Mad Hedge Biotech and Healthcare Letter
January 19, 2023
Fiat Lux
Featured Trade:
(AN UNBEATABLE BIOTECH AMID A MARKET BEATDOWN)
(GILD), (PFE), (MRNA)
Tag Archive for: (GILD)
With 2022 in the books, it’s easy to assume investors won’t be reminiscing about it too fondly. The world economy and the stock market struggled the entire year, severely depleting the resources of many businesses across the globe. These headwinds dragged down several quality stocks.
This year doesn’t look like an improvement, with experts predicting a recession. Such a debilitating economic event would extensively impact practically all sectors. If this is what we’re looking forward to in 2023, then it’s high time to look for stocks that are safe to hold.
Fortunately, some businesses have proven resilient to significant downturns' adverse consequences. Actually, there are a handful of companies that managed to perform so much better than the rest despite all the economic and financial woes of the world.
One of the companies that successfully delivered market-beating returns is biotechnology giant Gilead Sciences (GILD). More importantly, this business has the tools to do it again in 2023.
Gilead Sciences recently announced promising data on its antiviral pill, dubbed GS-5245. Before this, the company had Remdesivir, now marketed as Veklury, which was the first authorized treatment for COVID-19 back in May 2020.
Unlike the ultra-blockbuster sales of the COVID-19 candidates of Pfizer (PFE) and Moderna (MRNA), Veklury only raked in $3.4 billion in 2022.
This is because the treatment is administered intravenously, which poses limitations in terms of its usefulness. With the new GS-5245, however, Gilead Sciences holds a better chance of competing against the market leaders.
While it is similar to Veklury, GS-5245 is in pill form, making it far more convenient and helpful. Although Gilead Sciences’ antiviral pill works very differently from Pfizer’s Paxlovid, the two are expected to become close competitors.
For context concerning potential revenue, Paxlovid alone could add a jaw-dropping $67.1 billion to Pfizer leading up to 2024.
Prior to COVID-19, Gilead Sciences had already been considered a top biotechnology stock that is notably safer than its peers in a recession.
A key reason for this confidence is rooted in the nature of the treatments the company develops. Most of the products in its portfolio and candidates in its pipeline are vital to patients.
HIV treatments are crucial parts of Gilead Sciences’ operations, with drugs in that sector accounting for about 75% of its core business.
For the first nine months of 2022, the company’s HIV-related sales reached $12.4 billion and climbed by 5% year over year. These figures demonstrate resiliency despite the inflation.
Its highest-selling drug in this field, Biktarvy, recorded a revenue run rate that exceeded $10 billion. Sales of this product continue to sustain their momentum and possibly grow rapidly as it expands its 45% market share in the HIV treatment market in the US.
Last December 2022, Gilead Sciences announced another development in this sector as its new drug, Sunlenca, received FDA approval.
This new treatment to the company’s portfolio is an important win.
For one, it all but cements Gilead Sciences as the leader in HIV treatment, as Sunlenca serves as a long-acting drug option. Instead of going through regular treatments, patients now have the option to receive this twice-a-year HIV regimen—the first of its kind.
Another reason is that the market for HIV treatments showed a decline during the pandemic. It has only just started to exhibit some recovery. Hence, launching a new and innovative treatment at this crucial period is a surefire way to attract a lot of eligible patients, mainly since the company provides a long-acting regimen.
With these in mind, Sunlenca has the clear marking of a potential blockbuster. In adding a new and more attractive treatment to the list of its top-selling HIV products, Gilead Sciences has set itself up to be strategically positioned to take advantage of the growing HIV treatment market.
The HIV drug market worldwide is estimated to be worth over $45 billion by 2028, rising at a compound annual growth rate of 5.9%.
On top of its solid and consistent core business, Gilead Sciences also offers an above-average dividend yield of 3.4%. In comparison, the average yield of the S&P 500 is 1.7%.
Overall, Gilead Sciences is a solid business, getting shots in the arm with its new long-term HIV treatment and antiviral pill. Although its valuation has been climbing as of late, this stock remains reasonably priced and is a good investment in the long run. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
November 1, 2022
Fiat Lux
Featured Trade:
(BARGAIN DEAL FOR A QUALITY STOCK)
(ABBV), (ABT), (RGNX), (JNJ), (MRK), (GILD), (AMGN), (LLY), (BMY), (PFE)
Uncertainty. That’s the prevalent sentiment in the investment community these days.
Investors have been hesitant to buy stocks because they believe the bear market isn’t over yet.
Moreover, investors are anxious over the possibility that the stocks will keep falling as issues like higher inflation continue to hound the market.
However, it’s critical to remember that although today’s situation is challenging, it’s only temporary. This means that businesses with solid track records and promising prospects still make excellent buys.
One of the companies outperforming the market this year but which has fallen out of investors’ favor recently, is AbbVie (ABBV).
AbbVie stock has been declining in value lately following an underwhelming third-quarter earnings report. On top of that, the looming patent expiration of its top-selling drug Humira remains a significant concern among investors.
While the Humira situation is clearly not good news for the company, the reality is that AbbVie has impressively preserved the medication’s exclusivity for almost a decade longer than initially expected. Plus, the company has been boosting Humira pricing every year to cope with the declining revenues in the EU, where it already lost patent protection in 2018.
Hence, it’s acceptable for Humira’s chapter in AbbVie’s story to end. After all, the drug has given the company so much. It has been primarily responsible for the more than 325% climb in the company’s share price since 2012 when AbbVie was spun out of Abbott Laboratories (ABT).
Nonetheless, Humira’s impending patent loss doesn’t mean that AbbVie will simply abandon its roots.
The company has since developed potential successors of Humira, namely, Skyrizi and Rinvoq.
So far, the two auto-immune drugs have delivered promising results and are on track to keep the company in tip-top shape in its post-Humira era.
These newer immunology drugs are showing impressive growth potential, with Rinvoq recording a 56% increase in revenue in the third quarter of 2022 and Skyrizi revenue soaring by 85%.
Both are also on track to beat Humira’s peak sales, with joint peak sales from Skyrizi and Rinvoq initially estimated to reach roughly $15 billion.
However, recent revenue reports show that the two could surpass the estimate and completely eclipse Humira’s more than $20 billion annual return.
Obviously, AbbVie would require more than its immunology segment if it plans to sustain a good top and bottom-line growth trajectory.
Other than the more than 10 neuroscience, hematology, immunology, and oncology candidates in its pipeline, which are projected to be ready for market launches in the three to five years, AbbVie has been diving into the aesthetics and eye care markets.
Its eye care program, specifically RGX-314, which is currently being developed in partnership with Regenxbio (RGNX), is an interesting wildcard. For context, the eye care segments for wet and dry advanced macular degeneration are roughly worth over $10 billion to $20 billion annually.
With its Humira chapter closing, AbbVie could be ushering in a new era where products from its Allergan acquisition take the lead.
For example, its Botox franchise consistently delivers impressive results. Even its Botox for migraine line has been recording double-digit revenue growth in the third quarter, indicating gains in AbbVie’s neuroscience segment.
As for the aesthetic indications of Botox, this particular portfolio could be a key driver in the company’s future growth.
Aside from Botox, AbbVie also gained access to the widely used dermal filler Juvederm. With the facial aesthetics industry pegged to experience a compound annual growth rate yearly at 14%, the market is estimated to hit $15.2 billion by 2028.
This trend of AbbVie dominating the market is likely to continue as the company is confident that competitors would be unable to develop biosimilars of Botox. That means its Botox line could keep adding to its top-line growth for an extended period.
Overall, AbbVie is a solid bet among the “Big 8” in the pharmaceutical world, which includes Johnson & Johnson (JNJ), Merck (MRK), Gilead Sciences (GILD), Amgen (AMGN), Eli Lilly (LLY), Bristol Myers Squibb (BMY), and Pfizer (PFE).
Moreover, this is an excellent time to hunt for deals as several quality stocks continue to decline, affected negatively partly by the momentum of the broader market. Among stocks to consider, AbbVie should be at the top of your list.
Mad Hedge Biotech and Healthcare Letter
October 11, 2022
Fiat Lux
Featured Trade:
(A GUARANTEED WIN IN HEALTHCARE)
(PFE)
Mad Hedge Biotech and Healthcare Letter
October 6, 2022
Fiat Lux
Featured Trade:
(A SOLID BIOTECH THAT CAN SURVIVE THE CRASH)
(GILD)
In years filled with virtually never-ending market volatility fears, the third quarter of 2022 seems to be one for the books.
We’ve gone through wild currency fluctuation, with the British pound practically free-falling to a record low against the US dollar.
The US Treasury yields rose to their peak since April 2011, while the S&P 500 is going into its third-consecutive quarter marked with losses for the first time since we experienced the 2008 financial crisis.
On top of these, the Federal Reserve disclosed that rates would climb even higher than expected as the previous month’s inflation data came in scorching.
The situation across the globe isn’t exactly showing any indications of improvement. Sanctions on Russia are becoming more severe following the Kremlin’s decision to annex certain areas of Ukraine formally. Meanwhile, emerging markets look to be down in the dumps as well.
Amid the market turmoil, some stocks managed to weather the storm and still hold the potential to deliver good results.
One of them is Gilead Sciences (GILD).
Gilead rose to fame when it launched an effective treatment for HCV, which came after its excellently timed (or lucky) acquisition of Pharmasset for $11 billion. This created a massive boost to the company’s business, with shares peaking at more than $100 per share in 2015.
With HCV finally having a solution, the boom did not last. Obviously, sales from the drug were not recurring since the patients were already getting cured.
At that time, Gilead bolstered its pipeline with a flourishing HIV business. However, the company’s revenues and earnings eventually became flat.
In the meantime, Gilead went after more expensive deals, including a $21 billion acquisition of Immunomedics to gain access to Trodelvy, a $12 billion contract with Kite Pharma to get their hands on Yescarta, and multi-billion deals involving Forty-Seven and Galapagos. Unfortunately, none of them delivered the same pay-off as the Pharmasset deal.
However, Gilead has been gaining traction recently.
Wall Street has been desperately looking for businesses that could help investors regain their losses, and it looks like Gilead is part of the very short list of companies that made the cut.
While it hasn’t exactly done anything groundbreaking as of late, the company’s consistency and foreseeable growth are boosting its attractiveness to investors.
Right now, Gilead’s HIV franchise is singlehandedly supporting the entire market cap of the stock. That’s impressive and promising, considering the company also has a burgeoning oncology sector.
For context, Gilead’s oncology franchise is estimated to hit roughly $5 billion in sales by 2030.
Meanwhile, Gilead has another HIV blockbuster making waves in Lenacapavir. Earlier in 2022, the company managed to expand the covered distribution channels of this HIV treatment and gained marketing authorization in the EU.
Given the current performance of its HIV franchise and the promise of expansion for Lenacapavir, this particular segment can be conservatively estimated to report at least single-digit growth through the early 2030s.
Overall, Gilead has been recording solid results for this year. In the first quarter, sales climbed 3% to $6.6 billion, partly thanks to its Veklury sales and the gaining momentum of its cell therapy business.
While growth was not as impressive, the 10% earnings yield, stability, and, of course, 5% dividend yield make Gilead a compelling choice. Admittedly, we’ve witnessed how interest rates climb higher, which results in additional competition for the 5% dividend yield, but the company appears to be holding up nicely in this aspect.
Gilead’s apparent independence from its COVID-centered product shows a highly encouraging trend. In August, Gilead shared its second quarter report showing revenues rising 1% to $6.3 billion. The “positive” note is that Veklury, a COVID-19 treatment, fell 46% while other products jumped 7% to contribute $5.7 billion.
Riding this momentum, Gilead shared another bolt-on deal worth $405 million to acquire MiroBio, a biotechnology company based in the UK. MiroBio develops treatments that aim to restore immune balance.
In summary, Gilead remains a solid bet in these trying times. It has established programs, which are expected to rake in higher earnings in the years to come, and an ability to execute great deals to bolster its pipeline—all while keeping its debts and costs well under control. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
August 11, 2022
Fiat Lux
Featured Trade:
(BUILDING A RECESSION-PROOF PORTFOLIO)
(AMGN), (GILD), (MRK), (ABBV), (PFE), (JNJ), (BMY)
In my biotechnology and healthcare newsletter earlier this week, I talked about Amgen (AMGN) and how critical it is to determine recession-proof businesses.
In the next quarters and even years, it will no longer be as vital to identify companies that can bring high growth returns in the short term.
Instead, what’s more important is to find stocks that can withstand any bear market and a recession.
Like Amgen, Gilead Sciences (GILD) also performed better than the S&P 500 (SPY) and the Nasdaq 100 (QQQ) in the past 12 months.
Considering that we are anticipating a steep recession and a potentially brutal bear market in the following quarters, Gilead Sciences is presenting itself as a solid pick.
Some refer to Gilead Sciences as a one-trick pony, but that’s not an opinion I agree with despite the company’s over-reliance on its HIV programs and antiviral treatments.
For perspective, its antiviral portfolio comprises more than 90% of the company’s 2021 revenues while its top-selling products that year are all from its HIV segment.
Although Gilead Sciences has been expanding its portfolio, the company’s HIV program remains its best moneymaker. In the second quarter of 2022, sales of its HIV treatments have risen by 7% year-over-year.
Demand for treatments in this space has climbed in the past months, which allows for more room for growth in the foreseeable future.
Among the HIV treatments, Biktarvy is the best-selling product. It’s also the treatment that continues to gain a bigger market share.
By the second quarter of 2022, Biktarvy has been reported to claim roughly 44% of the market share in the US, marking a 4% increase year-over-year.
Meanwhile, another potential blockbuster is Lenacapavir. This is a new product, which will be marketed as a long-acting injectable HIV treatment once it gains FDA approval. If this gets the green light, this could rake in an estimated $2 billion in the first year of its release.
Aside from its HIV treatments, Gilead Science’s hepatitis franchise has also been steadily growing.
Amid the competition against the likes of Abbvie’s (ABBV) Mavyret, the company’s combo treatments with Sofosbuvir continue to generate significant cash flows and promising sales.
However, this segment raked in $1.9 billion in sales, down 9% year-over-year. The decline could be attributed to the effects of the pandemic.
Nevertheless, Gilead Sciences have been working on updating this particular program and adding newer treatments to deliver better results.
Another segment that saw a spike in 2021 is the antiviral program, primarily due to Veklury or Remdesivir.
When COVID-19 broke, Veklury was hailed as the first-in-line treatment. This led to a substantial boost in sales since 2020, with the company earning $2 billion from the product at that time.
By 2021, Veklury sales skyrocketed by 98% to hit $5.6 billion.
Frankly, no one truly expected Veklury to reach those figures—even Gilead Sciences’ management. In their first-quarter conference call in 2021, the company estimated full-year sales for the product to be roughly $2 to $3 billion.
While Veklury’s numbers are impressive, I think this product’s days are numbered because of the emergence of more competitors and better alternatives in the market these days.
In any case, this treatment is a testament to Gilead Sciences’ ability to deliver effective and reasonably priced antivirals to market.
Moving forward, Gilead Sciences looks to be exploring the oncology sector.
Its move to acquire CAR T-cell therapies via the $12 billion deal with Kita Pharma in 2017 is one of the clearest indicators of this plan.
On top of that, Gilead Sciences also acquired Trodelvy from Immunomedics in 2020. As far as fast-tracking its expansion in the oncology space goes, this definitely pushes the company to the forefront.
As a standalone treatment, this can reach peak sales of $2 billion to $3 billion.
Other than testing it with its own pipeline as a breast cancer treatment, Gilead Sciences has been collaborating with Merck (MRK) to determine the efficacy of Trodelvy when combined with Keytruda as a first-line treatment for non-small cell lung cancer.
Overall, Gilead Sciences is a great addition to a portfolio of recession-proof companies.
While it may not be as impressive as industry titans like Bristol Myers Squibb (BMY), Merck, AbbVie, Pfizer (PFE), and Johnson & Johnson (JNJ), it definitely bears the early signs of improvement, a promising future, and the ability to withstand a recession.
Mad Hedge Biotech and Healthcare Letter
August 9, 2022
Fiat Lux
Featured Trade:
(A REVIVED BIOTECH GAINING MOMENTUM)
(AMGN), (SEGN), (MRK), (REGN), (GILD), (CCX), (BMY)
