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)
Tag Archive for: (LLY)
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 13, 2022
Fiat Lux
Featured Trade:
(A SAFE BET IN A VOLATILE MARKET)
(AMGN), (NVO), (LLY)
The biotechnology and healthcare industry is fraught with risk. However, it’s also brimming with opportunities.
On the one hand, a new drug takes years of clinical research. On top of that, the average cost to bring each product to the market reached $1 billion between 2009 and 2018.
On the other hand, the chosen few that receive the green light from the FDA more often than not deliver on their promise to become blockbusters, raking in sales of over $1 billion every year.
This arguably justifies the risks that come with the industry.
Amgen (AMGN) has become the recent embodiment of this promise. Despite the volatility of the market in the past months, the company remains a strong player thanks to several factors that could bolster its share price.
In particular, Amgen investors are looking forward to potential gains courtesy of the pipeline of drugs slated for market release over the medium term.
The most exciting among them is its obesity drug AMG 133.
The positive data from AMG 133’s unveiling had experts excited over the drug, with many expecting it to become a multi-billion dollar revenue stream for Amgen.
As expected, Amgen will be facing stiff competition in this market, specifically between 2025 and 2030.
To date, investors have been closely monitoring the obesity segment, with two companies clearly leading the charge: Novo Nordisk (NVO) and Eli Lilly (LLY).
Novo Nordisk markets Wegovy, which is a shot that targets obesity by zeroing in on the glucagon-like peptide receptor, or GLP-1. This is also the same target for many diabetes treatments.
Meanwhile, Eli Lilly is working to integrate obesity as part of the conditions treated by its recently approved diabetes drug Mounjaro. Like Wegovy, this drug also targets GLP-1.
What makes it more potent is that it also targets glucose-dependent insulinotropic polypeptides or GIP. Both GLP-1 and GIP are hormones linked to blood sugar control.
What makes AMG 133 different from other approved and experimental treatments for obesity is that it blocks not only a particular hormone but also a specific protein involved in controlling blood sugar.
While it targets GLP-1, Amgen’s candidate works on a gut protein linked to digestion, called the gastric inhibitory polypeptide receptor, or GIPR.
The obesity market is a lucrative space since the medical world now categorizes obesity as a type of chronic illness instead of a mere consequence of lifestyle choices.
That is, obesity drugs are on the cusp of entering the mainstream primary health care system.
An apparent precedent for this opportunity is the high blood pressure sector, initially a nascent segment in the 1980s and eventually skyrocketed to a $30 billion industry by the 1990s.
In 2022, the obesity market is estimated to be worth $2.4 billion. By 2030, this space is projected to reach $54 billion.
That places all competitors in the same space, Amgen, Eli Lilly, and Novo Nordisk, in excellent positions. In fact, Novo Nordisk has been dealing with shortages of Wegovy due to rising demand.
While any upgrade or downgrade prompted by a single drug’s potential, or even multiple treatments’ potential, is exciting, it should be taken with a grain of salt.
The biotechnology and healthcare industry is continuously in flux, and any company in the sector is one major failed trial or one rival’s success away from facing trouble. Simply put, they tend to be volatile.
Amgen is not an exception to this harsh truth despite the company’s solid obesity prospects and impressive portfolio and pipeline. That means investors expecting an immediate payout following the recent developments might get disappointed.
Nonetheless, it’s also vital to remember that biotechnology and healthcare stocks tend to deliver better results than the broader market even amid the economic turmoil.
These companies seem to operate and function outside typical economic cycles, providing investors with dependable performance when most businesses are struggling.
Amgen is one of the biggest biotechnology companies in the world. It has been one of the pioneers in this segment since the 1980s. It’s also a part of the prestigious Dow 30 list of companies.
Moreover, it has a massive and diversified product portfolio, with nine treatments that individually generate more than $1 billion in sales annually.
These drugs are not only huge sellers, but also offer wide margins because of the existing restrictive and high barriers to entering the biotech world.
Hence, this enables Amgen to enjoy a remarkable pricing power and autonomy over its products while still growing its top line at a steady pace.
If you’re looking for a conservative and attractive long-term investment, then buying Amgen when the price drops wouldn’t be a bad bet.
Mad Hedge Biotech and Healthcare Letter
September 29, 2022
Fiat Lux
Featured Trade:
(TAKING ON THE WEIGHT OF THE WORLD)
(LLY), (NVO)
This is not your run-of-the-mill weight-loss story.
The number of obese American adults has climbed from 13% to 43% in the last 60 years. That’s approximately 100 million individuals in the United States alone.
The average American male currently weighs about 200 pounds, up from 166 back in 1960, while the average female is at 171 pounds, up from 140.
Obesity, or just being overweight, has several ripple effects. This carries the risk of diabetes, cardiovascular issues, and even cancer. It can also interfere with a person’s work, sleep, and other day-to-day activities.
Many factors have been studied as potential reasons behind obesity, but it has become very clear that solving the epidemic would need more than simply diet and exercise.
Taking on this challenge are Eli Lilly (LLY) and Novo Nordisk (NVO), competitors that came up with a promising drug, known as incretins, to hopefully solve the issue.
Amid all the dietary fads, supplements, and exercise trends we’ve seen, we are on the cusp of finally getting safe and effective drugs for this condition.
We can go as far as claiming that these could very well be our best hope in the fight against obesity. This epidemic has been threatening the way of life of over 100 million Americans and roughly half a billion people globally.
Nobody has ever witnessed the weight loss offered by this new category of drugs, called incretins.
Scientific research has enabled people to shed over 20% of their weight. Needless to say, incretins could become the top-selling drugs in the history of the pharmaceutical industry.
For context, a drug is tagged as a “blockbuster” when it manages to record $1 billion in sales annually. To date, the top-selling drug worldwide is Humira from AbbVie (ABBV), with roughly $20 billion in yearly sales.
If each obese American sought treatment (and given the projected prices of these drugs) the yearly sales for incretins would hit at least a trillion dollars.
Obviously, insurers would refuse to pay these sums, which is why studies have been conducted to show how these drugs could effectively prevent critical conditions like diabetes and heart disease. That is, it will be considered a maintenance drug.
Marketing incretins as treatments for diabetes and obesity could rake in $50 billion to $60 billion in sales over the next decade. As of the moment, the market is dominated by a duopoly of Eli Lilly and Novo Nordisk.
Recently, Eli Lilly gained much attention after its diabetes drug Mounjaro received FDA approval. While the product was given the green light earlier in 2022, the company has also become more aggressive in marketing it as an anti-obesity treatment.
When it goes to market, Mounjaro is expected to go head-to-head against Novo Nordic’s Wegovy. Both target basically the same market, but Eli Lilly’s candidate showed better results.
According to Eli Lilly, patients given the highest dosage of Mounjaro recorded an average weight loss of 22.5% over roughly 18 months.
In terms of sales potential, Wegovy reached $183 million in the first quarter of 2022. With Eli Lilly hot on its heels, investors should expect a slide in Novo Nordisk’s sales for this product.
When Mounjaro was initially released, it was expected to reach peak sales of $15.4 billion. However, the drug’s effectivity and potential to address weight loss boosted predictions to $25 billion.
The reason for the increase in confidence in Eli Lilly’s drug is pretty simple. Offering treatment to 1.6 million Americans yearly would generate $20 billion in sales in the US alone—which only comprises 2% of the estimated population of obese individuals in the country.
Either way, it’s a massive market. Dominating a small portion would already move the needle for any biopharmaceutical company. Hence, I recommend you buy the dip for these companies aiming to solve the obesity epidemic.
Mad Hedge Biotech and Healthcare Letter
September 27, 2022
Fiat Lux
Featured Trade:
(LAST CHANCE AT SALVATION)
(BIIB), (ESALY), (RHHBY), (LLY), (NVS), (AMGN), (REGN), (BMY), (ABBV), (MRK), (PFE)
Biogen (BIIB) is taking another crack at Alzheimer’s. This is a crucial moment for the biotech following its move to abandon its plans to market Aduhelm, another Alzheimer’s treatment after healthcare insurers refused to pay for it despite gaining FDA approval.
The moment of truth will come this fall when Biogen and Eisai (ESALY) are anticipated to share the results of their massive trial created to determine whether lecanemab, their latest candidate for Alzheimer’s, can deliver its promise to decelerate the progression of the neurodegenerative condition in early-stage patients.
Needless to say, an effective Alzheimer’s drug would not only bring incredible development and hope for patients and their loved ones but also offer a much-needed reprieve for Biogen.
Success would push the biotech to pursue a quick turnabout, with Biogen and Eisai already planning to request an accelerated approval. If the Phase 3 data turns out promising, then the next move would be to clear the way to get Medicare coverage, ensuring that the Aduhelm debacle won’t happen again.
In terms of market opportunity, treatments like lecanemab can rake in over $20 billion in sales in the United States alone.
Still, investors remain cautious. After all, betting on a positive result of an Alzheimer’s trial has proven to be a wrong move in the past—a sentiment that’s apparent in Biogen’s beaten-down price these days.
When Aduhelm gained approval in June 2021, Biogen’s shares climbed almost 40%. Unfortunately, the price steadily fell as the biotech encountered roadblock after roadblock since the drug’s approval and commercialization.
Last year, Biogen shares rose from $270 to hit $400 following Aduhelm’s approval. These days, the biotech has been trading at roughly $205. That’s about 40% below its price in 2018.
By April 2022, Biogen threw in the towel when Medicare flat-out rejected any request to pay for Aduhelm.
More than that, though, Biogen’s results for its lecanemab trial could spell the difference for other Alzheimer’s drugs in late-stage development, including the candidates from Roche (RHHBY) and Eli Lilly (LLY).
What would happen if Biogen fails again?
A failure would make the beginning of a new period for the biotech. Looking at Biogen’s pipeline and portfolio, it’s clear that the next move would either be to sell off pieces of the company or become more aggressive in pursuing mergers.
With the primary business unable to deliver, the expectations shift to the pipeline to pick up some slack. Unfortunately, Biogen’s lineup looks underwhelming. Its disastrous Aduhelm project caused too much damage to the biotech’s finances, restricting its clinical trials.
While Biogen remains the biggest pure neurology biotech thus far, this position is under attack, and its pipeline seems too slow to react in the wake of back-to-back failures.
Reviewing Biogen’s pipeline in Phase 3 trials does not show any candidates that stand out as groundbreaking or transformative. None has the capacity to anchor the company anytime soon.
Apart from that, Biogen is facing fierce competition in its other treatments, including its MS portfolio from the likes of Novartis (NVS), Amgen (AMGN), and Regeneron (REGN).
Meanwhile, more and more pharma names are challenging its neurology drugs like Bristol Myers Squibb (BMY), AbbVie (ABBV), and Merck (MRK). Even Pfizer (PFE) is making a play in this sector with its plan to acquire neurology biotech pure-play Biohaven.
Given Biogen’s track record, the best thing to do right now is to sit and wait until the data are out. If the data turns out positive, then the opportunity would be massive enough for investors to buy in later.
Besides, Eli Lilly and Roche will also release their results in the following months. Those will offer a clearer path and better flesh out the picture of the future of this segment. Most importantly, these will provide investors with safer options to make their bets.
Mad Hedge Biotech and Healthcare Letter
September 6, 2022
Fiat Lux
Featured Trade:
(ONLY FOOLS RUSH IN)
(APDN), (RVPH), (NERV), (JNJ), (BMY), (AZN), (LLY), (PFE)
Following a promising first half of 2022, it looks like the markets are taking an about turn as more and more investors start dumping their stocks.
The seemingly recovering Nasdaq Composite showed a 4.3% decline last month despite reporting its best record since 2020 just last July.
Nevertheless, several biotech names appear to have avoided the crash thanks to some exciting company-specific updates.
The top gainers so far include Apple DNA Sciences (APDN), which skyrocketed 340% by the end of August. Among the projects in its pipeline, the most promising to date is its monkeypox virus test.
Another name on the list is Reviva Pharmaceuticals Holdings (RVPH). This clinical-stage biopharmaceutical firm reported a whopping 244% gain during its second-quarter earnings report.
However, the top gainer that has been on the news lately is Minerva Neurosciences (NERV). This budding biopharmaceutical company gained 321%, according to its report last month.
Minerva Neurosciences isn’t a name I have kept track of nor even heard of until these past months when its wild upswing started to make me curious.
The company started attracting attention when billionaire Steve Cohen of Point72 Asset Management fame invested in it. This move saw Minerva Neurosciences’ shares soar to more than 70% at that time.
Just before August wrapped up, the company filed for its long-delayed schizophrenia treatment, Roluperidone.
Entering the neuroscience industry is a clever move, especially with the potential of this segment. In 2021, this market was estimated to be worth $32.22 billion. By 2027, the neuroscience segment is projected to reach $41.24 billion.
As for schizophrenia, roughly 1% of the entire population is affected by this disease. Based on recent WHO reports, more than 24 million individuals are suffering from schizophrenia annually.
In 2021, the global schizophrenia drug market was reported to cost $8.02 billion. Taking into consideration the changes in the environment and living conditions, the number is expected to go higher as the years pass. With these in mind, the estimated worth of this market is expected to reach $10.15 billion by 2027.
Minerva Neurosciences wouldn’t be the first to take interest in the schizophrenia segment. Prior to this biopharma’s entry, there have already been a handful of key players attempting to be hailed as the leader of this sector.
The names include Johnson & Johnson (JNJ), Bristol-Myers Squibb (BMY), AstraZeneca (AZN), Eli Lilly (LLY), and Pfizer (PFE).
However, only Minerva Neurosciences specifically targets the negative symptoms of schizophrenia. That makes the company stand out in this steadily growing segment.
Given that Minerva Neurosciences is cheaper than these stocks, would it then be wise to buy shares from the smaller company to gain entry into the neuroscience market?
At this point, Minerva Neurosciences has yet to prove that it’s more than just a one-trick pony. In fact, the company has not even sufficiently shown that it has mastered its single trick.
When looking at the potential of any biotechnology and healthcare company, I generally begin by checking out its pipeline.
For Minerva Neurosciences, the list does not look sustainable.
The company’s MIN-301 for Parkinson’s Disease remains inconsequential since it’s still in the preclinical trial stage.
Prior to this, Minerva Neurosciences worked with JNJ to develop treatments for insomnia and major depressive disorder. However, those have yet to yield tangible results that can move the needle for the company’s share price.
That means Minerva Neurosciences is all about Roluperidone. While the company is moving as fast as it could to launch the product to market, more questions remain than answers.
Actually, the company seems to have eliminated earnings conference calls. These could have been useful in offering a more accurate picture of its future, but it looks like investors will need to make do with whatever information is published.
Admittedly, exciting times could very well be waiting for Minerva Neurosciences’ shareholders. The recent progress with Roluperidone most likely offered them some relief.
No doubt that the optimistic investors are hoping that the 321% gain would signify another incredible run in the following weeks. However, this might not be likely. In fact, a pullback seems to be more in the horizon.
Considering its sparse pipeline and the lingering uncertainty over Roluperidone’s performance, this might not be the best time to buy Minerva Neurosciences’ shares.
