Mad Hedge Biotech and Healthcare Letter
May 19, 2022
Fiat Lux
Featured Trade:
(A PASSIVE INCOME STOCK THAT STEADILY DELIVERS)
(ABBV), (ABT), (AMGN), (BIIB)
Tag Archive for: (AMGN)
Mad Hedge Biotech and Healthcare Letter
May 17, 2022
Fiat Lux
Featured Trade:
(A BIOTECH PIONEER WITH AN ENDURING LEGACY)
(AMGN), (AZN), (ABBV)
Mad Hedge Biotech and Healthcare Letter
May 6, 2022
Fiat Lux
Featured Trade:
(A PANDEMIC CONQUEROR READY FOR MORE)
(PFE), (BNTX), (AMGN), (JNJ), (BIIB), (RHHBY), (SGMO), (BMRN)
The past 50 years have been excellent for investors as stocks have climbed by over 100% within a five-year span ending last December 2021.
Sadly, this story has taken a different course in 2022 as investors became more cautious primarily due to inflationary fears.
However, a handful of businesses are strong and promising enough to survive and even thrive in a high inflation environment.
One company that met this challenge head-on in the healthcare and biotechnology sector is Pfizer (PFE).
In fact, Pfizer didn’t simply meet the estimates of Wall Street in its 2022 first-quarter earnings report. It blew past their expectations.
Pfizer recorded $25.7 billion in revenue for the first quarter, well above the consensus estimate of $23.9 billion. This represented a 77% surge year-over-year.
Meanwhile, its earnings per share of $1.62 was notably higher than the average $1.47.
As anticipated, these gains were mainly driven by the staggering revenues from its COVID-19 vaccine and antiviral medication.
Comirnaty continued its winning ways, with Pfizer generating a jaw-dropping $13.2 billion in sales from the vaccine it co-created with BioNTech (BNTX).
The company's market share in the developed world currently stands at 67%, while it holds 62% of the global market.
As for its Paxlovid antiviral treatment, this drug raked in $1.5 billion in the first quarter and claimed approximately 90% of the US market.
Evidently, Pfizer continues to receive massive boosts from its COVID-19 treatments.
Now, the real question moving forward hinges on whether these financial results can be normalized as part of Pfizer’s future regardless of the pandemic’s effects.
After all, the vaccine sales comprised almost 60% of the company’s total revenue. With this in mind, Pfizer remains firm in its projections that it could rake in $98 billion to $102 billion in annual revenue for 2022.
While this still indicates a strong belief in the pandemic-related treatments, it’s also indicative of a deeper and more diverse pipeline.
Although not as high-flying as the COVID-19 vaccines, a number of other categories notched notable gains year-over-year, like its rare disease segment, which saw a 23% increase.
The growth of its oncology sector, which recorded a 6% climb, was mainly attributed to the 35% rise and expansion of Pfizer’s biosimilar arm.
So far, the top-selling treatments in this segment are Retactrit, a biosimilar of Amgen’s (AMGN) Epogen and Johnson & Johnson’s (JNJ) Procrit, Zirabev, a biosimilar of Roche’s (RHHBY) Avastin, and Rixience, a biosimilar of Biogen’s (BIIB) Rituxan.
Even Pfizer’s pneumonia vaccines showed off a 22% growth this quarter with $1.57 billion in sales.
Apart from these, the FDA has recently lifted the hold on the Hemophilia A gene therapy clinical trials of Pfizer and Sangamo (SGMO).
Without this limitation, the two companies may already have the opportunity to catch up to the leading biotech in this sector, BioMarin (BMRN). If everything works out, Pfizer and Sangamo are slated to release a readout from this program by the second half of 2023.
Another venture that’s expected to pay off soon is Pfizer’s $6.7 billion acquisition of Arena Pharmaceuticals, which was seen as a decisive move to bolster its inflammation and immunology segment.
The company is expected to file for a regulatory for Etrasimod, Arena’s lead program on ulcerative colitis and Crohn’s disease, by the second half of 2022.
This means that the recent acquisition is already expected to add to the near-term growth of Pfizer, which could be as early as 2023.
Moreover, Etrasimod represents an incredible market opportunity, with the treatment projected to reach $28 billion in annual sales by 2025.
Aside from the promising potential of Arena’s pipeline, Pfizer’s move also shows how the company is leveraging the capital influx from its COVID sales and its strategy on a more aggressive growth investment cycle.
On top of that, Pfizer’s partnership with BioNTech highlighted the benefits and competitive advantage in terms of how the biopharmaceutical titan works and collaborates with smaller biotechnology firms.
Hence, Pfizer has made itself the first and obvious choice among budding companies with groundbreaking innovations.
Overall, Pfizer has proven itself more than capable of handling any economic and health crisis. Not only has it come up with a solution that ultimately saved humanity from a deadly virus, but it also emerged victorious and stronger amid a global meltdown.
Given its history and trajectory, it looks like it has nowhere else to go but up. Hence, it would be best if you bought the dip.
Mad Hedge Biotech and Healthcare Letter
April 19, 2022
Fiat Lux
Featured Trade:
(A BUDDING UNDERDOG TO DOMINATE THE ALZHEIMER’S BATTLE)
(SAVA), (BIIB), (LLY), (RHHBY), (ABBV), (AMGN)
One of the most significant unmet medical needs worldwide is the treatment of Alzheimer’s Disease (AD).
With over 6 million people affected in the US alone and roughly 40 million globally, this number is projected to double by 2050 as the population ages and more individuals live longer lives.
That’s why it comes as no surprise that even though the Centers for Medicare & Medicaid Services decided to limit the coverage of Biogen’s (BIIB) AD drug, Aduhelm, more and more drugmakers continue to move forward with their own candidates.
Eli Lilly (LLY) continues to work on Donanemab, which could be available for review by mid-2023. Meanwhile, Roche (RHHBY) is anticipated to release data on Gantenerumab by the end of 2022.
Among the drugmakers pursuing this field, one name continues to rake in positive reports: Cassava Sciences (SAVA).
Cassava’s lead AD drug candidate is Simufilam, a small oral pill. Thus far, this has shown no safety issues and even released the best clinical AD data.
Notably, this is the only treatment that demonstrated tangible cognitive improvement for longer than 6 months in the clinical studies for AD.
The fact that Cassava’s candidate bested Donanemab and Gantenerumab, which both received breakthrough designations, and Aduhelm, which got an accelerated approval, indicates its candidate’s strong potential.
Between their promising results, convenient storage of the pill, easy dosing method, impressive safety data, and the vast unmet medical market, Simufilam could very well be hailed as the best-selling AD treatment the moment it gains approval.
Another indicator of Simufilam’s promise is the lack—or even absence—of insider trading within Cassava in the past years.
Typically, company insiders know more about the projects than anyone else. Strong insider selling is generally followed by a fall in a company’s stock price.
This has not been spotted anywhere in Cassava, with multiple insiders taking on very big stakes in the company.
However, the strongest indicator for Cassava’s impending win is Simufilam being in clinical progression. In fact, it’s already dosing in Phase 3 trials.
While other drugmakers working on an AD treatment may have promising options, the earlier a candidate is in the clinical trials, the higher the risk of failure and the longer it’ll take to be commercialized.
Each step forward in clinical trials is basically a way to “de-risk” the candidates, which leads to an increased value of the company.
Naturally, one of the questions raised when dealing with a biotech not as large as AbbVie (ABBV) or even Amgen (AMGN) concerns financial health.
Cassava’s recent financial filings showed that the company has roughly $240 million in cash and $0 debt.
Looking at their workflow, Cassava typically burns about $9 million every quarter.
As they ramp up their Simufilam trials, this is obviously expected to change.
After all, Phase 3 trials tend to cost more. So, the company anticipates a bump in spending to reach $12.5 million to $15 million per quarter this 2022.
While this is a substantial increase in capital expenditure, the jump remains within reasonable projections of the price of Phase 3 trials.
Taking into consideration the higher burn rate of roughly $15 million every quarter, Cassava would still have sufficient cash to operate for 16 quarters or 4 years without the need to resort to any additional financing rounds—at least for Simufilam.
If it fails, investors would already know whether Simufilam was a success.
That means if Cassava does pursue financing efforts, it would be for new projects and not for this particular AD treatment.
The market has not been kind to the biotechnology sector lately. It’s because the market tends to overreact to negative news.
Farsighted investors who recognize the enduring potential of a company—even at its vulnerable periods—can sometimes reap outsized returns if they turn out correct.
However, a successful strategy for some investors is to bet on companies that other investors are afraid to touch.
Nevertheless, it’s still prudent to keep in mind that investing in a roller coaster like Cassava means preparing yourself for an unexpected and possibly wild ride.
Mad Hedge Biotech and Healthcare Letter
March 29, 2022
Fiat Lux
Featured Trade:
(A DURABLE AND ENDURING STOCK IN THESE TROUBLING TIMES)
(AMGN), (JNJ), (AZN), (ABBV)
The latest market sell-off has motivated me to take a closer look at blue-chip businesses with solid track records of bringing value to shareholders regardless of the economic conditions.
After all, an insistence on putting money only in the highest quality stocks is key to long-term success in investing.
And when investing in the biotechnology and healthcare industry, it’s vital to choose stocks with robust drug portfolios and promising pipelines of candidates. This ensures continuous solid growth in the near and long run.
Amgen (AMGN) fits that description.
Over the years, Amgen has risen as one of, if not the most prominent biotechnology company. This company is one of the largest and possibly longest-running biotechnology businesses in the world.
It is a leader in various sectors, including oncology, blood disorders, cardiology, inflammation, and immunology. It has also expanded in other segments, with “King of Biologics” as the latest moniker for this biotech titan.
Amgen has been consistently profitable throughout its history, sustaining industry-leading margins that boost both its top and bottom-line growth.
Founded in 1980, it has steadily made a name for itself following the approval of its first drug —anemia treatment Epogen — in 1989.
Since then, this biotechnology stalwart has evolved into a significant player in the industry with a market capitalization of roughly $130 billion and an enterprise value of approximately $156 billion.
This translates to the company demonstrating a solid balance sheet on top of a robust repurchase program and an impressive track record of increasing its dividends.
Amid the sluggish economic climate in 2021, Amgen pulled $26 billion in total revenue to record a 6% climb year-over-year in adjusted EPS.
This improvement in its performance was fueled by its remarkable portfolio of branded drugs and biosimilars.
Naturally, the next question is whether the company can sustain this growth.
For 2022, Amgen announced a guided total revenue within the range of $25.4 billion and $26.5 billion.
In 2023, the company anticipates an accelerating growth primarily due to the US launch of the all-around immunology injection Amgevita, the expansion of psoriasis and psoriatic arthritis Otezla’s label, and additional momentum from future blockbusters severe asthma treatment Tezspire and non-small cell lung cancer oral therapy Lumakras.
Looking at the track record, the company estimates potential mid-single-digit growth in revenues from these products and over double-digit increase in EPS.
Moreover, the company has an impressive pipeline of roughly 40 innovative candidates. The programs include 10 cutting-edge molecules advancing through mid- and late-stage trials.
Among these are biosimilars for blockbuster products such as Johnson & Johnson’s (JNJ) Crohn’s disease treatment Stelara, and AstraZeneca’s (AZN) blood disorder drug Soliris.
If these get the green light, then each biosimilar could siphon hundreds of millions of dollars in yearly revenue from these competitors.
In particular, Amgen’s work on a biosimilar for AbbVie’s (ABBV) severe rheumatoid arthritis treatment Humira could generate substantial sales for the company.
Its burgeoning biosimilars programs and other pipeline candidates contribute to predictions that Amgen could record at least 7% in annual earnings growth over the next five years.
More importantly, Amgen offers a market-beating 3.3% dividend yield, making it an attractive investment with incredible growth potential.
As the market continues to make sense of the effects of inflation, the continuing conflict between Ukraine and Russia, and the constant threat of rate hikes, it has become essential to come up with a list of top quality companies that can offer steady growth and a healthy dividend.
Thus far, Amgen has been excellent at delivering on both counts.
It’s a great biotechnology company with a very solid history and, judging from its pipeline candidates, an even more solid future.
Mad Hedge Biotech and Healthcare Letter
February 10, 2022
Fiat Lux
Featured Trade:
(A HEALTHCARE ENIGMA TO ADD TO YOUR WATCHLIST)
(GILD), (JNJ), (PFE), (ABBV), (LLY), (MRK), (BMY),
(AMGN), (MRNA), (AZN), (REGN), (BNTX), (NVAX)
The top names in the biopharmaceutical world based on their market capitalization include Johnson & Johnson (JNJ), Pfizer (PFE), AbbVie (ABBV), Eli Lilly (LLY), Merck (MRK), Bristol Myers Squibb (BMY), Amgen (AMGN), and Gilead Sciences (GILD).
Among these names, Gilead is often viewed as an enigma, given its history and the challenge in predicting its share price trajectory.
Over the past months, Gilead has been testing the patience of investors. In fact, the company is projected to experience a fall in revenues this year from $27 billion in 2021 to $24.05 billion in 2022.
The latest news that added to their anxiety was the pause on clinical trials for its cancer therapy, Magrolimab.
This came after its short-lived dominance in the Hepatitis C segment.
At that time, the sales of its leading drug Sovaldi skyrocketed from $140 million in 2013 to a jaw-dropping $10.2 billion by 2014.
Meanwhile, another Hepatitis C treatment, Harvoni, single handedly raked in $13.8 billion in sales in 2015, pushing the entire company’s revenues to an impressive $32.6 billion.
Unfortunately for Gilead, it became the victim of its own staggering success.
Its Hepatitis C treatments, Sovaldi and Harvoni, were incredibly effective and managed to cure the patients within months. The demand for these drugs fell because the patient pool gradually ran dry.
By 2019, the Hepatitis C franchise of the company had declined and managed to scrape $2.9 billion in combined sales.
Since then, though, the company has been struggling to regain investors' faith.
Nevertheless, these recent developments are not enough reasons to panic. If anything, Gilead has simply become even more attractively priced due to the fallout.
In 2020, Gilead managed to report its first year-on-year increase in revenues since its glory days in 2015.
As the COVID-19 pandemic started to take hold of the world, it was Gilead’s Veklury (Remdesivir) that secured the first-ever Emergency Use Authorization from the FDA.
While Veklury was eventually overshadowed by COVID-19 vaccines from Pfizer, Moderna (MRNA), JNJ, and AstraZeneca (AZN), as well as other treatments and antibody cocktails from Eli Lilly, Regeneron (REGN), and Merck, Gilead’s candidate managed a comeback by the fourth quarter of 2021 after experts declared it to be effective against the Omicron strain.
In effect, Veklury had a major impact on the company’s 2021 performance, recording $5.6 billion in annual sales.
Although this is not as illustrious or groundbreaking as its Hepatitis C treatments, the reemergence of Gilead as a frontrunner in the pandemic is proof that the company has not lost its knack for discovering and developing a winning formula for blockbuster treatments.
Another avenue that Gilead has been exploring is actively acquiring assets to expand its portfolio.
One notable move in that direction is its $11.9 billion acquisition of Kite Pharma, a leader in the cell therapy space, in 2017. Thus far, this agreement has yielded two drugs: Yescarta and Tecartus.
Since oncology is one of Gilead’s major areas of concentration, the commercialization of these two treatments conveys a promising future.
While both are yet to become blockbusters, the field of cell therapy has been rapidly expanding and turning into a critical therapeutic option for certain patient categories.
Yescarta is projected to rake in $1.5 billion in revenues if it receives the FDA green light for large B-cell lymphoma
Considering that its last trial data showed off a 60% improvement with Yescarta compared to standard of care in terms of halting the disease’s progression or even death, there’s a huge possibility that Gilead will be delivering good news soon.
As for Tecartus, this treatment received approval for acute lymphoblastic leukemia last year and is aiming to expand to cover mantle cell lymphoma by July 2022.
With its list price of $373,000, this CAR-T therapy is projected to reach blockbuster status in the following months as well.
Another oncology drug anticipated to reach blockbuster status soon is metastatic triple-negative breast cancer treatment Trodelvy, which Gilead gained access to following a $21 billion deal with Immunomedics in 2020.
Given its current approved indications and the queued trials to expand its coverage, Trodelvy is projected to reach $4.7 billion in peak sales.
Going back to the 2022 revenue forecast for Gilead, I think the change is from the company’s anticipated decline in Veklury sales.
Since Pfizer, BioNTech (BNTX), Novavax (NVAX), and Moderna have been actively working on Omicron-focused vaccines and treatments, Gilead expects its Veklury revenues to shrink as well.
Overall, Gilead still presents an excellent opportunity for long-term investors.
Despite its setbacks, the company has proven that it still holds the knack of rolling out remarkable and effective best-in-class treatments.
Moreover, its pipeline is filled with promising candidates poised to deliver in the years to come. So, don’t be too quick to write off Gilead just yet.
