(JNJ) Archives - Page 12 of 29 - Mad Hedge Fund Trader

A Quality Healthcare Stock in a Jam

Sometimes the market overreacts, and it presents a buying opportunity for savvy investors. This is what happened with Bristol Myers Squibb (BMY).

Investors pulled back on BMY shares following mixed results from the Phase 2 trials of Milvexian, a stroke therapy the biopharmaceutical giant is developing with Johnson & Johnson (JNJ).

This treatment works as an anticoagulant formulated to prevent secondary strokes that usually occur after an ischemic stroke.

Ischemic strokes are the most common kind of strokes, triggered when a blood clot blocks an artery heading to the brain.

In its trial, Milvexian showed that it was able to lower the recurrence of ischemic strokes by 30% among patients who exhibited symptoms.

Unfortunately, it wasn’t able to show any effect on the smaller lesions typically detected only via MRIs. This is where the problem lies since the latter was part of the predefined endpoints when the trials started.

So, in terms of reducing symptomatic stroke, Milvexian’s results were “very positive.” But if you consider all the factors, then you get mixed data.

The underwhelming results of Milvexian’s Phase 2 trials led to a 5.5% fall in BMY’s shares, clearly demonstrating the erosion of investor confidence going into Phase 3.

What does this mean?

Milvexian was designed to become the successor of BMY’s mega-blockbuster Eliquis. BMY’s shares are declining because of the fear over the effectiveness of the company’s strategy to power through upcoming patent losses.

Despite the setback, BMY and JNJ aren’t giving up on the treatment. Apart from the 30% risk reduction it offers patients, Milvexian has an impressive safety profile. Based on these results alone, the companies still consider the candidate a good product.

Moreover, the results do not appear to be affecting the overall performance and strategy of the company. Minor adjustments simply need to be made.

The pharma giant’s recent quarter report disclosed revenue of $11.9 billion, which climbed 2% year over year. Within its US market, BMY’s revenue grew by 12%.

The company is also continuously innovating. In early 2022, the FDA approved a new cancer treatment it developed, estimated to rake in $4 billion in peak sales.

It’s also consistent in terms of delivering results. BMY has been generating over $11 billion in revenue quarterly, with profits reaching 14% of sales during those periods.

These sound financials place BMY in a great position to expand and pay out its dividend, which is at 2.9% to date.

Year to date, BMY has been consistently and soundly beating the general markets. It has been up 19% compared to the 10% fall of the S&P 500 as of late.

Aside from developing potential successors, BMY has also been active in acquiring assets. Recently, it shelled out $13 billion to buy MyoKardia.

The deal enabled BMY to gain access to Camzyos, a prescription medicine used to treat adults with a heart condition called symptomatic obstructive hypertrophic cardiomyopathy.

Camzyos recently gained approval and is estimated to reach $4 billion in peak sales annually.

BMY also recently acquired Turning Point Therapeutics for $4.1 billion to gain access to Repotrectinib, which is pegged as the next-generation oral treatment for lung cancer.

Given the drug’s data, it has the potential to competitively go head-to-head against Roche’s (RHHBY) Rozlytrek and rake in $1.5 billion in peak sales.

So, should investors start buying BMY shares following the clinical setback with Milvexian?

While Milvexian isn’t shaping up as the heir apparent for Eliquis, BMY still has a broad pipeline and portfolio of high-value treatments in the market and is under development.

In other words, BMY could easily shake off this setback. That means savvy investors may want to look into the stock and take advantage of this momentary weakness in the Big Pharma’s stock price.

After all, BMY is an excellent drugmaker that investors can rely on for long-term growth and dividend income.

August 30, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 30, 2022
Fiat Lux

Featured Trade:

(THE TIMES ARE A-CHANGING)
(NVS), (LLY), (ALC), (GSK), (PFE), (JNJ), (BMY)

The Times Are A-Changing

Biotech Letter

With the US GDP sliding for another quarter, the economic projections are becoming increasingly hostile.

However, investors who have consistently been buying quality stocks could easily consider the gloomy economic conditions as a bump in the road.

One of the most resilient companies in the biotechnology and healthcare industry is Novartis (NVS).

The Swiss drugmaker, which has a massive market capitalization of $207 billion, is ranked as the sixth biggest pharma stock worldwide.

Over the past 12 months, Novartis has delivered better results than the overall pharmaceutical industry and the S&P 500. Its performance, albeit marginally better than the rest, proved its resilience amid such chaotic and complex situations.

Recently, Novartis announced that it would cut loose its Sandoz division, turning it into a standalone spinoff by the second half of 2022.

Basically, Novartis has two main segments: Innovative Medicine and Sandoz.

The company’s Innovative Medicine section comprises roughly 80% of its sales and centers on everything involving patented to prescription products.

Its Sandoz section, approximately 20% of the total sales, is further categorized into franchises: Biopharmaceuticals, Retail Generics, and Anti-Infectives.

The stay-behind business would be composed solely of the products in the Innovative Medicines segment, a combination of Novartis’ oncology and pharmaceuticals business divisions.

This makes Novartis the latest name to be added in the long line of Big Pharma players letting go of their generics division to strip away all but their core products in development.

The plan to spin off Sandoz, Novartis’ division concentrating on generics and biosimilars, has been in the works for quite some time now.

Prior to this announcement, there were even talks of a potential acquisition instead of creating a standalone company. However, no attractive enough offer was given, pushing Novartis to go ahead with its original plan.

Sloughing off the generics and biosimilars divisions could help solve some of the company’s issues.

The generic drug sector has been causing issues for drugmakers as of late, and sales of the Sandoz division have been notably stagnant compared to the steady growth of Novartis’ new drugs sector.

To put things in perspective, Sandoz’s net sales in 2021 was only $9.6 billion, while the company’s Innovative Medicine division raked in a whopping $42 billion.

Getting rid of Sandoz means Novartis could focus on more promising products in its portfolio and develop more blockbuster drugs in its pipeline.

For instance, the company can focus on expanding the treatments involving Cosentyx.

The top-selling drug in Novartis’ portfolio, making up 10% of total revenues, Cosentyx continues to rise rapidly, reporting double-digit growth.

This drug targets psoriatic arthritis and was valued at $7.15 billion in 2019. By 2027, this drug is expected to be worth $13.64 billion.

Most importantly, its patent will last longer as it will expire by 2028 in the US, 2029 in Japan, and 2030 in Europe.

Another blockbuster drug in Novartis portfolio is chronic heart failure treatment Entresto, which accounts for roughly 9% of the company’s total revenues. The growth of this product has been impressive thanks to the high demand in Europe, which means an increase in its sales is almost guaranteed.

Like Cosentyx, its patent will also last longer and is estimated to reach until 2036. This makes Entresto one of the most interesting—if not the most exciting—drug in Novartis’ pipeline.

Novartis is also becoming a significant player in the metastatic breast cancer market, estimated to grow from $15.52 billion in 2020 to $41.74 billion in 2030.

The company’s product in this segment, Kisqali, has been gradually taking up market share and is expected to gain more traction as it expands its indications.

In terms of growth, though, multiple sclerosis drug Kesimpta is the top performer in Novartis’ portfolio. In the second quarter of 2021, sales were at $22 million. In the same period in 2022, the number skyrocketed to $239 million.

Kesimpta is anticipated to become another blockbuster, especially with the projections in the multiple sclerosis market.

This segment is estimated to be worth $25.43 billion in 2022 and will grow to $33.17 billion by 2029. While the growth isn’t as massive as other segments, the exciting news is that Kesimpta has been outpacing the growth rate of the reference market thus far.

The move to eliminate Sandoz is in line with the ongoing aggressive slimming down of the company’s operations.

In 2014, Novartis sold its animal health segment to Eli Lilly (LLY). A few years after, it spun off its eye-care sector to become Alcon (ALC), then sold its consumer health segment to GlaxoSmithKline (GSK) for $13 billion.

Meanwhile, the decision to become a pure-play pharma has become a widespread trend among prominent names in the industry, with the likes of Pfizer (PFE), Johnson & Johnson (JNJ), and Bristol Myers Squibb (BMY) transforming into sleeker and slimmer businesses.

Ultimately, the goal is for these pharma giants to shed unwanted weight to compete in the faster-paced biotechnology world. The plan is to focus all their resources on advancing the science and developing the technology needed to come up with the next groundbreaking innovation.

With Novartis joining the bandwagon, we can expect its growth to accelerate over the long term as it focuses more on strengthening its already solid and impressive pipeline. I highly suggest that you buy the dip.

August 24, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 24, 2022
Fiat Lux

Featured Trade:

(A NEW KID ON THE BLOCK)
(GSK), (HLN), (UL), (PG), (JNJ), (PRGO), (PBH)

A New Kid On The Block

Biotech Letter

GlaxoSmithKline (GSK) started 2022 by turning down a $60 billion offer from Unilever (UL) for its consumer healthcare division, describing the price as too low.

By June, this same division became a standalone company named Haleon (HLN), with a market value of $29 billion—less than half the amount Unilever wanted to pay.

This means investors looking to buy shares of this spinoff still have a chance to take advantage of the bargain price.

Haleon is so far valued at roughly 13.5 times the consensus average for 2023 earnings, making it a lower multiple compared to competitors selling consumer healthcare items like Unilever, which roughly trades at 17 times its projected 2023 profits, and Procter & Gamble (PG), which trades at about 24 times its estimated earnings.

Compared to Procter and Gamble and Unilever, though, Haleon is a large-cap company that’s considered a pure-play consumer healthcare company.

It started trading as a standalone company by July, with a portfolio that included oral health items such as Aquafresh and Sensodyne, some OTC drugs like Advil and Theraflu, and several supplements including the best-selling multivitamin brand Centrum.

Keep in mind that the majority of Haleon’s core products have been practically unchanged for years. This spinoff only allotted roughly $300 million for R&D in 2021.

That comprises a mere 2.7% of its turnover. Meanwhile, GSK spent over 20% of its turnover on R&D initiatives within the same period excluding Haleon.

So far, the only notable pure-play consumer healthcare competitors are Perrigo (PRGO) and Prestige Consumer Healthcare (PBH). However, these two operate at a far smaller scale, with market capitalizations of less than $6 billion.

The absence of a competitive peer group and the limited track record of Haleon as a solo company makes this GSK spinoff more speculative compared to other consumer healthcare firms.

Haleon’s future would become clearer by the end of 2022, with more earnings reports under its belt, alongside the completed deal with Johnson & Johnson (JNJ).

JNJ also plans to create a standalone company for its consumer healthcare division in 2023. Haleon will be combined with this particular spinoff to form a new category.

Based on its current portfolio, brand recognition, and years of experience under Big Pharma’s, Haleon is projected to grow by 3.3% annually from 2023 through 2026.

At this point, Haleon is already considered a dominant player in the field. In the 2021 earnings report, this division brought $11.5 billion to GSK. That’s lower than JNJ’s own consumer healthcare division, which raked in $14.6 billion, but higher than Procter & Gamble’s $10 billion.

A standalone consumer healthcare company has the capacity to attract additional investor attention and gain higher valuations for those looking for steady—albeit not jaw-dropping—growth while earning consistent income from dividends.

Haleon announced that it intends to start paying out in the first half of 2023 “at the lower end” of the 30% to 50% range of its earnings. Looking at the company’s recent price, its 2023 dividend yield is estimated to be at 2.3%.

The consumer healthcare sector is a lucrative segment. The size of this market is estimated to reach $301.4 billion by 2027, with a 7.2% growth in CAGR throughout that period.

The demand for products in this segment tends to be unaffected by economic issues like recessions. Moreover, established brands, particularly those under Big Pharma names like JNJ and GSK, can easily set a very high barrier for competitors to overcome.

Overall, Haleon presents an opportunity for investors to bag a bargain.

It has a solid lineup of strong brands, which have shown their capacity to drum up consistent sales and demand low R&D expenses. These factors make Haleon a potential cash cow that could steadily deliver rising dividends for years to come.

Haleon is a good bet on an excellent emerging market—not to mention a virtually recession-proof—market.

haleon

August 16, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 16, 2022
Fiat Lux

Featured Trade:

(A FAIL-SAFE HEALTHCARE STOCK FOR PATIENT INVESTORS)
(JNJ)

A Fail-Safe Healthcare Stock for Patient Investors

Biotech Letter

Warren Buffett is arguably one of the most celebrated investing minds in history. In the 57 years that the Oracle of Omaha was hailed as the leader of Berkshire, the business’ Class A shares (BRK.A0 grew 3,641,613% through December 31, 2021.

In fact, his company has been outperforming the broader market by leaps and bounds that even if Berkshire’s shares fall 99% tomorrow, it would still be ahead of the S&P 500—an achievement it has been celebrating since 1965.

While there’s a long list of factors behind Buffett’s long-running success, his preference for relatively safe businesses serves as one of the foundations of Berkshire’s superior and stable returns.

One of the companies in Berkshire’s portfolio is Johnson & Johnson (JNJ). Although it comprises only 0.02% of Buffett’s holdings, JNJ represents the steady and long-term holdings the Oracle has been known to chase.

Since August 2012, the company’s trailing-12-month net profit has climbed by 116%, exceeding $18.3 billion. To hit that mark, JNJ creates and markets a slew of products and treatments alongside medical devices and consumer health staples such as Tylenol and Sudafed.

It’s highly probable that JNJ’s stable track record of growth and success in expanding and diversifying its portfolio year after year is what lured Buffett to invest in the company.

JNJ’s operating segments hold a vital role in its growth as well. Although marketing brand-name pharmaceuticals comprise the majority of JNJ’s operating and growth margins, the reality is that brand-name products can only hold on to a finite period of exclusivity in sales.

To counter the issues involving patent cliffs, JNJ has implemented a myriad of tactics. For instance, it can rely on its top-performing medical device segment to help augment the loss of income.
For JNJ, when one door closes, another door or a group of doors tend to open.

Unlike most businesses that attract Buffett, which have wide economic moats, JNJ’s significant competitive edges rely on its sheer size compared to its rivals and the brand recognition attached to most of its products.

Nevertheless, a considerable part of its lineup speaks volumes in terms of highlighting Buffett’s preference for businesses that allow him to generate income without necessitating additional investments in development.

If you really think about it, you’ve likely purchased Tylenol or Listerine mouthwash several times in your life. The formulas have not been modified or changed that much, and neither has JNJ’s unit economics when it comes to manufacturing them.

Another factor that makes JNJ an excellent company is its continuity in operations. Keep in mind that this company has been in business for 136 years, and within that period, it only had 10 CEOs. Possessing continuity in critical leadership roles has guaranteed that strategic goals are constantly met.

On top of these, JNJ is one of the most financially sound—if not the most economically sound—publicly traded companies in the world. It has boosted its base annual dividend consistently over the past 60 years. It is recognized as one of the only two publicly traded companies with the highest credit rating (AAA) awarded by Standard & Poor.

Moreover, JNJ is a thriving healthcare stock.

Healthcare stocks are one of the most stable investments since they are defensive. Regardless of the economy and stock market performance, people will continue to buy prescription medicine, use medical devices, and avail of healthcare services. Therefore, this puts minimal demand on healthcare stocks. We do not stop getting sick or going to hospitals because Wall Street hits a roadblock.

Overall, JNJ is an excellent, safe, and reliable long-term investment. While it has not outperformed the broader market in the past 10 years, the business brings joy to its shareholders by steadily paying and boosting its dividend.

There’s a catch here, though. Buying a stock like JNJ signifies your willingness to hold it for years. Hence, this is a business for patient investors only.

August 11, 2022

Biotech Letter

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)

Building A Recession-Proof Portfolio

Biotech Letter

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.

August 4, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 4, 2022
Fiat Lux

Featured Trade:

(A SELLOFF SURVIVOR READY FOR MORE GAINS)
(PFE), (SRPT), (PTCT), (GSK), (JNJ), (MRNA)

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