Mad Hedge Biotech and Healthcare Letter
March 8, 2022
Fiat Lux
Featured Trade:
(A BIOTECHNOLOGY AND HEALTHCARE TRIFECTA STOCK)
(ABBV), (NVO), (CPH), (LLY)
Tag Archive for: (NVO)
A myriad of macroeconomic problems has thrown the stock market and the economy off balance.
Major US indices have been down since 2022, with some like the Nasdaq slipping by over 10% year-to-date due to volatile trading.
Meanwhile, there are businesses on a tear amid the issues.
One of them is AbbVie (ABBV), which gained more than 20% over the past six months.
This growth reinforced AbbVie’s reputation as a rock-solid investment that investors can rely on during uncertain periods.
Looking at its performance, AbbVie can be considered an investor’s trifecta primarily because of the benefits the company offers, namely, high yield, promising growth potential, and solid dividend growth.
AbbVie came off 2021 with 30% growth in its shares despite the global economic slowdown.
During that period, AbbVie reported a 13.4% year-over-year increase in its adjusted EPS at $3.31 and a 7.4% jump for its revenues at $14.9 billion.
This notable performance is mainly due to Humira’s sales, but this won’t be the case in the following years.
In 2018, AbbVie lost patent protection for Humira in Europe and is slated to lose exclusivity in the US by 2023.
For the longest time, AbbVie has depended mainly on Humira as its most vital source of revenue stream.
Nowadays, the company has been taking on a more diversified tactic instead of solely relying on the top-selling drug. The effects can be seen in its fourth-quarter report.
The company’s oncology sector grew by 4.6% to reach $1.9 billion. As for its neuroscience branch, it reported $1.7 billion in revenues or an impressive 19% climb from last year.
While AbbVie has been honing its diversification plans, the company still hasn’t forgotten where its true strength lies: immunology treatments.
Its immunology segment, where Humira is filed under, raked in $6.7 billion in revenues, showing a 13.2% increase compared to the same period.
To keep the momentum and preserve its spot as the leader in this segment, AbbVie introduced two successors to Humira: Skyrizi and Rinvoq.
In the same report, it can be seen that Humira still brought in the bulk of AbbVie’s immunology revenues at $5.33 billion, indicating a 3.5% increase in its previous revenues.
However, Skyrizi and Rinvoq also showed promising results.
Skyrizi sales carried on with its upward trajectory, as seen in the whopping 70.5% jump it recorded to contribute $895 million to the company.
As for Rinvoq, this treatment recorded an even higher jump at 84.4% to reach $517 million.
Throughout 2021, Skyrizi generated $2.94 billion while Rinvoq contributed $1.65 billion in sales. This indicated an 85% growth for Skyrizi and an over 100% year increase for Rinvoq.
Considering their performance, these two immunology successors to Humira are anticipated to move forward at a strong clip as AbbVie bags more FDA approvals for additional uses.
If things go as planned, Skyrizi and Rinvoq can quickly reach a combined revenue of $15 billion by 2025.
Outside its immunology sector, oncology treatment Imbruvica is projected to become another blockbuster.
To date, this drug ranks second to Humira in terms of sales, with roughly $5.41 billion in total in 2021.
Meanwhile, AbbVie has also been busy boosting its neurosciences division.
The company recently acquired Belgium-based Syndesi Therapeutics for approximately $1 billion.
Offering an upfront payment of $130 million, Syndesi granted AbbVie access to its portfolio of novel modulators of the synaptic vesicle protein 2A (SV2A). Among the products in development, the most prized treatment is Syndesi’s lead molecule SDI 118.
This mechanism is currently under Phase 1b trials for its potential use to treat cognitive impairment and other conditions linked to various neuropsychiatric and neurodegenerative diseases. These include Alzheimer’s disease and major depressive disorder.
Basically, SDI-118 targets a patient’s nerve terminals to boost synaptic efficiency.
This would complement the bigger company’s existing neuroscience efforts since AbbVie believes that synaptic dysfunction is an underlying problem when it comes to cognitive impairment associated with several disorders.
Launched in 2017, Syndesi is a biotechnology company backed by Novo Holdings, which owns controlling shares in global companies Novo Nordisk (NVO) and Novozymes (CPH).
Apart from its remarkable performance and growing pipeline, AbbVie’s stock dividend also serves as a strong pull for investors.
AbbVie stands at $1.41 per quarter or $5.64 per year.
Since its inception in 2013, the company has consistently increased its dividend annually.
In fact, AbbVie’s dividend yield of 3.87% remains a key attraction to investors despite the stock’s rising price.
No matter what metrics you use, AbbVie has managed to securely position itself at the top of the healthcare and biotechnology sector.
Over the course of the more than 9 years since AbbVie became a publicly-traded company, only Eli Lilly (LLY) has raked in higher total returns.
While the general market continues to bring uncertainty, AbbVie has been executing all the right moves to provide shareholders a haven to invest their hard-earned cash and earn a steady and rising return.
Mad Hedge Biotech and Healthcare Letter
November 11, 2021
Fiat Lux
Featured Trade:
(A HIGH-QUALITY DIVIDEND STOCK WITH MORE ROOM TO GROW)
(LLY), (INCY), (GILD), (ABBV), (PFE), (NVO), (BIIB)
Investors can enjoy long-term recurring income and stability with dividend stocks. However, paying out dividends is largely discretionary.
Each business frequently determines whether it’s in a good position to hand out part of its profits to shareholders.
One method to assess a dividend’s safety is reviewing a company’s history and whether it makes regular payouts. The longer its track record shows a consistent payment, the more preferable the business.
There’s a stock particularly known for paying dividends every year for over a century in the biotechnology and healthcare sector: Eli Lilly (LLY).
While Eli Lilly’s dividend yield is only 1.5% at its current share price, which is a bit over the S&P 500’s average reported at less than 1.3%, the company has been paying out dividends since 1885.
Apart from its consistent payouts throughout the years, Eli Lilly also holds promising potential for future hikes.
At the moment, the quarterly payout of Eli Lilly is $0.85, which is 75% higher than its 2015 payout of $0.49.
This number can still climb thanks to its robust revenue growth of 19.2% year over year, with its current approved drug portfolio generating $13.55 billion in the first six months of 2021.
In the first two quarters of the year alone, several products recorded year-over-year sales growth of over 20%.
Eli Lilly isn’t content in growing its dividend, though. It’s also working on expanding its drug portfolio.
Among its existing drugs, the company has been maximizing Olumiant to include more indications.
One of the recent advancements involving Olumiant is Eli Lilly’s work with Incyte (INCY), which utilizes the drug as a treatment for COVID-19 patients.
In fact, the FDA has recently approved the use of Olumiant with or without the need to combine it with Gilead Sciences (GILD) Remdesivir.
However, Olumiant’s application as a COVID-19 treatment isn’t the most promising expansion for this drug.
Just recently, Eli Lilly and Incyte disclosed that Olumiant could be used as a treatment for an autoimmune disorder more commonly known as alopecia areata—an indication that could very well transform the drug into the company’s next blockbuster.
In a nutshell, Olumiant can help alopecia patients regrow their hair at a more rapid speed and consistent rate than other competitors.
So far, the drug has recorded an 80% hair growth among those who tested it.
In the previous months, the FDA included Olumiant and AbbVie’s (ABBV) Rinvoq in the list of JAK inhibitors that needed to carry a warning label sharing their severe potential side effects like blood clots and even cancer.
Despite this, Eli Lilly’s product proved to be safe for alopecia patients.
If approved for alopecia, Olumiant could become a groundbreaking treatment sought after by roughly 147 million people across the globe who suffer from the condition.
For context, the global market for alopecia is projected to grow in revenue from $ 7.6 billion in 2020 to reach over $ 14.2 billion by 2028 annually.
Alopecia areata, which is the target market of Eli Lilly, is expected to hold about 35% of the total. This puts the addressable market for Olumiant at $5 billion by 2028.
Considering that another name has been working to dominate the market, Pfizer’s (PFE) Cibingo, we can realistically assume that Eli Lilly will get at least 15% of the market share worldwide.
This would mean roughly $750 million in yearly revenue for Olumiant’s alopecia market alone.
Other than its work on alopecia areata, Eli Lilly has another potential blockbuster. This time, the treatment is targeting the diabetes sector.
The company has an up-and-coming treatment called Tirzepatide, which could not only expand Eli Lilly’s diabetes market share but also provide a strong competitor against Novo Nordisk’s (NVO) top-selling Ozempic.
Tirzepatide is the successor of Eli Lilly’s bestseller Trulicity, which logged $2.99 billion in the first half of 2021 and is set to lose patent protection by 2027.
Looking at Tirzepatide’s trajectory, the drug is projected to reach peak annual sales worth $10 billion—an amount that could easily offset the gradual decline in sales by Trulicity.
Even the company’s breast cancer drug, Verzenio, is set to show off impressive growth soon. In the first half of 2021, the treatment raked in $610 million in sales, demonstrating a 53.8% increase year-over-year.
Considering Eli Lilly’s efforts to distinguish its breast cancer treatment from Pfizer’s Ibrance, Verzenio is anticipated to generate $4.6 billion in annual sales by 2024.
Another exciting development is Eli Lilly’s Alzheimer’s disease treatment Donanemab.
Although Phase 3 data are expected to be released in 2023, this candidate is already reported to be a superior treatment than Biogen’s (BIIB) controversial Aduhelm.
These are some of the results of Eli Lilly’s efforts to continue expanding in the diabetes area, as seen in its ramped-up R&D spending.
So far, the company boosted its research investment by 21% year-over-year to reach $3.36 billion.
While doing this isn’t exactly a guarantee of commercial success, it’s undoubtedly a solid strategy to protect and enhance its pipeline.
Overall, Eli Lilly is a high-quality stock with a verifiable and impressive history of innovation.
Given the promising lineup of approved drugs and pipeline candidates of Eli Lilly, it’s reasonable to expect roughly a 15% yearly earnings growth from the company over the next 5 years.
Mad Hedge Biotech & Healthcare Letter
August 24, 2021
Fiat Lux
FEATURED TRADE:
A GENE EDITING PURE PLAY UP FOR GRABS
(MRNA), (EDIT), (CRSP), (NTLA), (VRTX), (REGN), (BMY),
(BLUE), (NVO), (GRTS), (INBX), (BEAM), (VERV), (SGMO)
Moderna (MRNA) is faced with a dilemma. And it’s a pretty good problem to face at this point.
The biotechnology company has a flourishing cash stockpile courtesy of the increasing demand for its COVID-19 vaccine, and it needs to find something to do with its overflowing cash.
As of the end of the second quarter, the company has already reported a cash position of over $12 billion—a figure that offers Moderna the flexibility to go on a bit of a shopping spree.
So far, Moderna has set its sights on expanding its internal R&D programs on top of the $1 billion share repurchase program approved by its board of directors.
However, the most exciting news is the company’s plans to potentially make acquisitions soon.
This is where Editas Medicine (EDIT) enters the picture.
Moderna has not been shy in declaring that it wants to add gene editing therapies to its growing pipeline along with nucleic acid technologies and mRNA.
While Moderna did not specifically mention Editas in its plans, the smaller biotechnology company looks to be the most promising candidate for acquisition, especially if the COVID-19 vaccine leader plans to jump right into the action in the gene editing space.
After all, there are only three companies in this segment with therapies under clinical testing: CRISPR Therapeutics (CRSP), Intellia Therapeutics (NTLA), and Editas.
CRISPR Therapeutics is practically joined at the hip with Vertex Pharmaceuticals (VRTX). Meanwhile, Intellia has a strong ongoing partnership with Regeneron (REGN).
That leaves Editas, which currently has no partner for its lead program, making it a prime buyout candidate for Moderna.
Editas is also the cheapest by far among all three clinical-stage biotech with $4.12 billion in market capitalization.
In comparison, CRISPR Therapeutics has a market cap of $8.93 billion, while Intellia has a market cap of $10.97 billion.
Moderna could find Editas’ lower market capitalization as an add-on, as it would allow the bigger biotech to not spend all its cash on the acquisition.
Moreover, Editas has another advantage.
While both CRISPR Therapeutics and Intellia only focus on CRISPR-Cas9, which is a way to locate and bind targeted genes, Editas has developed another option platform to do that.
Its alternative option, called Cas12, could boost the company’s capacity to develop gene editing treatments.
Simply put, its rivals only have one weapon in their arsenal, while Editas has come up with a dual-option CRISPR platform to double its chances of succeeding in gene therapy development.
If, for instance, Moderna does not acquire Editas, there are still a lot of options available for the bigger company.
One possibility is with Juno Therapeutics, which is part of Bristol-Myers Squibb (BMY), as the company is already collaborating with Editas on the development of genetically modified T-cells to come up with a powerful cancer therapy.
Meanwhile, if Editas’ pipeline and portfolio do not quite cut it with Moderna, another potential buyout candidate for this biotechnology giant is bluebird bio (BLUE).
While it’s not as advanced as CRISPR Therapeutics, Intellia, and Editas, bluebird bio has ongoing work with the likes of Bristol-Myers Squibb, Regeneron, Novo Nordisk (NVO), Gritstone Oncology (GRTS), and Inhibrx (INBX).
Other candidates that Moderna could take into consideration include Beam Therapeutics (BEAM), Verve Therapeutics (VERV), and Sangamo Therapeutics (SGMO).
Regardless of Moderna’s future decisions, its announcements that it plans to expand on the gene editing space could potentially spur other huge biopharmaceutical companies to explore their own business development agreements with up-and-coming biotechnology firms.
In fact, even if Moderna ends up not calling, there’s a big possibility that Editas could easily find others who will be interested in acquiring this pure play gene editing frontrunner.
Mad Hedge Biotech & Healthcare Letter
July 15, 2021
Fiat Lux
FEATURED TRADE:
(A SAFE STOCK TO BUOY UP YOUR PORTFOLIO)
(LLY), (NVO), (BIIB), (RHHBY)
More than halfway into 2021, and so much has transpired in the investing world.
We witnessed a historical short squeeze, the unprecedented rise of cryptocurrencies, and even the battle among billionaires on who would get to explore outer space first.
The stock market has been quite volatile over the past months, and the fears that we’re barreling towards another downturn, as fueled partly by concerns on inflation, continue to haunt us.
Amid the noise and the chaos, it’s critical to bear in mind one of the most important rules of investing: Buying and holding shares of stable companies for a long period usually reaps great returns.
While no one knows what the rest of 2021 holds, there are still remarkable companies that are worth buying and holding through the course of the next few months.
One such company is Eli Lilly (LLY).
The greatest strength of Eli Lilly is the way it handles its diverse pipeline. While it continues to expand its reach to cover more and more markets, the company also ensures that it doesn’t neglect its well-established niches.
For instance, Eli Lilly continues to boost its diabetes and obesity sector. One of the company’s most promising projects is a new drug called Tirzepatide, which targets these health conditions.
This is now undergoing Phase 3 clinical trials, and if successful, could rake in $7.8 billion in sales for Eli Lilly.
It’s also developing a once-a-week insulin, called Basal Insulin Fc, which would be administered to patients with Type 2 diabetes.
If approved, this would be a massive breakthrough considering that the patients typically need to take insulin daily.
Another effort to shore up its diabetes franchise is Eli Lilly’s decision to buy a next-generation biotechnology company called Protomer for a whopping $1 billion.
Although Protomer has only been in operations for six years, the private company has already developed incredible technology in the diabetes sector.
The most remarkable achievement it has so far is a platform that can create glucose-response insulins, which can sense the body’s sugar levels and then get activated automatically throughout the day.
Although this is still in its early stages, this technology could drastically reduce the risk of hypo- and hyperglycemia among diabetes patients.
Eli Lilly’s deal with Protomer follows in the footsteps of the leading diabetes company worldwide, Novo Nordisk (NVO), which also struck a similar agreement worth $800 million with another biotech startup in 2018.
Aside from diabetes and obesity, Eli Lilly has also been working on dominating in the Alzheimer’s disease space.
When the FDA granted Biogen’s (BIIB) Alzheimer candidate Aduhelm with accelerated approval, it also opened a door for Eli Lilly.
Even prior to this approval, Eli Lilly has already been working on its own candidates, Donanemab. What the Biogen approval provides is a higher chance of positive review for Eli Lilly’s candidate.
In fact, mere weeks after Aduhelm’s accelerated approval, Eli Lilly announced that it would submit an application for the same authorization by the end of 2021.
At this point, the treatment holds a Breakthrough Therapy designation from the FDA.
Given this, it’s presumably a shoo-in for approval soon, thereby adding a new growth driver to the company’s extensive arsenal.
Other than the two, Roche (RHHBY) is also expected to throw its hat in the ring with its Alzheimer’s candidate Gantenerumab.
Eli Lilly’s current lineup of products is definitely worth mentioning as well.
In the first quarter of 2021, the company’s revenue climbed by 16% year over year to hit $6.9 billion.
One of its top performers is its diabetes drug Trulicity, which recorded an 18% jump in sales to reach $1.5 billion.
In terms of its bottom line, Eli Lilly projects its adjusted earnings to increase between 15% and 18% year over year in 2021.
Looking at its financials, it’s clear that Eli Lilly’s current portfolio and pipeline are favorably positioned to deliver strong financial results year after year.
Although the company hasn’t exactly catapulted to unprecedented heights, it has shown stable and consistent growth as well as notable gross margins of over 70%.
It has consistently outperformed the markets in the past five years, climbing close to 200%.
This is the reason why regardless of the ups and downs of the market, investors can easily count on this stock to climb continuously in the long run.
Mad Hedge Biotech & Healthcare Letter
May 13, 2021
Fiat Lux
FEATURED TRADE:
(THE HOLY GRAIL OF DIABETES)
(NVO), (LLY), (SNY), (BNTX), (CRSP), (EDIT), (NTLA)
Diabetes and obesity continue to be two of the major health issues across the globe—and these problems are only getting worse.
There are about 463 million people worldwide afflicted with diabetes, with only half of this number actually diagnosed and even fewer seeking treatment.
This situation is alarming considering that diabetes is a major cause of diseases like heart attacks, stroke, blindness, kidney failure, and even amputation of the lower limb.
The key to handling diabetes for many diabetics is taking insulin, which is a hormone that aids in regulating the amount of glucose in the patient’s blood.
To date, only 16% of diabetics take insulin.
Interestingly, there are only a handful of producers of this drug despite the fact that the global spending for insulin is estimated to reach $28 billion by 2026.
Only three companies practically control over 90% of the insulin market. That dominance, along with the absence of generic competition, allowed them to generously reward their shareholders.
Currently, one company is dominating the insulin market and holds a virtual monopoly of this lucrative industry: Novo Nordisk (NVO).
In fact, Novo Nordisk shares have increased by over 2,500% since 2000—an honest to goodness wealth-building investment.
For years, Novo Nordisk has focused on developing products specifically for diabetes and obesity.
Thanks to its efforts in these sectors, the company has become the undisputed leader with a 44.5% share of the insulin market and a 49.9% share of the blood sugar drug GLP-1 market.
In 2018 alone, Novo Nordisk generated roughly $14.26 billion in revenue from its diabetes lineup.
In comparison, the second largest producer of these products, Eli Lilly (LLY), generated only $9.71 billion.
Meanwhile, the third challenger in this space, Sanofi (SNY), began its exit from the diabetes industry when the pandemic struck last year.
At this point, Novo Nordisk holds 29.2% of the global diabetes market, making the company within arm’s reach of its goal to conquer one-third of the segment by 2025.
Amid its success in the industry, Novo Nordisk refuses to rest on its laurels. The company continues to come up with innovative treatments for diabetes and obesity.
Novo Nordisk’s latest product is Rybelsus, which is an oral medication for blood sugar, particularly for Type 2 diabetes patients.
In an effort to corner the market, Rybelsus is actually a direct competitor of Novo Nordisk’s own products, Ozempic and Victoza, which target the same market. The difference is that the new product can be taken orally while the two older ones need to be injected into the bloodstream.
When Ryblesus was launched in late 2020, it was hailed as the “holy grail” of diabetes treatments and generated $64.5 million in the first six months.
To understand the potential of Rybelsus, it’s good to remember the growth story of Ozempic.
From $264 million in sales in 2018, this drug skyrocketed to rake in $1.7 billion by 2019 and generated $1.1 billion in the first half of 2020.
Although diabetes clearly holds the bulk of Novo Nordisk’s portfolio, it’s not the sole revenue stream for the company.
In the past years, Novo Nordisk has also been developing treatments for chronic obesity—a condition that could lead to serious diseases, including various types of cancer and heart disorders.
Global obesity has roughly tripled since 1975, with the COVID-19 pandemic accelerating this alarming trend.
For context, 1.9 billion adults were diagnosed as overweight in 2016. Of these, 650 million were considered obese.
More alarmingly, only 2% of 650 million people suffering from obesity are receiving any medical treatment.
In relation to Novo Nordisk’s revenue stream, this offers notable potential for future revenues for the segment.
The company’s flagship obesity drug, Saxenda, has shown extremely strong growth in terms of market share as well as total revenue since its launch.
With incredible attention focused on groundbreaking treatments for diabetes like messenger RNA from companies like BioNTech (BNTX), CRISPR Therapeutics (CRSP), Editas Medicines (EDIT), and Intellia Therapeutics (NTLA), it’s understandable to find a company established in the 1920s extremely boring.
However, it’s important to always keep in mind what investing is truly about. It’s distributing your money to businesses that have the capacity and potential to grow over the long term.
This is what sets apart companies like Novo Nordisk.
Historically, Novo Nordisk has been giving back to its shareholders for decades.
Since it debuted in the US market in 1981, the company has returned roughly 22,000% to its investors.
Four decades later, shareholders can rest easy and expect continuous rewards in the years to come. So, take advantage of this opportunity and buy the dips.
