(PFE) Archives

The Times Are A-Changing

With the US GDP sliding for another quarter, the economic projections are becoming increasingly hostile.

However, investors who have consistently been buying quality stocks could easily consider the gloomy economic conditions as a bump in the road.

One of the most resilient companies in the biotechnology and healthcare industry is Novartis (NVS).

The Swiss drugmaker, which has a massive market capitalization of $207 billion, is ranked as the sixth biggest pharma stock worldwide.

Over the past 12 months, Novartis has delivered better results than the overall pharmaceutical industry and the S&P 500. Its performance, albeit marginally better than the rest, proved its resilience amid such chaotic and complex situations.

Recently, Novartis announced that it would cut loose its Sandoz division, turning it into a standalone spinoff by the second half of 2022.

Basically, Novartis has two main segments: Innovative Medicine and Sandoz.

The company’s Innovative Medicine section comprises roughly 80% of its sales and centers on everything involving patented to prescription products.

Its Sandoz section, approximately 20% of the total sales, is further categorized into franchises: Biopharmaceuticals, Retail Generics, and Anti-Infectives.

The stay-behind business would be composed solely of the products in the Innovative Medicines segment, a combination of Novartis’ oncology and pharmaceuticals business divisions.

This makes Novartis the latest name to be added in the long line of Big Pharma players letting go of their generics division to strip away all but their core products in development.

The plan to spin off Sandoz, Novartis’ division concentrating on generics and biosimilars, has been in the works for quite some time now.

Prior to this announcement, there were even talks of a potential acquisition instead of creating a standalone company. However, no attractive enough offer was given, pushing Novartis to go ahead with its original plan.

Sloughing off the generics and biosimilars divisions could help solve some of the company’s issues.

The generic drug sector has been causing issues for drugmakers as of late, and sales of the Sandoz division have been notably stagnant compared to the steady growth of Novartis’ new drugs sector.

To put things in perspective, Sandoz’s net sales in 2021 was only $9.6 billion, while the company’s Innovative Medicine division raked in a whopping $42 billion.

Getting rid of Sandoz means Novartis could focus on more promising products in its portfolio and develop more blockbuster drugs in its pipeline.

For instance, the company can focus on expanding the treatments involving Cosentyx.

The top-selling drug in Novartis’ portfolio, making up 10% of total revenues, Cosentyx continues to rise rapidly, reporting double-digit growth.

This drug targets psoriatic arthritis and was valued at $7.15 billion in 2019. By 2027, this drug is expected to be worth $13.64 billion.

Most importantly, its patent will last longer as it will expire by 2028 in the US, 2029 in Japan, and 2030 in Europe.

Another blockbuster drug in Novartis portfolio is chronic heart failure treatment Entresto, which accounts for roughly 9% of the company’s total revenues. The growth of this product has been impressive thanks to the high demand in Europe, which means an increase in its sales is almost guaranteed.

Like Cosentyx, its patent will also last longer and is estimated to reach until 2036. This makes Entresto one of the most interesting—if not the most exciting—drug in Novartis’ pipeline.

Novartis is also becoming a significant player in the metastatic breast cancer market, estimated to grow from $15.52 billion in 2020 to $41.74 billion in 2030.

The company’s product in this segment, Kisqali, has been gradually taking up market share and is expected to gain more traction as it expands its indications.

In terms of growth, though, multiple sclerosis drug Kesimpta is the top performer in Novartis’ portfolio. In the second quarter of 2021, sales were at $22 million. In the same period in 2022, the number skyrocketed to $239 million.

Kesimpta is anticipated to become another blockbuster, especially with the projections in the multiple sclerosis market.

This segment is estimated to be worth $25.43 billion in 2022 and will grow to $33.17 billion by 2029. While the growth isn’t as massive as other segments, the exciting news is that Kesimpta has been outpacing the growth rate of the reference market thus far.

The move to eliminate Sandoz is in line with the ongoing aggressive slimming down of the company’s operations.

In 2014, Novartis sold its animal health segment to Eli Lilly (LLY). A few years after, it spun off its eye-care sector to become Alcon (ALC), then sold its consumer health segment to GlaxoSmithKline (GSK) for $13 billion.

Meanwhile, the decision to become a pure-play pharma has become a widespread trend among prominent names in the industry, with the likes of Pfizer (PFE), Johnson & Johnson (JNJ), and Bristol Myers Squibb (BMY) transforming into sleeker and slimmer businesses.

Ultimately, the goal is for these pharma giants to shed unwanted weight to compete in the faster-paced biotechnology world. The plan is to focus all their resources on advancing the science and developing the technology needed to come up with the next groundbreaking innovation.

With Novartis joining the bandwagon, we can expect its growth to accelerate over the long term as it focuses more on strengthening its already solid and impressive pipeline. I highly suggest that you buy the dip.

August 25, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 25, 2022
Fiat Lux

Featured Trade:

(A RISK WORTH TAKING)
(AXSM), (SAGE), (RLMD), (PFE), (LLY), (BMY), (BIIB)

A Risk Worth Taking

Biotech Letter

When a drugmaker does not deliver a new product within the promised timeframe, its shares generally drop.

When this happens, investors should take a closer look at regulatory headwinds as potential buying opportunities, especially in the biotechnology world.

However, it’s important to determine whether the business in question can satisfactorily address the issues raised by the regulators and eventually get the green light for the held-up product.

Several companies find themselves in this scenario, but a particular one looks promising: Axsome Therapeutics (AXSM).

While Axsome isn’t one of the most renowned biotechs and its shares may look somewhat risky, it’s worth considering initiating positions in this growing company.

One reason is Axsome’s recent victory over a hurdle, finally gaining the long-awaited FDA approval for its depression drug that can take effect within just 1 week because it uses a unique mechanism instead of the traditional elements.

The drug, previously known as AXS-05, will be marketed as Auvelity and slated for sale in the fourth quarter of 2022.

For months, investors have been closely monitoring the progress and approval of this drug with some concern.

Doubts over Axsome’s capacity to deliver started to hound the company, especially after FDA’s self-imposed approval deadline for AXS-05 passed in 2021.

However, the company attributed the delay to the pandemic and shrugged off concerns over the actual drug.

Auvelity is the first of a class of drugs, which are classified as NMDA receptor antagonists, to be marketed in pill form created as a treatment for depression.

It is the only approved pill working as a fast-acting drug targeting major depressive disorder. This will also be Axsome’s first-ever marketed product.

Other than Axsome, there are several biotechs working on antidepressant treatments.

Among them, the closest potential competitors are Sage Therapeutics (SAGE) and Relmada Therapeutics (RLMD).

Sage recently started rolling out its own candidate, Zuranalone, for approval as a treatment for major depressive disorder.

Relmada is also working on a similar candidate, REL-1017, but seems to be at an earlier stage.

Psychiatric treatments like Auvelity are widely sought after and highly coveted assets in the biopharma world for a myriad of reasons.

The sheer potential of Auvelity puts Axsome on buyout watch for several Big Pharma and even expanding biotechnology and healthcare companies today.

Moreover, Axsome’s major depressive disorder drug would dovetail conveniently with the lineups of a lot of leading pharmaceutical names in the industry including Pfizer (PFE), Eli Lilly (LLY), Bristol-Myers Squibb (BMY), and even Biogen (BIIB).

With that in mind, Axsome’s brain trust would most likely demand an astronomical premium based on or relative to its current valuation if it ever enters any buyout discussion with interested suitors.

Auvelity sales are projected to hit $209.1 million in 2023, growing impressively to blockbuster status by 2027 at $1.5 billion.

By 2030, sales of this major depressive disorder drug are estimated to reach $2 billion every year.

Auvelity is made up of two drugs that physicians already readily prescribe and are comfortable with for years; one of which is bupropion.

Bupropion, marketed under the brand name Zyban, actually raked in blockbuster sales marketed as a smoking cessation treatment.

Hence, Axsome plans to leverage the success of Auvelity to begin a pivotal study that could utilize this major depressive disorder as a smoking cessation treatment as well.

On top of these, Axsome is anticipating another FDA approval in the next months.

The company submitted its new migraine treatment, AXS-07, for review in 2021. Like Auvelity, it encountered delays due to the pandemic. However, things seem to be moving along as the regulatory committees catch up.

By 2023, Axsome plans to submit another candidate for FDA approval. Clinical trial results for its fibromyalgia treatment, AXS-14, recently released positive data.

So, what now?

When investing in biotech, it’s always good to keep in mind that extreme volatility is an ever-present risk. This makes the sector unfit for those looking for short-term investments.

For Axsome, the biggest challenge today is showing that Auvelity sales can support the development of AXS-07 and AXS-14 and fund operations into 2024 without the need to ask shareholders for more capital.

However, even if Auvelity fails to deliver strong revenues in 2023, the rest of the company’s late-stage pipeline still looks pretty exciting.

Taken together, Axsome looks like a promising stock to invest in as a relatively small portion of a diversified biotech portfolio.

August 18, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 18, 2022
Fiat Lux

Featured Trade:

(MORE THAN JUST A ONE-TRICK PONY)
(MRK), (SGEN), (SNY), (PFE), (BNTX), (GSK), (CVAC), (MRNA)

More Than Just A One-Trick Pony

Biotech Letter

When executed correctly and sufficient time is allocated, stock market investing can be highly rewarding. But, what can investors do to make the most of their opportunities in the market?

The short answer: Choose businesses that have or are building a strong competitive advantage.

Those investing in the biotechnology and healthcare sector know that buying companies with promising portfolios and diverse pipelines is vital.

After all, a solid lineup can generate and secure steady cash flow to fund R&D efforts as well as acquisitions to expand the pipeline. Consequently, this guarantees steady growth in revenues as existing products face patent exclusivity losses.

Within this sector, one of the companies with a strong portfolio and promising pipeline is Merck (MRK).

Merck has become practically synonymous with Keytruda—the #1 cancer drug in terms of sales globally. In the first 6 months of 2022 alone, this drug already raked in $10.1 billion in sales.

While several biotechnology companies would be content with this top-tier drug in its portfolio, Merck refuses to be a one-trick pony.

Leveraging its $222 billion market capitalization, the fifth-biggest pharmaceutical company on the planet has been steadily expanding its portfolio.

In fact, Keytruda only made up 33% of its total $30.5 billion sales in the first half of the year.

Merck has built a formidable oncology lineup and developed several blockbuster treatments in this space.

Its flagship, Keytruda, climbed 30% year-over-year in its second-quarter earnings report to record $5.3 billion for that period. Other cancer treatments improved their performance as well. Lynparza grew 17% while Lenvima rose 33%.

Amid these growths, Merck remains aggressive in expanding its oncology lineup. Earlier this year, the healthcare world has been abuzz with Merck’s plan to buy cancer-centered biotech Seagen (SGEN).

The deal, if it pushes through, would be reportedly worth $40 billion and add 4 already approved cancer drugs to Merck’s portfolio.

On top of these market-ready products, Seagen will also bring numerous late-stage candidates to the table.

Merck also recently inked a smaller deal with Orion Corporation. The agreement, worth $290 million, will grant Merck access to Orion’s drug candidate for prostate cancer.

Meanwhile, Merck just announced its plan to catch up with its peers in the COVID-era race. Specifically, the biotech giant has finally become more invested in entering the messenger RNA technology segment.

Earlier this week, Merck struck a $3.7 billion deal with Cambridge-based private biotech Orna Therapeutics for the latter’s novel take on mRNA called oRNA.

Basically, Orna’s approach involves altering the mRNA strands in such a way that it creates a circle instead of a line.

According to the firm, this will be a more effective way to apply the technology to mRNA-based vaccines and therapies.

This isn’t the first time Merck collaborated with a smaller firm to pursue mRNA technology.

As early as 2015, Merck has already been investing in this segment. In fact, it was one of the early partners of Moderna (MRNA), signing a series of agreements with the latter including collaborations on infectious diseases programs.

While some of the programs have been discontinued, Merck and Moderna continue to work together on a personalized cancer vaccine program.

Amid these efforts, Merck is still regarded as a laggard compared to its Big Pharma peers in terms of making huge investments in the mRNA space.

Recent mRNA collaborations include Sanofi’s (SNY) $3.2 billion deal with Translate Bio, Pfizer’s (PFE) massive investment in BioNTech’s (BNTX) technology, and GlaxoSmithKline’s (GSK) deal with CureVac (CVAC).

Nevertheless, the deal with Orna suggests a shift with Merck’s strategy.

Overall, Merck is a premier biotech and healthcare business with a strong portfolio and a promising pipeline.

Its profitability and expansion over the past years have been proven to be top-notch, and it’s not farfetched to expect the same or even better results in the future. I recommend buying the dip.

August 11, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 11, 2022
Fiat Lux

Featured Trade:

(BUILDING A RECESSION-PROOF PORTFOLIO)
(AMGN), (GILD), (MRK), (ABBV), (PFE), (JNJ), (BMY)

Building A Recession-Proof Portfolio

Biotech Letter

In my biotechnology and healthcare newsletter earlier this week, I talked about Amgen (AMGN) and how critical it is to determine recession-proof businesses.

In the next quarters and even years, it will no longer be as vital to identify companies that can bring high growth returns in the short term.

Instead, what’s more important is to find stocks that can withstand any bear market and a recession.

Like Amgen, Gilead Sciences (GILD) also performed better than the S&P 500 (SPY) and the Nasdaq 100 (QQQ) in the past 12 months.

Considering that we are anticipating a steep recession and a potentially brutal bear market in the following quarters, Gilead Sciences is presenting itself as a solid pick.

Some refer to Gilead Sciences as a one-trick pony, but that’s not an opinion I agree with despite the company’s over-reliance on its HIV programs and antiviral treatments.

For perspective, its antiviral portfolio comprises more than 90% of the company’s 2021 revenues while its top-selling products that year are all from its HIV segment.

Although Gilead Sciences has been expanding its portfolio, the company’s HIV program remains its best moneymaker. In the second quarter of 2022, sales of its HIV treatments have risen by 7% year-over-year.

Demand for treatments in this space has climbed in the past months, which allows for more room for growth in the foreseeable future.

Among the HIV treatments, Biktarvy is the best-selling product. It’s also the treatment that continues to gain a bigger market share.

By the second quarter of 2022, Biktarvy has been reported to claim roughly 44% of the market share in the US, marking a 4% increase year-over-year.

Meanwhile, another potential blockbuster is Lenacapavir. This is a new product, which will be marketed as a long-acting injectable HIV treatment once it gains FDA approval. If this gets the green light, this could rake in an estimated $2 billion in the first year of its release.

Aside from its HIV treatments, Gilead Science’s hepatitis franchise has also been steadily growing.

Amid the competition against the likes of Abbvie’s (ABBV) Mavyret, the company’s combo treatments with Sofosbuvir continue to generate significant cash flows and promising sales.

However, this segment raked in $1.9 billion in sales, down 9% year-over-year. The decline could be attributed to the effects of the pandemic.

Nevertheless, Gilead Sciences have been working on updating this particular program and adding newer treatments to deliver better results.

Another segment that saw a spike in 2021 is the antiviral program, primarily due to Veklury or Remdesivir.

When COVID-19 broke, Veklury was hailed as the first-in-line treatment. This led to a substantial boost in sales since 2020, with the company earning $2 billion from the product at that time.

By 2021, Veklury sales skyrocketed by 98% to hit $5.6 billion.

Frankly, no one truly expected Veklury to reach those figures—even Gilead Sciences’ management. In their first-quarter conference call in 2021, the company estimated full-year sales for the product to be roughly $2 to $3 billion.

While Veklury’s numbers are impressive, I think this product’s days are numbered because of the emergence of more competitors and better alternatives in the market these days.

In any case, this treatment is a testament to Gilead Sciences’ ability to deliver effective and reasonably priced antivirals to market.

Moving forward, Gilead Sciences looks to be exploring the oncology sector.

Its move to acquire CAR T-cell therapies via the $12 billion deal with Kita Pharma in 2017 is one of the clearest indicators of this plan.

On top of that, Gilead Sciences also acquired Trodelvy from Immunomedics in 2020. As far as fast-tracking its expansion in the oncology space goes, this definitely pushes the company to the forefront.

As a standalone treatment, this can reach peak sales of $2 billion to $3 billion.

Other than testing it with its own pipeline as a breast cancer treatment, Gilead Sciences has been collaborating with Merck (MRK) to determine the efficacy of Trodelvy when combined with Keytruda as a first-line treatment for non-small cell lung cancer.

Overall, Gilead Sciences is a great addition to a portfolio of recession-proof companies.

While it may not be as impressive as industry titans like Bristol Myers Squibb (BMY), Merck, AbbVie, Pfizer (PFE), and Johnson & Johnson (JNJ), it definitely bears the early signs of improvement, a promising future, and the ability to withstand a recession.

August 4, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 4, 2022
Fiat Lux

Featured Trade:

(A SELLOFF SURVIVOR READY FOR MORE GAINS)
(PFE), (SRPT), (PTCT), (GSK), (JNJ), (MRNA)

A Selloff Survivor Ready for More Gains

Biotech Letter

The broader market hasn’t been putting that much faith in drugmakers these days, and this could very well be a mistake.

While 2022 has not been particularly kind to equities recently, several names in the biotechnology and healthcare sector still managed to keep themselves safe from the selloff.

Pfizer (PFE), with its COVID vaccine sales, is one of them. Admittedly, this pharmaceutical giant has not shown substantial growth in the past monthS. Nonetheless, its quarterly updates and, more importantly, pipeline have exhibited notably encouraging signals.

As a massive underperformed in the past 20 years, Pfizer has taken aggressive steps to transform its strategy. The most obvious way to shake up the business is to eliminate the bulk of its noncore products.

However, it’s not advisable to buy a company just because it has been underperforming and would then be sold at lower prices. Instead, it is critical to determine whether there’s a catalyst.

For Pfizer, the catalyst was clear: COVID.

The company was and still is at the heart of the coronavirus vaccine drives and treatments—a position that’s projected to be sustained for years to come.

The company has made a fortune from this program, and it’s still reaping the rewards in a massive way.

In the second quarter of 2022, Pfizer’s revenue climbed by 53% year-over-year to reach $27.7 billion. Based on the company’s record, this is the most significant quarterly sales during this period to date.

For context, its COVID vaccine, Comirnaty, raised $8.8 billion in sales. This is 20% higher than its reported sales in 2021 over the same period.

Meanwhile, Pfizer’s new COVID therapy, Paxlovid, recorded $8.1 billion in sales. Taken together, Paxlovid and Comirnaty comprise over half of the company’s total revenue for the second quarter.

Leveraging these growth opportunities, Pfizer has been steadily expanding its pipeline.

To date, the company has roughly 96 drugs in its pipeline. Of these, 6 drugs are in registration, while 29 candidates are queued for Phase 3 trials. There are 31 drugs in Phase 2 and 30 more in Phase 1.

Pfizer’s candidates range from treatments for inflammation, immunology, oncology, vaccines, and internal medicine to rare disease therapies.

Among the treatments in its Phase 3 study, two have been identified to bring in billions of dollars for Pfizer potentially.

One is PF-06939926, which is a treatment for Duchenne syndrome. The other is PF-06928316, which is for Respiratory Syncytial Virus (RSV).

Globally, 1 in 3,500 to 5,000 males suffer from Duchenne syndrome. This puts the number of patients at roughly 250,000, with about 10,000 to 15,000 found in the US. While it generally affects males, it can sometimes affect females as well.

In terms of market size, the Duchenne syndrome market is expected to be worth $4 billion in 2023 and $7 billion by 2027.

Currently, the major approved treatments for this condition are Sarepta's (SRPT) Exondys 51, Vyondys, and Amondys, as well as PTC Therapeutics (PTCT) Emflaza and Translarna.

PTC recorded $236 million in sales for Translarna, which is approved in Europe, and $187 million for Emflaza, approved in the US, for a total of $423 million in sales in 2021. Meanwhile, Sarepta’s overall sales reached $612 million for that same period.

Adding the rest of the minor competitors for Duchenne syndrome treatments, only $1.5 billion of the projected market value is held by the existing drugs. Clearly, there’s a lot of room for more companies to join the fray.

Meanwhile, RSV presents another lucrative market. According to the Centers for Disease Control and Prevention, this condition causes approximately 58,000 hospitalizations annually in the US.

Of these, 100 to 500 deaths are children under 5 years old and 14,000 are adults aged 65 and above. The average expense in managing adult patients alone has reached roughly $3 billion every year.

In terms of market value, the RSV market is projected to reach $4 billion by 2027. So far, the biggest competitors in this space are GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), and Moderna (MRNA).

While its rivals are challenging, Pfizer still estimates sales for its RSV vaccine to reach at least $1.5 billion annually.

Thanks to its COVID programs, Pfizer has been hailed as the undisputed leader of the pack in terms of reputation and credibility in research.

Needless to say, these factors would serve as a valuable growth lever for the healthcare giant for decades.

As one of the largest biopharmas in the world, Pfizer has established a reputation for outstanding innovation. Over the years, the company has delivered several revolutionary treatments to the market like Viagra or Lyrica.

Simultaneously, it developed Lipitor, reaching $14.5 billion in sales over 14.5 years.

Since then, it has become a highly reputable industry name. Its diverse and extensive pipeline demonstrates that it remains a company highly capable of innovating and maintaining its dominance.

August 2, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
August 2, 2022
Fiat Lux

Featured Trade:

(A RISING TIDE LIFTS ALL BOATS)
(MRNA), (PFE), (NVAX), (SNY), (BNTX)

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