(ABBV) Archives - Page 8 of 20 - Mad Hedge Fund Trader

A Discounted Misunderstood Stock

At times, a single stressful scenario triggers such wide-ranging panic among already anxious investors that it blocks out all the positive things occurring simultaneously.

This is what’s currently happening with AbbVie (ABBV), which is struggling to keep investors’ fears at bay as its mega-blockbuster Humira reaches patent expirations.

Humira is a treatment for various diseases such as rheumatoid arthritis, psoriatic arthritis, any losing spondylitis, and Crohn's disease. Since its approval and commercial launch in 2002, this immunosuppressive has managed to rake in a whopping $200 billion in sales.

For 2022, this drug is projected to account for 36%, or roughly $21.2 billion, of the company’s sales. Needless to say, it’s one of AbbVie’s top-selling treatments.

While AbbVie fought extremely hard to extend its patent protection, Humira has already lost exclusivity in Europe.

It is also gearing up to battle an increasing number of eager competitors in the form of biosimilars in the United States, which would all be allowed to market their versions of Humira by 2023.

AbbVie is more than just Humira, though. This giant biopharmaceutical company has actually developed treatments with the capacity to fill the anticipated revenue gap following Humira’s decline.

In fact, shareholders who opted to wait and hold until AbbVie reaches the transition point from Humira to the new products may have erred. After all, the company’s stock is up by over 19% thus far in 2022.

Besides that, AbbVie stock appears cheap and has an attractive dividend yield. Hence, it’s worth owning, especially in these challenging times.

To date, the company has been hard at work in developing its blood cancer or hematologic oncology program. This franchise is estimated to bring in $7.6 billion in sales by 2025, which is up from the $6.8 billion expected this year.

AbbVie is also experiencing increasing sales from two newly released drugs, Skyrizi and Rinvoq, which target psoriasis and arthritis, respectively. Both are estimated to account for $7.7 billion in the 2022 revenue of the company or 13% of the total.

Moreover, these treatments should be exclusively owned by AbbVie for a while. The company won’t be facing another patent loss on any essential product until 2029.

Looking at the trajectory of Skyrizi and Rinvoq, the two can become the next big stars and eventually offset the losses from Humira’s decline.

Not only those, but AbbVie also bought Allergan in 2020, building an ironclad plan to ensure it won’t sink after Humira’s patent expiration. The aesthetics franchise, which covers Botox, cool sculpting, and Juvederm, now contributes 10% to the total sales of the company.

This implies that AbbVie’s earnings, despite the Humira issue, are anticipated to hold up better than projected.

Moreover, AbbVie has a $22 billion free cash flow from 2021, while its dividend yield is currently at 3.7%.

These factors make AbbVie look even more lucrative as interest rates continue to hike and a potential recession is on its way.

At this point, it’s prudent to keep defensive stocks, particularly businesses without massive debt maturities, in the near future. In such a volatile market, AbbVie is one of the safest and most attractive stocks to invest in.

Overall, AbbVie is a well-positioned stock. Its tactical acquisitions, such as its aggressive move to buy Allergan, have all but guaranteed that it won’t be heavily relying on a drug with an expiring patent.

More importantly, this giant biopharmaceutical company developed potentially blockbuster successors of Humira in the form of Rinvoq and Skyrizi, ensuring that its future remains bright even without its decades-long top-selling product.

AbbVie has proven itself to be a solid stock and an excellent buy for long-term investors. It’s highly advisable to buy the dip.

November 22, 2022

Biotech Letter

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

Featured Trade:

(THE STOCK THAT KEEPS ON GIVING)
(MRK), (JNJ), (PFE), (IMG), (ABBV), (AZN)

The Stock That Keeps on Giving

Biotech Letter

Although the broader market has been experiencing the worst year in a very long time, some businesses still manage to deliver excellent results.

One of them is Merck (MRK).

This biotechnology and healthcare giant has been defying gravity this 2022. While the Health Care Select Sector SPDR (XLV) has slid by quite a substantial margin this year, with the likes of Johnson & Johnson (JNJ) and Pfizer (PFE) succumbing to the pressure, Merck bucked the trend. Its shares have been up by 31% since early January.

Amid the economic and financial crises, Merck remains a promising stock with a number of factors going its way. More importantly, there is a high probability that it can sustain its momentum regardless of what happens to the broader market or the economy.

Merck’s determination to keep this momentum has once again become apparent in its recent announcement.

Earlier this week, the biotech giant disclosed that it would acquire a biopharmaceutical company called Imago BioSciences (IMG) for $1.35 billion.

This would translate to $36 in cash for every share of Imago, which is about twice its recent closing price of $17.40. The deal is anticipated to be completed by March 2023.

Like its large competitors, Merck also has a portfolio of treatments that continue to aid in the growth of its top and bottom lines.

In the third quarter of this year, the biotech’s revenue climbed by 14% year-over-year to reach roughly $15 billion. Meanwhile, its adjusted net income was $4.7 billion, showing a 4% increase compared to the same period in 2021.

Among its products, Merck has been most closely associated with the cancer drug Keytruda. So far, this treatment is on track to rake in $20 billion in net sales this year alone.

In fact, it’s expected to surpass AbbVie’s (ABBV) Humira as the top-selling drug by 2026.

With Keytruda’s patent exclusivity lasting until 2028, Merck has more than sufficient time to prepare for it. Moreover, that means the company can still rely on Keytruda as a strong growth driver for at least five more years.

However, astute investors would point out Merck’s reliance on Keytruda and the risks that come with this arrangement. With the mega-blockbuster’s $5.4 billion net sales, which comprised 36.3% of Merck’s $15 billion total sales in the third quarter, this is a legitimate concern.

It should be noted that Keytruda isn’t the only promising moneymaking treatment in Merck’s portfolio.

One of its promising treatments is its collaboration with AstraZeneca (AZN), which resulted in another cancer medicine called Lynparza. Another is Merck’s HPV vaccines, which continue to rise at a good pace. Finally, the company’s vaccine portfolio has been expanding, with its pneumococcal vaccine recently gaining approval.

Most of its therapies and even its vaccine franchises are on pace to surpass at least $1 billion in net sales this 2022. Needless to say, Merck has been successful in its quest to become more than just a cancer therapy leader.

On top of these, another good reason to take Merck into consideration is its dividend yield.

Merck’s current dividend yield is at 2.8%, which outpaces the 1.6% average yield of the S&P 500. Aside from its top-selling products and robust pipeline that easily support this payout, the company’s dividend is well-covered as well.

Overall, Merck is one of the handful of companies across all industries that has been breaking the norm of poor stock performance in this highly challenging year.

The company can offer a strong shield for wary investors as we deal with the onset of yet another recession. Not only is this biotechnology and healthcare company part of a naturally defensive sector, but its outlook also remains positive amid the issues plaguing the world.

November 8, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
November 8, 2022
Fiat Lux

Featured Trade:

(A GROWTH STOCK POISED TO BREAK RECORDS)
(LLY), (JNJ), (NVDA), (MA), (PG), (NVO), (ABBV)

A Growth Stock Poised Break Records

Biotech Letter

The stock market has been down in the past couple of months, and the outlook still does not look all that good, considering that the issues with inflation and economic crises are showing no signs of ending anytime soon.

However, as Berkshire Hathaway Vice Chairman Charlie Munger noted, long-term investors should not be too anxious over “when” the markets will recover.

Instead, he advised “to think about ‘what’ will happen versus ‘when’” as a far more efficient way to behave in these challenging times.

Bearing that advice in mind, a particular biotechnology and healthcare stock stands out and is worth considering given its promising future: Eli Lilly (LLY).

Eli Lilly has grown at a fast pace and is considered among the most prominent pharmaceutical businesses in the world, ranking second behind Johnson & Johnson (JNJ).

At the moment, its market capitalization is at about $340 billion, making Eli Lilly more valuable than juggernaut Nvidia (NVDA) and other big names like Mastercard (MA) and Procter & Gamble (PG).

The most promising drug in Eli Lilly’s pipeline right now is Mounjaro, earlier known as tirzepatide, which recently received the green light from the Food and Drug Administration.

This once-a-week injection is an approved therapy that targets Type 2 diabetes. On top of that, Mounjaro can also be used as a potential weight loss drug.

While there are already existing diabetes drugs that double as weight loss treatments, mainly from Novo Nordisk (NVO), what makes Mounjaro distinct is the fact that it’s the first-ever unimolecular dual GIP/GLP-1 receptor agonist. In layman’s terms, this treatment could function in the same way as two completely different hormones that serve to control blood sugar levels.

Now, the question is: How significant an impact is Mounjaro on Eli Lilly?

Based on data from the National Institute of Diabetes and Digestive and Kidney Diseases, about 2 in every 5 adults are classified as obese, while 1 in 11 adults suffer from severe obesity.

That’s a substantial market. More than that, the consequences of obesity are said to have ripple effects throughout the entire healthcare industry.

In fact, the Centers for Disease Control and Prevention estimate the yearly medical costs in the United States due to obesity to be roughly $173 billion in 2019.

Following its approval, Mounjaro raked in $16 million in sales. Given its unique mechanism and the massive market it can target, Mounjaro is estimated to rake in $25 billion in peak revenue annually.

Moreover, this treatment could not only be a game changer for the company but also the entire healthcare community.

For context, Eli Lilly’s total revenue in 2021 from all its products combined was $28 billion. Needless to say, Mounjaro would put the company on track for some serious growth.

Looking at this weight loss and diabetes drug's trajectory and potential, Mounjaro can benefit Eli Lilly in the same way AbbVie (ABBV) maximized Humira. For years, Humira was hailed as the top-selling drug in the world.

While it’s set to lose its patent protection by 2023, there’s no doubt that this anti-inflammatory drug boosted the share price and bottom line of AbbVie.

Clearly, this is a business poised to become even more valuable soon. This means its current share price could be considered a bargain in the next few years.

How long it would take for Eli Lilly to make money off its pipeline remains a question mark. However, concentrating on “what” is most likely about to happen instead of “when” makes it easy to make a case for Eli Lilly being an excellent growth investment.

November 1, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
November 1, 2022
Fiat Lux

Featured Trade:

(BARGAIN DEAL FOR A QUALITY STOCK)
(ABBV), (ABT), (RGNX), (JNJ), (MRK), (GILD), (AMGN), (LLY), (BMY), (PFE)

Bargain Deal For A Quality Stock

Biotech Letter

Uncertainty. That’s the prevalent sentiment in the investment community these days.

Investors have been hesitant to buy stocks because they believe the bear market isn’t over yet.

Moreover, investors are anxious over the possibility that the stocks will keep falling as issues like higher inflation continue to hound the market.

However, it’s critical to remember that although today’s situation is challenging, it’s only temporary. This means that businesses with solid track records and promising prospects still make excellent buys.

One of the companies outperforming the market this year but which has fallen out of investors’ favor recently, is AbbVie (ABBV).

AbbVie stock has been declining in value lately following an underwhelming third-quarter earnings report. On top of that, the looming patent expiration of its top-selling drug Humira remains a significant concern among investors.

While the Humira situation is clearly not good news for the company, the reality is that AbbVie has impressively preserved the medication’s exclusivity for almost a decade longer than initially expected. Plus, the company has been boosting Humira pricing every year to cope with the declining revenues in the EU, where it already lost patent protection in 2018.

Hence, it’s acceptable for Humira’s chapter in AbbVie’s story to end. After all, the drug has given the company so much. It has been primarily responsible for the more than 325% climb in the company’s share price since 2012 when AbbVie was spun out of Abbott Laboratories (ABT).

Nonetheless, Humira’s impending patent loss doesn’t mean that AbbVie will simply abandon its roots.

The company has since developed potential successors of Humira, namely, Skyrizi and Rinvoq.

So far, the two auto-immune drugs have delivered promising results and are on track to keep the company in tip-top shape in its post-Humira era.

These newer immunology drugs are showing impressive growth potential, with Rinvoq recording a 56% increase in revenue in the third quarter of 2022 and Skyrizi revenue soaring by 85%.

Both are also on track to beat Humira’s peak sales, with joint peak sales from Skyrizi and Rinvoq initially estimated to reach roughly $15 billion.

However, recent revenue reports show that the two could surpass the estimate and completely eclipse Humira’s more than $20 billion annual return.

Obviously, AbbVie would require more than its immunology segment if it plans to sustain a good top and bottom-line growth trajectory.

Other than the more than 10 neuroscience, hematology, immunology, and oncology candidates in its pipeline, which are projected to be ready for market launches in the three to five years, AbbVie has been diving into the aesthetics and eye care markets.

Its eye care program, specifically RGX-314, which is currently being developed in partnership with Regenxbio (RGNX), is an interesting wildcard. For context, the eye care segments for wet and dry advanced macular degeneration are roughly worth over $10 billion to $20 billion annually.

With its Humira chapter closing, AbbVie could be ushering in a new era where products from its Allergan acquisition take the lead.

For example, its Botox franchise consistently delivers impressive results. Even its Botox for migraine line has been recording double-digit revenue growth in the third quarter, indicating gains in AbbVie’s neuroscience segment.

As for the aesthetic indications of Botox, this particular portfolio could be a key driver in the company’s future growth.

Aside from Botox, AbbVie also gained access to the widely used dermal filler Juvederm. With the facial aesthetics industry pegged to experience a compound annual growth rate yearly at 14%, the market is estimated to hit $15.2 billion by 2028.

This trend of AbbVie dominating the market is likely to continue as the company is confident that competitors would be unable to develop biosimilars of Botox. That means its Botox line could keep adding to its top-line growth for an extended period.

Overall, AbbVie is a solid bet among the “Big 8” in the pharmaceutical world, which includes Johnson & Johnson (JNJ), Merck (MRK), Gilead Sciences (GILD), Amgen (AMGN), Eli Lilly (LLY), Bristol Myers Squibb (BMY), and Pfizer (PFE).

Moreover, this is an excellent time to hunt for deals as several quality stocks continue to decline, affected negatively partly by the momentum of the broader market. Among stocks to consider, AbbVie should be at the top of your list.

October 19, 2022

Diary, Newsletter, Summary

Global Market Comments
October 19, 2022
Fiat Lux

Featured Trade:

(THE BARBELL PLAY WITH BERKSHIRE HATHAWAY),
(BRKA), (BRKA), (BAC), (KO), (AXP), (VZ), (BK) (USB),
(MRK), (ABBV), (CVX), (GM), (PCC), (BNSF), (TLT), (AAPL)

September 27, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
September 27, 2022
Fiat Lux

Featured Trade:

(LAST CHANCE AT SALVATION)
(BIIB), (ESALY), (RHHBY), (LLY), (NVS), (AMGN), (REGN), (BMY), (ABBV), (MRK), (PFE)

Last Chance at Salvation

Biotech Letter

Biogen (BIIB) is taking another crack at Alzheimer’s. This is a crucial moment for the biotech following its move to abandon its plans to market Aduhelm, another Alzheimer’s treatment after healthcare insurers refused to pay for it despite gaining FDA approval.

The moment of truth will come this fall when Biogen and Eisai (ESALY) are anticipated to share the results of their massive trial created to determine whether lecanemab, their latest candidate for Alzheimer’s, can deliver its promise to decelerate the progression of the neurodegenerative condition in early-stage patients.

Needless to say, an effective Alzheimer’s drug would not only bring incredible development and hope for patients and their loved ones but also offer a much-needed reprieve for Biogen.

Success would push the biotech to pursue a quick turnabout, with Biogen and Eisai already planning to request an accelerated approval. If the Phase 3 data turns out promising, then the next move would be to clear the way to get Medicare coverage, ensuring that the Aduhelm debacle won’t happen again.

In terms of market opportunity, treatments like lecanemab can rake in over $20 billion in sales in the United States alone.

Still, investors remain cautious. After all, betting on a positive result of an Alzheimer’s trial has proven to be a wrong move in the past—a sentiment that’s apparent in Biogen’s beaten-down price these days.

When Aduhelm gained approval in June 2021, Biogen’s shares climbed almost 40%. Unfortunately, the price steadily fell as the biotech encountered roadblock after roadblock since the drug’s approval and commercialization.

Last year, Biogen shares rose from $270 to hit $400 following Aduhelm’s approval. These days, the biotech has been trading at roughly $205. That’s about 40% below its price in 2018.

By April 2022, Biogen threw in the towel when Medicare flat-out rejected any request to pay for Aduhelm.

More than that, though, Biogen’s results for its lecanemab trial could spell the difference for other Alzheimer’s drugs in late-stage development, including the candidates from Roche (RHHBY) and Eli Lilly (LLY).

What would happen if Biogen fails again?

A failure would make the beginning of a new period for the biotech. Looking at Biogen’s pipeline and portfolio, it’s clear that the next move would either be to sell off pieces of the company or become more aggressive in pursuing mergers.

With the primary business unable to deliver, the expectations shift to the pipeline to pick up some slack. Unfortunately, Biogen’s lineup looks underwhelming. Its disastrous Aduhelm project caused too much damage to the biotech’s finances, restricting its clinical trials.

While Biogen remains the biggest pure neurology biotech thus far, this position is under attack, and its pipeline seems too slow to react in the wake of back-to-back failures.

Reviewing Biogen’s pipeline in Phase 3 trials does not show any candidates that stand out as groundbreaking or transformative. None has the capacity to anchor the company anytime soon.

Apart from that, Biogen is facing fierce competition in its other treatments, including its MS portfolio from the likes of Novartis (NVS), Amgen (AMGN), and Regeneron (REGN).

Meanwhile, more and more pharma names are challenging its neurology drugs like Bristol Myers Squibb (BMY), AbbVie (ABBV), and Merck (MRK). Even Pfizer (PFE) is making a play in this sector with its plan to acquire neurology biotech pure-play Biohaven.

Given Biogen’s track record, the best thing to do right now is to sit and wait until the data are out. If the data turns out positive, then the opportunity would be massive enough for investors to buy in later.

Besides, Eli Lilly and Roche will also release their results in the following months. Those will offer a clearer path and better flesh out the picture of the future of this segment. Most importantly, these will provide investors with safer options to make their bets.

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