Mad Hedge Biotech and Healthcare Letter
January 30, 2024
Fiat Lux
Featured Trade:
(BRAIN GAINS)
(BIIB), (ESALY) (LLY), (REGN), (ALNY), (MRK), (AMGN), (PFE), (BMY)
Tag Archive for: (MRK)
Let's talk about a golden opportunity knocking at our doors – the booming market of Alzheimer's disease treatments in biopharma. We're not just talking about a small uptick here. With a slew of new meds on the horizon, this market is gearing up for some serious growth, and you might want to grab a piece of this pie.
The dominant name on our radar is Biogen (BIIB), ticking at $260 per share with a market cap that's flirting with $39 billion.
Now, with a solid $10 billion in sales and trading at a nifty 16 times its 2024 estimated earnings, Biogen's got some serious mojo. I've been eyeing it since last year, but boy, have things changed since then.
A critical game-changer was Chris Viehbacher, the new CEO since November 2022. He's already played a couple of aces – slicing $800 million in costs (which, by the way, could pump up earnings by $5 a share by 2025) and wrapping up the acquisition of Reata Pharmaceuticals in September 2023.
This new addition to Biogen’s portfolio has a hot ticket item, Skyclarys, for treating Friedreich’s ataxia. It's a rare find, but it could add a cool $5 per share in earnings in a few years.
But the most exciting name in Biogen’s arsenal is Leqembi, the company’s Alzheimer’s treatment. They're splitting the pot with Eisai (ESALY), and this drug is a little like turning back the clock on cognitive decline – think a two-year rewind button.
The big bucks talk here: we're eyeballing $2 billion in revenue by 2028 and maybe a whopping $4 billion by 2033. And hey, there might even be more where that came from.
Let's chew on a few things here. Biogen has the potential to snag a 60% market share against Eli Lilly’s (LLY) donanemab – the only worthy opponent in the market so far. And given Leqembi's safety creds, this might be playing it safe.
Aside from Eli Lilly, there’s Roche (RHHBY), with candidates in Phase 2 and Phase 1 trials, but they're not quite hitting the jackpot yet. As for other competitors in the space like Regeneron (REGN) and Alnylam (ALNY)? Well, they're cooking up something different in Phase 1, but it's a bit early to call.
Meanwhile, Biogen's got another trick – a home-use version of Leqembi coming this fall. And get this: doctors are buzzing about nipping Alzheimer’s in the bud, way before it crashes the party. Imagine getting a jab of Leqembi as part of your routine check-up when you're only 50. If this works, then we could be kissing Alzheimer’s goodbye by 2040.
For the longest time, Biogen was like that one-hit wonder with its multiple sclerosis treatments. But now, they're swinging for the fences with the largest unmet health need out there. If Leqembi hits it big, and I mean really big, we could be talking about sales far beyond that $4 billion mark by 2033.
But let's not get ahead of ourselves. The big pharma world is about to hit a few speed bumps with a wave of patent cliffs from 2025 to 2029. That’s a headache for the likes of Merck (MRK), Amgen (AMGN), Pfizer (PFE), and Bristol Myers Squibb (BMY).
Biogen, though, is sitting pretty with two growth products and a pipeline that’s got pizzazz. Plus, they're a hot catch for any big pharma looking for a dance partner without stepping on regulatory toes.
As we roll into the next decade, keep your eyes peeled for investment opportunities popping up like daisies. And don't feel like you've got to jump on the first bandwagon that rolls by. This market's just stretching its legs, and today's champs might just be tomorrow's old news.
So, what's the smart play here? Spread your bets across a few horses in the Alzheimer's race, and make sure they're not one-trick ponies.
Eli Lilly, for instance, is more than just an Alzheimer's bet – they're making waves in diabetes and soon, obesity treatments. Biogen, despite its Alzheimer's experience, is a bit of a gamble, especially after its first drug's rocky start.
Remember, investing in Alzheimer's treatments now is like catching the early wave – it's riskier, sure, but the potential for a big payoff is there. This is an emerging market, and it's revving up for an exciting ride. I suggest you add these names to your watchlist.
Mad Hedge Biotech and Healthcare Letter
January 16, 2024
Fiat Lux
Featured Trade:
(PHARMA GIANTS HUNTING FOR THE NEXT BIG THING)
(IMCR), (SNDX), (BPMC), (MRK), (JNJ), (HARP), (AMAM), (MDGL), (VKTX)
Alright, let's dive back into the biotech pool – and no, it's not the kind where you just dip your toes. We're talking about a full-blown belly flop into the deep end of the stock market.
Since October 2023, biotech stocks have been playing a game of limbo, asking themselves, "How low can you go?" But just when they hit two-thirds below their Covid pandemic peak, Big Pharma came to the rescue like knights in shining armor (or should I say, lab coats?).
In an earlier letter, I talked about J.P. Morgan’s annual healthcare conference, essentially the Super Bowl for healthcare geeks. The buzz? Merck (MRK) grabs Harpoon Therapeutics (HARP) for $680 million – a move as sharp as, well, a harpoon.
Not to be outdone, Johnson & Johnson (JNJ) scoops up Ambrx Biopharma (AMAM) for a cool $2 billion. Talk about shopping sprees!
But wait, there’s more. Looking into the rest of the biotech companies in the market today, I can spot a few potential biotech Cinderellas, waiting for their Big Pharma prince. And no, I don't have a crystal ball, but I do have some educated guesses.
First up, let’s chat about Immunocore Holdings (IMCR). These British wizards have been turning heads since Kimmtrak, their first drug for a rare eye cancer, got the green light in 2022.
This biotech is a $1.9 billion David amidst the Goliaths, with a therapy that’s like whispering secret orders to the patient's immune system – "Psst, go beat up that tumor, will you?" And guess what? It listens. This approach isn’t just for show; it’s bumping up survival rates, and that’s a big deal.
Impressively, Immunocore isn't just a one-hit wonder. Kimmtrak, their star player, is not your average Joe of the T-cell receptor (TCR) immunotherapy world. It's more like the valedictorian – first of its kind to get the thumbs up in a who’s who of countries, including the United States, Canada, the E.U., the U.K., and Australia.
For a small-cap player, that’s like winning the World Cup in its rookie year. And with no rivals for Kimmtrak’s indication, it’s like they’ve got the whole playground to themselves.
Next, let’s take a trip to Boston’s backyard – Syndax Pharmaceuticals (SNDX). They’re nearly doubling their value faster than you can say “biotech boom,” thanks to some promising drugs for leukemia and transplant complications.
With a market cap near $1.7 billion and potential FDA nods on the horizon, they're like the biotech version of a sleeper hit.
Checking out the long-term plans of Syndax, they've got a lineup of compounds that are like a biotech fan's dream team, eyeing not one, but two FDA green lights in 2024. They're buddying up with Incyte (INCY) on these compounds, and let me tell you, the scientific world is giving them the thumbs up. And to keep the lights on and the science humming, they've tucked away a cool $200 million from a recent capital raise.
But that’s not all. Since the market hit rock bottom in late October, Syndax's stock has been shooting up like a rocket, a whopping 75% jump. It’s like they've been hitting the gym hard. Bank of America's bullish call on the stock? That was the protein shake.
Now, I'm all for a good success story, but let’s not get ahead of ourselves. I'm keeping an eagle eye on this one, waiting for the perfect moment when the shares might take a little breather, maybe dip into the mid-teens. That's when I’ll swoop in, snagging a slice of SNDX, especially with those FDA approvals on the horizon. After all, these deals are all about timing.
And who could ignore Blueprint Medicines (BPMC)? Straight out of Cambridge, Massachusetts, these folks have a drug targeting certain white blood cell cancers.
These folks aren't your average biopharma company; they're more like the MIT of medicine, crafting precision treatments that home in on the genetic bad guys causing cancer and blood disorders. Their lineup? A dynamic duo of Ayvakit for systemic mastocytosis and Gavreto for those tricky RET-cancers, plus four more contenders in clinical trials, all ready to rumble in the biotech arena.
Blueprint's story started in 2011. They then hit the public scene in 2015, where they raised a whopping $154.8 million at their IPO - talk about making an entrance.
Fast forward to today, and their stock is hovering around $85.00 a pop, boasting a market cap of $5.4 billion – that's billion with a “B.”
What’s their secret sauce, you ask? These geniuses have a discovery platform that's like a GPS for kinases, the sneaky culprits behind many diseases. Their method? Create compounds that are like guided missiles, targeting these kinases with precision. The result? Two FDA approvals, and probably a few high fives in the lab.
But hey, it’s not all about cancer. The weight-loss drug arena is heating up, too. Madrigal Pharmaceuticals (MDGL) and Viking Therapeutics (VKTX) are the names to drop here. Madrigal’s eyeing FDA approval for a liver treatment, while Viking’s showing some early promise in the weight-loss game.
So, there you have it – the biotech scene is sizzling, and these companies are the ones turning up the heat. My two cents? Keep these companies under your watchful eye. You never know, one of them might just be the golden ticket in this dazzling biotech arena.
Mad Hedge Biotech and Healthcare Letter
January 11, 2024
Fiat Lux
Featured Trade:
(HEALTHCARE GIANTS GO SHOPPING)
(JNJ), (MRK), (AMAM), (PFE), (HARP), (NVS), (CYTK)
Ah, San Francisco, the city of fog and fabulous biotech and healthcare feasts. In case you missed it, the J.P. Morgan annual healthcare conference, the biotech Super Bowl, just kicked off this January.
Imagine a bustling downtown San Francisco, where hotels are as jam-packed as a can of sardines, but instead of fish, they're brimming with investors and healthcare execs.
Let's focus on the biotech sector, which, let's be honest, has seen its fair share of ups and downs. The past three years? More like watching paint dry.
But, as if by magic, we've seen a recent upturn. A two-month price surge that’s as unexpected as it is welcome.
The SPDR S&P Biotech ETF (XBI), our financial barometer here, has gone from a nosedive (down over 60% since February 2021) to a rocket ship (up nearly 40%). Interest rate cuts and M&A buzz are like the Red Bull in this energy drink mix.
Now, to the heart of the story: big pharma's shopping spree.
The day of surprise comes when Merck & Co. (MRK) and Johnson & Johnson (JNJ) strut in with deals that leave us wide-eyed.
And these are not just any deals, but the kind where these healthcare giants are practically throwing money like it's going out of style – over 100% premiums over the last prices. It's like offering to pay double for a house just because you love the wallpaper.
Johnson & Johnson swoops in on Ambrx Biopharma (AMAM) for a cool $2 billion. At $28 per share, they're paying a 105.4% premium.
For context, this isn't your run-of-the-mill biopharmaceutical company. Oh no, Ambrx is more like the Elon Musk of the biotech world, innovating like there's no tomorrow.
This biotech is all about cooking up some of the most cutting-edge therapies out there – think antibody-drug conjugates (ADCs) and other engineered marvels that give the immune system a superhero makeover.
On top of that, Ambrx actually has a secret weapon – their expanded genetic code technology platform called Engineered Precision Biologics (EPBs).
This technology isn't just smart; it's Einstein-level genius. It brings together site-specific conjugation with proprietary linkers and payloads. It's like building a custom-made luxury car, except this one's designed to obliterate cancer.
Researchers are raving about Ambrx's ADCs, calling them “guided missiles.” And they're not exaggerating.
These bad boys zero in on cancer cells with the precision of a sniper, taking them out without wreaking havoc on the innocent bystanders – the healthy tissue. It's pretty much like having a Swiss watch in your medical arsenal, sleek, sophisticated, and super effective.
Impressively, Ambrx isn't stopping at just being a one-hit wonder. They're pushing the envelope with enhanced antibody-drug conjugate, immuno-oncology conjugate, and bispecific candidates. These aren't just treatments; they're potential game-changers in the war against cancer.
So, when Johnson & Johnson ponied up $2 billion for Ambrx, they weren't just buying a company; they were investing in a future where cancer might just meet its match.
In fact, Pfizer (PFE) recently grabbed Seagen for $43 billion in 2023, just to get a slice of this ADC pie. It's the latest fashion in cancer treatment, and everyone wants in.
Meanwhile, Merck, not to be outdone, grabs Harpoon Therapeutics (HARP) for $680 million, a 118% premium at $23 per share. It's a biotech-feeding frenzy, and Merck's got its teeth out.
Harpoon is a clinical-stage immunotherapy company that's not just playing in the big leagues, but changing the game. They're all about developing a novel class of T-cell engagers, and let me tell you, this stuff is like the Navy SEALs of cancer treatment.
Imagine these T-cell engagers as tiny, engineered proteins. They're like undercover agents directing a patient’s own T-cells (the body's immune commandos) to seek and destroy cells waving the bad guy flag – specific proteins or antigens carried by those nasty cancer cells.
Basically, it's like having a GPS-guided missile system in your body, targeting only the rogue cells.
And Harpoon isn't just dabbling here, but also innovating with their proprietary Tri-specific T cell Activating Construct (TriTAC) platform.
Picture a pipeline, but instead of oil, it's flowing with novel TriTACs focusing on laying siege to solid tumors and blood malignancies. If successful, they plan to arm the immune system with a whole new arsenal.
Aside from these, Harpoon also whipped up something they call the ProTriTAC platform. Think of it as the James Bond of T-cell engagers – it stays under the radar (inactive) until it gets to the tumor. Once there, it's “license to kill” mode on. This prodrug concept is slick, ensuring that the therapeutic action happens right where the trouble is, and not anywhere else.
And for their third act, Harpoon presents the TriTAC-XR platform. This one's a bit of a tightrope walker, designed to dodge a potential pitfall known as cytokine release syndrome – a sort of overreaction from the immune system. It’s like having a safety net under your high-wire act.
Now, these premiums are not just showing off. They're a sign of desperate love from big pharma for these biotech beauties, a stark contrast to the recent cold shoulder of stock market blues.
Recently, there have also been whispers of Novartis (NVS) eyeing Cytokinetics (CYTK), a biotech belle with a $9.2 billion price tag. It's like the gossip at a high school prom, only with more zeros.
So, what's the takeaway from this biotech bazaar? It's simple: after a snooze-fest of a bear market, biotech's back, and it's hotter than a stolen Ferrari.
For investors, it's like watching a new season of your favorite show, only this time, the plot twists involve billion-dollar deals and cutting-edge cancer drugs. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
December 28, 2023
Fiat Lux
Featured Trade:
(CLOSING THE YEAR WITH A BANG)
(XBI), (ABBV), (IMGN), (RHHBY), (PFE), (MRK), (AMGN), (VKTX), (TERN)
The biotechnology sector, pretty much like a phoenix rising from the ashes of its recent lackluster performance, is experiencing a renaissance as 2023 draws to a close. The recent spree of high-stakes deals has set the stage for what could be a significant rebound, a situation that savvy investors should watch closely.
In a remarkable display of strategic maneuvering, AbbVie (ABBV) has been on an acquisition tear.
Earlier in December, they've recently snapped up Cerevel Therapeutics for an eye-popping $8.7 billion, only a week after announcing their intent to acquire ImmunoGen (IMGN) for a formidable $10.1 billion.
And in this high-stakes game, Roche Holding (RHHBY) isn't playing second fiddle, having declared their acquisition of Carmot Therapeutics for $2.7 billion.
This flurry of activity isn't just a few isolated incidents. It's actually a trend. Of the 18 biotech acquisitions exceeding $1 billion announced this year, a significant one-third have emerged since October. This surge is like a shot in the arm for the sector, suggesting a much-anticipated uptick.
But let's take a step back and consider the broader picture.
The SPDR S&P Biotech ETF (XBI) has shown some muscle in November and December. However, it's still trailing behind this year, down by 3%, while the S&P 500 has surged by 19.5%.
Now, focusing on the XBI, a temperature check for the sector: trading around $80, it's a steep drop from its heyday in the $140 range during late 2020 and early 2021. It's down nearly 50% from its peak in February 2021.
This isn't just a dip; it's a nosedive.
Looking at the turn of events, it’s possible that the AbbVie-ImmunoGen deal is perhaps the precursor to a more consistent pattern of mergers and acquisitions in 2024. It seems that we've hit the floor and the only way now is up, with M&A activities poised to inject some much-needed vitality into the sector.
In previous years, the biotech valuations took a hit, and understandably, companies were hesitant to settle for offers that undervalued them compared to their pandemic-era zeniths. But this year, the tide has turned.
Notably, the cumulative value of biopharma deals at a whopping $128 billion this year, shooting up from $61 billion in 2022.
Key transactions fueling this jump include Pfizer's (PFE) massive $43 billion deal for Seagen and Merck’s (MRK) $10.8 billion acquisition of Prometheus Biosciences.
The shift in the regulatory landscape is also worth noting.
Antitrust regulators, who initially seemed poised to block deals like Amgen's (AMGN) $27.8 billion acquisition of Horizon Therapeutics, have shown more flexibility. This change in stance is likely emboldening companies to pursue larger deals.
Now, let's talk about the financial clout.
Large-cap biopharma companies are projected to have about $199 billion in cash by year-end. There's a noticeable dip in dividends and stock buybacks, hinting at a strategic pivot towards mergers and acquisitions. It could indicate that we can expect Pharma to maintain an aggressive stance on the M&A front.
So, what's in store for the XBI and investors alike?
This uptick in M&A activity is like untying the strings of a tightly held purse, releasing cash back into the sector. It's a magnet for both specialist and generalist investor interest, a potential boon for the XBI.
Predicting the next wave of M&A is basically like reading tea leaves. Yet, this year has shown a marked preference for biotechs specializing in obesity, immunology, and cancer.
A notable example is the speculation around Pfizer eyeing a deal with a biotech firm developing an anti-obesity pill.
The ripple effect? Shares of Viking Therapeutics (VKTX) and Terns Pharmaceuticals (TERN), both in the obesity pill race, have seen their stocks jump 47% and 62.5%, respectively, in December.
Evidently, the biotech sector, once in the doldrums, is now witnessing a renaissance. This resurgence is marked by major deals reshaping the industry landscape, holding significant implications for 2024 and beyond.
For investors, this sector represents a fertile ground for growth and opportunity. Staying informed and nimble is key to capitalizing on these dynamic developments. The biotech sector, it seems, is back in the game, and how!
Mad Hedge Biotech and Healthcare Letter
December 21, 2023
Fiat Lux
Featured Trade:
(UNLEASHING THE UNDERDOGS)
(NVS), (LLY), (PNT), (RYZB), (MRK), (ABBV)
Grab your notebooks because class is in session, and today's topic is radiopharmaceuticals.
Yes, you heard it right - radiopharmaceuticals. It’s not your everyday cocktail party topic, but it's certainly the buzzword in the biotech investing world. And let me tell you, the numbers are sizzling.
Venture capital deals in this sector have shot up by an eye-watering 550% to $408 million this year. Back in 2017, this figure was a mere $63 million. Talk about going from zero to hero.
The global market for these radioactive wonders zoomed past $5.2 billion in 2022 and is now racing towards an estimated $13.67 billion by 2032. That's a CAGR of 10.2% for the statisticians among us.
So, what's cooking in the radiopharmaceutical kitchen? Well, a lot, apparently.
Leading the pack are the heavyweights – Novartis (NVS) and Eli Lilly (LLY). Novartis has thrown its hat into the ring, making radiopharmaceuticals a showstopper in its oncology lineup. With stars like Lutathera and Pluvicto, they're not just playing; they're here to dominate.
As for Eli Lilly, they're playing catch-up but with style. They laid down a cool $1.4 billion for Point Biopharma Global — a biotech gem focusing on radioligand therapies. Notably, Point investors are playing hardball, waiting for a Phase 3 reveal.
Meanwhile, Eli Lilly's also buddied up with Mariana Oncology and its $175 million Series B – these guys are eyeing small cell lung cancer with a glint in their eye.
So, what does this mean for the investor universe? Well, in a nutshell, it's party time. Early-stage companies, especially those with their lab coats on in discovery and preclinical stages, are like magnets to investors right now.
There’s POINT Biopharma, which hails from Indianapolis, that went public on Nasdaq as of July 1, 2021. Remember the ticker symbol “PNT”? That's them, and they currently have roughly $1.33 billion in market cap.
Another promising option is Mallinckrodt Pharmaceuticals. These folks are into everything from specialty pharmaceuticals to, you guessed it, radiopharmaceuticals—an American-Irish charm, if I may say so.
Abdera Therapeutics, a Canadian startup (eh!), is also in the running. This company is all about precision radiotherapeutics. They're eyeing small-cell lung cancer, and they've got the funds to back it up.
And then there’s ARTBIO, with an impressive $90 million Series A six months post-launch.
There’s also RayzeBio (RYZB), which is based in sunny California. They're not just turning heads; they're opening wallets. This company raised a whopping $160 million in Series D last year and then sprinted towards a dazzling $311 million IPO just last September.
Between 2018 and 2023, US-based radiopharmaceutical companies attracted a hefty $1.2 billion in venture financing. The peak? A cool $262 million in 2021. And guess what? Most of this dough was for preclinical and discovery shenanigans.
But let's not forget the hurdles, particularly the supply challenges and overwhelming demand. Yet, despite these hiccups, the sector remains hotter than a summer in the Sahara.
Prior to this, ADCs (Antibody Drug Conjugates) dominated the conversation.
We witnessed Merck (MRK) confidently investing $4 billion in Daiichi Sankyo for their ADC prospects. Lilly was busy forming a cozy partnership with Mablink Bioscience. And let's not forget AbbVie (ABBV), which generously splurged $10.1 billion on ImmunoGen's Elahere.
To this day, ADCs are still the talk of the town. But here's the thing: radiotherapeutics might be the underdog next to ADCs, but they're catching up. Fast.
This sector is bubbling with potential, simmering with innovation. For investors and pharma bigwigs, radiopharmaceuticals are more than just a fad. They're the future.
So, what's the takeaway? Radiotherapeutics might not be grabbing the spotlight like ADCs, but they’re like that quiet kid in class who ends up acing the test.
Mark my words. This is one space in oncology that's set to make some serious noise in the coming years.
