Mad Hedge Biotech and Healthcare Letter
April 25, 2024
Fiat Lux
Featured Trade:
(RACING TO SWAP A GOLDEN GOOSE FOR A NEW FLOCK)
(MRK), (NVO), (LLY), (JNJ), (ABBV), (PFE)
Tag Archive for: (JNJ)
Big pharma usually makes investors smile - fat profits, juicy dividends, and stocks that crush the market.
Lately, though, some of these giants are looking more like grumpy old men. Sure, there are exceptions like Novo Nordisk (NVO) and Eli Lilly (LLY) printing money with their obesity blockbusters.
But what about the rest? Even with Washington breathing down their necks, patent cliffs, and a shaky economy, you'd think these drug titans wouldn't be lagging the market, right? Wrong.
Check out the "Big Eight" top dogs - Johnson & Johnson (JNJ), Merck (MRK), AbbVie (ABBV), Pfizer (PFE), and the rest. Only a few have really delivered the goods in the past five years. AbbVie and Merck have been alright, but the others? They make me want to take a nap.
Now, I'm not saying give up on pharma entirely - there's still money to be made. But you've got to do your homework. Today, let's take a look at Merck.
They raked in $60.1 billion in 2023, making them a heavy hitter. But without their COVID cash machine Lagevrio, growth is...less impressive. Still up, but not setting the world on fire.
The real story is spending - Merck went on a spree, burning through cash on R&D. Why? Their golden goose Keytruda, that $25 billion cancer blockbuster, is facing generic competition soon.
Merck isn't just sitting around waiting for the Keytruda patent cliff either. They're furiously throwing money at new drugs, acquisitions, cancer, heart disease, immune disorders - hoping to find the next Keytruda before the current one fades away. It's like an aging rockstar desperately trying to write another big hit.
But let's be real, finding billion-dollar breakthroughs is a gamble, even for giants like Merck. They've got potential in the pipeline for sure, but it's a long road from the lab to pharmacy shelves. Plenty of drugs flame out along the way.
Looking back, 2023 wasn't a victory parade for Merck. It was more like a mad dash to spend their way out of the looming Keytruda patent cliff. But hey, sometimes you've gotta break a few eggs to make an omelet, right?
Speaking of potential winners, let's talk about those newly approved lung drugs – sotatercept could be a major player.
Merck's vaccine department is looking strong too, with potential blockbusters targeting lung infections and RSV in the pipeline.
Of course, it hasn't all been smooth sailing. That new cough drug, gefapixant, getting rejected by the FDA again? Merck took a hit on that. Still, this biotech’s not giving up. This is a company buying time to build up a whole new arsenal, and the Keytruda cliff might hurt, but they'll come out swinging.
So, let’s forget about that 2023 earnings dip. Merck's forecasting a serious jump in 2024 profits as they dial back the crazy spending. Yes, their balance sheet took a hit, but look at what they're building. They're hunting big deals to bolster that pipeline, and that's a good thing in my book.
Speaking of big moves, Merck's been on a shopping spree. Wall Street might get nervous if they drop another bombshell, but I trust their judgment. These aren't just random buys; this is how they protect their future cash flows. Besides, any short-term drama from a big deal could be a sweet buying opportunity.
And while Merck’s still figuring out which one could be the next big thing, the true star of the show, until that patent cliff arrives, is still Keytruda.
That beast is still growing and could keep going strong for years, especially in early-stage treatments. Plus, that new subcutaneous version of this blockbuster treatment? Talk about extending the gravy train well past the generic competition.
Let's also check out the other horses in this race: sotatercept's early sales numbers, a potential FDA approval for that HER2 drug, the saga of gefapixant's third shot (or not), and the cash potential of V116 and Welireg. Not to mention, juicy updates on that Moderna (MRNA) partnership…Merck’s next months could be packed with surprises.
As for this company’s dividend? Decent track record, but don't expect fireworks after the recent hike. As for buybacks, Merck seems to have...other priorities right now. Those profits are pouring straight into the growth pipeline.
The bottom line: While some of Big Pharma looks pale lately, Merck is still bringing it, share price gains and all. Sure, that gefapixant rejection stings. But Keytruda keeps roaring, and Merck's pipeline is buzzing with potential. I'm not sweating earnings.
Merck's got contingencies lined up for the Keytruda patent apocalypse - new drugs, deals, maybe even extending Keytruda itself. They're playing for the long game here. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
April 11, 2024
Fiat Lux
Featured Trade:
(BELLY BUSTERS)
(NVO), (LLY), (JNJ), (AMGN), (RHHBY), (GSK), (VKTX)
Did you know that more Americans are now trying to lose weight than trying to quit smoking? That's a staggering shift, and it has a lot to do with the buzz around those new obesity drugs.
Novo Nordisk (NVO) got the ball rolling in 2021 when they received the green light to market their diabetes drug, Ozempic, as a weight loss miracle called Wegovy.
Not to be outdone, Eli Lilly (LLY) swooped in the fall of 2023 with Mounjaro – also a diabetes drug, sold as Zepbound – that got the FDA nod for weight loss, too.
Then, the whole pharma world, it seems, has started to go all-out on obesity, flooding the market with a whole new generation of weight loss drugs.
To date, there are 124 obesity meds in the works – a mix of 61 Phase 1 hopefuls, 47 in Phase 2, eight in Phase 3, and eight already greeting patients.
Remember that whole fen-phen disaster back in the 90s? That left a bad taste in everyone's mouth when it comes to weight loss drugs.
But things are different this time. These new obesity meds, especially those from Novo Nordisk and Lilly, are a game-changer. They're blowing those old weight loss pills out of the water.
It's not about fitting into those skinny jeans anymore (though that's a nice bonus). The focus is on health.
And while Novo Nordisk and Eli Lilly might be the big names in the obesity drug game, they've got competition. There's a whole crew of pharma companies jumping on the bandwagon, like Currax Pharmaceuticals, Roche (RHHBY), GlaxoSmithKline (GSK) – you get the picture.
But here's the really wild part about these drugs like Mounjaro and Wegovy, which use GLP-1 (Glucagon-like peptide-1) compounds to treat diabetes: They kinda stumbled onto their weight loss powers by accident.
Turns out, while they were busy helping diabetes patients, boom, patients started shedding pounds. Talk about a happy side effect.
As expected, this has created excitement in the market. Now, usually in the drug world, it's baby steps forward. A little better here, a bit less nausea there... yawn.
But with eight of these drugs already in the late stages of development (Phase 3), expect even more surprises as potential breakthroughs could bypass traditional drug trial phases for a faster route to market.
Frankly, I'm shocked at the number of new mystery drugs suddenly popping up in early testing. Even those old-school Big Pharma players are jumping in: AstraZeneca (AZN), Novartis (NVS), Amgen (AMGN), and, heck, even Johnson & Johnson (JNJ) – everyone wants a slice of the obesity pie.
Now, this whole obesity meds craze reminds me of what happened with those PD-1 drugs in cancer treatment.
One good result, and suddenly everyone was scrambling to get their version to market. But like in a reality TV show, not everyone makes it to the finale.
But what's the endgame in this obesity market expansion? Not 124 contenders, that's for sure.
Even right now, with everything in its early stages, you can already see which candidates have the potential. The competition's going to get fierce, and only the strongest drugs will survive.
Viking Therapeutics (VKTX), for example, has a dual GLP-1 and GIP agonist showing serious promise. After just 13 weeks, patients lost an average of 14.7% of their weight.
This data, released in February, proves Viking’s not just chasing the big pharma players; they're running right alongside them.
Now, over at Novo and Lilly, the pace hasn’t slowed down one bit either. Wegovy, which is Novo's contender in the ring, just got a nod in March for something a bit bigger than weight loss.
It’s been approved to tackle some serious heavyweights — cardiovascular deaths, heart attacks, and strokes in adults dealing with obesity or who are overweight. It's like getting a one-two punch for health.
As for Eli Lilly? They’ve been making some noise with tirzepatide, especially around metabolic dysfunction-associated steatohepatitis, or MASH for short.
They’ve got results showing that 74% of adults who were either overweight or obese managed to kick MASH to the curb without any increase in liver scarring after sticking with the treatment for 52 weeks.
Sadly, the biggest roadblock isn't the science, it's the money. It’s not just about making these drugs. It’s about getting them into the hands of those who need them most.
The current scene? A bit of a heartbreaker.
Most US insurance companies are drawing the line at covering Wegovy or Zepbound for obesity. This leaves a hefty bill on the table, putting these potentially life-altering treatments out of reach for many.
Think about it – the people who could benefit the most, maybe those on Medicaid or living paycheck to paycheck, are staring at a closed door. And let’s not even get started on Medicare, which, as of now, can’t even touch these drugs.
It’s a strange paradox, isn’t it? The very treatments that could lift the weight of obesity off society’s shoulders are dangling just out of reach for many.
So, now, the burning question isn’t so much about whether these treatments can make shareholders and companies do a happy dance. It’s more about where we’re heading.
Think about cancer treatment – the sickest patients get the cutting-edge drugs first. What would that even look like in obesity?
Will all these 124 experimental options help level the playing field, finally forcing insurers to step up? Only time will tell.
As of now, the obesity treatment field is going through a revolution. While the market faces challenges like accessibility, I suggest you closely monitor the progress of key players like Novo Nordisk and Eli Lilly.
Consider smaller, innovative companies, such as Viking Therapeutics, for potential high-risk, high-reward investments as well.
Mad Hedge Biotech and Healthcare Letter
April 9, 2024
Fiat Lux
Featured Trade:
(A PHARMA TORTOISE IN A MARKET FULL OF HARES)
(JNJ)
For the thrill-seekers who get a kick out of watching industries move faster than a cat on a hot tin roof, riding the wave of trending growth stocks might be for you.
But for those who prefer a good night's sleep over night sweats about market swings, pinning down stocks that promise a smooth sail towards retirement is the name of the game.
Now, if I were to put my money on one sector that's as steady as they come, I'd bet the farm on healthcare.
Why, you ask? Well, let’s take a look at the numbers.
U.S. healthcare spending ballooned to a jaw-dropping $4.5 trillion in 2022. That’s $13,493 for every man, woman, and child. With an army of about 10,000 baby boomers daily marching into Medicare eligibility, it's a safe bet this number's on a one-way trip up.
Let’s talk about a healthcare giant arena that might not make you rich overnight, but it's a dividend machine you can count on: Johnson & Johnson (JNJ).
Think of J&J as the responsible older sibling of your portfolio. They recently raised their dividend for the 61st year in a row. That's a 3.1% yield right now – a pretty good return for such a dependable company.
Over the past five years, J&J’s payout has beefed up by over 25%. Quite the feat, especially considering it just slimmed down by spinning off its consumer health division.
This strategic move has made J&J a lean, mean, dividend-paying machine. They're now laser-focused on their core businesses: med tech and pharmaceuticals.
This focus is paying off – they raked in a sweet 11.1% jump in adjusted earnings in 2023. With dividends sitting pretty at $4.76 a share and a clear path for growth, this blue chip just keeps getting better.
But J&J's not just a big fish in the healthcare pond – it's practically the whole ocean. They hauled in a jaw-dropping $85.2 billion in revenue last year. This company has a decades-long track record of turning its massive size into consistent growth for shareholders.
Case in point: J&J just made a big power play, grabbing Shockwave Medical (SWAV) for a cool $13.1 billion.
Not bad for a company that clearly loves shopping for heart-focused companies – remember when they scooped up heart device maker Abiomed for $16.6 billion in 2022? This latest acquisition isn't just about beefing up their medical device game. It's their ticket to dominating the cardiovascular space.
But, J&J's not content with just hearts; they're setting their sights on robot-assisted surgery with their new Ottava device.
Sure, they might be playing catch-up to Intuitive Surgical (ISRG), but think about it: barely any surgeries use robots right now. This market has potential written all over it
Of course, it's not all sunshine and roses in the land of Big Pharma. J&J's had its share of courtroom battles and regulatory headaches, just like any mega-corporation.
But they've weathered the storm, and their credit rating is better than Uncle Sam's. That shows a kind of resilience you just can't fake.
In today's volatile market, it's easy to get swept up in the hype of flashy, high-risk stocks – the hares of the investing world. But what if true wealth lies in the slow and steady pace of the tortoise?
In the pharma world, J&J is proof that slow and steady progress, unwavering reliability, and a continuous effort to innovate are the secrets to long-term success. They might not be the flashiest stock, but their steady march of growth and consistent dividends make them a quiet force in the pharma world.
So the next time you're tempted to chase the latest market fad, remember the pharma tortoise – and consider adding a reliable blue-chip like J&J to your portfolio. If you see a dip, don't hesitate, buy it.
Mad Hedge Biotech and Healthcare Letter
April 2, 2024
Fiat Lux
Featured Trade:
(BREATHE EASY)
(MRK), (JNJ)
It looks like Merck (MRK) just scored a major touchdown in the drug wars, which might make the looming Keytruda patent expiration sting a little less.
Remember when Merck dropped $11.5 billion on Acceleron back in 2021 to get their hands on Winrevair (then known as Sotatercept)? That was a seriously gutsy move to soften the blow when their Keytruda goldmine started drying up.
Talk about a gamble. Acceleron didn't even have their Phase 3 trial results in hand yet. A lot of people were scratching their heads at the time, thinking maybe Merck had lost their marbles.
But fast-forward to today, those Phase 3 results drop, and here we are. Turns out Merck knows a thing or two about playing the long game.
Their new drug, Winrevair, which just got the FDA thumbs up for a rare heart condition, tackles a serious heart condition called pulmonary arterial hypertension (PAH).
PAH is no joke – it basically strangles your lungs and heart, drastically shortening your lifespan. Unlike those old PAH drugs like Uptravi from Johnson & Johnson (JNJ), Winrevair's got a completely different way of fighting back. That could be huge for patients who aren't getting enough relief with current options.
Winrevair targets that messed-up TGF-beta pathway, trying to reverse some of the damage caused by this disease.
Although PAH might be rare, affecting an estimated 15 to 50 people per million in the United States and Europe, those who suffer from it are often desperate for effective treatments.
The global PAH market is already worth a staggering $7.3 billion annually and is projected to hit $12.18 billion by 2032.
Merck's timing couldn't be better. Not only did Winrevair sail through approval, but it also dodged all those nasty black box warnings and extra safety hoops some drugs have to jump through.
Translation: this drug is about to hit the market full speed ahead.
Given the promise of this new drug, Merck must be popping champagne corks right about now. No restrictions mean doctors can prescribe this stuff far and wide – that's a probable goldmine, especially for a serious disease like PAH.
Let's not forget why all this matters. Keytruda was a $25 billion cash cow for Merck in 2023, making up a huge chunk of their revenue. Those cheap knock-offs are coming in 2028, ready to eat into that sweet slice of the pie.
But thanks to Wenrevair, that future doesn’t seem too daunting anymore.
Merck has set a price of $14,000 per vial for Winrevair, translating to an average annual cost of $212,000 per patient. While this may seem steep, it reflects the drug's potential to improve the lives of PAH sufferers and secure Merck's financial future.
Actually, analysts are predicting peak sales of a mind-boggling $11 billion – maybe even $8 billion at the low end. Either way, that's a massive lifeline for Merck as they brace for the dreaded Keytruda patent cliff in 2028.
In fact, Winrevair could pull in $500 million this year alone, jumping to $3 billion by 2027. Talk about a growth spurt.
With Winrevair set to change the PAH treatment landscape, investors can breathe easy knowing that Merck has a new ace up its sleeve.
After all, this drug is practically guaranteed to be another blockbuster, which is great news considering the looming Keytruda patent expiration in 2028.
Merck's audacious $11 billion bet on Acceleron seems to be paying off – Winrevair could easily bring in $30 billion over its lifespan.
But let's not get too carried away – Winrevair won't single-handedly save Merck in the long run. They'll need more hits to keep outperforming the competition.
For now, Merck seems like a decent hold. It's got reasonable growth potential, and you might even want to nab some shares if the price dips.
Mad Hedge Biotech and Healthcare Letter
March 28, 2024
Fiat Lux
Featured Trade:
(WALL STREET'S NEW HAPPY PILL)
(JNJ), (SEEL), (NUMI), (AITAI)
Who would've thought a drug that was once the go-to for keeping soldiers from feeling their limbs getting stitched up in 'Nam would find itself in the limelight, decades later, for something entirely different?
And who's the reason behind this resurgence? None other than Mr. Elon Musk, alongside memories of Matthew Perry, and a growing chorus of folks battling the blues.
Musk, in one of his late-night (or is it early morning?) tweet-a-thons and in a recent interview with Don Lemon, drops that he's dabbling in ketamine — not for kicks, but for a "negative chemical state," doctor's orders, of course. Once every couple of weeks, a small dose.
This coming from a guy who's brainstorming how to send us to Mars while running a social media circus.
Now, before we dive deeper, here's a quick primer on ketamine.
Born in the labs of Parke Davis in the 60s and tested on unsuspecting prisoners (yikes), it was the anesthetic dream.
By 1970, ketamine earns the FDA's gold star as a trusty anesthetic. But here's where it gets interesting – patients start raving about feeling surprisingly chipper after surgery. Scientists, naturally, get that “wait a minute, that's not supposed to happen” look on their faces.
By the time the 90s rolled in, scientists had discovered that this battleground drug might be a secret weapon against depression.
All those positive patient reports sparked a firestorm of studies, and suddenly ketamine's the underdog superhero taking on treatment-resistant depression, PTSD, and more.
Fast forward to 2019, and the FDA green-lights a derivative, esketamine, delivered via nasal spray, marking a new era in the treatment of severe depression.
Interestingly, despite esketamine’s presence in the market, doctors are still heavily prescribing the original stuff. Why?
Because it works, undeniably so, and those prescriptions are through the roof – up fivefold since 2017.
Actually, despite being a bit player compared to the heavyweight category of cancer research, mental health is a quietly exploding segment.
In fact, the market for ketamine's mental health revolution is massive, and that's not just feel-good talk. We're looking at over 264 million people globally battling depression alone.
Add to that the millions more struggling with PTSD, OCD, and a growing list of treatment-resistant conditions – it's a staggering potential patient base.
With mental health taking center stage these days, analysts predict the ketamine market could explode to $1.05 billion by 2027. That translates to a CAGR of 16.5% from 2020 – not just growth, but a serious acceleration.
Naturally, this has companies salivating. Big pharma like Johnson & Johnson (JNJ) is in the game – their Spravato spray raked in $164 million in 2020, and that was just their opening act.
But the real excitement is with the innovators: companies like Seelos Therapeutics (SEEL), with their focus on new delivery methods, Numinus Wellness (NUMI) building out a whole network of ketamine-assisted therapy clinics, and ATAI Life Sciences (ATAI) betting big on psychedelic-focused research.
So, are you seeing those dollar signs flashing yet? Because with ketamine, there might just be some serious gold to be found.
Sure, J&J's pulling in the cash, but that's just the tip of the iceberg. The companies blazing the trails – tweaking formulas, reimagining delivery methods, building whole new treatment models – those are the ones with that “make it big” potential.
Still, it’s important to be realistic here. After all, biotech investing is a rollercoaster, not a Sunday stroll. We're talking FDA approvals, trial setbacks, the whole wild ride.
Ketamine, with its trippy backstory and game-changing possibilities, is the embodiment of that risk-reward gamble. Its story is about second chances, unexpected breakthroughs, and pushing the limits of what we thought possible for mental health. And yeah, it's also about those sweet, sweet returns for investors willing to take that leap.
So here's my suggestion: throw this drug, and the companies pushing the envelope with it, straight onto your watchlist. Keep tabs on the clinical trials, the news about those new delivery methods, the regulatory updates.
This space is just getting warmed up, and you don't want to miss the boat when things start taking off. Ketamine might have started out in the shadows, but its future? Well, that could shine pretty bright.
