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Merck's Slow but Steady Covid-19 Headway

Is it truly better late than never?

Merck has been decisively cautious in its approach of potential COVID-19 treatments and even more so when it comes to their vaccine candidates.

Recently though, the company has finally offered a glimpse of its progress.

The first promising update is Merck’s work on MK-4482, which is an antiviral candidate aimed at treating COVID-19 patients. Basically, this candidate works by preventing the SARS-CoV-2 from replicating.

The laboratory results showed that an increasing dose of MK-4482 can effectively halt the progress of the virus in a patient’s system.

Judging from the timeline followed up to this point, Merck plans to begin huge trials by September.

The MK-4482 is expected to compete with Gilead Sciences’ (GILD) Remdesivir, with the Merck candidate possibly edging out the latter.

This is because the SARS-CoV-2 tends to mutate, rendering Remdesivir less potent the next time it is administered to patients. In comparison, MK-4482 has demonstrated an ability to fight off the mutated versions of the virus.

MK-4482 also comes in tablet form, making it a preferable and more convenient option compared to Gilead’s intravenous infusion and even Regeneron’s (REGN) injectable antiviral cocktail REGN-COV2.

On the COVID-19 vaccine front, Merck has been working with Thermis Biosciences in developing a candidate based on a measles virus vector platform originally developed by the Institut Pasteur researchers.

However, this is not Merck’s only shot on goal.

The company is also collaborating with the International AIDS Vaccine Initiative to develop another vaccine candidate, V590.

The two are using the same platform that Merck created for its already approved Ebola vaccine. The goal is to start human testing by the third quarter of 2020.

Merck is also looking into offering a single-dose vaccine instead of the double dose shots its competitors are working on, with one of its candidates developed to be taken orally instead of via injectibles.

If they succeed, then Merck’s vaccines will be more accessible and convenient for a lot of patients.

Aside from developing V590, Merck plans to use the same approved technology to advance its other antivirals in its clinical testing pipeline.

In fact, Merck’s move to acquire Thermis Bioscience demonstrates the company’s resolve to focus on strengthening its vaccine program. The primary expectation for this newly formed partnership is to come out swinging and eventually win big on the COVID-19 vaccine race.

The victory will then serve as a springboard for a new and powerful revenue stream for Merck, which would serve to quiet the fears of the company’s investors fretting over the patent expiration of blockbuster drug Keytruda.

The impending loss of exclusivity for cancer treatment Keytruda has been hanging over Merck’s head for quite some time now.

Aside from the potential biosimilar competition, Keytruda has been facing stiff competition against biotechnology giants like Bristol Myers Squibb (BMY), Roche (RHHBY), and Regeneron.

Needless to say, fears over this have been overshadowing the company’s impressive internal pipeline – a reaction that pretty much mirrors the experience of AbbVie (ABBV) on the pending patent loss of its blockbuster Humira.

However, Merck has been working on products that could rake in an additional $13 billion to $18 billion to its sales every year.

The list includes immuno-oncology antibody candidates, additional vaccines, and even HIV treatments.

The company also has more than $40 billion on its balance sheet, putting it in a favorable position to acquire more companies or products that could bolster its franchise.

Since the pandemic broke out, Merck has lagged behind its COVID-19 rivals AstraZeneca (AZN), Pfizer (PFE), and Moderna (MRNA).

Looking at its progress and future plans though, it looks like the company has set out to achieve a tortoise over the hare victory particularly in the COVID-19 vaccine race.

With incredible uncertainty hovering over the rest of 2020, it is only natural to seek stocks for an all-weather portfolio.

While there are many factors to consider, looking at businesses that allocated sensibly to capital expenditures and R&D is definitely a great way to start.

Merck’s strategic partnerships with companies like Thermis Biosciences, Taiho Pharmaceuticals, and Astex Pharmaceuticals also play significant roles in this aspect.

Although Merck has not provided a particularly strong performance so far this year, this biotechnology and health care giant is poised to stage a strong comeback when the dust settles.

merck

August 4, 2020

Diary, Newsletter, Summary

Global Market Comments
August 4, 2020
Fiat Lux

Featured Trade:

(MEET THE ITALIAN LEONARDO FIBONACCI)

(MRK), (GILD), (REGN), (AZN), (PFE), (MRNA), (ABBV), (BMY), (RHHBY)

July 23, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
July 23, 2020
Fiat Lux

Featured Trade:

(WHY IT'S OFF TO THE RACES FOR BRISTOL MYERS),
(BMY), (PFE), (GILD), (REGN)

Why It’s Off to the Races for Bristol Myers

Biotech Letter

For investors, compounding has long been considered the eighth wonder of the world.

Compounding refers to growing your initial capital over time, boosted by well-timed additions to increase your pool of funds. Warren Buffet calls it “snowballing.”

For compounding to work out, though, it’s important to have a long-term investment plan.

Naturally, the first step to successfully invest is choosing the most suitable stock for your portfolio. Ideally, these businesses should have growth runways set up to thrive in the long run and coupled with clear-cut competitive advantages.

These companies should be able to pay out decent dividends as well since these can later be reinvested to accelerate returns.

Among the companies in the biotechnology and healthcare sector today, Bristol-Myers Squibb (BMY) fits the bill.

The company’s strengths lie in its oncology and hematology departments, with sales for its pipeline of drug candidates estimated to beat expectations.

With the new drugs in late-stage trials, BMY raised its annual sales forecast to reach somewhere between $15 billion and $20 billion. This number is expected to be sustained over the next 10 years.

Many of BMY’s promising programs came from its Celgene acquisition in November 2019.

While the whopping $74 billion deal faced pushback at first, the merger is expected to yield $2.5 billion in savings for BMY. This offers the company more elbow room to invest in its R&D sector.

BMY is working on combining its cancer drugs Opdivo and Yervoy with Celgene’s top moneymakers Revlimid and Pomalys, effectively transforming the New York-based company into the largest seller of cancer treatments in the world.

Outside its immuno-oncology lineup, BMY is also performing quite well in the cardiovascular field.

Its blockbuster drug Eliquis, which is a collaborative effort with Pfizer (PFE), remains one of the highest-selling treatments among atrial fibrillation patients.

In 2019 alone, Eliquis raked in $7.71 billion in sales. As for its performance this year, this heart disease drug is estimated to add another $1 billion, pushing its 2020 annual sales to $8.79 billion.

So far, 8 of BMY’s drugs available in the market generate over $1 billion in yearly sales. The company also has 9 new products undergoing Phase 3 trials, with more than 20 drugs slated for review in the next 10 years.

For 2020, BMY is projected to earn $41.8 billion in revenue and roughly $6.20 per share compared to $4.69 last year.

BMY is also anticipated to generate over $14 billion in free cash this year. Thanks to its Celgene acquisition, the company’s revenue will experience a one-time jump of about 60%.

For 2021, BMY is expected to report a 7.5% revenue growth to reach $45 billion or $7.33 per share. This is just a conservative estimate though.

BMY is an attractive stock right now.

It’s currently trading at roughly $60. The company has about $136 billion in market capitalization and pays an annual dividend of $1.80 for a yield of 3%.

In the past 5 years, except for a single quarter in 2017, BMY reported positive quarterly earnings growth.

The shares trade for 8.6 times its expected earnings in the next 12 months, which is just ridiculous for a premium stock.

In terms of its long-term earnings per share, the company is expected to report a 9.3% growth rate.

Finding value among the biotechnology and healthcare sector has become increasingly tricky.

Since the pandemic broke, industry stalwarts like Gilead Sciences (GILD) and Regeneron Pharmaceuticals (REGN) have been receiving constant media attention for their COVID-19 vaccines and treatments. This pushed their valuations to skyrocket.

However, there remain a number of reasonably affordable biotechnology growth stocks.

While these are not making headlines in the fight against COVID-19, these companies offer attractively high long-term earnings-per-share growth rates – and BMY is one of them.

bmy

July 14, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
July 14, 2020
Fiat Lux

Featured Trade:

(GILEAD SCIENCES REMDESIVIR MIRACLE)
(GILD), (RHHBY), (LLY), (MYL)

Gilead Sciences Remdesivir Miracle

Biotech Letter

Gilead Sciences (GILD) has been in the spotlight for months now. The company gained even more attention when the FDA granted it emergency authorization to use its drug Remdesivir as a COVID-19 treatment.

To date, there are roughly 20 clinical trials for Remdesivir across the globe --- and Gilead is wasting no time to expand the use of this drug.

In a recent announcement, the company shared that Remdesivir will also be tested as an inhaled formulation for outpatients.

To compare, the drug is currently given in intravenous form to patients who are already considered severe cases. This latest iteration of the drug could offer a COVID-19 treatment to those with mild cases which could eventually lead to early treatment of the disease, making hospitalization unnecessary.

At the moment, Remdesivir shortens the recovery period of hospitalized COVID-19 patients by four days or roughly 31%.

Gilead will test this inhaled formulation of Remdesivir on 60 healthy participants in the US.

Aside from testing its inhaled formulation, the company is also planning to test an IV version of Remdesivir. This could be used for outpatient settings, such as nursing homes and infusion centers.

There are also trials to determine whether the efficacy level of Remdesivir could increase if combined with other drugs. For this, Gilead is working with Roche (RHHBY) for its Actemra and Eli Lilly (LLY) to test Olumiant. Both are used to treat rheumatoid arthritis.

Since the pandemic started and Gilead’s COVID-19 efforts, the company’s shares jumped by 17.5% so far, topping the 2% decline of the S&P 500 Index.

A notable factor that has been fueling Gilead’s improvement is the US government’s confidence in Remdesivir.

In early July, the Department of Health and Human Services all but wiped clean the company’s Remdesivir supply as it contracted Gilead to sell 500,000 treatment courses to US hospitals through the end of September.

This purchase adds up to $1.2 billion in Remdesivir sales in the third quarter of 2020 alone, with the drug estimated to generate $1.8 billion in the fourth quarter.

This puts the estimated total sales of Remdesivir at $3 billion for this year.

The company set the price for each course of Remdesivir treatment at $2,340 for the government, with a price tag of $3,120 for private US insurers. At this price point, every patient is estimated to save $12,000 in hospital bills.

This is actually lower than the anticipated pricing of Remdesivir. Initially, the cost per treatment course was projected to reach $5,080.

However, this pricing estimate is intended for developed countries.

For developing countries, Gilead forged deals with various generic manufacturers to ensure that the treatment is provided at substantially lower prices.

So far, the company has established licensing deals with generic drugmakers in 127 developing countries.

One of them is Mylan N.V. (MYL), which has received authorization from the Indian government to market its generic version of the Remdesivir.

Mylan’s version, which will be sold under the brand name Desrem, is expected to be around $62.40 per vial.

This is about 80% cheaper than Gilead’s Remdesivir, which costs $390 for each vial.

Outside its COVID-19 efforts, Gilead’s FDA application for rheumatoid arthritis drug Filgotinib is expected to inject the company’s top line with a much-welcomed sales growth.

Although Gilead’s 2019 top line fell flat, its first-quarter earnings report showed a promising 5% year-over-year bump in its sales. This growth is primarily attributed to the continuous improvement of its HIV product line, which showed a 14% increase in sales.

Overall, Gilead remains a value buy.

Gilead stock currently trades at 11.6 times its expected earnings over the course of the next 12 months, which is well above its average 7.3 times earnings.

The stock offers a quarterly dividend of $0.68, yielding a reasonable 3.5% annually. As modest as it sounds, this still well above the usual 2% that shareholders typically expect from an average stock.

July 9, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
July 9, 2020
Fiat Lux

Featured Trade:

(DOUBLING UP AGAIN ON BIOTECH),
(BMRN), (VRTX), (GILD), (MRNA), (CRSP)

Doubling Up Again on Biotech

Biotech Letter

If the volatility of the stock market lately has been making you sick, then it might be time to add more biotechnology and healthcare stocks to your portfolio. They’re all having the effect of dragging each other up in this superheated environment.

Investors looking for these businesses can find a safe haven in rare diseases big player BioMarin Pharmaceutical (BMRN), which has $16.5 billion in market capitalization.

While most businesses languished since the pandemic broke this 2020, this biotechnology company’s shares rose by 12% this year. That’s not where it ends, though.

BioMarin could still pick up even more momentum despite the second wave of COVID-19.

The company currently has an extensive pipeline aimed at rare genetic diseases, with seven already approved and marketed in over 75 countries across the globe.

Looking at BioMarin’s first quarter earnings report for 2020, the company recorded a revenue of $502.1 million. This shows a 25% increase from the $400.7 million it raked in during the same period in 2019. It also handily beat the analysts’ estimate of $468.8 million.

Among BioMarin’s products, genetic metabolic disorder infusion Naglazyme is considered the top-selling treatment.

Sales of this product climbed 32% year over year in the first quarter to hit $27.4 million, with the jump primarily attributed to an increase in sales in Russia and Brazil.

However, the rising stars of BioMarin are two enzyme replacement treatments.

One is genetic blood disorder treatment Palynziq, which skyrocketed by 181% year over year to reach $22.3 million.

The other is Batten disease treatment Brineura, which soared by a whopping 97% to rake in $24 million.

Three of BioMarin’s drugs also performed well during this quarter.

Phenylketonuria drug Kuvan recorded $15.1 million in sales, up by 14% from the same period in 2019.

Meanwhile, Morquio A syndrome medication Vimizim generated $11.4 million in sales, showing off a 9% year over year jump as well. As for Aldurazyme, this Hurler syndrome drug’s sales rose by 23% to reach 10.4 million.

Now, the company is looking into another rare-disease treatment, which could cover Hemophilia A therapies via its experimental gene therapy Roctavian. This can open up a huge market for BioMarin, with over 20,000 Americans suffering from this disease.

Roctavian is expected to receive the FDA green light earlier than its August 21 decision date, possibly marking another blockbuster drug added to BioMarin’s pipeline.

Needless to say, the steady sales growth of these products served as the major driver of the company’s improving bottom line.

Over the past 10 years, the annual revenue of BioMarin has consistently climbed and beat analysts’ expectations -- a trend that’s likely to go on in the next decade as well.

Another company that built its name on rare diseases treatments is Vertex Pharmaceuticals (VRTX).

While most stocks struggle to deal with black swan situations like the COVID-19 pandemic, Vertex is poised to enter the $100 billion market cap club soon.

In fact, the company recently updated its 2020 guidance, increasing its initial estimate from $5.1 billion and $5.3 billion to $5.3 billion to $5.6 billion.

In sum, Vertex is poised to continue its upward trajectory despite the current economic landscape.

The confidence in its growth is bolstered by its recent earnings report for the first quarter of 2020, which indicated an impressive 77% year over year to reach a net revenue of $1.5 billion.

At the moment, Vertex has $61.7 billion in market capitalization, with the company transforming into the most dominant player in the cystic fibrosis (CF) space. Actually, Vertex holds the monopoly on the approved drugs used to treat CF, namely, Kalydeco, Orkambi, and Symdeko.

Apart from its efforts to continuously dominate the CF sector, Vertex also has several moonshots that can eventually turn into major catalysts.

Among those is its partnership with CRISPR Therapeutics (CRSP).

The two biotechnology companies are developing a gene therapy called CTX001 which can cure rare genetic blood diseases. Specifically, CTX001 is designed to cure beta-thalassemia and sickle cell disease.

Apart from its partnership with CRISPR Therapeutics, Vertex also acquired Semma Therapeutics in 2019 with the goal of coming up with a cure for Type 1 diabetes. If things go as planned, a gene therapy for this genetic disease will advance to clinical testing by early 2021.

While the world is mired in crisis, the biotechnology sector has been fueled with excitement particularly because of the potential COVID-19 vaccines and cures from companies like Gilead Sciences (GILD) and Moderna (MRNA).

With insistent whispers that a second wave of the deadly COVID-19 is well on its way, opportunistic investors are actively seeking defensive stocks with businesses that can withstand the second wave of infections.

Both BioMarin and Vertex offer safe bets in this increasingly unpredictable world. Aside from proving their capacity to expand, both also have incredible room for growth.

July 7, 2020

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
July 7, 2020
Fiat Lux

Featured Trade:

(THE BILLIONS IN CROSS-PRESCRIBING FOR COVID-19),
(INCY), (NVS), (REGN), (SNY), (RHHBY), (LLY), (AZN), (GILD)

The Billions in Cross-Prescribing for Covid-19

Biotech Letter

Although there is no obvious connection between cancer and viral infections, Delaware-based biotechnology and pharmaceutical company Incyte (INCY) is optimistic that its blood cancer treatment Jakafi can offer a solution to the COVID-19 pandemic.

The research on Jakafi’s efficacy against the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) started in April. It’s rooted in the premise that since the drug works by inhibiting the immune cells, then it can be effective in suppressing the body’s response to the coronavirus attack.

This is promising considering that the immune system bears the brunt of the most deleterious effects of the virus, with the patients’ own cells attacking their bodies that subsequently leads to death.

Jakafi received its first approval back in 2011. While it was discovered and marketed by Incyte in the US, this drug is sold by Novartis (NVS) outside the country under the name Jakavi.

Apart from Incyte, other companies working on a similar strategy of using an autoimmune disease drug to treat COVID-19 complications include Regeneron (REGN), Sanofi (SNY), and Roche Holding’s (RHHBY).

Outside its COVID-19 efforts, Incyte is also looking into expanding the market for Jakafi.

In 2019, Jakafi sales grew by 21% to reach $1.7 billion. Revenues were derived from the drug’s three approved uses, namely, myelofibrosis, polycythemia vera, and acute graft-versus-host disease.

For 2020, Incyte estimates sales to grow to hit $1.8 billion to $1.95 billion, paving the way for Jakafi to become a $3 billion brand.

So far, Incyte is hoping to achieve this by expanding Jakafi’s indications to include atopic dermatitis. The goal is to submit this for approval by the fourth quarter of the year.

Another COVID-19-related effort linked to the company is testing rheumatoid arthritis drug Olumiant, which Eli Lilly (LLY) licensed from Incyte.

Eli Lilly is investigating this drug in partnership with the National Institute of Allergy and Infectious Diseases (NIAID) hoping Olumiant can be used to treat critically ill COVID-19 patients.

Other companies looking into the same plan are Roche with Actemra and AstraZeneca (AZN) via Calquence.

Aside from that, NIAID is also looking into the efficacy of Olumiant when combined with Gilead Sciences’ (GILD) lead COVID-19 candidate Remdesivir.

Looking into Incyte’s earnings history, it’s safe to say that the company is on its way to a brighter financial future.

Last year, Incyte’s total global revenue reached $2.16 billion, showing a 15% increase from 2018.

Aside from its best-selling drug Jakafi, Incyte has another potential blockbuster in its portfolio in the form of blood cancer treatment Iclusig. This drug, which the company licensed from Ariad Pharmaceuticals, added $90 million in sales last year.

In addition, Incyte earned $226 million in royalties from Novartis’ sales of Jakafi outside the US and $80 million from Eli Lilly’s Olumiant sales last year.

As for Incyte’s pipeline for 2020, the company kicked off the second quarter with an early FDA approval of bile duct cancer treatment Pemazyre.

This new medication is also anticipated to be another bestseller for Incyte, with a $17,000 price tag for every treatment cycle.

On average, each patient requires eight to nine cycles in a span of six months. This puts the cost for every patient somewhere between $136,000 and $153,000.

At this rate, Pemazyre can rake in $50 million for 2020 alone.

Given that the world is still struggling with the pandemic, the company reported a modest peak sales estimate for Pemazyre at $140 million.

While this may not be enough to move the needle, Incyte is optimistic that the number will rise once the crisis is behind us.

More importantly, Incyte offers a fast-growing portfolio along with promising pipeline candidates that could give bigger biotechnology companies a run for their money.

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