(JNJ) Archives - Page 13 of 29 - Mad Hedge Fund Trader

A Selloff Survivor Ready for More Gains

The broader market hasn’t been putting that much faith in drugmakers these days, and this could very well be a mistake.

While 2022 has not been particularly kind to equities recently, several names in the biotechnology and healthcare sector still managed to keep themselves safe from the selloff.

Pfizer (PFE), with its COVID vaccine sales, is one of them. Admittedly, this pharmaceutical giant has not shown substantial growth in the past monthS. Nonetheless, its quarterly updates and, more importantly, pipeline have exhibited notably encouraging signals.

As a massive underperformed in the past 20 years, Pfizer has taken aggressive steps to transform its strategy. The most obvious way to shake up the business is to eliminate the bulk of its noncore products.

However, it’s not advisable to buy a company just because it has been underperforming and would then be sold at lower prices. Instead, it is critical to determine whether there’s a catalyst.

For Pfizer, the catalyst was clear: COVID.

The company was and still is at the heart of the coronavirus vaccine drives and treatments—a position that’s projected to be sustained for years to come.

The company has made a fortune from this program, and it’s still reaping the rewards in a massive way.

In the second quarter of 2022, Pfizer’s revenue climbed by 53% year-over-year to reach $27.7 billion. Based on the company’s record, this is the most significant quarterly sales during this period to date.

For context, its COVID vaccine, Comirnaty, raised $8.8 billion in sales. This is 20% higher than its reported sales in 2021 over the same period.

Meanwhile, Pfizer’s new COVID therapy, Paxlovid, recorded $8.1 billion in sales. Taken together, Paxlovid and Comirnaty comprise over half of the company’s total revenue for the second quarter.

Leveraging these growth opportunities, Pfizer has been steadily expanding its pipeline.

To date, the company has roughly 96 drugs in its pipeline. Of these, 6 drugs are in registration, while 29 candidates are queued for Phase 3 trials. There are 31 drugs in Phase 2 and 30 more in Phase 1.

Pfizer’s candidates range from treatments for inflammation, immunology, oncology, vaccines, and internal medicine to rare disease therapies.

Among the treatments in its Phase 3 study, two have been identified to bring in billions of dollars for Pfizer potentially.

One is PF-06939926, which is a treatment for Duchenne syndrome. The other is PF-06928316, which is for Respiratory Syncytial Virus (RSV).

Globally, 1 in 3,500 to 5,000 males suffer from Duchenne syndrome. This puts the number of patients at roughly 250,000, with about 10,000 to 15,000 found in the US. While it generally affects males, it can sometimes affect females as well.

In terms of market size, the Duchenne syndrome market is expected to be worth $4 billion in 2023 and $7 billion by 2027.

Currently, the major approved treatments for this condition are Sarepta's (SRPT) Exondys 51, Vyondys, and Amondys, as well as PTC Therapeutics (PTCT) Emflaza and Translarna.

PTC recorded $236 million in sales for Translarna, which is approved in Europe, and $187 million for Emflaza, approved in the US, for a total of $423 million in sales in 2021. Meanwhile, Sarepta’s overall sales reached $612 million for that same period.

Adding the rest of the minor competitors for Duchenne syndrome treatments, only $1.5 billion of the projected market value is held by the existing drugs. Clearly, there’s a lot of room for more companies to join the fray.

Meanwhile, RSV presents another lucrative market. According to the Centers for Disease Control and Prevention, this condition causes approximately 58,000 hospitalizations annually in the US.

Of these, 100 to 500 deaths are children under 5 years old and 14,000 are adults aged 65 and above. The average expense in managing adult patients alone has reached roughly $3 billion every year.

In terms of market value, the RSV market is projected to reach $4 billion by 2027. So far, the biggest competitors in this space are GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), and Moderna (MRNA).

While its rivals are challenging, Pfizer still estimates sales for its RSV vaccine to reach at least $1.5 billion annually.

Thanks to its COVID programs, Pfizer has been hailed as the undisputed leader of the pack in terms of reputation and credibility in research.

Needless to say, these factors would serve as a valuable growth lever for the healthcare giant for decades.

As one of the largest biopharmas in the world, Pfizer has established a reputation for outstanding innovation. Over the years, the company has delivered several revolutionary treatments to the market like Viagra or Lyrica.

Simultaneously, it developed Lipitor, reaching $14.5 billion in sales over 14.5 years.

Since then, it has become a highly reputable industry name. Its diverse and extensive pipeline demonstrates that it remains a company highly capable of innovating and maintaining its dominance.

July 14, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
July 14, 2022
Fiat Lux

Featured Trade:

(GOODBYE BIG PHARMA, HELLO BIG BIOTECH)
(GSK), (PFE), (BMY), (VTRS), (LLY), (JNJ), (AMGN), (GILD),
(MRK), (RHHBY), (AZN), (NVO), (ABBV), (SNY), (ABT)

Goodbye Big Pharma, Hello Big Biotech

Biotech Letter

The moment GlaxoSmithKline (GSK) completes the spinoff of its massive segments marketing drugstore staples, such as Tums and Advil, it will become the latest name to join the list of Big Pharmas shuffling their assets and rebranding itself into a pure-play biopharma stock.

The reorganization of this UK-based company is the culmination of years-long process that has transformed practically all the biggest pharmaceutical companies globally into biotechnology companies on steroids.

This type of transformation, which gets rid of sideline businesses, has been going on for years. Pfizer (PFE) dumped its chewing-gum segment back in 2002 and established another spinoff unit, Viatris (VTRS), with Mylan in 2020.

Bristol Myers Squibb (BMY) decided to spinoff its infant-formula division in 2009. In 2018, a new animal health company came to be from Eli Lilly (LLY).

By 2023, Johnson & Johnson (JNJ) expects to complete the creation of a spinoff company and unload its consumer health segment, which offers Tylenol and Band-Aids.

Essentially, they’re turning into Amgen (AMGN) and Gilead Sciences (GILD) but with more money and resources to churn out high-priced, complex treatments for rare diseases.

However, not all Big Pharma names plan to become pure-plays. For example, Merck (MRK) still intends to retain its animal health sector while Roche (RHHBY) wants to keep its diagnostics segment.

As for the rest, including AstraZeneca (AZN), Novo Nordisk (NVO), and AbbVie (ABBV), their plan is to focus on creating new drugs and marketing these treatments—nothing more, nothing less.

The idea of Big Pharma transforming into “Big Biotech” dates back to 1992, when Henri Termeer, the CEO of Genzyme—now owned by Sanofi (SNY)—was summoned to a Senate hearing in Washington to argue and justify one of the most expensive medicines ever put to market.

The medication in question was for a rare genetic condition called Gaucher disease. A year-long treatment for one person needed tens of thousands of human placentas, and the price tag? A jaw-dropping $380,000 annually.

Amid the demand to make the treatment cheaper, Genzyme stood by its decision and the price barely budged after two years.

The company’s tenacity and insistence on standing by its pricing altered the biopharma landscape. That is, drug developers realized that rather than marketing cheaper drugs to combat common diseases, they can focus on biotech-style treatments to target rare conditions.

At that time, Big Pharma companies were battling over pieces of massive markets. They allocated considerable funds to their commercial teams, hoping to outrank one another in crowded spaces.

Meanwhile, biotechs like Genzyme decided on a different strategy.

They concentrated on more innovative approaches. Actually, the biotech focused on biologics at that point. Then, the company simply ignored the pricing rules and set its own prices, which were considerably higher.

A more recent go-to proof of concept for this strategy is Abbott Laboratories (ABT), which was initially a diversified company that offered an extensive range of products like medical devices and even infant formula.

In 2013, the company spun off its branded pharmaceutical sector into AbbVie, which became a pure-play biopharma that focused on developing and marketing the arthritis drug Humira. Since then, Humira has transformed into one of the top-selling drugs in history.

More than that, AbbVie pays substantial dividends while its shares have delivered 500% returns since the spinoff. In comparison, the S&P 500 has returned roughly 220% within the same timeframe.

While this is a shift that investors have clamored to see in the healthcare sector, it also means that the transformations could turn companies with solid revenue streams that have become reliable despite the ups and downs of the drug discovery process into riskier bets.

Although treatments for rare diseases admittedly come with very high price tags, focusing on smaller markets brings with it the inherent risk that these buy-and-stuff-under-the-mattress blue chips could no longer deliver returns as consistently.

These days, though, the advancements have made faster and safer scientific breakthroughs much more plausible.

Companies have gained a better understanding of the human genome, oncology treatments, genetic diseases, and groundbreaking modalities like gene therapies.

The science has now caught up with the demand. More importantly, Big Pharma has finally woken up and started to leverage its resources to take advantage of the opportunities.

This gradual change can be seen in the surge of new treatments in the past years. From 2016 to 2020, the FDA approved an average of 46 new therapies annually.

This is more than half the number between 2006 and 2010 when the organization only approved an average of 22 new treatments every year.

Needless to say, these changes are also partly in response to the overall dissatisfaction of investors with the diversification strategies of Big Pharma.

Basically, the general message here is that Big Pharma should let the investors worry about diversifying their own portfolios and focus on developing safe and effective drugs.

pharma

July 5, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
July 5, 2022
Fiat Lux

Featured Trade:

(AN AAA-RATED STOCK POISED TO DELIVER MARKET-BEATING RETURNS)
(JNJ), (AAPL), (GOOGL), (AMZN), (MSFT), (TSLA), (META), (BRK.A)

An AAA-Rated Stock Poised to Deliver Market-Beating Returns

Biotech Letter

More than six months after what appeared to be a never-ending assault on the biotechnology and healthcare industries, the sector seems to be slowly reviving.

While it is still too early to declare the pullback over, there are a few companies that provide a ray of hope for investors.

In the US, only four stocks have recorded a market capitalization of $1 trillion or higher: Apple (APPL), Alphabet (GOOGL), Amazon (AMZN), and Microsoft (MSFT). This year's market crash saw Tesla (TSLA) and Meta Platforms (META) departure from this elite group.

The market-wide selloff also made it more difficult for stocks to reach the $1 trillion mark. However, this does not necessarily preclude them from achieving this goal in the future.

Companies are rapidly expanding and equipped with the right tools and strategies to capitalize on growth opportunities, making them prime candidates to make the $1 trillion cut in a couple of years.

One of them is Johnson & Johnson (JNJ).

Almost everyone is familiar with JNJ's century-old brands, such as Band-Aids and Listerine. What many people probably do not realize is that the company's med-tech and pharmaceutical segments account for the vast majority of its total revenue.

In 2021, its pharmaceuticals segment alone comprised 55% of JNJ sales, while its medical devices unit contributed 29% to the company’s top line.

So far, the most promising drug in JNJ’s pharmaceutical segment is Tremfya. First-quarter sales for this psoriasis treatment jumped to a whopping 41% year over year to record an annualized $2.4 billion.

Meanwhile, JNJ's med-tech segment is poised for massive growth as a result of the strong demand for its electrophysiology products. These devices, used to keep hearts beating normally, have been identified as lucrative revenue streams and growth drivers in the long run.

The company has been working on spinning off its consumer segment into a separate publicly traded entity in the following months. This means that investors with JNJ stock will eventually end up owning shares of two different companies by 2023.

The decision to spin off its consumer health segment is part of the company's effort to shed a cyclical segment and become a health pure play focused on pharmaceuticals and medical devices.

Hence, now is an excellent time to buy JNJ shares.

While JNJ isn’t known as a high-growth stock, the company’s strategies have the potential to spur exponential growth and send shares soaring.

The next decade will be crucial for the company's success as it transforms. If the company executes its plans successfully, its current market capitalization of $467 billion could slowly but steadily increase to approximately $1 trillion.

J&J will be able to invest and concentrate its resources on segments with high sales and margins, which should increase the company's income and cash flows at a faster rate than at present.

Furthermore, JNJ's plan is expected to increase shareholder returns through higher dividends and share repurchases because of its growing cash flow. With these factors combined, JNJ's stock price will undoubtedly rise, as will its market cap.

On top of these, JNJ offers a 2.6% dividend yield. Admittedly, this isn’t remarkably high. However, investors can rely on its steady rise. Moreover, JNJ is a Dividend King. In fact, it recently raised its payout for the 60th year in a row.

If these aren’t enough to cement the company’s reputation as a solid investment, consider the fact that JNJ is one of the largest holdings in Warren Buffett’s (BRK.A) portfolio.

It’s also one of the only two publicly traded companies with the coveted AAA credit rating from S&P. For context, the US government only has an AA rating. Needless to say, this makes JNJ one of the safest—if not the safest—income stock to date.

Overall, JNJ has been diligent in getting all of its ducks in a row and is poised to provide market-beating returns to patient investors.

June 21, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 21, 2022
Fiat Lux

Featured Trade:

(A POTENTIAL ONE-STOP-SHOP IN THE CANCER MARKET)
(SEGN), (MRK), (PFE), (ABBV), (JNJ)

A Potential One-Stop-Shop in the Cancer Market

Biotech Letter

So far, there’s no clear leader in the cancer market. However, it looks like things might change soon if Merck (MRK) gets its way.

The biotechnology and healthcare sector has heard some interesting updates lately involving Merck and its frequent collaborator, Seagen (SEGN).

While Merck already has a stake in Seagen, it appears that the New Jersey biopharma wants the whole thing. There’s no need to panic buy just yet, though, since Merck still has to go through hoops to prove that its plan won’t cause any antitrust issues.

Moreover, Merck won’t be the only suitor. Several names in Big Pharma have been eyeing Seagen for quite some time, including Pfizer (PFE) and AbbVie (ABBV).

Even Japan’s Astellas Pharma, with a jaw-dropping $3.76 trillion market capitalization, is said to be interested.

If this does push through, it would be another massive deal since Seagen’s current market capitalization is at $31 billion.

Why is Seagen an attractive acquisition candidate?

This biotech currently has four cancer treatments available on the market.

It’s also reviewing a couple of candidates to determine how they react as part of a combo therapy with Merck’s blockbuster drug Keytruda.

Evidently, the potential to exclusively own the rights to compounds that could bolster the effects and expand the indications of its bestselling therapy is a significant motivation for Merck.

If the acquisition happens, Merck will undoubtedly be an incredibly formidable powerhouse in the oncology sector.

At the moment, the company already has 46 commercially approved indications in its cancer portfolio.

By 2028, Merck plans to see this number grow to over 80 oncology drugs, with Keytruda leading the charge.

Aside from its potential combination with Merck’s top-selling treatment, what’s more promising for Seagen is its actual portfolio of four molecules or its Big Four franchises.

These are Adcetris, Tukysa, Padcev, and Tivdak.

Adcetris has been hailed as the foundation of care for practically all types of lymphoma, while Padcev has been proven to be the standard of care for advanced bladder cancer.

Tukysa has been hailed as best-in-class for metastatic breast cancer, while Tivdak is the first-in-class for cervical cancer.

Holding such premier titles and indications ensures that these treatments generate highly aggressive revenue boosts, thereby guaranteeing their trajectory towards becoming blockbusters.

After all, you rarely hear of any blockbuster treatment being a second-line therapy.

In terms of sales, the Big Four managed to generate a total of $383 million in the first quarter of 2022. This indicates approximately 27% year-over-year sales growth, which bodes well for the future of Seagen’s portfolio.

Adcetris rakes in $181 million during the said period, Padcev contributed $100 million, Tukysa generated $90 million, and Tivdak recorded $11 million.

Tukysa’s growth was attributed to its penetration of the European market in February 2021, while Adcetris soared because of its expansion to include advanced Hodgkin lymphoma.

As for Tivdak, this particular product’s performance could be attributed to the fact that it was only approved last September 2021.

Among the four, however, Padcev showed the most aggressive rise in sales at a 44% increase year over year.

Its substantial growth is not only due to its superior efficacy over traditional treatments but also to its ever-increasing market penetration.

Aside from the US, it has successfully entered the UK, Japan, Canada, Israel, Switzerland, and the European Union.

Given its history and how it’s performing, Padcev is projected to become a blockbuster treatment before 2030.

Although the Big Four have delivered groundbreaking changes to the oncology sector, Seagen has been consistent in aggressively pursuing new candidates.

It currently has 17 programs in its pipeline, which target blood cancers and solid tumors.

Ultimately, Seagen’s goal is to become an all-around cancer biotech—aka the oncology sector's Johnson & Johnson (JNJ).

seagen

June 16, 2022

Biotech Letter

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

Featured Trade:

(AN UNDERRATED LONG-TERM BIOPHARMA STOCK)
(OGN), (MRK), (PFE), (VTRS), (ABBV), (JNJ), (AMGN), (RHHBY), (BMY)

An Underrated Long-Term Biopharma Stock

Biotech Letter

Six months into 2022, the markets are still in turmoil while highly valued stocks rapidly fall.

A way to cope with these is to search for safety and security among value-focused investments that are less at risk of sudden declines.

One business that remains profitable and is trading at a relatively affordable price, especially considering its future earnings multiples, is Organon (OGN).

Organon is a spinoff from Merck (MRK). It focuses on women’s health products, existing treatments, and biosimilars. It was launched roughly the same time Pfizer (PFE) launched its spinoff, Viatris (VTRS), in 2021.

While Organon has yet to become a superstar growth stock at the moment, it’s an excellent business to consider for a stable long-term investment.

So far, the company has managed to generate promising gross margins north of 60% and consistently proved to be profitable.

To date, Organon has over 60 treatments in its pipeline.

Thanks to strategic partnerships, Organon has become the biggest pharmaceutical company centered on women’s health.

Not only that, it has an extensive portfolio of biosimilars or biosimulators focusing on cardiovascular, dermatological, and respiratory conditions.

Meanwhile, Organon has one of the highest dividend yields among biopharma companies at 3.47%, with consistent dividend payments of $0.28 per share every quarter.

Organon’s biosimilar growth received a jumpstart from its agreement with Samsung Boepsis in 2013. The deal enables both companies to develop and market a number of biosimilar treatments focused on cancer and immunology.

Under this partnership, Organon has been granted exclusive license to manufacture, test clinically, and market inflammatory treatments like AbbVie’s (ABBV) top-selling Humira, Johnson & Johnson’s (JNJ) blockbuster Remicade, and Amgen’s (AMGN) moneymaking treatment Enbrel, as well as oncology therapies such as Roche’s (RHHBY) promising growth drivers Avastin and Herceptin.

These catapulted Organon as the leader in the fast-expanding healthcare field, where several lucrative drugs will lose their patent exclusivity before 2030.

Riding this momentum, Organon plans to expand its portfolio of biosimilars to cover more therapeutic fields like neuroscience, diabetes, and even ophthalmology.

To boost its portfolio, Organon has been collaborating with Shanghai’s Henlius Biotech to work on more biosimilars.

The Merck spinoff has agreed to pay $73 million upfront in addition to $30 million in milestone payments for the development of Pertuzumab, a biosimilar for Roche’s breast cancer treatment Perjeta, and Denosumab, a biosimilar of Amgen’s osteoporosis drug Prolia. Another Amgen drug, bone cancer treatment Xgeva, is included in the collaboration agreement.

For context, Amgen reported $873 million in sales for Prolia and $545 million for Xgeva in 2021, while Roche raked in $4 billion from Perjeta.

If this partnership works out, Organon and Henlius plan to move forward with a biosimilar to Bristol Myers Squibb’s (BMY) cancer drug Yervoy and its best-selling Opdivo.

While these are all exciting, it may still take some time for the biosimilars to be released to the market. Among them, the Prolia biosimilar has the most apparent timeline, potentially launching the product by 2024.

Although Organon has yet to make a splash in the biopharmaceutical market, the company holds impressive potential. So far this year, the stock has been up 15%—a performance that’s better than the S&P 500 that recorded 4% in losses over the same period.

More than that, its price is heavily discounted these days, offering investors an extra incentive to seize the opportunity to buy shares of this relatively new company in the healthcare sector.

It also has consistent revenue growth and a promising pipeline of diverse candidates with the potential to expand the company’s portfolio.

Taking all these into consideration makes Organon an underrated buy at the moment and a great candidate for long-term investors.

organon