(AZN) Archives

Another Buy-the-Dip Opportunity Dropped in our Lap

The ideal stocks are those you can just buy and hold for a long time. A healthcare and biotechnology company that perfectly fits the bill is Amgen (AMGN).

Amgen wasn’t an active participant in the COVID-19 race.

Instead, the biotechnology giant chose to stick with its circle of competence and focused on delivering remarkable results to its shareholders through boosting its revenue and increasing dividends.

Recently, this hyper-focus has paid off.

Amgen received FDA approval to market a drug that targets cancer cells in an area that researchers have been attempting to hit for decades.

The new treatment, Lumakras, will be the first of its kind to target a tumor growth process commonly known as KRAS for non-small cell lung cancer (NSCLC).

To understand the extent of Amgen’s breakthrough, scientists and researchers have been working on developing a KRAS blocker for over 40 years.

Prior to this, KRAS had been known as an “undruggable” target.

Basically, Amgen came up with a drug that can target the notorious and illusive cancer-causing protein—something that was previously considered the “Achilles heel” of lung cancer tumors.

More impressively, Lumakras was approved three months ahead of its schedule.

Based on the results of its Phase 2 trials, Lumakras can stall the progress of lung cancer in roughly 81% of the patients for a median time of 10 months.

In the Phase 3 trials, Amgen is looking into testing the drug in combination with other medications to hit the tumors that developed resistance to the pill.

A key factor in Lumakras’ launch is determining the types of patients who’d benefit most from the drug.

So far, Amgen has been collaborating with diagnostic partners, particularly Qiagen (QGEN) and Guardant Health (GH), for biomarker testing.

In terms of pricing, Amgen estimates monthly spending on Lumakras to be $17,900.

In the United States, roughly 30,000 patients of KRAS-mutated lung cancers are reported annually.

That puts Lumakras sales to at least $100 million for 2021 alone.

By 2025, the drug is expected to rake in roughly $1 billion annually, with sales growing to $1.51 billion in 2026.

These are actually conservative estimates that assume only a 50% success rate from Lumakras in the next few years.

Given the provisional and accelerated approval the drug has already received from the FDA though, it is safe to say that it can achieve at least 75% success rate, which means it can generate higher revenue.

The KRAS target is not limited to lung cancer. It also appears in other solid tumors, which Amgen continues to test Lumakras in a dozen other types, including colorectal cancer.

Depending on expansion plans, Lumakras sales can reach $3.2 billion by 2030.

Again, this expansion is a conservative estimate.

If the expansion for Amgen’s drug would be anything like AstraZeneca’s (AZN) blockbuster Tagrisso, which eventually became a recommended first-line therapy option for NSCLC, then Lumakras sales can peak at $4 to $5 billion.

Considering the potential of this market, it no longer comes as a surprise that competitors are hot on Amgen’s heels just days after Lumakras’ approval was announced.

The closest rival so far is Mirati Therapeutics (MRTX), which also has KRAS-inhibitor candidates in Phase 1 and Phase 2 trials.

Prior to that, Eli Lilly (LLY) and Johnson & Johnson (JNJ) tried their hands at KRAS mutation but failed.

Aside from Lumakras, Amgen has another blockbuster candidate in store for its shareholders: asthma drug Tezepelumab.

Developed in collaboration with AstraZeneca, this drug is already in the second late-stage pipeline and has been showing promising results so far.

Globally, there are about 2.5 million patients with severe asthma, with 1 million suffering from eosinophilic asthma in the United States. Amgen is hoping to target the latter population.

If Tezepelumab gets approved, it would be in direct competition against Sanofi (SNY) and Regeneron’s (REGN) asthma drug Dupixent. Peak sales for this asthma drug is estimated at roughly $3.5 billion.

Over the past 12 months, Amgen’s stock performance has been rangebound.

Although this is obviously frustrating for growth-oriented shareholders, I think the short-term volatility of the stock may present good opportunities for value-conscious investors.

That is, I view the drop in Amgen’s share price as another favorable buying opportunity.

Amgen

May 4, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
May 4, 2021
Fiat Lux

FEATURED TRADE:

(A BAD NEWS BUY STOCK)
(AZN), (PFE), (BNTX), (MRNA), (JNJ)

A Bad News Buy Stock

Biotech Letter

Along with Pfizer (PFE), BioNTech (BNTX), and Moderna (MRNA), one of the biggest potential winners in the COVID-19 vaccine race is AstraZeneca (AZN).

While the company did manage to develop a vaccine nearly as fast as the others, its product is now suffering the same fate as Johnson & Johnson’s (JNJ) candidate and is getting bogged down by blood clotting issues.

As if that isn’t enough, AstraZeneca’s plan to use its diabetes drug Farxiga as another potential COVID-19 treatment also flopped.

Needless to say, it looks like not a lot of things are going well for AstraZeneca in the past months.

Looking at its fundamentals though, it’s worth noting that AstraZeneca stock might just be one of those rare prime candidates for being bad news buys.

After all, the company never really had plans to profit from its COVID-19 vaccine venture. In fact, AstraZeneca has long announced that it would sell its vaccine at cost. Hence, any bad news from the vaccine won’t really affect the company’s sales.

For years, AstraZeneca has been focused on creating a hyper-growth product lineup in several of the pharmaceutical industry’s most profitable submarkets.

In fact, the Phase 3 advanced pipeline candidates of the company are some of the most promising candidates in the industry, with these soon-to-be-launched drugs already generating 24% growth in revenue as early as 2017.

Not including cancer, there are at least 2.1 billion people globally who suffer from various chronic diseases. That accounts for over 25% of the entire human population, thereby representing a massive and lucrative addressable market--the very same market that AstraZeneca has been targeting.

In the years to come, AstraZeneca is projected to release at least six blockbuster drugs—each one of them estimated to rake in more than $1.3 billion in sales annually.

At the moment, one of the company’s major growth drivers is its oncology franchise, which has an early-stage pipeline anticipated to rake in roughly $1.3 billion each year by 2026.

In particular, AstraZeneca’s recently released cancer drugs Imfinzi and Tagrisso are well-positioned to dominate the segment thanks to their leading efficacy when it comes to hard-to-treat cancer types.

Meanwhile, other sub-sectors are expected to contribute $2.65 billion annually.

So far, AstraZeneca operates in more than 70 countries, ensuring its presence in practically all potential addressable markets.

In China alone, the company’s new product sales have risen by 68%, while the rest of the emerging markets recorded 56% growth.

Despite the negative publicity of its COVID-19 vaccine recently, AstraZeneca still managed to report positive data for its first quarter earnings.

Within this period, the company generated $7.2 billion in revenue, which is 15% more than its earnings during the same time last year. Its earnings per share rose by 100% to reach $1.19, while its core earnings were up 55%.

This is a welcome surprise, especially since analysts predicted $0.75 per share for the company.

The rise in AstraZeneca’s stock performance was driven mostly by its best-selling drugs, including Tagrisso with $1.15 billion in sales in the first quarter of 2021 alone and showing off a 17% jump year-over-year.

Even with the failed COVID-19 treatment, the diabetes drug Fargixa soared this quarter with $625 million, indicating a 54% increase from its previous performance during the same period.

More importantly, AstraZeneca has been consistently paying investors a dividend since it started doing it 20 years ago—a trend that’s expected to continue since the company is poised to become one of the fastest growing businesses in the world with 15% growth annually.

Given its pipeline programs and current portfolio of products, AstraZeneca is on track to continue its hypergrowth through 2023. At this pace, we can expect an estimated 105% in total returns and compound annual growth rate returns at 30.2%.

Currently, AstraZeneca stock is experiencing some turbulence due to the bad news linked to its COVID-19 vaccine. Now would be the best time to buy the dips on the bad news.

March 30, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
March 30, 2021
Fiat Lux

FEATURED TRADE:

(A PURE PLAY STOCK SELLING AT A BARGAIN)
(PFE), (BNTX), (MRNA), (AZN), (JNJ), (NVAX), (MRK), (VTRS), (LLY), (REGN)

A Pure Play Stock Selling at a Bargain

Biotech Letter

It’s virtually impossible to find a period in history when drug development gained the unmitigated attention of the whole world.

Yet, this is exactly what happened in 2020 when we all waited with bated breath for the results of COVID-19 trials from the likes of Pfizer (PFE), BioNTech (BNTX), Moderna (MRNA), AstraZeneca (AZN), Johnson & Johnson (JNJ), and Novavax (NVAX).

Despite this, it is astounding that biopharmaceutical stocks are cheaper than they have ever been in the past 20 years.

Given the fact that its collaboration with BioNTech made a central figure in the COVID-19 vaccine race, I think it’s best to put a spotlight on Pfizer today.

Pfizer was the first biopharmaceutical company to successfully market a COVID-19 vaccine, BNT162b2.

Recently, Pfizer received another good news. The FDA is no longer demanding that the company transport BNT162b2 at ultra-low temperatures.

When Pfizer revealed its strong results last year, the world was impressed and no one barely noticed the ultra-cold storage requirement that the achievement entailed.

But with competitors already gaining approvals as well, this particular requirement started to pose noticeable challenges to Pfizer’s vaccine supply chain and made it extremely challenging transporting the much-needed vaccines to remote areas.

These challenges highlight the significance of the recent FDA announcement regarding BNT162b2.

In terms of market share, Pfizer holds a significant advantage over the others.

As of the year-end of 2020, the company supplied 65 million doses to developed markets.

Meanwhile, the 2021 forecast for this product is at nearly 2 billion doses. This is estimated to rake in roughly $15 billion in revenue for Pfizer.

In comparison, Moderna’s advanced purchase deals are estimated to be worth $18 billion.

To sustain immunity, there’s the possibility that the vaccine would be needed annually.

This could lead to substantial demand for doses, with a two-dose vaccine like BNT162b2 projected to reach about 10 billion doses every year.

Realistically, the rising need for doses and the manufacturing requirements will obviously pressure profit margins.

However, if the vaccine does turn out to be an annual necessity, then it could become a valuable asset.

The entire COVID-19 market is estimated at $39 billion in 2021 and $23 billion in 2022.

Pfizer and even Moderna’s first mover advantage can easily help them dominate the market this year.

This means that the competition will heat up by 2022.

To ensure that it keeps the lead, Pfizer has commenced the Phase 1 trial for a COVID-19 pill.

Pfizer’s pill, dubbed PF-07321332, aims to inhibit the enzymes that cause the SARS-CoV-2 virus to replicate. The goal is to create an antiviral drug that works pretty much the same way as the one developed for HIV and Hepatitis C.

If the trials generate positive results, then PF-07321332 could be taken at the first sign of infection.

So far, lab results have shown the pill’s potent capacity to prevent the SARS-CoV-2 virus and other coronaviruses from replicating.

Pfizer isn’t the only one that came up with the idea of a COVID-19 pill. Merck (MRK), Eli Lilly (LLY), and Regeneron (REGN) have been conducting tests for their own version of the antiviral.

However, Pfizer is more than its COVID-19 programs.

In the past, investors wondered about the long-term growth potential of this company. Some questions are linked to its Upjohn unit, which included several products that lost patent exclusivity.

This segment clouded Pfizer’s pure play revenue and even its earnings growth. However, these questions were put to an end last year when Upjohn’s finally separated from Pfizer and formed a new company, Viatris (VTRS), with Mylan.

The effect of this move showed an amplified growth for Pfizer almost immediately.

In the fourth quarter alone of 2020, the company reported $11.68 billion in revenue, indicating a 12% increase year-over-year. If we exclude the sales from the COVID-19 vaccine, Pfizer’s revenue was still up by 8%.

Every key product segment in the company recorded revenue growth, which is remarkable considering the effects of the pandemic.

Revenue for its oncology sector went up 23% to reach $3 billion, with breast cancer treatment Ibrance leading the charge with an 11% boost to its sales to hit $1.4 billion.

To ensure that it corners the market, Pfizer also launched biosimilars Zirabev and Ruxience in the same quarter. Both generated $171 million in total.

Outside its COVID-19 program, other products in Pfizer’s vaccine segment significantly contributed to the 17% increase in revenue to reach $2 billion.

For example, the pneumonia vaccine Prevnar generated $1.8 billion thanks to the 10% boost in its revenue year-over-year.

As for Pfizer’s rare disease unit, revenue went up 24% to reach $865 million.

The segment leader so far is cardiomyopathy treatment Vyndagel, which achieved a jaw dropping 96% year-over-year boost in its revenue to generate $429 million. This product won’t face patent loss until 2026, so Pfizer still has a few more years to take advantage of it.

Pfizer’s revenues in 2020 were up 2% at $41.9 billion. Considering that it still managed to boost sales despite the pandemic, there’s a good chance that 2021 will be a better year for the company.

In fact, Pfizer estimates that it would reach nearly $60 billion in revenue, with an annualized EPS of roughly $3.15 in 2021.

Global sales in the biotechnology and healthcare industry are projected to be worth $1.2 trillion annually. This is a massive market that is all but guaranteed.

The S&P 500 trades at nearly 21.5x forward earnings, with pharmaceutical companies trading at only 13.2x. That’s a whopping 60% discount.

Considering that drug stocks have historically traded at roughly the same level as the S&P 500, the current situation still offers an unmistakable promise even if nothing else happens.

Continuous development in the sector not only advances our quality of life but also offers reasonable returns to investors.

pfizer

March 23, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
March 23, 2021
Fiat Lux

FEATURED TRADE:

(THIS ISN’T THE TIME TO HIT THE PANIC BUTTON)
(AZN), (PFE), (BNTX), (ALXN), (MRK), (RHHBY)

This Isn't the Time to Hit the Panic Button

Biotech Letter

Everybody will have heard about the issue in Europe these days, with more countries suspending dosing of the COVID-19 vaccine from AstraZeneca (AZN) and Oxford.

However, I think gaining clarity over the situation is important.

I haven’t been the greatest advocate of the AstraZeneca vaccine because its initial rollout was, to put it mildly, botched.

At the time, it was difficult to determine just how efficacious the vaccine, AZD1222, really was, and the latest figure I heard is that it’s 60% effective.

While the European Medicines Agency declared AZD1222 as safe, many member states of the EU seem to disagree, pointing out the reports of blood clotting issues after dosing.

I can see several apparent levels of this concern, but the most pressing, clearly, is medical.

The main problem that the experts are figuring out isn’t about the fairly common blood clots, which actually occurred at background levels and can generally be observed among elderly folks.

Their focus is the extremely rare autoimmune disorder that’s triggered when the body starts aggressively destroying the platelets needed for clotting.

That particular condition is hard to treat and can even be fatal.

Although they haven’t zeroed in on the specifics of the problem just yet, the experts agree that the blood clot issue is caused by some sort of overreaction in the immune system.

The stimulus for this reaction is still under review, but there’s a growing consensus that it could be genetic predisposition in a rare group of people.

This could be the same case as the doctor in Florida who died because of his immune system’s overreaction, which was triggered by the vaccine from Pfizer (PFE) and BioNTech (BNTX).

That’s not conclusive though, since it’s the only case cited in the United States.

The experts also pointed out that the condition is extremely rare, which was why it was not observed even in the Phase 3 trial of AZD1222.

While this is clearly a medical issue, there’s also an image issue for AstraZeneca to think about. How does this negative news on AZD1222 affect the stock?

Here’s a key point to keep in mind when analyzing AstraZeneca’s potential: The company is not selling AZD1222 for a profit while we’re going through the pandemic.

That means that suspending the dosing of AZD1222 won’t hurt AstraZeneca’s profit for 2021.

However, that doesn’t mean that AZD1222 has absolutely no effect on the company’s standing.

If anything, AZD1222 is an earnings opportunity for AstraZeneca in the future because the company’s expected to raise prices and generate a profit after the pandemic.

To underscore this goal, AstraZeneca has actually been ramping up capacity to manufacture at least 3 billion doses every year.

Considering this target, AstraZeneca is clearly signaling that it has the infrastructure to become a dominant player—if not the ultimate market leader—in the coronavirus vaccine sector.

If the issues with AZD1222 are resolved, then AstraZeneca holds a product that could rake in billions in revenue in the years to come.

Notably, AstraZeneca’s shares haven’t budged much regardless of the vaccine news released.

Since April 30, which was the day that the company announced its plans to join the COVID-19 vaccine race, AstraZeneca stock has fallen by roughly 6%.

In the past 11 months, which was filled with ups and downs for AZD1222, and up until the European countries suspended dosing in March 2021, the shares barely changed.

On the whole, AstraZeneca isn’t exactly known for massive one-year gains.

Rather, investors enjoy long-term wins, as seen in the company’s impressive 75% climb in over the past five years.

So far, AstraZeneca has 38 candidates in its pipeline queued for Phase 1 trials, 54 are slated for Phase 2, and 41 are lined up to go through Phase 3.

To fight off stagnation, AstraZeneca acquired biotechnology company Alexion Pharmaceuticals (ALXN) for a whopping $39 billion last December.

This deal offers a major expansion in AstraZeneca’s portfolio because Alexion brings with it its famed rare disease drug Soliris, which generates approximately $1 billion in revenue every quarter.

For 2020 alone, Alexion was estimated to add up to $5.95 billion in sales.

By 2025, AstraZeneca projects that Alexion will be on track to consistently contribute double-digit growth in its annual revenue.

It’s reasonable to say that AstraZeneca is one of the frontrunners in the COVID-19 race.

However, the past weeks have seen the company’s woes multiply due to questions on AZD1222’s side effects.

It’s worth reminding ourselves though why huge biopharmaceutical companies like AstraZeneca, Pfizer, Merck (MRK), and Roche (RHHBY) are not sensitive to these vaccine updates: They do not rely on their vaccine revenue alone for growth.

AstraZeneca markets an extensive array of products, which include eight blockbuster drugs.

In 2020, the company’s sales climbed by 10% to reach over $25 billion year-over-year.

Therefore, the reports on AstraZeneca’s AZD1222 isn’t a cause for alarm. The company’s overall portfolio is well-positioned to drive profit higher in the next several years.

More importantly, if AstraZeneca’s track record serves as any indication, then long-term shareholders should remain optimistic about the company’s growth trajectory.

azd1222

March 9, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
March 9, 2021
Fiat Lux

FEATURED TRADE:

(AN MRNA STOCK TO CONSIDER)
(BNTX), (MRNA), (PFE), (NVS), (SNY), (AZN), (JNJ), (NVAX), (MRK), (BMY), (REGN), (DNA), (CVAC), (FB), (TSLA), (GOOG)

February 23, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
February 23, 2021
Fiat Lux

FEATURED TRADE:

(IS THIS THE YEAR OF BIOTECH UPSTARTS?)
(PFE), (GSK), (MRK), (SNY), (MRNA), (BNTX), (NVAX), (AZN)

Is This the Year of Biotech Upstarts?

Biotech Letter

Vaccines have long been shoved to a sleepy little corner of the biopharmaceutical world, ruled over by a handful of companies that cater to billions of dollars’ worth of demand for vaccines every year, undisturbed by newcomers.

However, the COVID-19 pandemic has made this particular corner of the industry a tad more crowded.

While there’s still no clear picture of how the next stage of the efforts to vaccinate the majority of the human population against COVID-19 will work out, what’s evident is that the dominance of the “big four” publicly-traded vaccine developers will be challenged.

That means the battle for supremacy in the vaccine market will no longer be confined within Pfizer (PFE), GlaxoSmithKline (GSK), Merck (MRK), and Sanofi (SNY).

As we’ve witnessed, the COVID-19 pandemic has provided entry points for new names in the industry, such as Moderna (MRNA), BioNTech (BNTX), and Novavax (NVAX).

By the second half of 2021, Novavax and its partners are targeting to supply 150 million doses of their vaccine, while Moderna says it would be distributing at least 600 million doses this year alone—a number that could reach a billion given the right partners in the future.

Those numbers are on par with global-level vaccine production—with Novavax and Moderna quickly gaining steam and catching up with the big players in the industry.

For context, Sanofi made 250 million doses of its own flu vaccine for the 2021 flu season.

Given that Novavax also plans to release its own flu vaccine combined with the smaller company’s momentum, Sanofi is looking at a long-term rival in this sector.

Aside from offering these smaller biotechs opportunities for growth in terms of business, the pandemic has fast-tracked the advent of next-generation technologies in the industry.

Both Pfizer and Moderna have been approved to use the pioneering messenger RNA technology to develop their COVID-19 vaccine candidates.

Apart from mRNA technology, a similarly revolutionary approach is being explored by Johnson & Johnson (JNJ): viral vector technology.

Meanwhile, AstraZeneca (AZN) and its partner Oxford University came up with their own viral vector vaccine, which has been approved in Europe.

As for Novavax, this Maryland-based company has decided to use the more conventional approach utilizing a protein subunit vaccine.

Although the exact size of the COVID-19 market is difficult to predict, it’s safe to say that it will be massive.

In terms of who could eventually get the lion’s share of the market, Pfizer is currently leading at the moment based on the government contracts the company managed to secure.

Pfizer estimates $15 billion in revenue from the COVID-19 vaccine in 2021—a number that’s two and a half times higher than its best-selling drug in 2020.

Moderna projects at least $10 billion in COVID-19 vaccine sales, while Novavax anticipates roughly $3.4 billion this year.

In the future though, there’s strong indication that AstraZeneca and JNJ will be vying for dominance for mass-market contracts. This is primarily because of their one-dose vaccine promise and the convenient storage requirements their candidates offer.

Another massive growth prospect for this vaccine is if the need for yearly boosters sticks around. This market would not only be lucrative for smaller companies like Novavax and Moderna, but even for the bigger vaccine players.

Considering the potential of this market, the current leaders of the COVID-19 vaccine race shouldn’t get too comfortable.

In fact, Sanofi and GlaxoSmithKline have already joined forces to create their own COVID-19 vaccine candidate.

So while Pfizer, Moderna, and AstraZeneca already have their products out the door, other vaccine developers still consider themselves in the running to topple them from their perch.

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