Tag Archive for: (NVS)

Mad Hedge Fund Trader

Why There’s Another Double in CRISPR Therapeutics

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Occasionally, I discover a piece of research from one of my other Mad Hedge publications that is so important that I send it out to everyone immediately.

Today piece from the Mad Hedge Biotech & Health Care Letter is one of the instances. It makes the case and provides the numbers as to why Biotech & Health Care will be one of two dominant sector to follow for the next decade. It also is a key plank in my argument for a return of a new Golden Age and a second “Roaring Twenties.”

Here it is.

Biotech investors, take note: 2019 was a great year for the industry, but the best is yet to come.

In the final three months of 2019, the biotech sector grew by 32% -- notably outpacing the pharmaceutical industry, which only recorded a 9.5% gain.

However, the biotechnology sector is estimated to grow substantially in 2020, and reach over $775 billion in revenue by 2024 as more and more treatments for previously incurable diseases get discovered.

Looking at all the progress in the biotechnology space, this could even be the year we’d finally discover the cure to many life-threatening and debilitating conditions like cancer and Alzheimer’s disease.

With all these technological advancements, two revolutionary tools have been overhauling the entire biotechnology and healthcare industry from the ground up: precision medicine and CRISPR. Actually, the impressive growth of the biotechnology industry has been largely attributed to the excitement generated by the gene-editing sector.

While the majority of companies concentrating on the human genome are still in the research phase, the growth of this industry is undeniable. 

Here’s tangible proof.

Just 20 years ago, reading all the DNA of a single person cost approximately $3 billion. Now, this price is down to only $1,000. In the future, this number will go even lower at $100. There are now gigantic factories in China sequencing DNA for companies like Ancestry.com and 23andMe.

This is just one example of how the biotechnology industry has grown by leaps and bounds. It’s also the reason behind the surge of CRISPR shares.

In effect, the specialists in this niche, including Crispr Therapeutics (CRSP), Bluebird Bio (BLUE), and Editas Medicine (EDIT), are amplifying their efforts in 2020.

Among the specialist companies, CRISPR Therapeutics is considered as one of the frontrunners -- if not the top stock. This is because compared to its rivals, which are still in preclinical phases of development, CRISPR Therapeutics’ already has two drugs going through Phase 1 trials: CTX001 and CTX110.

The promising results of the company’s research resulted in a 113% rise in shares last year, with the bulk of the surge starting in October. In fact, CRISPR Therapeutics’ performance had been so impressive that its market cap reached $3.4 billion.

CTX001 is created to target patients suffering from genetic blood disorders, specifically sickle-cell disease and transfusion-dependent beta-thalassemia.

Meanwhile, CTX110 is a CAR-T treatment. The process involves the extraction of immune cells from the patient. These are then retrained and later re-introduced to the human body.

CRISPR Therapeutics’ CAR-T treatment is anticipated to be offered at a cheaper price compared to the other CAR-T therapies.

Both Novartis (NVS) and Gilead Sciences (GILD) are pursuing the same treatment. However, the cost of the therapy from the latter two is expected to reach as much as $475,000 for every patient annually.

Apart from CTX001 and CTX110, CRISPR Therapeutics has two more immunology candidates, currently dubbed CTX120 and CTX130.

If both phase trials succeed, these will bring massive home runs for CRISPR Therapeutics, especially since the cancer immunology market is expected to reach $127 billion by 2026. Over the next 10 years, this niche is estimated to reach $25 trillion in sales.

Among the gene-editing treatments under development today, CRISPR is projected to grow tenfold in the number of applications and potentially curing 89% of disease-causing genetic variations by 2026.

Taking this pace into consideration, the valuation for this market is expected to grow from $551 million in 2017 to reach roughly $3.1 billion by 2023 and $6 billion by 2025.

Meanwhile, precision medicine as a whole is estimated to show a significant jump from $48.6 billion in 2018 to $84.6 billion by 2024. In 2028, this market is expected to rake in $216 billion.

Hence, further success with CTX001 and CTX110 along with additional treatments in the drug pipeline would all but guarantee that Crispr Therapeutics could beat the market again in 2020.

 

 

Mad Hedge Fund Trader

January 21, 2020

Mad Hedge Biotech & Healthcare Letter
January 21, 2020
Fiat Lux

Featured Trade:

(WHY THERE’S ANOTHER DOUBLE IN CRISPR THERAPEUTICS)
(CRSP), (BLUE), (EDIT), (NVS), (GILD)

Mad Hedge Fund Trader

Why There’s Another Double in CRISPR Therapeutics

Biotech investors, take note: 2019 was a great year for the industry, but the best is yet to come.

In the final three months of 2019, the biotech sector grew by 32% -- notably outpacing the pharmaceutical industry, which only recorded a 9.5% gain.

However, the biotechnology sector is estimated to grow substantially in 2020, and reach over $775 billion in revenue by 2024 as more and more treatments for previously incurable diseases get discovered.

Looking at all the progress in the biotechnology space, this could even be the year we’d finally discover the cure to many life-threatening and debilitating conditions like cancer and Alzheimer’s disease.

With all these technological advancements, two revolutionary tools have been overhauling the entire biotechnology and healthcare industry from the ground up: precision medicine and CRISPR. Actually, the impressive growth of the biotechnology industry has been largely attributed to the excitement generated by the gene-editing sector.

While the majority of companies concentrating on the human genome are still in the research phase, the growth of this industry is undeniable. 

Here’s tangible proof.

Just 20 years ago, reading all the DNA of a single person cost approximately $3 billion. Now, this price is down to only $1,000. In the future, this number will go even lower at $100. There are now gigantic factories in China sequencing DNA for companies like Ancestry.com and 23andMe.

This is just one example of how the biotechnology industry has grown by leaps and bounds. It’s also the reason behind the surge of CRISPR shares.

In effect, the specialists in this niche, including Crispr Therapeutics (CRSP), Bluebird Bio (BLUE), and Editas Medicine (EDIT), are amplifying their efforts in 2020.

Among the specialist companies, CRISPR Therapeutics is considered as one of the frontrunners -- if not the top stock. This is because compared to its rivals, which are still in preclinical phases of development, CRISPR Therapeutics’ already has two drugs going through Phase 1 trials: CTX001 and CTX110.

The promising results of the company’s research resulted in a 113% rise in shares last year, with the bulk of the surge starting in October. In fact, CRISPR Therapeutics’ performance had been so impressive that its market cap reached $3.4 billion.

CTX001 is created to target patients suffering from genetic blood disorders, specifically sickle-cell disease and transfusion-dependent beta-thalassemia.

Meanwhile, CTX110 is a CAR-T treatment. The process involves the extraction of immune cells from the patient. These are then retrained and later re-introduced to the human body.

CRISPR Therapeutics’ CAR-T treatment is anticipated to be offered at a cheaper price compared to the other CAR-T therapies.

Both Novartis (NVS) and Gilead Sciences (GILD) are pursuing the same treatment. However, the cost of the therapy from the latter two is expected to reach as much as $475,000 for every patient annually.

Apart from CTX001 and CTX110, CRISPR Therapeutics has two more immunology candidates, currently dubbed CTX120 and CTX130.

If both phase trials succeed, these will bring massive home runs for CRISPR Therapeutics, especially since the cancer immunology market is expected to reach $127 billion by 2026. Over the next 10 years, this niche is estimated to reach $25 trillion in sales.

Among the gene-editing treatments under development today, CRISPR is projected to grow tenfold in the number of applications and potentially curing 89% of disease-causing genetic variations by 2026.

Taking this pace into consideration, the valuation for this market is expected to grow from $551 million in 2017 to reach roughly $3.1 billion by 2023 and $6 billion by 2025.

Meanwhile, precision medicine as a whole is estimated to show a significant jump from $48.6 billion in 2018 to $84.6 billion by 2024. In 2028, this market is expected to rake in $216 billion.

Hence, further success with CTX001 and CTX110 along with additional treatments in the drug pipeline would all but guarantee that Crispr Therapeutics could beat the market again in 2020.

 

 

Mad Hedge Fund Trader

November 7, 2019

Mad Hedge Biotech & Healthcare Letter
November 7, 2019
Fiat Lux

Featured Trade:

(BUY NOVARTIS ON THE DATA SCANDAL DIP),
(NVS)

Mad Hedge Fund Trader

Buy Novartis on the Data Scandal Dip

Amid the public outcry over how Novartis A.G. (NVS) dealt with the data manipulation issue involving its $2.1 million gene therapy Zolgensma, the stock has been doing quite fine. In fact, the Food and Drug Administration (FDA) has reassured everyone that the drug is still a safe choice for spinal muscular atrophy.

Although the agency threatened to impose “civil or criminal penalties,” it also reiterated that the FDA “remains confident that Zolgensma should remain on the market.” This is probably because the data manipulation affected only a minimal part of the information submitted for Zolgensma’s approval. It had no connection at all to more pressing matters like human safety and efficacy tests.

Rather, it pertains to the mouse studies performed during the early stages of drug testing. The FDA explained that Novartis’ data “continues to provide compelling evidence supporting an overall favorable benefit-risk profile” for the drug.

Nonetheless, Novartis didn’t exactly go away scot-free as an ex-FDA commissioner said that “the key issue of trust in the face of overwhelming complexity is driving the stern warning and possible consequences.”

In terms of the effects of the issue on Zolgensma’s sales, it’s also unlikely that it will greatly affect Novartis as a whole. The treatment is currently estimated to bring $200 million in profits this quarter and possibly $300 million in the succeeding period. Assuming that the FDA decides to impose a more restrictive punishment, Zolgensma’s sales contribute a tiny drop in the bucket of the company’s $11.7 billion estimated quarterly earnings.

This is why despite all the hullabaloo, people who have no idea about the issue wouldn’t even catch a whiff of it from looking at the ticker. Reviewing Novartis’ performance during the height of the issue, its shares went down only 0.8% amid a general Biotech and Life Sciences market slowdown.

So, why isn’t Novartis getting penalized for this data manipulation scandal? Because at the moment, the issue -- no matter how humiliating -- seems highly unlikely to affect the stock’s bottom line.

In the second quarter of 2019, Novartis beat earnings and sales estimates with the company even raising its guidance for this year. It recorded core earnings of $1.34 per share, up from the $1.18 reported in 2018. The company’s profits increased to hit $11.8 billion as well. Compared to the rest of the industry, which suffered a 1.1% decline, Novartis recorded a 5.2% gain so far in 2019.

Now, let’s take a look at the performance so far of its two major growth drivers: Innovative Medicines (pharmaceuticals) and Sandoz (generics).

The pharma segment grew by 10% this year and reported sales worth $9.3 billion, indicating a 9% increase year over year. Among the notable performers in this division is psoriasis treatment Cosentyx, which has been gaining traction especially in the United States as shown by the 25% increase in its sales to hit $858 million.

A global uptake, particularly in the hospital and ambulatory demand for chronic heart failure medication Entresto, also boosted its sales by 81% to rake in $421 million.

Novartis’ oncology unit also showed an increase of 9% courtesy of acute lymphoblastic leukemia drug Kymriah, severe aplastic anemia medication Promacta, and breast cancer treatment Kisqali.

Even its Lutathera, the radioactive targeted therapy for neuroendocrine tumor that was a recent addition from the acquisition of Advanced Accelerator Applications (AAA), contributed to this solid performance. AAA sales reached $171 million with $109 million coming from Lutathera profits alone. Meanwhile, Kisqali’s sales grew 94% and Promacta profits grew 23%.

As for the Sandoz segment, the division recorded $4.8 billion in sales, up by 1%. Its biopharmaceuticals profits increased 14% mainly thanks to the notable double-digit growth of cancer and rheumatoid arthritis treatment Rixathon (a biosimilar of Roche Holding AG’s (RHHBY) Rituxan), plaque psoriasis medication Erelzi (a biosimilar of Amgen’s (AMGN) Enbrel), and rheumatoid arthritis drug Hyrimoz (a biosimilar of AbbVie’s Humira).    

The strong performance during the second quarter pushed Novartis to boost its sales and earnings forecasts for 2019 to reflect mid-to-high single-digit increase. The new wave of drug approvals the company has gained provided added confidence to its performance in subsequent months.

Aside from expanding its rare genetic disorder portfolio with Zolgensma and oncology division with advanced breast cancer drug Piqray, Novartis is also looking to bring more depth to its ophthalmic pharmaceutical department with the acquisition of dry eye treatment Xiidra.

Given its current performance and the promising drug pipeline it has for 2019, Novartis is anticipated to become one of the top-performing biopharmas in the market today.

Buy (NVS) on the next dip.

Mad Hedge Fund Trader

March 15, 2019

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Global Market Comments
March 15, 2019
Fiat Lux

Featured Trade:

(BUY JOHNSON & JOHNSON ON THE BAD NEWS),
(JNJ), ($INDU), (PFE), (NVS), (AZN)

Mad Hedge Fund Trader

Buy Johnson & Johnson on the Bad News

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When one of the 30 Dow Average companies ($INDU) gets into trouble, I sit up and take note, stand to attention and drill down with a magnifying glass.

After all, it may have a major important on an important tradable index, thus opening up an investment opportunity. It also may sound the alarm for a great single stock pick. That is certainly the case with New Brunswick, NJ based Johnson & Johnson, one of the oldest companies traded on the NYSE.

What piqued my interest today was the news that the company lost another talcum power lawsuit, which is alleged by plaintiffs to contain asbestos. This has been among the catalog of urban conspiracies for decades now.

Johnson & Johnson (JNJ) is, in fact, carrying on with their mission to strengthen their pharma sector which has consistently served as their top revenue driver in the past years. While their strong performance in this segment has always been led by their oncology portfolio, with sales of their cancer drugs increasing by 22.1% worldwide in the previous quarter, it looks like more and more products are on their way to becoming JNJ's blockbuster items.

The company estimates to launch more than ten new drugs -- all of which have the potential to be blockbuster products -- by 2021. On top of these, JNJ expects to complete 50 line extensions on their existing products. Both efforts are anticipated to temper the effects of generic drugs that are threatening to hamper the sales of a lot of key products in JNJ's portfolio.

The latest potential blockbuster drug for JNJ is Esketamine which is an anti-depressant aimed at treatment-resistant patients. This was developed by the company’s pharmaceutical arm, Janssen Pharmaceuticals Inc. This new groundbreaking product was approved on March 5 by the FDA and will be marketed as Spravato. It is hailed as the first prescription depression drug developed from ketamine, which is more commonly used as an anesthetic.

Although ketamine has long been tagged as a party drug, aka “Special K”, and is approved as an anesthetic, no company has patented its use. This is where Janssen swooped in and patented the left section of the molecule, called esketamine, and sent their application to FDA. The approval of this drug, which FDA described as a “breakthrough therapy” thus receiving priority review, translates to a potential cash cow for JNJ as it successfully legitimized the application of ketamine as an anti-depression drug.

Aside from depression, FDA is also taking into consideration the applicability of esketamine to patients afflicted with mood disorders such as bipolar disorder. The organization looks at it as a potential solution for reducing suicides as well.

Other drugs projected to rake in massive sales for JNJ pipeline include psoriatic arthritis Tremfya, prostate cancer medication Erleada, and metastatic urothelial cancer treatment Erdafitinib. With the addition of Spravato on the list, sales are expected to reach more than $1 billion.

However, no company is perfect and the same goes for products -- even if they are poised to become blockbuster drugs. A major hindrance for the success of Spravato is cost.

Here's a sample quote for potential patients.

A one-month initial treatment will cost somewhere from $4,000 to $7,000. The exact price will depend on the dosage and if it's availed wholesale. Expenses for follow-up treatments will reach $2,360 to $3,500 a month. All in all, Spravato could become as expensive as an electroconvulsive treatment or even a transcranial magnetic stimulation therapy. Worse, this treatment might have to be shouldered by the patients themselves.

Another deterrent for investors looking into JNJ is the continuing issue concerning the talcum powder lawsuits which claim that the talc items of the company contain asbestos that resulted in ovarian cancer among many of its female users. As of August 2018, a Missouri court has ordered JNJ to pay 22 women a total of $4.7 billion for damages. While the company announced its decision to appeal the ruling, the case has been a huge red flag for investors ever since.

Nonetheless, it appears that JNJ remains a solid stock for a lot of investors.

With an annual revenue of $81.6 billion, (JNJ) is anticipated to stay ahead of its competitors Pfizer (PFE) ($53.4B), Novartis (NVS) ($51B), and AstraZeneca (AZN) ($21.9B). Taking into consideration currency impact, which is expected to negatively affect sales by roughly 1.5%, JNJ's revenues are projected to hit $80.4 to $81.2 billion this year.

While it still has a long way to go, the recent approval of Spravato spelled higher confidence in JNJ's revenue growth this year. The company's purchase of robotic surgical instruments manufacturer Auris Health, for $3.4 billion further strengthened its dominance in the industry.

In the past month alone, its shares rose by 4.55%. Investors are also anticipating more growth until the next earnings report, which is anticipated to show $2.10 earnings per share for the company. This represents a 1.49% year-over-year increase.

 

 

 

 

 

A Killer?

Mad Hedge Fund Trader

December 19, 2018

Mad Hedge Technology Letter
December 19, 2018
Fiat Lux

Featured Trade:

(HOW TECH IS EATING INTO HEALTHCARE COSTS)
(VEEV), (CRM), (GSK), (AZN), (MRK), (NVS), (DBX), (OKTA), (TWLO)

Mad Hedge Fund Trader

How Tech is Eating into Healthcare Costs

It’s undeniable that American healthcare costs are a big part of a family’s monthly expenses.

Rising deductibles and out-of-network fees are a few of the out-of-pocket costs that can singe a hole in the average joes’ pocket.

It was only in 2016 when healthcare insurance costs eclipsed more than $10,000 a year per person, and over the past 12 months, 68% of people surveyed admitted that future healthcare costs would probably consume a larger part of their earnings.

The result is that healthcare companies are making money hand over fist.

Is there something that I deduce from this lucrative part of the economy that has the potential to feed into the tech sector?

The tidal wave of money spilling into the healthcare industry has also given impetus to these firms hoping to buttress their networks and IT with modern tech infrastructure to take advantage of the efficiencies on offer.

Building the best cloud services geared towards specific industries has been a winning formula and the generated momentum will continue into the next calendar year.

Prime models can be seen all over the tech ecosphere and they will be big winners of 2019.

One example is Twilio (TWLO) who has quietly risen the bar for communication cloud products.

A panoply of small companies can now offer professionalized email, text message, automated voice mail services amongst other services that do the work of 100 employees.

Recently, I touched on a cloud company named Okta (OKTA) responsible for managing the facilitation of passwords.

This identity management company was formed by a group of former Salesforce executives.

In my book, a Salesforce (CRM) credential is a golden stamp of approval for newly formed cloud-companies seeking to develop new cloud products in broad industries.

Why?

Salesforce’s client relationship management platform (CRM) is ubiquitous and the most popular enterprise software.

The way they develop their model is by launching and acquiring new e-commerce and marketing services - which lure in customers into its walled gardens.

Salesforce also applies its artificial intelligence platform Einstein to harness customer relationships and help businesses carry out decisions based on data alone instead of testosterone and emotion.

This all means that Salesforce executives have their finger on the pulse of the cloud landscape and know how to build a cloud business from scratch which is valuable.

They know what certain industries require to mushroom and can deploy resources in the quickest way possible while surrounding themselves by hordes of software engineers who can be poached for a certain fee.

The framework being in place is a massive bounty for these executives who just line up the dots then motor on to an industry confirmed by the data.

And remember that 99.9% of people do not have access to this proprietary data.

Consequently, they know more about corporate America than most Fortune 500 CEOs.

Marrying up the healthcare industry to the cloud was just a matter of time.

Veeva Systems (VEEV) is a cloud-computing company focused on pharmaceutical and life sciences industry applications.

Founder and CEO of Veeva Systems Peter Gassner cut his teeth at Salesforce serving as Senior Vice President of Technology.

His job was building the salesforce.com platform including product, marketing and developer relations.

Gassner has effectively transplanted the Salesforce platform model and applied it to the life sciences industry and has done a great job doing it.

The Veeva Commercial Cloud includes a CRM platform that aids drug company’s management of clients.

The Veeva Vault is a tool that tracks industry regulations, clinical trials, and recommends actionable habits in the cloud.

Veeva's CRM platform is powered by the Salesforce1 app development platform and is integrated into the broader Salesforce Marketing and Service Clouds.

The first mover advantage has offered all the low-hanging fruit for Veeva.

The lack of competition surely never lasts but the extra time to pad their lead is only a positive to its business model.

Veeva has already lured in some of the health industries biggest names such as GlaxoSmithKline (GSK), AstraZeneca (AZN), Merck & Co. (MRK), and Novartis (NVS).

These heavy hitters are meaningfully tied to its ecosystem, and it is safe to say that these relationships are only scratching the surface and have the potential to expand as Veeva installs more add-on tools into its platform.

The popularity shows up in the numbers with Veeva’s 3-year sales growth rate hovering around 30%.

Even better, the profitability of Veeva is indicative of the strength in its business model. They are simply at the right place at the right time to capture the momentum from the digital crossover in the healthcare industry.

Many similar names like Dropbox (DBX) are enormous loss-making enterprises but Veeva has shrugged off this stereotype that many cloud companies of its size can’t be profitable.

The effect of being strategically placed in a position to cherry pick the lucrative healthcare industry has also seeped into the strong profit margins of Veeva able to grow it to over 32%.

Touching more on the profitability, EPS has kicked into gear sequentially rising 80%, and the long-term outperformance is backed up with a 3-year EPS growth rate of 41%.

This cloud company is incredibly profitable for its size, and part of that is the absence of competition which increases pricing power.

Dropbox does not have that luxury of favorable pricing schemes which cripple profitability and leads to attrition and just as harmful – a price war.

Veeva’s forecasts for next year blew past Wall Street’s estimates and the company is modeling for EPS of $1.58 and revenue around $856 million in 2019.

Gassner has even publicly acknowledged that he expects 2019 revenue to come in between $1 billion and $1.1 billion which is a full year ahead of schedule.

The bullish guidance is a clue that the overall cloud story is alive and kicking, and there is absolutely no weakness whatsoever.

Making this story even more compelling is that in the last five years, profits are up six-fold, revenue is up four-fold, and the number of new products is up three-fold.

As we advance into 2019, I believe Veeva is a buy-on-the-dip candidate because of its favorable market position, rapidly expanding margins, and its low enterprise value of $11 billion which deems it, as I daresay, a lucrative buyout target for larger industry cloud players like Salesforce.

The tech industry has a habit of coming full circle become of its network effect of capital, talent, and management.

I would be interested in dipping my toe into any of Salesforce’s offspring because these models are built to scale and are waiting on the doorstep to seize revenue from industry migrating to digital.

Okta did it, and Veeva Systems made the leap of faith too, confirming that the Salesforce method is a path to untold profits for cloud-based software companies.

When the market can finally digest the macro rigmaroles, shares for this innovative and hyper-growth cloud company is set to take off.

 

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