(BMY) Archives

Brain Gains

Let's talk about a golden opportunity knocking at our doors – the booming market of Alzheimer's disease treatments in biopharma. We're not just talking about a small uptick here. With a slew of new meds on the horizon, this market is gearing up for some serious growth, and you might want to grab a piece of this pie.

The dominant name on our radar is Biogen (BIIB), ticking at $260 per share with a market cap that's flirting with $39 billion.

Now, with a solid $10 billion in sales and trading at a nifty 16 times its 2024 estimated earnings, Biogen's got some serious mojo. I've been eyeing it since last year, but boy, have things changed since then.

A critical game-changer was Chris Viehbacher, the new CEO since November 2022. He's already played a couple of aces – slicing $800 million in costs (which, by the way, could pump up earnings by $5 a share by 2025) and wrapping up the acquisition of Reata Pharmaceuticals in September 2023.

This new addition to Biogen’s portfolio has a hot ticket item, Skyclarys, for treating Friedreich’s ataxia. It's a rare find, but it could add a cool $5 per share in earnings in a few years.

But the most exciting name in Biogen’s arsenal is Leqembi, the company’s Alzheimer’s treatment. They're splitting the pot with Eisai (ESALY), and this drug is a little like turning back the clock on cognitive decline – think a two-year rewind button.

The big bucks talk here: we're eyeballing $2 billion in revenue by 2028 and maybe a whopping $4 billion by 2033. And hey, there might even be more where that came from.

Let's chew on a few things here. Biogen has the potential to snag a 60% market share against Eli Lilly’s (LLY) donanemab – the only worthy opponent in the market so far. And given Leqembi's safety creds, this might be playing it safe.

Aside from Eli Lilly, there’s Roche (RHHBY), with candidates in Phase 2 and Phase 1 trials, but they're not quite hitting the jackpot yet. As for other competitors in the space like Regeneron (REGN) and Alnylam (ALNY)? Well, they're cooking up something different in Phase 1, but it's a bit early to call.

Meanwhile, Biogen's got another trick – a home-use version of Leqembi coming this fall. And get this: doctors are buzzing about nipping Alzheimer’s in the bud, way before it crashes the party. Imagine getting a jab of Leqembi as part of your routine check-up when you're only 50. If this works, then we could be kissing Alzheimer’s goodbye by 2040.

For the longest time, Biogen was like that one-hit wonder with its multiple sclerosis treatments. But now, they're swinging for the fences with the largest unmet health need out there. If Leqembi hits it big, and I mean really big, we could be talking about sales far beyond that $4 billion mark by 2033.

But let's not get ahead of ourselves. The big pharma world is about to hit a few speed bumps with a wave of patent cliffs from 2025 to 2029. That’s a headache for the likes of Merck (MRK), Amgen (AMGN), Pfizer (PFE), and Bristol Myers Squibb (BMY).

Biogen, though, is sitting pretty with two growth products and a pipeline that’s got pizzazz. Plus, they're a hot catch for any big pharma looking for a dance partner without stepping on regulatory toes.

As we roll into the next decade, keep your eyes peeled for investment opportunities popping up like daisies. And don't feel like you've got to jump on the first bandwagon that rolls by. This market's just stretching its legs, and today's champs might just be tomorrow's old news.

So, what's the smart play here? Spread your bets across a few horses in the Alzheimer's race, and make sure they're not one-trick ponies.

Eli Lilly, for instance, is more than just an Alzheimer's bet – they're making waves in diabetes and soon, obesity treatments. Biogen, despite its Alzheimer's experience, is a bit of a gamble, especially after its first drug's rocky start.

Remember, investing in Alzheimer's treatments now is like catching the early wave – it's riskier, sure, but the potential for a big payoff is there. This is an emerging market, and it's revving up for an exciting ride. I suggest you add these names to your watchlist.

January 2, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
January 2, 2024
Fiat Lux

Featured Trade:

(FROM LIMPING TO LEAPING)

(LLY), (NVO), (PFE), (AMGN), (VRTX), (BMY), (CRSP), (NTLA)

From Limping To Leaping

Biotech Letter

The year 2023 in the biotechnology and healthcare world has been a rollercoaster with more dips than peaks.

While Eli Lilly (LLY) and Novo Nordisk (NVO) are hitting the jackpot with their new weight loss drugs, the rest of the healthcare sector is limping behind.

By year's end, the S&P 500 Health Care index had slipped by 0.4% since the start of the year, starkly contrasting the broader S&P 500's robust 24% growth.

That’s not just a minor setback; it's the sector's most significant underperformance in 30 years.

Fast forward to 2024. Conventional wisdom suggests healthcare stocks might lag in an election year. Why? Presidential candidates love to shake things up with healthcare reform promises, usually sending investors into a sell-off frenzy.

But this time around, the air is tinged with an unexpected optimism. After a year of hefty sell-offs, healthcare valuations have become irresistibly low, presenting a fertile ground for investment opportunities.

Plus, there's less regulatory uncertainty now, with major acquisitions like Amgen's (AMGN) of Horizon Therapeutics and Pfizer's (PFE) of Seagen sailing through without a hitch. And let's not forget the anticipated interest rate cuts could be a game-changer for the sector.

Interestingly, the typical election-year healthcare jitters might be less intense in 2024. After all, the likely presidential candidates are familiar faces, and the healthcare changes they've made (or not made) are well known.

Trump’s healthcare impact was minimal, and Biden has already pushed through significant drug pricing reform with the Medicare drug price negotiation program. This program, despite legal hurdles, is moving forward and has been priced into the market's expectations.

In a surprising turn of events, the Biden administration's recent move to potentially invalidate patents of some high-priced drugs didn't send investors running for the hills like it might have in previous years. It seems the fear of drug price regulation may be losing its sting.

Now, let's take a closer look at some of the healthcare sectors that are drawing attention.

Biotech has been in a slump since 2020, but things are starting to look up. The sector's last three-year downturn was in 1992, followed by a significant rebound.

Despite challenges like high capital-raising costs and a deluge of IPOs, biotech is showing signs of life. As these pandemic-era companies mature and produce valuable data, they offer both buying and selling opportunities.

M&A activity in biotech is also on the rise, and if interest rates fall, the sector's prospects look even brighter.

Keep an eye on Vertex Pharmaceuticals (VRTX), which is set to reveal more data on its experimental pain drug, and Amgen, which is awaiting data on its new obesity pill. CRISPR Therapeutics (CRSP) and Intellia Therapeutics (NTLA) should be on your watchlist, too.

Over in MedTech, the hype around GLP-1 weight loss drugs led to a sector-wide selloff.

The iShares Medical Devices ETF took a hit, dropping 13.9% by the end of October, but it started to recover in the last two months of the year. The GLP-1 concerns might continue to cast a shadow, but there's a growing sense that their impact might be more long-term, especially if interest rates fall.

In the pharma world, 2023 was a tale of two halves: Eli Lilly and Novo Nordisk on one side, with their successful weight-loss drugs and the rest trailing behind.

While the S&P 500 Pharmaceuticals index slightly declined, Lilly and Novo surged ahead with 56% and over 45% gains, respectively.

But 2024 might bring new challenges, especially for Lilly, as it rolls out Zepbound, its highly anticipated weight-loss drug.

For Novo, the focus will be on how Ozempic fares under Medicare's new drug pricing negotiations set to take effect in 2027.

The key to success in pharma now is finding companies with innovative drugs that promise revenue acceleration without the looming threat of patent cliffs. Pfizer and Bristol Myers Squibb (BMY), for instance, are under the microscope as they navigate impending patent expirations and strive to reassure investors.

In 2023, the healthcare market was a stock picker's paradise, especially given its complexity. The year ahead promises more of the same. Investors should be on the lookout for opportunities among stocks that underperformed last year but have solid fundamentals.

Despite the unpredictability of election years and the bumpy ride of 2023, the healthcare sector, buoyed by low valuations and potential rate cuts, is gearing up for what could be a significant turnaround this 2024. For savvy investors, this could be an opportunity not to be missed.

November 21, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
November 21, 2023
Fiat Lux

Featured Trade:

(A PRESCRIPTION FOR CAUTION)

(VTRS), (PFE), (JNJ), (LLY), (BMY), (TEVA), (ABBV), (CVS)

A Prescription For Caution

Biotech Letter

In the rollercoaster world of pharmaceutical stocks, 2023 has been like riding the Cyclone at Coney Island – thrilling for some, nauseating for others.

Take Pfizer (PFE), for instance. It’s seen its stock take a nosedive by 43.4%. That’s the kind of drop that makes you check if your wallet’s still there. Then there’s Johnson & Johnson (JNJ), trailing behind with a 16.4% decline. Not as dramatic, but still enough to make your stomach lurch.

Meanwhile, there’s Eli Lilly (LLY), playing the hero as it rockets up by an extraordinary 66.8%, thanks to its new weight-loss drugs. At this point, investors are practically throwing ticker-tape parades.

However, even with Eli Lilly’s star performance, the S&P 500 Pharmaceuticals index still shows a downturn of 2.3%.

Now, as we've seen earnings reports trickle in, a trend has started to stick out: positive results aren’t shielding drugmakers from a sell-off. Look at Pfizer and Bristol Myers Squibb (BMY), both hovering near their 52-week lows.

Still, investors are giving the biotechnology and healthcare stocks the side-eye for several reasons.

The new Medicare drug-price negotiation program is like a strict parent setting a curfew – it’s potentially restricting pricing power for certain medications. Plus, as interest rates climb, the allure of high dividend yields is diminishing faster than my motivation to hit the gym.

In this skeptical market, however, there are some optimistic investors who are digging through the bargain bin, hoping to strike gold.

Enter Viatris (VTRS), trading at just 3.3 times earnings and boasting a 5.1% dividend yield. It sounds promising, but only a few brave souls are recommending a buy.

Basically, this situation with Viatris is pretty much like finding a designer shirt at a discount store – sure, it’s cheap, but will it fall apart after two washes? Let’s take a closer look.

Viatris’s backstory is a bit of a soap opera. Born from the merger of Mylan and Pfizer's Upjohn unit, it carries the baggage of Mylan's EpiPen pricing scandal.

Since rebranding, Viatris has been trying to find its footing. Despite a shiny new business plan, which involves selling off assets for a potential $9 billion, investor confidence remains shaky at best.

Notably, its decision to exit the biosimilars market, where heavy hitters like Teva Pharmaceutical Industries (TEVA) and AbbVie (ABBV) play ball, has been seen as a bold move. Considering the potential of that market, it felt like leaving a high-stakes poker game just when the chips were starting to stack up. And with CVS Health (CVS) eyeing this lucrative space, Viatris might find itself wishing it had stayed at the table.

These past months, investors have been capturing this drama through a meme – comparing 'adjusted Ebitda' to 'free cash flow' with images of Jennifer Aniston and Iggy Pop. It’s a cheeky way of saying that Viatris’s financial projections might be wearing rose-colored glasses.

Looking ahead, Viatris is aiming for $2.3 billion in free cash flow next year, buoyed by recent sales. But the big question is: can it turn these assets into growth, or will it continue its high-wire act?

Reviewing its recent moves and their effects on the market, the Viatris saga has turned into a cautionary tale for investors in the pharma world – it’s a reminder that sometimes the threat of a nosedive is as real as the thrill of a skyrocket.

So, what’s the takeaway for those of us with skin in the game?

It seems wise to keep our eyes peeled and not jump on any bandwagons too hastily. Viatris, amidst its strategic transformations and market challenges, is worth watching with a careful eye. While its cash flow looks steady through 2027, thanks to planned asset sales, the long-term picture is as clear as mud.

As we navigate the unpredictable waves of the pharmaceutical market this year, let’s remember – it’s not just about holding on for the ride. It’s about knowing when to get on, when to get off, and maybe, just maybe, when to enjoy the view from the sidelines with some popcorn in hand. I say hold off from buying Viatris shares at the moment.

November 14, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
November 14, 2023
Fiat Lux

Featured Trade:

(REWRITING BIOPHARMA’S TRADITIONAL SCRIPT)

(AZN), (JNJ), (BMY), (NVO)

Rewriting Biopharma's Traditional Script

Biotech Letter

In the high-stakes game of pharmaceutical innovation, AstraZeneca (AZN) isn't just playing to win; it's rewriting the rulebook.

A century-old company, born in the quiet labs of 1913 Sweden, AstraZeneca has become a linchpin in today’s cutting-edge medical advances. This isn't merely a story of corporate survival; it's a journey of transformation, emblematic of how old-world tenacity meets new-world innovation.

As we navigate the intricate world of biotechnology and healthcare, where even giants like Johnson & Johnson (JNJ) and Bristol Myers Squibb (BMY) wobble despite outperforming estimates, AstraZeneca emerges as a study in strategic agility.

Picture this: a company whose shares have seen a 5.7% dip this year, yet it stands as a beacon of opportunity for the discerning investor.

Trading at 15.6 times expected earnings over the next 12 months, it beckons with a valuation that whispers promise, floating below its five-year average.

Needless to say, these aren’t only financial figures but signposts pointing towards a rare investment opportunity in a volatile marketplace.

Let’s delve into the heart of AstraZeneca’s financial anatomy.

Twelve medicines in its arsenal are each marching towards the $1 billion revenue mark this 2023. Tagrisso, its flagship drug, contributes a mere 13.1% to its first-half revenue, showcasing a diversified portfolio that's resilient and well-balanced.

However, innovation isn't without its hurdles.

AstraZeneca faced a 16% decline in Soliris revenue due to patient transitions to newer treatments.

Here lies a lesson in the pursuit of progress – commitment to innovation and affordability can sometimes be a double-edged sword, affecting short-term gains but setting the stage for long-term sustainability. Still, AstraZeneca isn’t one to dwell on its losses for long.

Now, let's turn the page to AstraZeneca's audacious new chapter: entering the fiercely competitive arena of weight-loss medication.

Through a licensing agreement with China’s Eccogene, it's poised to develop an oral medication in the same class as Novo Nordisk’s (NVO) Wegovy drug.

But, the key factor that distinguishes AstraZeneca’s efforts is the pricing, which the company aims to be roughly half the current cost today.

To put things in perspective, Wegovy is priced at $1,349.02 per package. This figure unfolds into a weekly cost of $269.80. When extended over the span of a year, the drug becomes a more substantial financial commitment at $16,188.24.

Notably, the success of Wegovy has catalyzed Novo Nordisk's shares to soar by almost 50% this year.

Given the demand and AstraZeneca’s plan to adjust the price point, this is more than a simple business move for AstraZeneca; it's a venture that could redefine the accessibility of treatments for conditions like diabetes and obesity, impacting over 1 billion people globally.

In the crucible of the pandemic, AstraZeneca partnered with Oxford University to forge a path in the global health crisis, delivering over 3.5 billion doses of a COVID-19 vaccine worldwide.

Looking ahead, AstraZeneca’s leaders view obesity as another pandemic, signaling a strategic shift that melds business acumen with a commitment to global health.

Meanwhile, the latest earnings report from AstraZeneca is proof of its resilient business model.

Amid a 5.7% dip in its shares, the company's outlook is bullish, with an expectation of a low-teens percentage increase in total revenue excluding COVID-19 drugs.

This projection, backed by a 6% year-over-year revenue growth to $22.3 billion and an adjusted core EPS increase of 13% to $4.07, isn't only impressive; it's a narrative of sustained growth amidst adversity.

In conclusion, AstraZeneca's journey isn’t confined to financial returns; it's about being part of a narrative that’s shaping the future of healthcare innovation. I recommend you buy the dip.

October 17, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
October 17, 2023
Fiat Lux

Featured Trade:

(AN EXCELLENT BLUEPRINT FOR SUCCESS)

(AMGN), (ABBV), (BMY)

An Excellent Blueprint For Success

Biotech Letter

Dividends, the consistent source of passive income, have long anchored many investment portfolios. For stock market investors, particularly those with an eye on the biotechnology and healthcare sector, dividends offer both stability and potential growth.

However, the landscape of dividends is not without its pitfalls. A significant concern for investors is when a company decides to cut or suspend these payouts. So, how can one navigate this challenge? The key is to pinpoint corporations that not only offer dividends but are also poised for sustained growth.

This brings us to a prime example: Amgen (AMGN).

Amgen, in recent times, has grappled with challenges that are not uncommon in the pharmaceutical world. The competitive landscape has chipped away at the market share of some of its flagship drugs, leading to a stagnation in revenue growth.

New therapies, like the asthma treatment Tezspire, have received approval but have yet to be the sales catalysts the company might have hoped for. However, it's crucial to understand that in the pharmaceutical industry, stagnation is not a death sentence but a call to innovate and adapt.

Recognizing the need for strategic growth, Amgen unveiled its plans to acquire Horizon Therapeutics for $28.3 billion in cash.

Horizon, specializing in rare autoimmune diseases, offers a rich pipeline of over 20 programs and an array of approved products. This move is not just an expansion; it's a strategic enhancement of Amgen's portfolio.

After some initial regulatory challenges, the acquisition was sealed on October 6, 2023, at $116.50 per share in cash, amounting to an equity value of $27.8 billion.

Now, let's delve into the numbers. Horizon reported a revenue of $3.6 billion for the year ending June 30, 2023, and an operating income of $513 million. When we juxtapose these figures against Amgen's performance, projections suggest that Horizon could amplify Amgen's annual revenue by a notable 12% to 14%.

As of October 9, 2023, Amgen's equity value stood at approximately $143 billion, translating to an equity value to an annual revenue ratio of 5.3x. In comparison, Horizon's ratio is 7.9x.

For the discerning investor, these figures hint at Amgen's belief in Horizon's potential to be a significant revenue generator.

But Amgen's story doesn't end with Horizon. The company's resilience is evident in its global strategies.

The inclusion of Repatha on China’s National Reimbursement Drug List as of January 1, 2022, bore fruit, with sales jumping from $388 million in the first quarter of this year to $424 million by the second quarter.

Even drugs like Enbrel and XGEVA, which faced concerns about increased competition, have shown promising sales trajectories. By the second quarter of 2023, Amgen's total product sales touched $6,683 million, a 14% leap from the previous quarter.

With a global footprint and encouraging data for drugs like Tarlatamab and LUMAKRAS, Amgen's revenue projections of $26.6 billion to $27.4 billion for 2023 seem well within reach.

Diversification is another feather in Amgen's cap. Beyond acquisitions, the company is nurturing a robust pipeline with numerous programs in development.

Venturing into the biosimilar market, Amgen is crafting alternatives to blockbuster drugs to compete with the more expensive options offered by the likes of Bristol Myers Squibb (BMY) and AbbVie (ABBV). In an era where affordable healthcare is not just a demand but a necessity, this strategy could further cement Amgen's position in the market.

In the intricate world of biotech investing, adaptability is the rhythm, and forward-thinking is the step. Challenges, while inevitable, are also opportunities in disguise. Strategic decisions, exemplified by Amgen's acquisition of Horizon, can chart the path for sustained growth.

For investors, the numbers are compelling. A dividend growth of 61% over five years, a competitive yield of 3.26%, and a forward P/E ratio of 14.3 paint a picture of stability and promise.

Ultimately, Amgen's journey in the biotech sector underscores the significance of adaptability, innovation, and strategic growth. In an industry marked by rapid changes and high stakes, the company emerges as a symbol of resilience.

For investors with an eye on biotechnology and healthcare, Amgen offers not just dividends but a vision of sustained growth and stability, making it an investment worth considering. I suggest you buy the dip.

September 19, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
September 19, 2023
Fiat Lux

Featured Trade:

(A SHOT AT HOPE)

(MRNA), (IMTX), (MRK), (PFE), (BMY), (GH), (ILMN), (NVS), (RHHBY), (BGNE), (AZN)

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