(BMY) Archives

A Shot at Hope

In a quaint Boston lab, as the first rays of dawn broke, a team of scientists, led by Moderna (MRNA), embarked on a mission. Their goal? To craft a solution to one of humanity's most persistent adversaries: cancer.

The grim reality remains that cancer is a leading cause of death in the United States. The statistics are daunting, with over 1.9 million new cases anticipated in 2023 and a projected death toll exceeding 600,000. The financial implications mirror this gravity, with costs expected to soar from $156 billion in 2018 to a staggering $246 billion by 2030.

As the world watched with bated breath, Moderna, already a household name for its COVID-19 vaccine, was silently weaving a narrative that could redefine the future of oncology.

Needless to say, the biotechnology sector, a realm of ceaseless innovation, has been abuzz with Moderna's latest venture. Earlier this month, the biotech announced its agreement with the German drug developer Immatics (IMTX) to develop cancer vaccines and therapies. As part of the deal, Moderna will pay $120 million in cash and will also make additional milestone payments.

This collaboration is not just about the financials; it's a beacon of hope for millions.

The partnership is set to merge Moderna's mRNA technology with Immatics’s T-cell receptor platform, focusing on various therapeutic modalities such as bispecifics, cell therapies, and cancer vaccines. Their combined research aims to leverage mRNA technology for in vivo expression of Immatics's half-life extended TCR bispecifics targeting cancer-specific HLA-presented peptides, among other innovative approaches.

With an upfront investment of $120 million, Moderna has made it clear: they're in it to win it. And the stakes? Potentially life-changing cancer vaccines.

However, this isn’t Moderna’s first foray into the realm of cancer treatments.

Building on the momentum of the technology of its highly potent COVID-19 shots, Moderna announced a partnership with Merck (MRK) earlier this year, combining their efforts to come up with treatments that can drastically reduce the spread of skin cancer. By leveraging Merck's Keytruda with its own innovative vaccine, Moderna has showcased the potential of such collaborations in advancing cancer treatment.

After all, the global community oncology services market is not just growing; it's clearly thriving.

From $47.95 billion in 2022 to a projected $53.79 billion in 2023, the numbers speak for themselves. By 2027, this figure is set to skyrocket to $81.33 billion. Such exponential growth underscores the immense potential and critical importance of advancements in oncology.

Yet, as expected, Moderna isn't the only player on the field.

Giants like Novartis (NVS) and Roche (RHHBY) have also thrown their hats in the ring, collaborating with known international cancer organizations to democratize access to cancer medicines. Among the myriad of promising stocks these days, though, Moderna, China’s BeiGene, Ltd. (BGNE), and the UK’s AstraZeneca PLC (AZN) shine the brightest.

Other notable contributors to the fight against cancer include Bristol Myers Squibb (BMY), Guardant Health (GH), Illumina (ILMN), and Pfizer (PFE). Their diverse portfolios and relentless pursuit of innovation are set to shape the future of oncology.

But as the curtains draw on this narrative, the spotlight remains firmly on Moderna. Their success with the COVID-19 vaccine has already etched their name in the annals of medical history. With their sights now set on cancer vaccines, the world waits with eager anticipation.

In the grand tapestry of medical advancements, Moderna's endeavors in the cancer vaccine domain promise to be a golden thread. Their journey, fraught with challenges and uncertainties, is proof of human resilience and ingenuity. As investors, we're not left standing on the sidelines watching history unfold; we're granted an active role in it.

The potential of Moderna's innovations in oncology beckons a promising horizon. For those looking to make a mark in the annals of medical investments, this biotech offers a gateway to the future of oncology. Act now, and be part of this groundbreaking narrative.

September 14, 2023

Biotech Letter

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

Featured Trade:

(A PIGGYBACK RIDE TO THE FUTURE)

(BMY), (NVS), (PFE), (MDT), (ABT), (TMO), (HCA), (UHS), (DGX), (LH)

A Piggyback Ride to the Future

Biotech Letter

As I walked the sterile, fluorescent-lit hallways of a leading biotechnological institute last summer, I overheard snippets of a conversation that immediately piqued my interest: “human-pig kidney,” “game-changer,” and “investor's goldmine.”

We often think of medical advancements in terms of their immediate patient benefits. Yet, in this chance encounter, the talk of the town was how these breakthroughs could cascade into lucrative opportunities in the stock market.

But how close are we to realizing this future?

Imagine a world where organ shortages, a grim reality for over 106,000 hopeful recipients in the U.S., could become a thing of the past. This isn’t a whimsical daydream but a tangible reality we're inching towards.

The mastermind behind this evolution? Kidneys grown inside pig embryos with a human cell composition ranging between 50% to 70%. This meticulous procedure, entailing 1,820 genetically modified pig embryos transplanted into 13 surrogate mothers, brought forth five specimens that met research criteria.

Switching our perspective, from a purely financial lens, the world of biotechnology is ripe with promise. But with the emergence of this organ transplant technology, investors should sit up and pay attention.

Consider giants like Bristol Myers Squibb (BMY), Novartis AG (NVS), and Pfizer Inc. (PFE). Their R&D teams are burning the midnight oil to roll out immunosuppressive drugs, pivotal for post-transplant procedures. Influenced by such groundbreaking endeavors, their stock trajectory could be a sight to behold in 2023.

Transitioning to medical equipment, Medtronic plc (MDT), Abbott Laboratories (ABT), and Thermo Fisher Scientific Inc. (TMO) aren't just names in the medical devices sphere. They represent the zenith of innovation, manufacturing state-of-the-art equipment integral to organ transplant procedures. If this biotechnological marvel scales, they stand at the precipice of unprecedented growth.

Moving onto healthcare, HCA Healthcare, Inc. (HCA) and Universal Health Services, Inc. (UHS) are the custodians of transplant centers. Their potential upswing is directly proportional to the success of human-pig kidney transplantations. And not to be overlooked, Quest Diagnostics Incorporated (DGX) and LabCorp (LH) are at the heart of organ compatibility diagnostics. As this transplant technology forges ahead, they are poised for a meteoric rise as well.

However, a word of caution is due.

While the financial forecasts appear rosy, any discerning investor is well aware of the need to balance enthusiasm with caution. The stock market's volatile nature, coupled with regulatory shifts and unpredictable research outcomes, can be game-changers. It is extremely crucial to keep your finger on the pulse of the sector and maybe even conduct more in-depth research on the potential of each company before making investment decisions.

Also, beyond finance, it would be remiss not to address the elephant in the room. The melding of human cells into pig embryos has raised eyebrows and ethical concerns. With human cells found in the embryos' brains and spinal cords, it prompts uneasy questions about the potential integration into the pigs' cognitive or reproductive systems. How the scientific community and regulators address these concerns will undoubtedly influence both the pace and direction of research, as well as investor sentiment.

Looking back, my chance encounter in that research institute was an omen of the times to come. On the brink of a scientific revolution, we are witnesses to a watershed moment in healthcare. But for the astute observer, it’s not just about saving lives. It's about understanding how such advancements can recalibrate the entire financial landscape.

To encapsulate the mood, let me leave you with this quote from the infamous Marie Curie: "Nothing in life is to be feared; it is only to be understood. Now is the time to understand more so that we may fear less.”

August 8, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 8, 2023
Fiat Lux

Featured Trade:

(A DISCOUNTED PHOENIX SET TO RISE)
(BMY), (JNJ), (GSK), (MRK)

A Discounted Phoenix Set to Rise

Biotech Letter

The rollercoaster ride that is the equity market never fails to excite, surprise, and occasionally bemuse us. There's an erratic heartbeat in how it functions - illogical at times, downright whimsical at others. The upshot? Sometimes, great companies find themselves in the bargain bin of Wall Street – perfect for investors who love a good discount.

This is where Bristol Myers Squibb (BMY) comes in.

In the rear-view mirror of the past year, Bristol Myers Squibb hasn't exactly been the star of the stock market show. Its financial pulse has been somewhat weak, with lethargic revenue growth and, at times, flatlining completely. A big part of this has been the loss of patent exclusivity on a once superstar medication last year, causing its top line to struggle.

Flash forward to BMY dropping its Q2 2023 financial report, and the question is whether the company met the Street's expectations. Well, not exactly.

Let's dive into the numbers. The Q2 2023 revenue was a hefty $11.23 billion, albeit a 0.97% dip from the previous quarter and a 5.6% drop year-over-year. Non-GAAP net earnings clocked in at $3.7 billion or $1.75 per share, a quarter less than my earlier prediction.

The culprit? A steeper decline in Revlimid's sales than expected. The blockbuster sales were $1,468 million, a sizable 41.3% YoY drop, thanks to generics flooding the market and lower net selling prices in Europe.

Cue the traders and investors giving a thumbs down to the financials, sending the stock price spiraling down by 4.2% in just two days.

Over half a year, BMY's share price shrank by a whopping 16%, even with a bunch of positive clinical trial results and a flurry of medicine approvals.

Meanwhile, the bigwigs of the global cardiovascular and oncology drug market, Johnson & Johnson (JNJ), GSK (GSK), and Merck (MRK), have been doing a victory lap.

Still, there’s a silver lining here.

Bristol Myers is currently strutting around with a forward price-to-earnings (P/E) ratio of just 8. If you stack that against the pharmaceutical industry's average of 15.3, our friend Bristol Myers looks appealing. This is especially true when you consider the company is far from down for the count and has quite a few tricks up its sleeve to stage a solid comeback.

Projected revenue for Bristol-Myers Squibb for Q3 2023 lands somewhere in the ballpark of $10.8 billion to $11.92 billion, which, sure, marks a 4.5% dip from Q2 expectations. But hold onto your hats because Bristol-Myers Squibb's revenue is projected to comfortably clear the bar and pull in a cool $11.35 billion.

The heroes of this victory? Groundbreaking drugs like Yervoy and Opdualag have become hotter than a two-dollar pistol in the medical world.

We're talking about a Q2 2023 sales total of $154 million for Opdualag alone, up a jaw-dropping 165.6% from Q2 2022. And let's not forget this medical marvel only debuted in March 2022 and has been selling like hotcakes thanks to its performance in clinical trials.

What's more, Bristol Myers Squibb has been as busy as a bee, adding nine innovative medicines to its repertoire over the last three years. These new kids on the block are set to step up to the plate and replace older, soon-to-be patent-less drugs. They're also expected to drive sales growth into the stratosphere for the foreseeable future.

Bristol Myers Squibb is expected to report continuous growth, thanks to its proven clinical trials and potential to expand its labels. The company is already rolling up its sleeves to test the safety and efficacy of Camzyos for conditions like non-obstructive hypertrophic cardiomyopathy and heart failure with preserved ejection fraction (HFpEF).

As we look towards the horizon of 2025, Bristol Myers forecasts an impressive revenue of $10 billion to $13 billion from its freshest batch of products. Considering it pulled in $2 billion last year from these drugs, that's not too shabby. But don't think it’s resting on its laurels. The company is already testing over 50 clinical compounds across a smorgasbord of trials.

Let's also pay attention to Bristol Myers' attractive dividend profile.

The company currently offers a yield of 3.5%, dwarfing the S&P 500's average of 1.5%. Plus, it has bumped its payouts by 43% over the last five years.

With a cash payout ratio of around 42%, there's much room for this trend to continue into the foreseeable future.

Despite recent stumbles on the revenue and stock value front, BMY is no slouch. Its unyielding character and unwavering commitment to ploughing funds into fresh offerings signal a robust comeback on the horizon.

So, in the immortal words of an old Wall Street sage, it’s time to "Buy low, sell high,” and BMY is looking like quite a bargain right now.

July 18, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
July 18, 2023
Fiat Lux

Featured Trade:

(BIG PHARMA, BIGGER OPPORTUNITIES)
(AMGN), (HZNP), (BMY), (GILD), (PFE)

Big Pharma, Bigger Opportunities

Biotech Letter

The irresistible charm of pharma companies often boils down to their potential pot of gold at the end of the rainbow: the groundbreaking drugs they're tirelessly laboring to introduce. But let's not be reckless.

As appetizing as these stocks may be, they carry a hefty price tag. Moreover, the road to drug development is fraught with unexpected potholes that can leave a nasty dent in the stock's value.

Alternatively, you could pivot to buying a cluster of the more affordable ones.

After all, embracing the tried-and-true philosophy of "a penny saved is a penny earned" can be a winning strategy across diverse sectors, and pharma stocks are no exception.

Here are some options you can explore.

Hovering at $222, Amgen (AMGN) carries a price-to-earnings ratio slightly shy of 12. The firm is grappling with the challenge of a potential few-billion-dollar-a-year dip in sales for some of its drugs while making ambitious strides to enhance its annual revenue of $27 billion.

So far, the most notable beacon of hope for Amgen is its experimental obesity treatments, AMG133 and AMG786, positioned in a market that has the potential to skyrocket beyond a whopping $30 billion annually.

Meanwhile, in a bold move, Amgen has proposed a $27 billion acquisition of Horizon Therapeutics (HZNP).

This strategic takeover could directly bolster Amgen's earnings per share (EPS) by more than $5, significantly enhancing the firm's current annual EPS of $18.

Amgen remains resilient despite facing hurdles from the Federal Trade Commission, which has launched legal proceedings to halt the transaction. The company is not just fixated on Horizon; it has the bandwidth to explore other potential acquisitions or augment its stock buyback program.

Another stock to consider is Bristol Myers Squibb (BMY). Priced at a humble $63, it’s trading at a modest valuation, barely touching eight times its earnings.

The market trembles at the potential stagnation—or worse, reduction—of its annual EPS, currently soaring just above $8. This anxiety is fuelled by the projected multi-billion dollar decline in sales for several drugs as the sands of time run out on their patents. These drugs, after all, form a substantial portion of this year's anticipated revenue of $46.6 billion.

However, it's not all gloom and doom. Bristol Myers Squibb has not one, not two, but a whopping eight new drugs jostling their way through clinical trials. One to keep an eye on is milvexian, a stroke prevention formula that shows immense promise.

These innovative concoctions could eventually inject a stunning $30 billion into the company's annual revenue stream, with the stock potentially reaching an ambitious price target of $85, projecting a handsome upside of 32%.

Gilead Sciences (GILD) is one more stock to take into consideration. Trading at an enticing 11 times earnings, it’s a steal at $76.

Yes, some of its products are on the downhill, but here's the game-changer: Trodelvy, an innovative cancer treatment.

Anticipated to triple revenues, this treatment’s sales is projected to surge from a humble $1 billion this year to a staggering $2.7 billion by 2028.

This suggests an upward trajectory for Gilead's sales, hurtling from just shy of $27 billion this year to well over $30 billion by 2028. The earnings per share (EPS) is poised to see an annual gain of about 6%, potentially reaching nearly $9 by then.

There’s also Pfizer (PFE), priced at a modest $36 and trading just shy of 11 times earnings.

As the dark cloud of Covid-19 gradually disperses, the pharmaceutical titan projects a significant contraction in its annual vaccine sales - halving it down to nearly $14 billion this year, contributing to the overall $67.8 billion income.

But don't be too hasty to dismiss Pfizer's prospects. Its innovation pipeline is teeming with promising solutions like its groundbreaking meningitis therapy. Moreover, it's poised to breathe fresh life into its vaccine division by fusing a flu and Covid vaccine.

Come 2026, the company anticipates its vaccines will arm over 130 million Americans, a notable surge from this year's 79 million recipients of the Covid vaccine alone.

You may find a less treacherous path by adopting a strategic approach of integrating more economically priced pharma stocks into your portfolio.

These stocks may grapple with dwindling sales from established drugs and the relentless onslaught of generic brands.

Nevertheless, they also harbor promising new entrants that, if successful, could spark a significant rally.

All things considered, the companies mentioned above are not mere “cheap” stocks but intriguing opportunities laced with robust potential. I suggest you take advantage of the dip.

June 27, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 27, 2023
Fiat Lux

Featured Trade:

(THE INCONSPICUOUS STAR)
(BMY)

The Inconspicuous Star

Biotech Letter

Do you remember the 1999 cinematic sensation "The Matrix?" Neo, the protagonist, had a choice: swallow the red pill to wake up to reality or the blue one to slumber in illusion. Perhaps our market could do with a similar reality check—swallow the red pill and recognize the true value of companies with hefty margins and cash rivers.

After all, not so long ago, the markets were all singing praises for pharmaceutical stocks, idolizing them for their deep cash coffers and ironclad resilience against inflation.

But in the theater of investment, the curtain has suddenly dropped on them, as the market's affection has pirouetted towards the exuberant dance of AI stocks, evoking memories of the late '90s tech bubble.

Yet, for the savvy value investors in the audience, this shift is less of a tragedy and more of a golden intermission.

They now have a chance to secure prime seats at discounted prices, notably at the performance of the pharmaceutical powerhouse, Bristol Myers Squibb (BMY).

As the market narrative unfolded this year, BMY's plotline took a 9% twist, veering away from the 12% uptick of the S&P 500 (SPY). I've earlier peeked behind BMY's curtains, shedding light on its promising pipeline.

So why does BMY steal the spotlight?

Bristol Myers Squibb is not merely an actor but a maestro orchestrating symphonies in cardiovascular, oncology, and immunology sectors. The jewel in its crown is its leading role in the lucrative and burgeoning realm of immuno-oncology.

Behemoths like BMY have a magic wand—they can either acquire promising new drugs or cultivate them in their own labs, thanks to their deep wells of expertise.

BMY has been striking high notes with its margin, powered by star-performing drugs like the cancer-fighting Opdivo and cardiovascular medicine Eliquis, both of which enjoy patent protection until 2028.

In the last act (over three years), BMY has introduced nine new characters to its play, which are predicted to rake in a whopping $4 billion in this year's box office sales.

These factors ensure BMY's marquee stays lit. Notably, it has earned an A+ profitability grade, with sector-leading EBITDA margin and return on equity of 43% and 23%, respectively.

Even though the first quarter's revenue seemed to tread water YoY (with a 1% dip after adjusting for currency effects), BMY's newest cast members have outshone the rest. This is demonstrated by new product revenue that soared from $350 million YoY to a hefty $723 million in Q1.

Peering into the future, BMY's management anticipates that the revenue from these nine new stars will breathe new life into their portfolio, contributing between $10 billion and $13 billion in annual sales by 2025.

This troupe includes the cardiovascular prodigy, Camzyos, which has been stealing the limelight with promising efficacy data. Given its record thus far, we can expect a considerable upside to its fair value of $66.

Despite the looming specter of generic pressures, Bristol Myers Squibb is in the throes of a grand product launch.

Aside from Camyzos, the newly launched stars anticipated to push BMY to greater heights include cancer combatant Opdualag (an extension of the Opdivo franchise), hematologic treatments Reblozyl, Abecma, and Breyanzi, and immunological medications Sotyktu and Zeposia.

Bristol's multi-pronged attempts to capture significant market opportunities should help navigate the stormy seas of the long-term patent cliff.

As a finale, BMY flaunts a sturdy BBB-rated balance sheet, featuring a safe net debt to TTM EBITDA ratio of 1.5x. It offers a respectable 3.5% yield, and the dividend is comfortably protected by a 29% payout ratio, with a 5-year CAGR of 7%.

BMY also has a trick up its sleeve to return capital to shareholders tax-savvy via share buybacks, currently having $7 billion in remaining buyback authorization. At a forward PE of just 8.2, BMY essentially gets a 12% earnings yield on share buybacks.

Lastly, I find BMY to be priced just right at $65.66 with the aforementioned PE of just 8.2. This valuation seems unfairly low for a company with a strong line-up of newer drugs.

While only a modest 4% EPS growth is predicted for the company this year and low single-digit EPS growth over the next couple of years, BMY management could stir up the plot and boost the bottom line with share buybacks at the current discounted price.

BMY, currently being snubbed by investors, provides a fantastic opportunity for value and income investors to scoop up high-quality stocks at the perfect price.

Its robust balance sheet, high margins, and portfolio of new drugs all add up to make BMY a compelling long-term buy for investors.

With the stock priced at a discount and offering a well-covered, attractive yield, income and value, investors could see significant returns over the long term.

April 25, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
April 25, 2023
Fiat Lux

Featured Trade:

(SMALL BIOTECHS, BIG OPPORTUNITIES)
(PFE), (SGEN), (MRK), (RXDX), (BMY), (BIIB), (ETNB), (KRTX), (MORF), (IDYA)

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