Global Market Comments
February 22, 2023
Fiat Lux
Featured Trade:
(TESTIMONIAL),
(TEN MORE TRENDS TO BET THE RANCH ON),
(AAPL), (AMZN), (GOOGL), (TSLA), (CRSP), (EDIT), (NTLA)
CLICK HERE to download today's position sheet.
Tag Archive for: (CRSP)
I believe that the pandemic and hyper-accelerating technology is bringing forward the future at an astonishing rate.
More applications will be created in the next year than over the last 40, some 500,000. The sum total of human knowledge is now doubling every year. The profits spun off and investment opportunities will be incredible, which is why I just doubled my ten-year forecast for the Dow Average (INDU) from 120,000 to 240,000.
Here are ten major trends for the economy and the markets that we can see already. It’s the unseen ones that will be really interesting.
(1) The Insurance Industry Changes Beyond All Recognition, confirming from “Recovery After Risk” to “Prevention of Risk”. Today, fire insurance pays you after your house burns down. Life insurance pays your next of kin after you die. And health insurance (which is really sick insurance) pays only after you get sick. During the next decade, we’ll see a new generation of insurance providers that offer you a service to KEEP you healthy and keep your house safe during a wildfire. Also, full autonomous driving will cut hospital admissions by half, dramatically dropping the cost of insurance. This is driven by machine learning, ubiquitous sensors, low-cost genome sequencing, and robotics to detect risk, prevent disaster, and guarantee safety before any costs are incurred.
(2) Autonomous Vehicles and Flying Cars (eVTOL) will make travel cheaper and easier. Fully autonomous vehicles (TSLA), (GOOGL), car-as-a-service fleets, and aerial ridesharing (flying cars) will be fully operational in most major metropolitan cities in the coming decade. The cost of transportation will plummet 3-4X, transforming real estate, finance, insurance, the materials economy, and urban planning. Where you live and work, and how you spend your time, will all be fundamentally reshaped by this future of human travel. Your kids and elderly parents will never drive. Already, a half dozen eVTOL companies have gone public raising more than $10B to fuel their growth. These vehicles are real and will help define the decade ahead. This is driven by machine learning, sensors, materials science, battery storage improvements, and ubiquitous gigabit connections.
(3) On-demand Production and On-demand Delivery Will Create an “Instant Economy of Things”. Urban dwellers will learn to expect “instant fulfillment” of their retail orders as drone and robotic last-mile delivery services carry products from local supply depots directly to your doorstep. Further riding the deployment of regional on-demand digital manufacturing (3D printing farms), individualized products can be obtained within hours—anywhere, anytime. I ordered a new high-end 50-pound garage door opener from Amazon Prime (AMZN) last month after my old one went kaput. Incredibly, they delivered it in hours! This is driven by networks, 3D printing, robotics, and AI.
(4) The Ability to Sense and Know Anything, Anytime, Anywhere. We’re rapidly approaching the era where 100 billion sensors (the Internet of Everything) are monitoring and sensing (imaging, listening, measuring) every facet of our environments, all the time. Global imaging satellites, drones, autonomous car LIDARs, and forward-looking augmented reality (AR) headset cameras are all part of a global sensor matrix, together allowing us to know anything, anytime, anywhere. In this future, it’s not “what you know,” but rather “the quality of the questions you ask” that will be most important. That gives us old guys a huge advantage. This is driven by the convergence of terrestrial, atmospheric, and space-based sensors, vast data networks, 5G and 6G communication networks (AAPL), next-gen Wi-Fi, and machine learning.
(5) Advertising Hyper Evolves. As ads become the primary driver of new services for free, AI becomes increasingly embedded in everyday life and your custom personal AI will soon understand what you want better than you do. In turn, we will begin to both trust and rely upon our AIs to make most of our buying decisions, turning over shopping to AI-enabled personal assistants. Your AI might make purchases based on your past desires, current shortages, conversations you’ve allowed your AI to listen to, or by tracking where your pupils focus on a virtual interface (i.e., what catches your attention). As a result, the advertising industry—which normally competes for your attention (whether at the Superbowl or through search engines)—will have a hard time influencing your AI. This is driven by machine learning, sensors, augmented reality, and 5G/networks.
(6) Cellular Agriculture Moves from the Lab to Inner Cities, Providing High-quality Protein that is Cheaper and Healthier. The next decade will witness the birth of the most ethical, nutritious, and environmentally sustainable protein production system devised by humankind. Stem cell-based “cellular agriculture” will allow the production of beef, chicken, and fish anywhere, on-demand, with far higher nutritional content, and a vastly lower environmental footprint than traditional livestock options. Traditional legacy steaks found at Ruth’s Chris and Morton’s will only to available to the wealthy. This is driven by biotechnology, materials science, machine learning, and agtech.
(7) Your Brain Will Integrate with Super-Fast Hardware and Software. My friend, technologist and futurist Ray Kurzweil, has predicted that by the mid-2030s, we will begin connecting the human neocortex to the cloud. This next decade will see tremendous progress in that direction, first serving those with spinal cord injuries, whereby patients will regain both sensory capacity and motor control. Yet beyond assisting those with motor function loss, several BCI pioneers are now attempting to supplement their baseline cognitive abilities, a pursuit with the potential to increase their sensorium, memory, and even intelligence. Recent demonstrations of a macaque monkey playing Pong using a Neuralink implant is proof of incredible progress. This is driven by materials science, AI/machine learning, robotics, and some fantastic imaginations.
(8) High-resolution Virtual Reality Will Transform Both Retail and Real Estate Shopping & the Future of Education. If you were a couch potato, you are about to become one on steroids. High-resolution, lightweight virtual reality headsets will allow individuals at home to shop for everything from clothing to real estate—all from the convenience of their living room. Need a new outfit? Your AI knows your detailed body measurements and can whip up a fashion show featuring your avatar wearing the latest 20 designs on a runway. Want to see how your furniture might look inside a house you’re viewing online? No problem! Your AI can populate the property with your virtualized inventory and give you a guided tour. On the education front, the use of VR and AI-driven avatars with technology such as that demonstrated by Dreamscape promises a future of game-like, immersive, and powerful education and training. This is driven by VR, machine learning, and high-bandwidth networks. Get your Oculus Rift from Facebook (FB) now!
(9) Increased Focus on Sustainability and the Environment will drive companies to invest in sustainability—both from a necessity standpoint and for marketing purposes. Breakthroughs in materials science, enabled by AI, will allow companies to drive tremendous reductions in waste and environmental contamination. One company’s waste will become another company’s profit center. Want to visit my chalet in Switzerland? You can do so by connecting your Oculus Rift headset to Google Maps….today! This is driven by materials science, AI, CRISPR, digital biology, and broadband networks.
(10) CRISPR and Gene Therapies Will Eliminate Disease. Perhaps one of the most powerful, underappreciated technologies in the world is CRISPR. In 2020, two incredible women won the Nobel Prize in medicine for its discovery, and revenues from CRISPR doubled between 2019 and 2020 to over $1.5B. A vast range of infectious diseases, from AIDS to Ebola, are now potentially curable, as are a wide range of genetic ailments like sickle cell anemia, thalassemia, and certain forms of congenital blindness. In addition, gene-editing technologies continue to advance in precision and ease of use, allowing families to treat and ultimately cure hundreds of inheritable genetic diseases. This is driven by various biotechnologies (CRISPR, Gene Therapy), genome sequencing, and AI. Only three companies have a monopoly in this sector right now, (CRSP), (EDIT), and (NTLA).
In the decade ahead, master entrepreneurs will look beyond the immediate effects of a given technology to seize secondary and tertiary, Google-sized business opportunities on the horizon.
As an investor, you should be asking yourself: What challenges or problems can I help solve? How can I leverage the coming waves of tech advancements?
I just thought you’d like to know.
John Thomas
Mad Hedge Biotech and Healthcare Letter
February 16, 2023
Fiat Lux
Featured Trade:
(AN INFALLIBLE GROWTH STOCK IN BIOTECH)
(VRTX), (CRSP), (MRNA)
A buzzer-beater that you have no doubt would win your team the championship trophy. A job interview where you unequivocally know you impressed the recruiter. A stock exhibiting incredible growth prospects. There are just some things you simply know will succeed no matter what.
One surefire growth stock comes to mind in the biotechnology and healthcare sector: Vertex Pharmaceuticals (VRTX).
Although several biotechnology stocks took it on the chin in 2022, Vertex has been spared. In fact, this biotech crushed the market in the trailing-12-month timeframe, amplified by solid revenue, promising earnings growth, and remarkable long-term catalysts. On top of these, Vertex continues to dazzle with its financial reports.
Last year, the company’s revenue jumped by 18% year over year to reach $8.9 billion. Meanwhile, Vertex’s net income soared by 42% compared to 2021 and hit $3.3 billion.
The main business of Vertex is focused on a lineup of treatments targeting the underlying causes linked to cystic fibrosis (CF), which continue to be significant moneymakers. However, the drugmaker also has its sights on gaining new approvals.
No other company has gotten close to challenging Vertex in the CF treatment market. The company holds the only approved medications targeting the underlying causes of this rare genetic disease. Its closest rival remains several years away from even having a chance at gaining regulatory approvals.
Nonetheless, Vertex isn’t satisfied to simply rest on the blockbuster success of its CF therapies. The company remains aggressive in developing its pipeline of new candidates, mainly targeting different segments of the rare disease treatment market.
Some of the most promising candidates in its pipeline are its work with CRISPR Therapeutics (CRSP) on a rare blood disease treatment, an mRNA-centered CF treatment with Moderna (MRNA), and a non-opioid medication targeting acute pain.
Its candidate with CRISPR is expected to gain approval in the second half of 2023, while its Moderna candidate is slated for the next phase around the same period.
Its non-opioid treatment, dubbed VX-548, is hailed as a potential new class of drug that can help manage acute pain by blocking the patient’s pain signal in the peripheral nerves. This drug could offer effective pain relief sans the risk of addiction.
To date, VX-548 has demonstrated strong efficacy in Phase 2 trials, with an excellent benefit-risk profile and absolutely no abuse potential. The Food and Drug Administration has granted it the fast track and breakthrough therapy designations—an acknowledgment of the rising unmet demand and the drug’s compelling clinical profile.
Currently, the standard of care for acute pain management continues to sorely lack a treatment that is both effective and not prone to abuse. VX-548 has the potential to fill the void and target a market size worth $4 billion in the United States alone.
Vertex also recently disclosed its move to send applications for regulatory approvals for two blood-related disorders, exa-cel and sickle cell disease, in the United Kingdom and Europe. With only a handful of available treatment options for these conditions, Vertex would be addressing a severely underserved demographic while opening new and lucrative revenue streams.
Another noteworthy move that indicated Vertex’s plans to go beyond its CF pipeline is its $320 million acquisition of ViaCyte last year.
ViaCyte gained popularity for its initiative to utilize novel stem cell-derived cell replacement therapies as a functional cure for Type 1 diabetes.
These decisions are in line company’s “five-in-five goal,” wherein the plan is to release new treatments targeting five conditions within a five-year window. If Vertex succeeds, then these could open multi-billion-dollar revenue streams for the company.
Looking at its trajectory and track record, Vertex is expected to earn major regulatory approvals soon and diversify its portfolio of treatments over the next couple of years. This would translate to sustained growth in its revenue and earnings, which would push its stock price higher. Overall, these comprise an excellent recipe for long-term growth.
Mad Hedge Biotech and Healthcare Letter
January 17, 2023
Fiat Lux
Featured Trade:
(COMPROMISE IS THE BEST STRATEGY)
(JNJ), (AMGN), (TAK), (VRTX), (CRSP), (EDIT), (PFE), (CRBU), (SGMO), (LLY), (AXSM)
An optimist looks at bubbles and visualizes champagne, while a pessimist’s mind goes to Alka-Seltzer. The same thing happens with investors.
Some believe that the steep losses suffered by stocks and bonds in 2022 are a much-needed “cleansing,” which would set the stage for renewed partnerships and collaborations along with high returns. Others simply view it as the first chapter in a protracted bear market.
Meanwhile, a handful believes that it’s a combination of both perspectives—especially for the biotechnology industry.
Roughly two years following the decline of biotechnology stocks, several executives from small and midsize organizations finally concede that their share prices might no longer be able to bounce back anytime soon. In fact, some have been fielding panicked calls from execs of fledgling biotech firms, offering to sell their companies at a discount.
The alteration in the medical device and biotechnology landscape only started a few months before the previous year ended.
This is because, before the change in perspective, when the SPDR S&P Biotech exchange-traded fund (XBI) had slid by about 40% from its 2021 peak, many leaders in the biotech sector still believed that their companies could regain momentum.
The primary concern for smaller biotech and medical devices companies, which allocate years to developing and testing products without any commercially approved treatment, is that the continuous decline in their valuations has made it practically impossible to generate new money to fund any of their projects.
Given this scenario, many small and midsize biotechs would go under soon, particularly those with no data strong enough to provide near-term growth catalysts.
This is where Big Pharma names are expected to come in. After all, these large-cap companies offer an alternative option with their non-dilutive sources of funding and ever-growing war chests.
Big companies, though, have been more cautious in cutting big checks for acquisitions. Despite the high expectations last year, we only saw a few massive deals, including Abiomed’s sale to Johnson & Johnson’s (JNJ) for $19 billion and Amgen’s (AMGN) $30 billion agreement with Horizon Therapeutics.
Instead, these Big Pharma companies appear to prefer partnerships and collaborations. In these deals, they give out smaller payments to biotechnology firms to work with them on specific early-stage programs.
This type of investment seems to be a safer bet for big companies because it allows them to make several deals without spending too much. They can even collaborate with competing biotechs to determine which could develop the most effective and cost-efficient solution.
Smaller biotechs benefit from this type of deal as well.
In the pre-pandemic era, the valuations of these companies quickly soared based on the potential of their pipeline candidates. Some share prices would skyrocket with just a hint of positive data. This is no longer the case these days, not only because investors have become more discerning but also more anxious over experimental programs.
So instead of getting acquired, smaller biotechs can choose to strike partnerships with large-cap companies. This is an excellent way to inject some funding into their programs and, hopefully, provide them with revenue streams, especially since Big Pharma companies know how to market new products.
It sounds challenging, but a genuinely promising program could fetch a large sum.
Perhaps the most significant indicator that not all hope is lost comes from Takeda (TAK) when it purchased an experimental treatment undergoing tests as a potential psoriasis medication.
This candidate, developed by a privately held biotechnology firm called Nimbus Therapeutics, was sold for a whopping $4 billion upfront, plus roughly $2 billion more for future milestone payments. And here’s the clincher: Takeda got the experimental drug by a razor-thin margin.
In terms of acquisitions, some larger companies have been open to that route. For instance, AstraZeneca (AZN) shelled out $1.3 billion for CiniCor Pharma, while Ipsen (IPSEY) purchased Albireo Pharma (ALBO) for $1 billion.
While the future for smaller biotechs remains uncertain, several names continue to be in conversations whenever acquisitions are discussed.
There’s Vertex Pharmaceuticals (VRTX), which has long been reported to take interest in acquiring CRISPR Therapeutics (CRSP) and Editas Medicine (EDIT), with the latter looking more attractive thanks to its cheaper price tag.
Meanwhile, Pfizer (PFE) has been shopping around for a biotech to bolster its gene-editing programs, and so far, Caribou Biosciences (CRBU) and Sangamo Therapeutics (SGMO) are under serious consideration.
With its continuing interest in central nervous system diseases, such as Alzheimer’s and Parkinson’s, Eli Lilly (LLY) has been aggressive in its search for a company to acquire. Among the strongest candidates is Axsome Therapeutics (AXSM).
With this daunting reality setting in, one thing has become absolutely sure: the biotechnology sector has become a buyer’s market for big companies with cash to spare for acquisitions and collaborations.
Mad Hedge Biotech and Healthcare Letter
January 3, 2023
Fiat Lux
Featured Trade:
(A REPRIEVE IN THESE TURBULENT TIMES)
(VRTX), (CRSP)
Following a punishing 2022, it’s reasonable to expect that the situation won’t get any better, especially with a recession hanging over our heads this 2023. Hence, industries widely known to be “resilient,” “stable,” and “durable” will sustain their momentum and continue to gain more investors. Meanwhile, sectors typically associated with “buzzy” updates will struggle to keep their businesses afloat.
That means the best businesses to put your money in are those where people have no other recourse but to spend regardless of the economic situation. With this in mind, investors are projected to load up on healthcare stocks to help them weather the incoming financial storm.
Actually, this has been the trend since the pandemic started, with the Health Care Select Sector SPDR ETF (XLV) only falling by 4.2% in 2022. It’s still good news, especially in light of significant tailwinds, like wars, inflation rates, and political turmoil. Looking at the performance of this sector, it’s evident that people will still seek medical care no matter what. That makes the healthcare sector the ideal combo of a reasonable valuation and defense.
Among the names in this segment, finding a company that performed better than Vertex Pharmaceuticals (VRTX) would be difficult. This business has swum against the tide throughout 2022, with shares climbing amid the struggles of the S&P 500. While Vertex already presented solid fundamentals this year, it could perform even better in 2023.
Vertex’s shares have risen by 32% year to date. In contrast, the S&P 500 has shown a 19% decline. What makes Vertex different from its competitors? Here is the short answer. The company is equipped with the tools to continue delivering impressive financial results in both the short and long terms.
The next couple of years will see Vertex continue to lean on its high-performing lineup of treatments that target cystic fibrosis (CF). This rare genetic condition results in digestive issues and affects the internal organs of patients.
Vertex has a virtual monopoly of this highly lucrative market, being the sole game in town targeting not only CF but the underlying conditions of this rare disease.
Actually, Vertex has been aggressive in expanding its CF franchise. Before 2022 wrapped up, the company submitted its Investigational New Drug application for another CF treatment called VX-522. This is an mRNA-based therapy, which was already cleared by the US Food and Drug Administration.
The CF market has massive potential, which Vertex has yet to explore fully. By 2025, the CF market is estimated to hit a whopping $13.9 billion. Considering that Vertex is the only drugmaker making an impact on this condition, this could translate to an even bigger revenue stream for the company.
Vertex’s lineup of CF treatments has enabled the company to start creating and developing new programs that hold the potential to become blockbusters. Thus far, the company has developed a pipeline of candidates for gene-editing and acute pain treatments.
To date, Vertex and its co-developer, CRISPR Therapeutics (CRSP), are awaiting regulatory approval for their one-time gene-editing therapy called Exa-cel. This treatment has the potential to cure two rare genetic blood diseases, namely, sickle cell disease and transfusion-dependent beta-thalassemia. Apart from being able to possibly treat these conditions, the capability of Exa-cel to eliminate the necessity for transfusions makes it incredibly impressive.
Another potential top-selling treatment for Vertex is VX-548, which targets neuropathic and acute pain. This is a non-opioid alternative that the company hopes to offer in an effort to curb the debilitating opioid addiction in the US. VX-548 is slated to undergo Phase 3 trials in the first half of 2023.
Overall, Vertex is an excellent buy for investors looking for a safe and solid stock in the healthcare industry. It has proven itself to be an extremely profitable company over the past decade, and its pipeline of potential treatments queued for clinical trials are indicative of its ability to grow beyond its CF program. Given Vertex’s success over the years, the business potential, and the current price, this company can quickly become a crowd favorite in 2023.
Mad Hedge Biotech and Healthcare Letter
December 20, 2022
Fiat Lux
Featured Trade:
(PATIENCE IS KEY FOR THIS BIOTECH)
(VRTX), (MRNA), (CRSP)
This year has been challenging for the majority of the stocks, with even the strongest and most dominant names struggling to keep up. The three major indexes all slipped into bear territory while economic issues such as rising inflation brought turbulent earnings seasons across virtually every industry.
Still, 2022 has revealed a handful of exceptions. Some businesses delivered good news and, against all odds, solid stock performance. Some investors lined up to buy shares of these companies. While some have soared to unreasonable prices, it’s not too late to invest in other players sold at modest prices.
A particularly promising stock that meets these criteria is Vertex (VRTX).
Vertex has risen notably this year, recording a 38% boost to date. However, it’s trading at roughly 20 times its forward earnings predictions. Hence, buying this stock could very well guarantee solid investment in the long run. After all, the following years are expected to be filled with significant turning points.
An excellent starting point in reviewing Vertex’s potential is its portfolio. Right now, the company has six drugs sold commercially, reporting $7.5 billion in revenue last year. All six focus on cystic fibrosis (CF).
Vertex has been hailed as the worldwide leader in the CF market for years. On an even more promising note, the company is projected to sustain this momentum until the late 2030s.
Specifically, Vertex’s most recent CF treatment, Trikafta, has presented plenty of room for revenue growth in the years to come, courtesy of anticipated additional approvals in more countries and younger age brackets.
Vertex is also reviewing another CF candidate, which is now in Phase 3 trials. Based on previously released data, this new product has the potential to become even better than Trikafta.
Another CF candidate queued for review is the drug Vertex has been working on in collaboration with Moderna (MRNA). If approved, this product will cover patients not eligible for the current CF roster of Vertex.
Surprisingly, however, the potential catalyst for Vertex’s share price in the coming years has absolutely nothing to do with its highly successful and established CF program.
Rather, it has something to do with the company’s new venture on blood disorders: Exa-cel. This is a one-time cure developed by Vertex and Crispr Therapeutics (CRSP), which targets two blood orders. To this day, there remain minimal options for patients with these diseases.
For two key reasons, gaining approval for Exa-cel could be a massive game changer for Vertex. One is that it can provide definitive proof that the company can expand beyond its CF programs.
The second is that it would provide an additional revenue stream for Vertex, and that’s always a desired outcome regardless of the billions of dollars the company is already generating.
CF sales have clearly powered Vertex’s net income, which increased by about 1,140% in the past five years. With exa-cel, though, it’s evident that the company has been working to diversify its market to cover other diseases.
Reviewing its pipeline, Vertex has 18 programs with excellent chances of getting commercialized in the next 10 years. These run the gamut of treatments and therapies, including promising results for sickle cell disease, type 1 diabetes, kidney disease, and acute pain relief.
While it’s impossible to accurately determine the amount of money these drugs could make by 2032, it’s not that hyperbolic to believe that they can at least contribute several billions to the company.
Overall, Vertex stock offers a bright and solid future. In the next 10 years, the business would evolve into a much bigger, more entrenched, and more diversified entity. That means it would be a less risky investment compared to today.
Vertex would be an excellent choice for patient investors seeking to start a position in some biotechnology and healthcare companies.
