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Don't Miss the Boat on This Best of Breed Biotechnology Stock

The past few weeks have been hectic for the healthcare industry, with Moderna (MRNA), Pfizer (PFE), BioNTech (BNTX), and even Johnson & Johnson (JNJ) working hard to manufacture and distribute their COVID-19 vaccines all over the world.

There’s one major player in the healthcare industry that has been out of the spotlight for quite some time: Amgen (AMGN).

While Amgen has been doing its part from the sidelines by helping out companies like Eli Lilly (LLY) with the manufacturing of their COVID-19 drugs, it looks like investors are flocking towards businesses that allocate more resources toward fighting off the pandemic.

In fact, JNJ recently reached a new high at $170 per share.

Nonetheless, I think investors are missing out on a great opportunity by ignoring Amgen these days.

The biotech world, which basically involves formulating drugs and treatments for living organisms, was somewhat limited back in 1980.

Over the past decades, however, this industry has shifted and managed to successfully launch groundbreaking drugs commercially.

Before, only a handful of legacy companies had occupied this space. Now, so many up-and-coming companies try to conquer the biotech world.

For context, an FDA report in 2019 showed that 64% of drugs approved in the previous year were developed by biotech companies.

Moving forward, it’s reasonable to say that the biotech industry will continue to come up with breakthrough treatments for rare and complex conditions compared to our traditional pharmaceutical companies.

Actually, this sector has been hot in recent years, with companies like AbbVie (ABBV) and Celgene, now with Bristol-Myers Squibb (BMY), coming up with mega-blockbuster treatments, such as Humira and Revlimid, that rake in billions in sales annually.

Among them, Amgen has emerged as one of the most consistent and aggressive players in the biotech world, with competitors still struggling to topple some of its products after decades of being in the market.

This biotech giant has also been busy boosting its pipeline of newly developed treatments. It’s even bolstering its biosimilar lineup to ensure its dominance in the sector.

Last year, Amgen’s revenue rose by 9%, with more growth indicators lighting the way for a brighter future for the company.

While Amgen has been working on many conditions, its portfolio still looks focused on particular diseases.

In 2020 alone, Amgen’s seven blockbusters each generated over $1 billion in revenue. Among these, four managed to rake in more than $2 billion in annual sales.

Amgen’s impressive lineup of drugs includes psoriatic arthritis treatment Enbrel, osteoporosis and bone cancer injection Prolia, and even newcomer heart disease medication Repatha.

With its rivals nipping at the heels of its first-generation blockbusters like Neupogen, Amgen has been hustling to find ways to reinvent itself.

Apart from developing new drugs, the company has been looking into acquisitions to sustain its position at the top.

Recently, Amgen has been doubling down on its newest shining star: Otezla.

Otezla was one of the company’s biggest purchases, with Amgen acquiring this drug for a whopping $13.4 billion from Celgene in August 2019.

In 2019, Otezla sales rose by 25% to reach $1.6 billion. By 2020, the drug generated $2.2 billion in sales, showing off a 36.5% jump.

Over the next few years, Amgen estimates that Otezla sales will climb by over 10% annually.

Riding the momentum of not only Otezla but its entire portfolio and programs in the pipeline, Amgen aims to dominate the immunology sector.

Among the candidates in Amgen’s pipeline, the most promising is its lung cancer medication Sotorasib, which should complete Phase 2 in the first half of 2021.

Meanwhile, Amgen’s latest deal outside its own pipeline is the $1.9 billion acquisition of Five Prime Therapeutics (FPRX), which is a small biotech company developing treatments for stomach cancers. The agreement should be finalized by June 2021.

Five Prime’s experimental treatment, Bemarituzumab, perfectly aligns with the other stomach cancer medications queued in Amgen’s pipeline.

If this proves successful, then Bemarituzumab will be a strong contender against Bristol-Myers Squibb’s blockbuster treatment Opdivo.

While Opdivo has been in the market longer, Five Prime’s candidate has consistently shown stronger and more promising results since the trials started.

Prior to its deal with Prime Five, Amgen acquired a 20% stake in Beijing-based biotech company BeiGene (BGNE). This is a telling move as it indicates the company’s efforts to expand its reach in Asia, particularly in China and Japan.

Another revenue stream that Amgen has been pushing for expansion is its biosimilars sector.

The company released its first-ever blockbuster, Epogen, in 1989. Since then, this anemia drug has been a top seller. However, biosimilar competition eventually caused a decline in its sales starting in 2015.

Learning from the fall of Epogen in the hands of biosimilars, Amgen decided to turn its weakness into its strength.

Since 2015, the company has been expanding its work on biosimilars. In that year alone, Amgen developed 29 biosimilars for its own products and launched 18 more to compete with other companies.

To date, biosimilars have been generating at least $2 billion in revenues, with 10 more queued in Amgen’s pipeline.

Considering the accelerated growth of the biotechnology sector, now is not the time to count out Amgen.

Today, Amgen has transformed itself into one of the leaders in the biotech world, generating over $25 billion in revenue.

Since 1988, the company has only reported a decline in its year-over-year revenue three times: 2009, 2018, and 2019.

This performance shows tangible proof that Amgen is not a “one-hit-wonder” type of biotech stock. Instead, it demonstrates its capacity to generate solid earnings and sustainability.

Currently, Amgen trades at a price-to-earnings multiple that’s actually 40% lower than the average S&P 500 stock. Its EPS is estimated to rise in the high single digits in the next several years.

Simply looking at its 2020 fiscal report, it’s obvious that Amgen delivered an impressive performance considering the recession and the pandemic.

The company also continues to reward its shareholders with double dividend increases plus an aggressive repurchase program, which Amgen plans to spend roughly $3 billion to $4 billion.

Recently, the stock has been trading at a roughly 30% discount. This is a real bargain considering everything Amgen has to offer.

March 16, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
March 16, 2021
Fiat Lux

FEATURED TRADE:

(A BARGAIN BUY STOCK)
(NVAX), (PFE), (MRNA), (JNJ), (SNY)

A Bargain Buy Stock

Biotech Letter

Biotechnology stocks have been going through a rough patch in the past weeks.

These previously unstoppable stocks have trailed the same path as the market in a sell-off, which has some of their investors fighting to keep calm.

In fact, the iShares Biotech Nasdaq ETF slid over 9% in the past month—a fall that affected some players who experienced all-time highs or enjoyed four-digit gains in 2020.

Inasmuch as all these sound discouraging, the decline might actually offer an opportunity.

Now, investors can snatch up some excellent stocks at pre-pandemic prices.

Among the biotechnology stocks that have dropped more than 28% to date from their latest high points, I find Novavax (NVAX) to be one of the most promising.

Novavax rose to over 2,700% in 2020, with the stock extending its gains well into 2021.

In the first five weeks of the year, Novavax jumped 186% following positive data from the Phase 3 trial of its COVID-19 vaccine, NVX-CoV2373, in the UK.

NVX-CoV2373 is widely anticipated to be the next COVID-19 vaccine candidate to win major regulatory approval.

Its Phase 3 study in the UK showed that NVX-CoV2373 was 96.4% effective against mild, moderate, and even severe cases of COVID-19 caused by the original strain of the coronavirus.

When tested against the “UK variant,” NVX-CoV2373 showed 86.3% efficacy.

Meanwhile, NVX-CoV2373 was found to be 55.4% efficacious against the “South African” variant.

Overall, NVX-CoV2373 proved to be 100% effective in protecting patients from hospitalization and death. More importantly, the vaccine didn’t cause severe side effects.

Despite the promising results released, the biotech stock has slipped 46% since early February.

While some investors fret over the fact that rivals like Pfizer (PFE), Moderna (MRNA), and Johnson & Johnson (JNJ) have already started production and shipment of their vaccines, the developers of NVX-CoV2373 say there’s nothing to worry about.

NVX-CoV2373 doses are readily available and can be shipped as soon as Novavax gains regulatory approval.

More reassuringly, this vaccine candidate can be stored for months without any special handling.

While it hasn’t landed as many orders in the United States as its counterparts, Novavax has been securing its spot in the international markets.

The company has landed orders for roughly 200 million doses of NVX-CoV2373 for Canada, Australia, Switzerland, New Zealand, and the UK. It also has an agreement to supply 1.1 billion doses to the Serum Institute of India.

On top of these, Novavax has signed a deal to supply over 1 billion doses to COVAX, which is a global project initiated to secure fair access to vaccines for all countries.

Novavax has been boosting its manufacturing capacity as well, with the company ramping to produce over 2 billion doses of NVX-CoV2373 every year by mid-2021.

By comparison, Moderna is estimated to produce about 700 million to 1 billion doses this year.

In terms of revenue, Novavax hasn’t definitely discussed its pricing. What we know so far is the price paid by the US, which is $16 per dose.

Back of the napkin math says that brings the total to $4.8 billion for the orders from the US and the other countries so far this year and excluding the COVAX deal since the pricing might be substantially lower.

This is a massive revenue for a biotech company that doesn’t even have a product revenue yet.

Another exciting prospect is Novavax’s pipeline.

Right now, the company has another vaccine that can become a great revenue source: NanoFlu.

Before the pandemic broke, NanoFlu was actually the major reason investors flocked towards Novavax.

With its overwhelming performance against Sanofi’s (SNY) own FluZone Quadrivalent, NanoFlu has been slated for a myriad of commercial possibilities.

These include developing it as a combination vaccine with NVX-CoV2373 as well as with Novavax’s other vaccine candidate, with its experimental respiratory syncytial virus (RSV) vaccine.

Another program is looking into combining all three vaccines together.

Riding the momentum of its success with NVX-CoV2373, Novavax is also planning to develop vaccines for other coronavirus variants.

This could include a bivalent vaccine program, which is expected to commence by June 2021.

All these programs are positioning Novavax as a dominant leader in the vaccine market.

If you haven’t considered Novavax before, then now is a good time to look into the stock. This is a company that has billions in locked-in revenues coming in this year alone.

Basically, buying Novavax stock would get you revenue in the near future, new products that will generate additional sales, and pipelines that offer growth—and if you buy the stock on the dip, you’re getting all these at a bargain.

March 9, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
March 9, 2021
Fiat Lux

FEATURED TRADE:

(AN MRNA STOCK TO CONSIDER)
(BNTX), (MRNA), (PFE), (NVS), (SNY), (AZN), (JNJ), (NVAX), (MRK), (BMY), (REGN), (DNA), (CVAC), (FB), (TSLA), (GOOG)

March 4, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
March 4, 2021
Fiat Lux

FEATURED TRADE:

ARE WE THERE YET: HOW THE JNJ VACCINE COULD BE THE ANSWER
(JNJ), (MRNA), (PFE), (BNTX), (MRK), (SNY)

Are We There Yet: How the JNJ Vaccine Could Be the Answer

Biotech Letter

Since the pandemic started, we’ve had two extremely similar COVID-19 vaccines approved: the mRNA vaccines created by Moderna (MRNA) and Pfizer (PFE) / BioNTech (BNTX).

Now, there’s another coronavirus shot that gained FDA approval: Johnson & Johnson’s (JNJ) adenovirus jab.

In fact, JNJ’s candidate received a unanimous approval from the FDA—a first among the COVID-19 vaccine developers.

Results showed that JNJ’s shot has 66% effectivity at preventing coronavirus infections and 85% effective at blocking severe COVID-19 cases when allowed at least four weeks to take effect.

Taken at face value, the numbers from JNJ’s trials may not seem as impressive as the two-shot vaccines of Moderna or Pfizer, which both demonstrated efficacy results of over 94% in their 2020 reports.

However, it’s important to not make any conclusions based on incomplete data.

After all, drawing comparisons among different vaccine studies performed at different periods is practically comparing apples to oranges.

That’s why Dr. Anthony Fauci and other experts declared that they’ll just take whichever vaccine shot they could avail of.

Actually, the JNJ vaccine may be the ideal option for some people.

Since the JNJ vaccine shows less severe reactions compared to Pfizer and Moderna’s vaccines, this could be preferable for people who couldn’t tolerate the side effects.

Although the side effects of Pfizer and Moderna are temporary, some people need to take days off to recover. Sadly, not everyone has the luxury to do that.

The fact that it’s a single jab vaccine makes it an attractive option for young and healthy individuals, who can’t afford to go back to get a second shot.

It’s also less fragile and can be stored in a regular fridge for three months without the need for any hyper-cold storage system like the mRNA vaccines require. This would make it an attractive option for rural areas.

Plus, JNJ tested its candidate at the height of the pandemic. That means the numbers the company released could have been affected by the situation at the time.

Although JNJ’s vaccine does not completely get rid of the disease, it delivers on the promise of protecting the patients from the worst possible scenarios of COVID-19: hospitalization and death.

Basically, the JNJ vaccine is cheap to manufacture as well as pretty simple to administer and get.

People can get some dependable viral protection within a span of four weeks, without the need to return for a second jab.

As a bonus, the JNJ vaccine could even protect you better from the new variants that are starting to spread fast.

Despite the $410 billion market capitalization of JNJ though, it looks like the New-Jersey-based giant isn’t up for the massive rollout the world expects from its vaccine.

This is where Joe Biden steps in.

With the goal of having every American vaccinated by the end of May, Biden tapped Merck—a fierce rival of JNJ—to help out with the production.

While Merck’s own COVID-19 vaccine program was shut down, this company remains the leading vaccine developer across the globe.

This means it knows a thing or two about fast-moving mass production during outbreaks—and this is exactly the kind of expertise JNJ needs.

If things work out, JNJ should be able to produce 94 million doses by the end of May—roughly 7 million doses ahead of what’s stipulated in its contract—and the full 100 million by June.

This arrangement isn’t anything new. Since the COVID-19 pandemic, competitors have been joining forces to find ways to put an end to the crisis.

In January this year, Sanofi (SNY) announced that it would be collaborating with BioNTech to help manufacture additional doses of the COVID-19 vaccine it developed with Pfizer.

When JNJ receives authorization from the EU as well, Sanofi would also be there to help with the production.

The JNJ vaccine could just be the escape hatch we’ve all been waiting for since the pandemic started.

With this FDA authorization, we’d be able to vaccinate millions more at a breakneck speed.

February 25, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
February 25, 2021
Fiat Lux

FEATURED TRADE:

(AN UNDER THE RADAR BIOPHARMA PLAY)
(ALNY), (PFE), (BNTX), (MRNA), (NVS), (GME), (BX)

An Under the Radar Biopharma Play

Biotech Letter

Financial markets have been incredibly volatile in the past months primarily due to the COVID-19 pandemic.

The situation was made even more unpredictable by the GameStop (GME) and bitcoin drama.

So it’s expected that investors are looking for guidance in this time of instability, and a good place to start is the Blackstone Group (BX).

Considering that the basic philosophy of this company is to “buy, fix, and sell,” it’s safe to say that Blackstone only puts its money, time, and effort in promising investments.

Around the time of the pandemic outbreak last year, Blackstone poured in roughly $2 billion investment in a biopharmaceutical company, Alnylam Pharmaceuticals (ALNY).

While Alnylam may be virtually unknown to the public, this is actually a promising company with an impressive backstory.

Founded in 2002, Alnylam is mainly known for its technology, RNAi or RNA interference.

This is a gene-silencing technique, which was discovered by Andrew Fire and Craig Mello back in 1998. The two won the Nobel Prize for it in 2006.

Even before the Nobel, Alnylam has already seen the potential of this technology and started developing it in the early 2000s.

For decades, this work had been underappreciated—up until the COVID-19 pandemic.

This is because the leading vaccine candidates right now, developed by Pfizer (PFE)-BioNTech (BNTX) and Moderna (MRNA), are both mRNA-based drugs.

Although the vaccine developers customized the technology, they still used the same delivery technique that Alnylam developed.

Clearly, there has been a lot of piggybacking on this discovery.

While Moderna, Pfizer, and BioNTech used the technology to create RNA-based drugs for the COVID-19 vaccines, Alnylam decided to utilize it to develop treatments for other diseases.

The first approval was hereditary transthyretin-mediated amyloidosis drug Onpattro, launched in 2018.

As of 2020, sales of this high-priced therapy reached roughly $300 million, ensuring that it was on pace with the company’s target.

Alnylam’s second approved treatment is ultra-rare genetic disease drug Givlaari, which hit the market early last year.

By the third quarter of 2020, sales of this acute hepatic porphyria drug climbed by $67 million despite the effects of the pandemic.

In the next decade, Givlaari is estimated to peak at $550 million annually.

By 2025, yearly sales for Givlaari and Onpattro are projected to hit roughly $1.5 billion in total.

Riding this momentum, Alnylam has been collaborating with Sanofi (SNY) to develop another rare disease drug, Vutrisiran. This could rival the company’s own Onpattro.

Aside from Vutsiriran, Alnylam and Sanofi are also working on a potential novel hemophilia treatment, Fitusiran.

The latest treatment to gain approval is rare kidney disorder drug Oxlumo, which is estimated to net Alnylam roughly $380,000 per patient annually.

While this may be a hefty price tag, it’s expected that insurance companies and governments will be the ones to ultimately shell out the money for these rare disease drugs.

Before 2021 ends, Alnylam is expected to gain FDA approval for another potential blockbuster drug, Inclisiran. This is a cholesterol-fighting treatment, which is a work in progress with Novartis (NVS).

Over the past decade, Blackstone has been quietly stashing multi-billion-dollar stakes in the life sciences.

In 2020 alone, the company poured roughly $16 billion into the industry. This is its largest investment theme for the entire year.

While this business has yet to make a dent on Blackstone’s $600 billion assets, the attention that the companies have been getting is worth noting—and a good place to start is Alnylam.

For a better context of its potential, Blackstone invested $3 billion in a dating app called Bumble (BMBL) back in 2018.

Fast forward to 2021, this company is now worth approximately $14 billion following its recent IPO.

With a market capitalization of roughly $15 billion and for a company that’s not anticipated to generate over $1 billion in annual revenue until 2022, Alnylam’s current price might be considered high by some investors.

Looking at its pipeline though, which is filled with potential blockbusters, and its track record that shows that the company definitely knows how to launch new drugs to the market, I believe Alnylam stock is worth considering right now.

alnylam

February 23, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
February 23, 2021
Fiat Lux

FEATURED TRADE:

(IS THIS THE YEAR OF BIOTECH UPSTARTS?)
(PFE), (GSK), (MRK), (SNY), (MRNA), (BNTX), (NVAX), (AZN)

Is This the Year of Biotech Upstarts?

Biotech Letter

Vaccines have long been shoved to a sleepy little corner of the biopharmaceutical world, ruled over by a handful of companies that cater to billions of dollars’ worth of demand for vaccines every year, undisturbed by newcomers.

However, the COVID-19 pandemic has made this particular corner of the industry a tad more crowded.

While there’s still no clear picture of how the next stage of the efforts to vaccinate the majority of the human population against COVID-19 will work out, what’s evident is that the dominance of the “big four” publicly-traded vaccine developers will be challenged.

That means the battle for supremacy in the vaccine market will no longer be confined within Pfizer (PFE), GlaxoSmithKline (GSK), Merck (MRK), and Sanofi (SNY).

As we’ve witnessed, the COVID-19 pandemic has provided entry points for new names in the industry, such as Moderna (MRNA), BioNTech (BNTX), and Novavax (NVAX).

By the second half of 2021, Novavax and its partners are targeting to supply 150 million doses of their vaccine, while Moderna says it would be distributing at least 600 million doses this year alone—a number that could reach a billion given the right partners in the future.

Those numbers are on par with global-level vaccine production—with Novavax and Moderna quickly gaining steam and catching up with the big players in the industry.

For context, Sanofi made 250 million doses of its own flu vaccine for the 2021 flu season.

Given that Novavax also plans to release its own flu vaccine combined with the smaller company’s momentum, Sanofi is looking at a long-term rival in this sector.

Aside from offering these smaller biotechs opportunities for growth in terms of business, the pandemic has fast-tracked the advent of next-generation technologies in the industry.

Both Pfizer and Moderna have been approved to use the pioneering messenger RNA technology to develop their COVID-19 vaccine candidates.

Apart from mRNA technology, a similarly revolutionary approach is being explored by Johnson & Johnson (JNJ): viral vector technology.

Meanwhile, AstraZeneca (AZN) and its partner Oxford University came up with their own viral vector vaccine, which has been approved in Europe.

As for Novavax, this Maryland-based company has decided to use the more conventional approach utilizing a protein subunit vaccine.

Although the exact size of the COVID-19 market is difficult to predict, it’s safe to say that it will be massive.

In terms of who could eventually get the lion’s share of the market, Pfizer is currently leading at the moment based on the government contracts the company managed to secure.

Pfizer estimates $15 billion in revenue from the COVID-19 vaccine in 2021—a number that’s two and a half times higher than its best-selling drug in 2020.

Moderna projects at least $10 billion in COVID-19 vaccine sales, while Novavax anticipates roughly $3.4 billion this year.

In the future though, there’s strong indication that AstraZeneca and JNJ will be vying for dominance for mass-market contracts. This is primarily because of their one-dose vaccine promise and the convenient storage requirements their candidates offer.

Another massive growth prospect for this vaccine is if the need for yearly boosters sticks around. This market would not only be lucrative for smaller companies like Novavax and Moderna, but even for the bigger vaccine players.

Considering the potential of this market, the current leaders of the COVID-19 vaccine race shouldn’t get too comfortable.

In fact, Sanofi and GlaxoSmithKline have already joined forces to create their own COVID-19 vaccine candidate.

So while Pfizer, Moderna, and AstraZeneca already have their products out the door, other vaccine developers still consider themselves in the running to topple them from their perch.

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