(BMY) Archives

My Newly Updated Long-Term Portfolio

I am really happy with the performance of the Mad Hedge Long Term Portfolio since the last update on February 2, 2021. In fact, not only did we nail the best sectors to go heavily overweight, we also completely dodged the bullets in the worst-performing ones.

For new subscribers, the Mad Hedge Long Term Portfolio is a “buy and forget” portfolio of stocks and ETFs. If trading is not your thing and you don’t want to remain glued to a screen all day, these are the investments you can make. Then don’t touch them until you start drawing down your retirement funds at age 72.

For some of you, that is not for another 50 years. For others, it was yesterday.

There is only one thing you need to do now and that is to rebalance. Buy or sell what you need to reweight every position to its appropriate 5% or 10% weighting. Rebalancing is one of the only free lunches out there and always adds performance over time. You should follow the rules assiduously.

Despite the seismic changes that have taken place in the global economy over the past nine months, I only need to make minor changes to the portfolio, which I have highlighted in red on the spreadsheet.

To download the entire new portfolio in an excel spreadsheet, please go to www.madhedgefundtrader.com, log in, go “My Account”, then “Global Trading Dispatch”, the click on the “Long Term Portfolio” button, then “Download.”

Changes

Biotech

Pfizer (PFE) has nearly doubled in six months, while Crisper Therapeutics (CRSP) has almost halved. Since the pandemic, which Pfizer made fortunes on, is peaking and we are still at the dawn of the CRISPR gene editing revolution, the natural switch here is to take profits in (PFE) and double up on (CRSP).

Technology

I am maintaining my 20% in technology which are all close to all-time highs. I believe that Apple (AAPL), (Amazon (AMZN), Google (GOOGL), and Square (SQ) have a double or more over the next three years, so I am keeping all of them.

Banks

I am also keeping my weighting in banks at 20%. Interest rates are imminently going to rise, with a Fed taper just over the horizon, setting up a perfect storm in favor of bank earnings. Loan default rates are falling. Banks are overcapitalized, thanks to Dodd-Frank. And because of the trillions in government stimulus loans they are disbursing, they are now the most subsidized sector of the economy. So, keep Morgan Stanley (MS), Goldman Sachs (GS), JP Morgan (JPM), and Bank of America, which will profit enormously from a continuing bull market in stocks. They are also a key part of my” barbell” portfolio.

International

China has been a disaster this year, with Alibaba (BABA) dropping by half, while emerging markets (EEM) have gone nowhere. I am keeping my positions because it makes no sense to sell down here. There is a limit to how much the Middle Kingdom will destroy its technology crown jewels. Emerging markets are a call option on a global synchronized recovery which will take place next year.

Bonds

Along the same vein, I am keeping 10% of my portfolio in a short position in the United States Treasury Bond Fund (TLT) as I think bonds are about to go to hell in a handbasket. I rant on this sector on an almost daily basis so go read Global Trading Dispatch. Eventually, massive over-issuance of bonds by the US government will destroy this entire sector.

Foreign Exchange

I am also keeping my foreign currency exposure unchanged, maintaining a double long in the Australian dollar (FXA). Eventually, the US dollar will become toast and could be your next decade-long trade. The Aussie will be the best performing currency against the US dollar.

Australia will be a leveraged beneficiary of the synchronized global economic recovery through strong commodity prices which have already started to rise, and the post-pandemic return of Chinese tourism and investment. I argue that the Aussie will eventually make it to parity with the US dollar, or 1:1.

Precious Metals

As for precious metals, I’m keeping my 0% holding in gold (GLD). From here, it is having trouble keeping up with other alternative assets, like Bitcoin, and there are better fish to fry.

I am keeping a 5% weighting in the higher beta and more volatile iShares Silver Trust (SLV), which has far wider industrial uses in solar panels and electric vehicles. The arithmetic is simple. EV production will rocket from 700,000 in 2020 to 25 million in 2030 and each one needs two ounces of silver.

Energy

As for energy, I will keep my weighting at zero. Never confuse “gone down a lot” with “cheap”. I think the bankruptcies have only just started and will stretch on for a decade. Thanks to hyper-accelerating technology, the adoption of electric cars, and less movement overall in the new economy, energy is about to become free. You are looking at the next buggy whip industry.

The Economy

My ten-year assumption for the US and the global economy remains the same. I’m looking at 3%-5% a year growth for the next decade after this year’s superheated 7% performance.

When we come out the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 700% or more from 35,000 to 240,000 in the coming decade. The American coming out the other side of the pandemic will be far more efficient, productive, and profitable than the old.

You won’t believe what’s coming your way!

I hope you find this useful and I’ll be sending out another update in six months so you can rebalance once again. If I forget, please remind me.

Stay healthy.

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

July 13, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
July 13, 2021
Fiat Lux

FEATURED TRADE:

(SPINOFF STOCKS POISED FOR LONG-TERM GROWTH)
(VTRS), (OGN), (PFE), (MRK), (JNJ), (LLY), (ABBV),
(AZN), (GSK), (BMY), (GILD), (REGN), (PYPL), (EBAY), (CARR), (UTC)

Spinoff Stocks Poised for Long-Term Growth

Biotech Letter

Spinoffs have historically been known to deliver healthy returns for their investors.

A good example is PayPal (PYPL), which grew sevenfold since 2015 following its spinoff from eBay (EBAY).

A more recent example is Carrier Global (CARR), which tripled its shares amid the pandemic after its spinoff from United Technologies (UTC) last year.

Basically, spinoffs allow smaller segments of companies to thrive on their own or push high-growth divisions to expand faster.

Over the past months, the cheapest stocks found in the S&P 500 have recently spun off pharmaceutical companies: Viatris (VTRS) and Organon (OGN).

Viatris is a spinoff of Pfizer (PFE), which merged with Mylan, while Merck (MRK) jettisoned Organon (OGN) just last month.

Both are brand new and still under the radar, particularly among investors who don’t follow healthcare updates.

While these two have yet to impress the market, both exhibit potential that could make them promising long-term prospects.

Viatris holds an extensive portfolio of drugs courtesy of Pfizer’s Upjohn unit and Mylan’s pipeline.

The list includes the previously top-selling Lipitor, Viagra, Lyrica, and even Norvasc from Pfizer. It also has Mylan’s income-generating EpiPen along with the company’s HIV/AIDS therapies and 7,500 marketed products across the globe.

To date, Viatris has fallen roughly 30% from its average price target. It’s not for the subpar performance of its products though. This is mostly attributed to the lack of attention from investors and possibly a bit of skepticism from some analysts.

However, Viatris has a really good value proposition.

The main goal of the biggest names in the biopharmaceutical sector, such as Johnson & Johnson (JNJ), Eli Lilly (LLY), AbbVie (ABBV), AstraZeneca (AZN), GlaxoSmithKline (GSK), Bristol-Myers Squibb (BMY), and Gilead Sciences (GILD), is to develop and launch the best-in-class treatments to market.

To achieve that, these industry giants are granted a set period to exclusively sell and market each new drug that gains approval.

This would allow them to command a premium price, which in turn would give them the money to fund the next round of research and development needed to come with the next generation of newer and improved versions of the treatment.

However, not everyone can afford those premium prices.

So when the periods of exclusivity end, there are companies like Mylan—now Viatris—that are allowed to manufacture generic versions of those branded drugs and sell them at lower prices.

The list of drugs with soon-to-expire patents for which Viatris has been working on creating biosimilars or generic versions include Humira from AbbVie, which recorded peak sales at $20 billion; Eylea from Regeneron (REGN), which peaked at $7.5 billion; and even Allergan’s Botox, which peaked at $5 billion.

Viatris is also working on biosimilars for Roche’s (RHHBY) cancer treatments Avastin, which had peak sales of $7 billion, and Perjeta, which peaked at $5 billion.

Obviously, Viatris will not reach the same height of success as the companies that created those branded drugs.

But, if it manages to achieve even only 10% of those numbers, then it can generate roughly $4 to $5 billion in sales—and that’s just the tip of the iceberg.

So far, Viatris owns at least 1,400 approved molecules applicable in roughly 10 therapeutic segments.

It has roughly 350 products in its pipeline at the moment, with each item estimated to generate approximately $100 million to $500 million in sales.

With its current performance and access to 165 countries and territories, Viatris is expected to generate roughly $224 billion in global sales annually.

With all these in mind, Viatris’ value proposition looks impressively strong to me.

More importantly, this Pfizer spinoff has the capacity to become the world’s first dominant generic and biosimilar drug manufacturer, with its revenues potentially becoming comparable to major pharmaceutical companies at some point.

The same value proposition could be behind Organon, as this newly spun-off company markets Merck’s off-patent drugs.

While the move to separate from its parent company has yet to show tangible results, Organon is projected to rake $6.1 billion to $6.4 billion in revenue for 2021, with annual sales expected to rise in mid-single digits and dividends anticipated to be about 3%.

The biosimilars market is still relatively young, with only 60 biosimilars approved in the EU and 29 in the US thus far. In total, those represent a market worth approximately $17 billion.

Conservative estimates project that the global biosimilars market will be worth $692 billion by 2027, considerably outpacing the mainstream pharmaceutical sector.

Given their potential and prospect for future gains, the low prices for companies like Viatris and Organon present rare opportunities to grab long-term investments.

May 20, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
May 20, 2021
Fiat Lux

FEATURED TRADE:

(REGENERATED REGENERON)
(REGN), (PFE), (JNJ), (AMGN), (BMY), (GILD), (MRK), (LLY), (SNY), (BAYRY), (NVS), (RHHBY)

Regenerated Regeneron

Biotech Letter

The biotechnology and healthcare sectors have become attractive investment targets for investors who recognize the value and essence of these industries along with the possible risks associated with them.

While not all companies in these areas are great investments, some offer remarkable growth opportunities.

One company worth considering is Regeneron (REGN), with its strong and stable investment thesis and steady organic growth.

Regeneron joins the ranks of Pfizer (PFE) and Johnson & Johnson (JNJ) as one of the handful of biopharmaceutical companies to release solid first quarter results this 2021 compared to other big names in the industry, including Amgen (AMGN), Bristol Myers Squibb (BMY), Gilead Sciences (GILD), Merck (MRK), and Eli Lilly (LLY).

The New York-based company reported a 38% boost in its revenue compared to the same period in 2020, reaching $2.5 billion for the first quarter of 2021 alone.

Virtually all of Regeneron’s products generated solid growth during this period, with the company’s COVID-19 antibody cocktail REGEN-COV delivering the highest sales at $262 million.

To underscore just how significant REGEN-COV is to Regeneron this quarter, its absence from the roster would take away 18% from the company’s overall revenue growth.

Riding the momentum of its COVID-19 program, Regeneron has developed Inmazeb, which is a treatment for Ebola virus infection.

Aside from its COVID-19 antibody cocktail, Regeneron also saw an impressive boost in the performance of its atopic dermatitis drug Dupixent.

Dupixent, which Regeneron sells in partnership with Sanofi (SNY), generated $1.26 billion in sales in the first quarter, showing off a notable 48% increase from its 2020 report.

Although Dupixent is a shared product with Sanofi, this dermatitis drug holds incredible promise for Regeneron.

To date, only 6% of eligible patients are being treated with Dupixent. This indicates a massive space that is yet to be explored by both companies.

Taking into consideration the pace at which Dupixent has been growing so far, this drug is projected to peak at roughly $12.5 billion in sales in the coming years.

Another high-selling drug for Regeneron is wet age-related macular degeneration (AMD) treatment Eylea.

Sales for this drug, which was developed in collaboration with Bayer (BAYRY), went up from $1.2 billion in the first quarter of 2020 to $1.3 billion this year.

The increase in sales for Eylea is a welcome surprise for both Regeneron and Bayer, especially since more and more competitors are attempting to topple the drug as the top product in the niche.

Cornering the AMD segment is an attractive venture for any biopharmaceutical company.

After all, Eylea generated $4.9 billion in sales in 2020 from the US market alone.

Thus far, two main competitors have come forward as the strongest.

One is Novartis (NVS), which released Beovu in 2019.

The second, and possibly the stronger competitor between the two, is Roche (RHHBY) with Faricimab.

To ensure its dominance in the AMD market, Regeneron has been expanding the use of Eylea.

The latest development is the drug’s enrollment in the Phase 3 program, which would allow extended periods in between treatments but still deliver the same level of efficacy and safety.

Aside from these, Regeneron is looking into additional revenue streams ahead.

One growth segment is its oncology program, particularly its cancer drug Libtayo, which may soon be marketed to cover a fourth type of cancer.

Regeneron aims to submit Libtayo for review as a treatment for advanced cervical cancer.

On top of this, the drug is also a strong contender in the development of several antibody treatments.

Thus far, the company has 12 oncology antibodies under clinical development.

Overall, Regeneron’s strong results for the first quarter of 2021 highlighted its continuous evolution into a company carrying multiple and diverse portfolios of products and pipeline programs that address an extensive range of serious diseases, from COVID-19 and rare diseases to cancer.

May 6, 2021

Biotech Letter

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

FEATURED TRADE:

(THE WHITE KNIGHT OF BIOPHARMA)
(PFE), (AMGN), (BMY), (LLY), (GILD), (MRK), (BNTX), (VTRS), (GSK)

The White Knight of Biopharma

Biotech Letter

After a week of dissatisfying earnings reports from huge biopharmaceutical firms like Amgen (AMGN), Bristol-Myers Squibb (BMY), Eli Lilly (LLY), Gilead Sciences (GILD), and Merck (MRK), one company has managed to buck the trend: Pfizer (PFE).

In its first quarter earnings report for 2021, Pfizer reported adjusted diluted earnings of 93 cents per share, surpassing the earlier experts’ estimate of 77 cents.

Even its reported revenue exceeded the earlier predictions of $13.4 billion, raking in $14.6 billion during the period instead.

Aside from those, Pfizer also massively boosted its projected revenue from the COVID-19 vaccine it developed with BioNTech (BNTX).

Pfizer’s COVID-19 vaccine is slated for approval to be used for 12- to 15-year-olds by next week.

On top of these, the company expects data from its third COVID-19 vaccine candidate. This recent trial is for a booster dose, which could have results by early July and possibly a full emergency approval later on the same month.

The company now estimates $26 billion in sales for the vaccine, which is notably up from its $15 billion projection in February 2021.

Pfizer is also confident in its capacity to manufacture at least 3 billion doses of the COVID-19 vaccine in 2022, with the company already negotiating agreements with countries for their 2022 supply and beyond.

While the huge boost in the company’s COVID-19 vaccine sales expectations definitely grabs headlines, Pfizer’s base business brought in notable results as well.

Apart from the vaccine, the company’s operational growth in the first quarter was mostly driven by the sales from its blood clot treatment Eliquis, which went up by 25% operationally.

Sales of its heart drug Vyndagel soared by 88%, while its cancer drug Xeljanz jumped 18%.

One of the most notable moves from Pfizer is spinning off its off-patent drug division, Upjohn, to form a new company with generic drug developer Mylan, called Viatris (VTRS).

This decision would rid Pfizer of several well-known products, such as Viagra, Lyrica, Lipitor, Celebrex, and Chantix, which were responsible for roughly 15% of its total revenues.

However, sales for these items fell by 30% in the first nine months of 2020 alone—a chronically falling performance since 2017.

By eliminating the products that no longer hold any exclusivity rights and signing them off to Viatris, Pfizer can focus on developing and marketing new and innovative treatments.

So far, this strategy has started to bear fruit.

At the moment, Pfizer has several attractive assets in its pipeline. One of them is non-small cell lung cancer (NSCLC) treatment Lorbrena, which could become one of the highest-selling products in the oncology market.

Lorbrena is estimated to grow to over $40 billion each year by the mid-2020s.

At this point, the drug is in its registration phase and was granted a priority-review status. That means approval is on the horizon in the not-so-distant future.

Other potential blockbuster oncology assets include prostate cancer drug Xtandi, NSCLC treatment Bavencio, and breast cancer medication Ibrance.

All these are in late-stage trials, which means they should be available to market soon.

In total, Pfizer currently has at least 33 drugs queued in either Phase 3 trials or registration. The list includes vaccine candidates, immunology treatments, and, of course, oncology assets.

While Pfizer lost Upjohn in 2020, it gained a new partner in GlaxoSmithKline (GSK). The two companies decided to merge their consumer healthcare programs.

This made them the biggest provider of non-prescription drugs across the globe.

By shedding its sluggishly growing assets, Pfizer managed to develop its culture into one that concentrates on developing and marketing new and innovative products.

Additionally, the company’s current portfolio holds several growing products with the potential for expansion.

Given all these changes, Pfizer raised its financial guidance for 2021 as well.

For this year, the company now estimates adjusted diluted earnings to be valued between $3.55 and $3.65 per share compared to the previous range of $3.10 to $3.20 per share.

In terms of its full-year revenue, the company raised it from its estimate between $59.4 billion and $61.4 billion to $70.50 billion and $72.5 billion.

In terms of its projected revenue compound annual growth rate, Pfizer reconfirmed that it could deliver at least 6% through 2025 and a double-digit growth on its bottom line.

Remarkably, this is still not taking into consideration its COVID-19 vaccine.

If you pull out the revenues from its COVID-19 vaccine, then the company’s projected EPS growth for 2021 is at 15%.

Adding the vaccine into the equation gives us an impressive 41% increase in its EPS.

If you consider the wild card that is Pfizer’s COVID-19 vaccine, which would include a price increase coupled with the possibility of booster shots administered annually, and combine it with its base business, then it’s easy to see how the company’s growth could be turbocharged in the next few years.

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.