of biosimilars, Amgen decided to turn its weakness into its strength.

Since 2015, the company has been expanding its work on biosimilars. In that year alone, Amgen developed 29 biosimilars for its own products and launched 18 more to compete with other companies.

To date, biosimilars have been generating at least $2 billion in revenues, with 10 more queued in Amgen’s pipeline.

Considering the accelerated growth of the biotechnology sector, now is not the time to count out Amgen.

Today, Amgen has transformed itself into one of the leaders in the biotech world, generating over $25 billion in revenue.

Since 1988, the company has only reported a decline in its year-over-year revenue three times: 2009, 2018, and 2019.

This performance shows tangible proof that Amgen is not a “one-hit-wonder” type of biotech stock. Instead, it demonstrates its capacity to generate solid earnings and sustainability.

Currently, Amgen trades at a price-to-earnings multiple that’s actually 40% lower than the average S&P 500 stock. Its EPS is estimated to rise in the high single digits in the next several years.

Simply looking at its 2020 fiscal report, it’s obvious that Amgen delivered an impressive performance considering the recession and the pandemic.

The company also continues to reward its shareholders with double dividend increases plus an aggressive repurchase program, which Amgen plans to spend roughly $3 billion to $4 billion.

Recently, the stock has been trading at a roughly 30% discount. This is a real bargain considering everything Amgen has to offer.

March 18, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
March 18, 2021
Fiat Lux

FEATURED TRADE:

(A BLUE CHIP STOCK SELLING AT A DISCOUNT)
(LLY), (GILD), (REGN), (SNY), (AMGN), (TEVA), (NVO), (ABBV), (BMY)

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