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Sailing To Biotech Valhalla

In a market full of duds and darlings, every once in a while, you stumble upon a stock that skyrockets so fast it gives you whiplash. Viking Therapeutics (VKTX) is that stock and boy, am I glad I trusted my gut on this one.

We're talking a journey from $4 to $62 in what feels like a blink of an eye - a voyage straight to biotech Valhalla, if you will. A 1,500% gain? Somebody hand me my horn of mead – and maybe a bigger treasure chest.

See what I did there? Viking stock, sailing to Valhalla – sorry, I couldn't resist. Anyway, if you missed out on this raid, don't worry. This biotech longship is still sailing strong, and it’s only getting started.

Now, I've seen my fair share of biotech booms and busts over the years, from the dizzying heights of the genome sequencing craze to the sobering lows of failed drug trials.

But this obesity drug market? It's shaping up to be the mother of all biotech booms.

At the heart of Viking's meteoric rise is a little molecule called VK-2735, a GLP-1 / GIP receptor agonist.

In layman's terms, it's a weight loss wonder drug that's got Wall Street salivating like Pavlov's dogs at dinnertime.

And why wouldn't they? We're talking about a market that could be worth north of $150 billion annually by the early 2030s.

Let's crunch some numbers, shall we? In the first half of 2024, Novo Nordisk's (NVO) dynamic duo, Ozempic and Wegovy, raked in a cool $11.7 billion.

Not to be outdone, Eli Lilly's (LLY) tag team of Mounjaro and Zepbound pulled in $6.66 billion. That's enough cash to make even a seasoned hedge fund manager's eyes water.

But here's where it gets really interesting. Viking's VK-2735, in its Phase 2 Venture study, showed weight loss results that could make even the most stubborn bathroom scale do a double-take. We're talking up to 14.7% weight loss from baseline in just 13 weeks.

Now, before you start maxing out your credit cards to buy Viking stock, let's pump the brakes a bit. This data is still in its infancy, like a toddler taking its first wobbly steps.

We're talking about a study with just 35 patients. That's barely enough people to fill a small yoga class, let alone stake billions of dollars on.

And let's not forget about safety. While VK-2735 seems to be playing nice overall, there are a few wrinkles to iron out.

The highest dose saw a 20% dropout rate, which is about as concerning as finding a shark in your swimming pool. Most patients experienced some side effects, with nausea, diarrhea, and constipation leading the pack.

Not exactly a walk in the park, but then again, no pain, no gain, right?

Looking ahead, Viking's still got its work cut out. They're aiming to kick off a Phase 3 study by Q1 2025, which means we might not see VK-2735 hit the market until Q1 2027. In biotech years, that's practically an eternity.

But here's the kicker - this delay might actually work in Viking's favor. While they're dotting their i's and crossing their t's, Novo Nordisk and Eli Lilly are out there doing the heavy lifting, expanding the market and greasing the wheels with insurers.

Still, Viking's not resting on its laurels. They're working on a monthly dosing regimen and an oral version of VK-2735.

If they pull that off, it could be a game-changer. After all, who wouldn't prefer popping a pill over jabbing themselves with a needle?

Of course, this isn't a one-horse race. The obesity drug market is starting to look like a biotech version of the Oklahoma Land Rush, with everyone from Amgen (AMGN) to Pfizer (PFE) trying to stake their claim.

But with $935 million in the bank and a net loss of only $50 million for the half-year, Viking's got the financial firepower to go the distance.

So, what's the play here? Well, given the market's current love affair with all things GLP-1, Viking's strong financial position, and the potential of both VK-2735 and their NASH candidate VK2809, I'm cautiously bullish on Viking stock.

It's a high-risk, high-reward proposition, but then again, isn't that what makes this game so damn exciting? Just don't forget to pack your Dramamine - this ride's bound to have some turbulence.

August 22, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 22, 2024
Fiat Lux

Featured Trade:

(BITING OFF MORE THAN THEY CAN CHEW)

(LLY), (NVO), (CTLT), (ZLDPF), (RHHBY), (AMGN), (PFE), (LZAGY), (TMO)

Biting Off More Than They Can Chew

Biotech Letter

"If you build it, they will come." But what happens when they come before you've finished building?

That's the billion-dollar question facing the makers of GLP-1 weight loss drugs.

GLP-1 drugs, the newest darlings of the pharmaceutical world, are selling like hotcakes. Eli Lilly (LLY) and Novo Nordisk (NVO), the current heavyweights in this arena, raked in a whopping $10.4 billion and $6.85 billion respectively last year.

Basically, the demand is there, but the supply? Well, that's another story.

So far, Lilly and Novo have been throwing money at the problem like it's going out of style. We're talking billions here. Novo's earmarked $6.5 billion for production this year alone, while Lilly's already shelled out $5.3 billion to beef up its manufacturing muscle. They're expanding facilities faster than you can say "miracle weight loss drug."

But even that's not enough. Lilly admits the industry needs at least 10 to 15 dedicated sites to even come close to meeting demand.

It's like trying to serve a five-course meal to a packed restaurant with just one chef and a microwave.

And let's not forget about the price tag on these manufacturing sites. Novo just dropped $11 billion to buy three fill-finish sites from Catalent (CTLT). Talk about paying a premium for prime real estate.

While Lilly and Novo scramble to ramp up production, their manufacturing woes have created a window of opportunity for competitors eyeing a slice of the GLP-1 pie.

Boehringer Ingelheim and Zealand Pharma (ZLDPF) are closest to market with their Phase 3 drug survodutide.

Meanwhile, Roche (RHHBY) and Amgen (AMGN) aren't far behind in Phase 2. Even Pfizer's (PFE) dipping its toes in the water with an early-stage drug.

But here's where it gets interesting for us who want a piece of the action. These newcomers are facing a manufacturing dilemma of their own.

Do they build their own facilities and risk being late to the party? Or do they outsource and potentially lose control over production?

Some, like Boehringer and Roche, are already talking about using third-party manufacturers. It's like hiring a catering company instead of building your own restaurant – less upfront cost, but you're at the mercy of someone else's kitchen.

Enter the contract manufacturing organizations (CMOs), the unsung heroes of the pharmaceutical world who might just hold the key to unlocking the full potential of the GLP-1 market.

Let’s take a look at the big players in this space.

Lonza Group (LZAGY), with its $6.6 billion in annual revenue and 10% market share in biologics contract manufacturing, is a force to be reckoned with. They're not just sitting on their laurels either – they're pumping $850 million into a new biologics facility in Switzerland.

Then there's Thermo Fisher Scientific (TMO), the 800-pound gorilla of the industry. With a cool $44.9 billion in revenue last year and an 8% to 10% market share in contract manufacturing, they're a go-to partner for big pharma.

They've been on a shopping spree too, scooping up Pharmaceutical Product Development (PPD) for $17.4 billion to boost their manufacturing capabilities.

And, of course, let's not forget about Catalent. They might have sold some facilities to Novo, but they're still a major player with $4.8 billion in revenue last year. They're betting big on biologics, with plans to increase capacity by 40% by 2025.

As for those looking for growth potential, keep an eye on Samsung Biologics. They're the new kid on the block, with a 30% compound annual growth rate over the past five years and the world's largest single-site biologics manufacturing facility.

So, there you have it. The obesity epidemic is a tragedy, but it's also a trillion-dollar opportunity.

With half the population projected to be obese by 2030, this isn't just a health crisis—it's a financial frontier.

The GLP-1 market is poised to balloon to $130 billion, creating a feeding frenzy for those ready to capitalize on the supply squeeze.

But here's the real meat of the matter: in this gold rush, it's not just the drug developers who are striking it rich. The real winners are the manufacturers—those with the capacity to meet the insatiable demand. They're the ones handing out the "shovels" in this weight loss bonanza.

So while everyone else is focused on the flashy GLP-1 drugs, I suggest you also keep a watchful eye on these behind-the-scenes players.

Now, if you'll excuse me, I'm off to patent my groundbreaking idea: GLP-1-infused kale chips. Who says you can't have your cake and eat it too?

August 15, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 15, 2024
Fiat Lux

Featured Trade:

(THE INCREDIBLE BULK)

(LLY), (NVO), (RHHBY), (AMGN), (PFE), (VKTX)

August 13, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 13, 2024
Fiat Lux

Featured Trade:

(THE RISE OF THE STEADY EDDIES)

(CNC), (UNH), (PFE), (JNJ), (ABBV), (LLY), (BIO), (UHS), (WAT), (AMGN), (REGN), (VRTX), (CRSP), (MRNA)

The Rise Of The Steady Eddies

Biotech Letter

Think of the market as a body fighting off an infection. Tech stocks might be the flashy antibodies, but healthcare is the steady, reliable immune system, keeping things stable when the going gets tough. And right now, that immune system is looking stronger than ever.

Skeptical? I get it. We've heard the hype about healthcare before. But this time, it's different.

The Healthcare Select Sector SPDR ETF (XLV) has been on a tear, up 9.3% this year as of Thursday's close. That's nearly keeping pace with the broader S&P 500's 12% gain - a remarkable feat in a market that's been anything but stable.

But what's even more impressive is the turnaround. Back in mid-July, XLV was lagging behind like a three-legged horse in the Kentucky Derby, up only 8.3% while the S&P 500 was showing off with an 18% gain.

In fact, out of the 63 healthcare stocks in the S&P 500, only a dozen have been slacking off since July. The rest? They've been outperforming like it's going out of style.

So what changed?

Well, it wasn't so much that healthcare stocks suddenly discovered the fountain of youth. No, my friends, it was more like the rest of the market decided to take a swan dive off the high board.

You see, while tech stocks were busy doing their best Icarus impression – flying too close to the sun and then plummeting back to earth – healthcare stocks were steady as she goes. It's like the old tortoise and hare story, except in this version, the hare got distracted by shiny objects and ran off a cliff.

Now, let's shine the spotlight on some of the key players driving this healthcare rally.

Remember those health insurers everyone was worried about back in spring? The ones that had investors biting their nails over the future of Medicare Advantage? Well, they've made a comeback.

The S&P 500 Managed Health Care index was down 12% in mid-April, looking about as healthy as a chain smoker with a Big Mac habit. But now? It's up 4.5% since the start of the year.

Companies like Centene (CNC) and UnitedHealth Group (UNH) have bounced back faster than a rubber band on steroids.

And it's not just the insurers. Big Pharma's been flexing, too.

Pfizer (PFE), the company that became a household name faster than you can say "vaccine," is holding steady. Johnson & Johnson (JNJ) is up 2.2%, probably thanks to all that baby powder they're not selling anymore.

Meanwhile, AbbVie’s (ABBV) up 11% since July. These guys are like the Energizer Bunny of the pharma world – they just keep going and going.

But the real showstopper? Eli Lilly (LLY). This biopharma has been on a tear since the beginning of 2024. Up 45% on the year at one point, they've been climbing faster than a squirrel up a tree with a dog in hot pursuit.

Then, there are companies like Bio-Rad Laboratories (BIO), up 20% since July. Universal Health Services (UHS)? Up 18% since July. Waters (WAT), the life sciences tools folks? Up 15%.

Even the biotechs are out to impress.

Amgen (AMGN), the granddaddy of biotech, is up 10% year-to-date. They're selling drugs like Prolia and Enbrel faster than hotcakes at a lumberjack convention.

And Amgen’s pipeline? It’s packed with potential blockbusters, setting the stage for further expansion in the future.

Gilead Sciences (GILD)? Up 15% year-to-date. Turns out, their COVID-19 treatment, Remdesivir, is back in vogue like bell-bottom jeans. And their HIV and hepatitis C drugs? They're still growing stronger.

But the real rock star of biotech? That'd be Regeneron Pharmaceuticals (REGN). These guys are up over 30% year-to-date. They're treating everything from eye diseases to cancer to inflammation.

Vertex Pharmaceuticals (VRTX) is another one to watch. Up 12% this year, they've got the cystic fibrosis market cornered. And they're not stopping there – they're expanding faster thanks to their collaboration with the likes of Crispr Therapeutics (CRSP).

Now that I’ve mentioned gene therapy, I know you're wondering about Moderna (MRNA). After all, weren’t they the darlings of the COVID era? Well, yes and no.

Their stock's down about 35% year-to-date, but don't count them out just yet. Their mRNA technology is hotter than a jalapeño popper fresh out of the fryer. They might be down, but they're definitely not out.

So, what's the takeaway here? I suggest you keep your eyes peeled on the biotechnology and healthcare sectors. After all, in this market, the best offense might just be a good defense – and what's more defensive than betting on the sector that keeps us all alive and kicking?

August 8, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 8, 2024
Fiat Lux

Featured Trade:

(WHEN A+ PROFITS MEET C-VALUATION)

(AMGN), (ABBV), (GILD)

August 1, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 1, 2024
Fiat Lux

Featured Trade:

(THE PLAYBOOK FOR A BIOTECH TRIPLE CROWN)

(ABBV), (TEVA), (PFE), (AMGN), (AZN), (BGNE), (LLY), (CERE)

A Playbook For A Biotech Triple Crown

Biotech Letter

AbbVie (ABBV): A biotech stock that's been on my radar longer than most. If I could travel back to my UCLA biochem days, I'd tell young John to ditch the petri dishes and buy shares in this pharma giant. Why?

Because AbbVie isn't just another pharma play – it's a masterclass in diversification, innovation, and market-beating performance.

This is the stock that could turn a bright-eyed student into a savvy investor faster than you can say "immunology franchise."

In fact, if you've been paying attention to the market, you might have noticed that AbbVie's stock has been outperforming the broader U.S. market since mid-April, and for good reason.

This is a company that's been running at full throttle, posting some seriously impressive numbers in Q2 2024. We're talking $14.46 billion in revenue, a whopping 17.5% increase from the previous quarter and beating consensus estimates by a cool $430 million.

Earnings per share may have fallen just short of analysts' expectations, but they still climbed by a respectable 34 cents to $2.65.

But here's the thing: AbbVie's success isn't just a flash in the pan. This is a company with a diversified portfolio that's driving growth across multiple fronts.

I'm talking about their immunology, oncology, and neuroscience franchises, which together account for a staggering 75% of the company's total revenue.

Let's start with immunology. Now, I know what you're thinking - isn't that just Humira, AbbVie's blockbuster drug for Crohn's disease and ulcerative colitis? Well, yes and no.

While Humira has been facing some generic competition from the likes of Teva Pharmaceutical (TEVA), Pfizer (PFE), and Amgen (AMGN), resulting in a 30% year-over-year decline in global sales, AbbVie's got a couple of other tricks up its sleeve.

Enter Skyrizi and Rinvoq, two immunology drugs that are picking up the slack in a big way. Sales of these bad boys climbed 45% and 56%, respectively, in Q2 2024.

Skyrizi, in particular, has been an absolute beast, raking in $2.73 billion and growing 44.8% year-over-year. And with the FDA giving it the green light for moderate-to-severe ulcerative colitis in June 2024, the sky's the limit for this game-changer.

But AbbVie's not content to rest on its laurels. They're pushing the envelope with Rinvoq, a JAK inhibitor that's been approved for a wide range of indications and is showing some serious promise.

In Q2 2024, Rinvoq brought in $1.43 billion, a 30.8% quarter-over-quarter increase, thanks to strong demand in the U.S., excellent clinical trial results, and FDA approval for treating children with psoriatic arthritis and juvenile idiopathic arthritis.

And let's not forget about giant cell arteritis, a condition that AbbVie's been targeting with Rinvoq.

Recent trials have shown some impressive results, with 46% of adult patients taking Rinvoq 15 mg experiencing sustained remission, compared to just 29% of those on placebo.

No wonder AbbVie's been submitting applications left and right to get this drug approved for even more indications.

But it's not just immunology where AbbVie's making waves. Their oncology portfolio, bolstered by the acquisition of ImmunoGen in mid-February 2024, is also delivering the goods.

Sure, demand for Imbruvica may be declining due to newer BTK inhibitors from AstraZeneca (AZN), BeiGene (BGNE), and Eli Lilly (LLY), but Elahere, an antibody-drug conjugate for ovarian cancer, is quickly becoming a rising star.

In Q2 2024, Elahere sales jumped 65.4% quarter-over-quarter to $128 million, driven by increased marketing, growing awareness among physicians, and promising data from clinical trials.

Finally, let's not overlook AbbVie's neuroscience franchise, which generated a cool $2.16 billion in Q2 2024, a 14.7% year-over-year increase.

Headlining this portfolio are Qulipta and Ubrelvy for migraine treatment, and Vraylar for a range of psychiatric conditions.

Qulipta, specifically, has been a standout, with sales surging 56.3% year-over-year to $150 million, thanks to its convenient oral administration and long-term efficacy data.

Looking ahead, AbbVie's got even more irons in the fire. Their $8.7 billion acquisition of Cerevel Therapeutics (CERE) is set to close soon, bringing promising neuroscience candidates like emraclidine for schizophrenia and davapidon for Parkinson's into the fold.

With all these positive developments, it's no wonder AbbVie's feeling confident enough to raise its full-year adjusted EPS guidance to $10.71-$10.91, up from the previous range of $10.61-$10.81. Talk about a biochemistry experiment gone right!

So, there you have it. AbbVie: a healthcare powerhouse that's firing on all cylinders and poised for even greater success in the years to come. If only I could've shown this to my younger self back in those UCLA labs – he might've traded his test tubes for trading terminals a lot sooner.

Now, if you're ready to take a ride on this rocket ship, I suggest you buckle up and hang on tight. Because let me tell you, dissecting AbbVie's financial DNA has been more thrilling than any fracking adventure or hedge fund rodeo I've ever been on.

And if there's one thing I've learned in my years hopscotching from biochem labs to Wall Street, it's that the view from the top of a well-diversified, innovative pharma giant is always worth the climb. I suggest you buy the dip.

June 20, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 20, 2024
Fiat Lux

Featured Trade:

(VAX TO THE FUTURE)

(AMGN), (RHHBY), (BNTX), (MRNA), (GNCA), (IOVA)

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