(PFE) Archives

A Rising Tide Lifts All Boats

Moderna (MRNA) shareholders have one major worry in recent months: that the biotech company’s billion-dollar COVID-19 vaccine sales will eventually dry up.

After all, roughly 67% of the US population has already been fully vaccinated. Hence, it’s not surprising for investors to wonder whether the company’s glory days are over.

As a result, Moderna’s share price has taken a hit. The stock has slipped by over 35% so far in 2022. However, this looks more like an overreaction rather than a response to anything the company has done.

If anything, it seems that investors have read the situation wrong since Moderna recently received a billion-dollar vaccine dollar from the US.

The deal isn’t for the original version of its COVID-19 vaccine though. Instead, it’s for an updated booster candidate that targets the original coronavirus and the emerging omicron BA.4 and BA.5 strains.

Moderna will receive $1.74 billion to supply the US with 66 million doses of the updated booster. This means the price per dose would be $26.36.

This pricing is lower than the deal with Pfizer (PFE) for a similar booster, which had an implied price per dose of $30.48. In total, Pfizer is set to receive $3.2 billion for 105 million doses.

Nevertheless, this new Moderna contract shows a substantially higher price compared to the previous deal wherein the US paid $3.3 billion for 200 million doses.

That particular deal implied that the price per dose of the vaccine was at $16.50. in comparison, Pfizer’s vaccine was priced at $24 per dose.

A probable explanation for this disparity in pricing is the fact that Moderna received approximately $1 billion in funding from the US government courtesy of its Operation Warp Speed program. Meanwhile, Pfizer refused to participate in such a scheme.

Taken together, Moderna and Pfizer are slated to deliver 171 million doses of the updated booster by fall and winter.

Admittedly, those won’t be sufficient to cover the entire US population. This is why both contracts have options that would allow the government to add 300 million doses each as needed.

In terms of delivery, Moderna announced that its candidate should be ready for the fall vaccination campaign by the end of August.

Outside its coronavirus vaccine efforts, Moderna has a promising pipeline of candidates. To date, the company has 46 programs under development including personalized cancer vaccines.

Of these, Moderna has three candidates queued for Phase 3 trials. All of them are investigational vaccines. One is for the flu, another is for the respiratory syncytial virus (RSV), and the third targets the cytomegalovirus (CMV).

The flu vaccine has competition in Sanofi (SNY) and possibly Novavax (NVAX). However, there are no CMV and RSV vaccine candidates in existence.

Needless to say, getting the green light from the FDA for one or both of these vaccine candidates would be a massive win for Moderna.

More importantly, the company would hold the precious first-to-market competitive edge.

Another exciting candidate is Moderna’s collaboration with Vertex Pharmaceuticals (VRTX). The two are working on an inhaled candidate treatment for patients with cystic fibrosis.

Considering that Vertex is practically a monopoly in this space, its partnership with Moderna could mean a potential game changer in the industry.

Overall, Moderna’s lucrative deal with the US government could be indicative of another exciting period for coronavirus vaccine stocks.

After all, a rising tide lifts all boats.

Moreover, this group had the best performers on the market in the past years. Novavax skyrocketed by 2,700% in 2020 following the announcement of its COVID-19 program. BioNTech (BNTX) jumped by 600%, while Moderna climbed by an impressive 1,200%. Even Pfizer reaped rewards from its coronavirus candidate as it rose by 59% during the same period.

While these vaccine stocks won’t likely repeat their stellar performances, there are still several investment opportunities involving these companies.

The key is to choose a business that does not simply depend on its coronavirus vaccine gains but also leverages the opportunities to expand and diversify its portfolio.

This is what Moderna has been doing. With numerous programs in its pipeline, the company has turned itself into a multi product business that offers stability and growth. Investors eager to add a vaccine stock in their portfolio should buy the dip.

July 14, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
July 14, 2022
Fiat Lux

Featured Trade:

(GOODBYE BIG PHARMA, HELLO BIG BIOTECH)
(GSK), (PFE), (BMY), (VTRS), (LLY), (JNJ), (AMGN), (GILD),
(MRK), (RHHBY), (AZN), (NVO), (ABBV), (SNY), (ABT)

Goodbye Big Pharma, Hello Big Biotech

Biotech Letter

The moment GlaxoSmithKline (GSK) completes the spinoff of its massive segments marketing drugstore staples, such as Tums and Advil, it will become the latest name to join the list of Big Pharmas shuffling their assets and rebranding itself into a pure-play biopharma stock.

The reorganization of this UK-based company is the culmination of years-long process that has transformed practically all the biggest pharmaceutical companies globally into biotechnology companies on steroids.

This type of transformation, which gets rid of sideline businesses, has been going on for years. Pfizer (PFE) dumped its chewing-gum segment back in 2002 and established another spinoff unit, Viatris (VTRS), with Mylan in 2020.

Bristol Myers Squibb (BMY) decided to spinoff its infant-formula division in 2009. In 2018, a new animal health company came to be from Eli Lilly (LLY).

By 2023, Johnson & Johnson (JNJ) expects to complete the creation of a spinoff company and unload its consumer health segment, which offers Tylenol and Band-Aids.

Essentially, they’re turning into Amgen (AMGN) and Gilead Sciences (GILD) but with more money and resources to churn out high-priced, complex treatments for rare diseases.

However, not all Big Pharma names plan to become pure-plays. For example, Merck (MRK) still intends to retain its animal health sector while Roche (RHHBY) wants to keep its diagnostics segment.

As for the rest, including AstraZeneca (AZN), Novo Nordisk (NVO), and AbbVie (ABBV), their plan is to focus on creating new drugs and marketing these treatments—nothing more, nothing less.

The idea of Big Pharma transforming into “Big Biotech” dates back to 1992, when Henri Termeer, the CEO of Genzyme—now owned by Sanofi (SNY)—was summoned to a Senate hearing in Washington to argue and justify one of the most expensive medicines ever put to market.

The medication in question was for a rare genetic condition called Gaucher disease. A year-long treatment for one person needed tens of thousands of human placentas, and the price tag? A jaw-dropping $380,000 annually.

Amid the demand to make the treatment cheaper, Genzyme stood by its decision and the price barely budged after two years.

The company’s tenacity and insistence on standing by its pricing altered the biopharma landscape. That is, drug developers realized that rather than marketing cheaper drugs to combat common diseases, they can focus on biotech-style treatments to target rare conditions.

At that time, Big Pharma companies were battling over pieces of massive markets. They allocated considerable funds to their commercial teams, hoping to outrank one another in crowded spaces.

Meanwhile, biotechs like Genzyme decided on a different strategy.

They concentrated on more innovative approaches. Actually, the biotech focused on biologics at that point. Then, the company simply ignored the pricing rules and set its own prices, which were considerably higher.

A more recent go-to proof of concept for this strategy is Abbott Laboratories (ABT), which was initially a diversified company that offered an extensive range of products like medical devices and even infant formula.

In 2013, the company spun off its branded pharmaceutical sector into AbbVie, which became a pure-play biopharma that focused on developing and marketing the arthritis drug Humira. Since then, Humira has transformed into one of the top-selling drugs in history.

More than that, AbbVie pays substantial dividends while its shares have delivered 500% returns since the spinoff. In comparison, the S&P 500 has returned roughly 220% within the same timeframe.

While this is a shift that investors have clamored to see in the healthcare sector, it also means that the transformations could turn companies with solid revenue streams that have become reliable despite the ups and downs of the drug discovery process into riskier bets.

Although treatments for rare diseases admittedly come with very high price tags, focusing on smaller markets brings with it the inherent risk that these buy-and-stuff-under-the-mattress blue chips could no longer deliver returns as consistently.

These days, though, the advancements have made faster and safer scientific breakthroughs much more plausible.

Companies have gained a better understanding of the human genome, oncology treatments, genetic diseases, and groundbreaking modalities like gene therapies.

The science has now caught up with the demand. More importantly, Big Pharma has finally woken up and started to leverage its resources to take advantage of the opportunities.

This gradual change can be seen in the surge of new treatments in the past years. From 2016 to 2020, the FDA approved an average of 46 new therapies annually.

This is more than half the number between 2006 and 2010 when the organization only approved an average of 22 new treatments every year.

Needless to say, these changes are also partly in response to the overall dissatisfaction of investors with the diversification strategies of Big Pharma.

Basically, the general message here is that Big Pharma should let the investors worry about diversifying their own portfolios and focus on developing safe and effective drugs.

June 23, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 23, 2022
Fiat Lux

Featured Trade:

(AN A-RATED STOCK FOR THE ANXIOUS INVESTOR)
(PFE), (AZN), (MRK), (NVO), (BNTX), (VLA), (GSK)

An A-Rated Stock for the Anxious Investor

Biotech Letter

Choosing businesses with size and scale in their favor is more often than not a wise move for investors.

After all, these companies tend to be well established in their respective fields and hold a higher chance than their peers in terms of sticking around for a long time.

Pfizer (PFE) is an excellent example of a mature biopharmaceutical stock that could efficiently deliver great rewards to investors for many years.

However, the elephant in the room for this stock is whether the bumper profits from its COVID-19 vaccines will be sustained in the long term. These concerns have kept a lid regarding the company’s valuation.

If we strip out Comirnaty from the conversation, Pfizer will still have a decent valuation in relation to its share price today.

It has a current P/E of 11x and market capitalization to operating cash flows of 8.9x. In contrast, fellow vaccine maker AstraZeneca (AZN) has been trading at a negative P/E and a stressful market cap to operating cash flow of 27 times.

For added context, Big Pharma names Merck (MRK)’s P/E is 17x while Novo Nordisk (NVO) has been trading 37 times.

Going back to Pfizer, the company’s first-quarter earnings results for 2022 indicated a strong performance and reinforced its guidance this year.

For the full year of 2022, the company projects sales within the range of $98 billion to $102 billion.

To offer you a better picture of the scale of this growth, this would amount to 150% times the yearly sales between 2018 and 2020

It would actually be a quarter higher than the 2019 and 2020 sales combined.

If this roughly $100 billion forecast is achieved, Pfizer will become the first-ever pharmaceutical stock to reach that goal.

To put this in perspective, if we consider Pfizer as a country or a territory, then its GDP would be ranked 64th globally.

This would put it above Ethiopia and immediately behind Puerto Rico.

During this period, Pfizer recorded $25.7 billion in revenue, showing off an impressive 82% operational growth rate year-over-year and a 76% EPS growth.

Comirnaty, co-created with BioNTech (BNTX), raked in $13.2 billion, reporting a 282.1% spike for Pfizer

Meanwhile, the newly launched COVID-19 treatment, Paxlovid, generated $1.5 billion in revenue.

Pfizer’s consistent exponential growth, as shown in the first-quarter earnings, isn’t solely dependent on its COVID vaccines.

While Comirnaty and Paxlovid comprised over 50% of the $25 billion revenue in that period, sales from other segments continued to rise.

For example, stroke and blood clot treatment Eliquis generated $1.8 billion, up by 12% from its 2021 first-quarter sales of $1.2 billion. Meanwhile, heart failure treatment Vyndamax jumped by an impressive 41% to hit $612 million.

On top of its solid drug development pipeline, Pfizer has been leveraging its bumper cash flow to pursue bolt-on acquisitions of promising biopharmas.

Just last month, Pfizer acquired Biohaven Pharmaceuticals for $11.6 billion in cash. The smaller company’s primary treatment is Rimegepant, a migraine medication approved in both the US and Europe.

Aside from that, Pfizer threw its weight behind a fellow COVID vaccine maker, a French biotechnology company called Valneva (VLA).

Valneva’s most promising program is its late-stage development of a vaccine for Lyme disease.

When Pfizer announced its decision to add $95.6 million to the project plus up to $100 million in milestone payments, it triggered a massive 81% surge in Valneva stock price.

Pfizer and Valneva’s partnership for developing a Lyme disease vaccine started in 2020 when the bigger biopharma paid $130 million upfront.

This latest revision of their deal will not only up Pfizer’s stake in Valneva to 8.1% but also allow the French biotech to continue with its Phase 3 trial without the fear of straining its cash position.

Pfizer currently holds a distinct position in its history, with gushers of cash coming practically from all places.

These sums can only be expected to go higher with the anticipated listing of its consumer healthcare business, which it co-owns with GlaxoSmithKline (GSK). While there’s no official word yet on the deal, Pfizer’s plan to sell its stake could generate roughly $19 billion.

Moreover, the company maintains a respectable dividend yield of 3% and a net debt of roughly $10 billion, which can be completely paid off using its operating cashflows for three to four months.

This enables Pfizer to sustain a comfortable credit rating of “A” Stable from Fitch, thereby making it financially stable and safe from the ever-increasing interest rates.

Needless to say, Pfizer is the kind of stock that offers rare stability in this turbulent period.

June 21, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 21, 2022
Fiat Lux

Featured Trade:

(A POTENTIAL ONE-STOP-SHOP IN THE CANCER MARKET)
(SEGN), (MRK), (PFE), (ABBV), (JNJ)

A Potential One-Stop-Shop in the Cancer Market

Biotech Letter

So far, there’s no clear leader in the cancer market. However, it looks like things might change soon if Merck (MRK) gets its way.

The biotechnology and healthcare sector has heard some interesting updates lately involving Merck and its frequent collaborator, Seagen (SEGN).

While Merck already has a stake in Seagen, it appears that the New Jersey biopharma wants the whole thing. There’s no need to panic buy just yet, though, since Merck still has to go through hoops to prove that its plan won’t cause any antitrust issues.

Moreover, Merck won’t be the only suitor. Several names in Big Pharma have been eyeing Seagen for quite some time, including Pfizer (PFE) and AbbVie (ABBV).

Even Japan’s Astellas Pharma, with a jaw-dropping $3.76 trillion market capitalization, is said to be interested.

If this does push through, it would be another massive deal since Seagen’s current market capitalization is at $31 billion.

Why is Seagen an attractive acquisition candidate?

This biotech currently has four cancer treatments available on the market.

It’s also reviewing a couple of candidates to determine how they react as part of a combo therapy with Merck’s blockbuster drug Keytruda.

Evidently, the potential to exclusively own the rights to compounds that could bolster the effects and expand the indications of its bestselling therapy is a significant motivation for Merck.

If the acquisition happens, Merck will undoubtedly be an incredibly formidable powerhouse in the oncology sector.

At the moment, the company already has 46 commercially approved indications in its cancer portfolio.

By 2028, Merck plans to see this number grow to over 80 oncology drugs, with Keytruda leading the charge.

Aside from its potential combination with Merck’s top-selling treatment, what’s more promising for Seagen is its actual portfolio of four molecules or its Big Four franchises.

These are Adcetris, Tukysa, Padcev, and Tivdak.

Adcetris has been hailed as the foundation of care for practically all types of lymphoma, while Padcev has been proven to be the standard of care for advanced bladder cancer.

Tukysa has been hailed as best-in-class for metastatic breast cancer, while Tivdak is the first-in-class for cervical cancer.

Holding such premier titles and indications ensures that these treatments generate highly aggressive revenue boosts, thereby guaranteeing their trajectory towards becoming blockbusters.

After all, you rarely hear of any blockbuster treatment being a second-line therapy.

In terms of sales, the Big Four managed to generate a total of $383 million in the first quarter of 2022. This indicates approximately 27% year-over-year sales growth, which bodes well for the future of Seagen’s portfolio.

Adcetris rakes in $181 million during the said period, Padcev contributed $100 million, Tukysa generated $90 million, and Tivdak recorded $11 million.

Tukysa’s growth was attributed to its penetration of the European market in February 2021, while Adcetris soared because of its expansion to include advanced Hodgkin lymphoma.

As for Tivdak, this particular product’s performance could be attributed to the fact that it was only approved last September 2021.

Among the four, however, Padcev showed the most aggressive rise in sales at a 44% increase year over year.

Its substantial growth is not only due to its superior efficacy over traditional treatments but also to its ever-increasing market penetration.

Aside from the US, it has successfully entered the UK, Japan, Canada, Israel, Switzerland, and the European Union.

Given its history and how it’s performing, Padcev is projected to become a blockbuster treatment before 2030.

Although the Big Four have delivered groundbreaking changes to the oncology sector, Seagen has been consistent in aggressively pursuing new candidates.

It currently has 17 programs in its pipeline, which target blood cancers and solid tumors.

Ultimately, Seagen’s goal is to become an all-around cancer biotech—aka the oncology sector's Johnson & Johnson (JNJ).

June 16, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 16, 2022
Fiat Lux

Featured Trade:

(AN UNDERRATED LONG-TERM BIOPHARMA STOCK)
(OGN), (MRK), (PFE), (VTRS), (ABBV), (JNJ), (AMGN), (RHHBY), (BMY)

An Underrated Long-Term Biopharma Stock

Biotech Letter

Six months into 2022, the markets are still in turmoil while highly valued stocks rapidly fall.

A way to cope with these is to search for safety and security among value-focused investments that are less at risk of sudden declines.

One business that remains profitable and is trading at a relatively affordable price, especially considering its future earnings multiples, is Organon (OGN).

Organon is a spinoff from Merck (MRK). It focuses on women’s health products, existing treatments, and biosimilars. It was launched roughly the same time Pfizer (PFE) launched its spinoff, Viatris (VTRS), in 2021.

While Organon has yet to become a superstar growth stock at the moment, it’s an excellent business to consider for a stable long-term investment.

So far, the company has managed to generate promising gross margins north of 60% and consistently proved to be profitable.

To date, Organon has over 60 treatments in its pipeline.

Thanks to strategic partnerships, Organon has become the biggest pharmaceutical company centered on women’s health.

Not only that, it has an extensive portfolio of biosimilars or biosimulators focusing on cardiovascular, dermatological, and respiratory conditions.

Meanwhile, Organon has one of the highest dividend yields among biopharma companies at 3.47%, with consistent dividend payments of $0.28 per share every quarter.

Organon’s biosimilar growth received a jumpstart from its agreement with Samsung Boepsis in 2013. The deal enables both companies to develop and market a number of biosimilar treatments focused on cancer and immunology.

Under this partnership, Organon has been granted exclusive license to manufacture, test clinically, and market inflammatory treatments like AbbVie’s (ABBV) top-selling Humira, Johnson & Johnson’s (JNJ) blockbuster Remicade, and Amgen’s (AMGN) moneymaking treatment Enbrel, as well as oncology therapies such as Roche’s (RHHBY) promising growth drivers Avastin and Herceptin.

These catapulted Organon as the leader in the fast-expanding healthcare field, where several lucrative drugs will lose their patent exclusivity before 2030.

Riding this momentum, Organon plans to expand its portfolio of biosimilars to cover more therapeutic fields like neuroscience, diabetes, and even ophthalmology.

To boost its portfolio, Organon has been collaborating with Shanghai’s Henlius Biotech to work on more biosimilars.

The Merck spinoff has agreed to pay $73 million upfront in addition to $30 million in milestone payments for the development of Pertuzumab, a biosimilar for Roche’s breast cancer treatment Perjeta, and Denosumab, a biosimilar of Amgen’s osteoporosis drug Prolia. Another Amgen drug, bone cancer treatment Xgeva, is included in the collaboration agreement.

For context, Amgen reported $873 million in sales for Prolia and $545 million for Xgeva in 2021, while Roche raked in $4 billion from Perjeta.

If this partnership works out, Organon and Henlius plan to move forward with a biosimilar to Bristol Myers Squibb’s (BMY) cancer drug Yervoy and its best-selling Opdivo.

While these are all exciting, it may still take some time for the biosimilars to be released to the market. Among them, the Prolia biosimilar has the most apparent timeline, potentially launching the product by 2024.

Although Organon has yet to make a splash in the biopharmaceutical market, the company holds impressive potential. So far this year, the stock has been up 15%—a performance that’s better than the S&P 500 that recorded 4% in losses over the same period.

More than that, its price is heavily discounted these days, offering investors an extra incentive to seize the opportunity to buy shares of this relatively new company in the healthcare sector.

It also has consistent revenue growth and a promising pipeline of diverse candidates with the potential to expand the company’s portfolio.

Taking all these into consideration makes Organon an underrated buy at the moment and a great candidate for long-term investors.

June 7, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 7, 2022
Fiat Lux

Featured Trade:

(A LOW-KEY BIOTECH SET FOR A BULL RUN)
(REGN), (BAYG), (NVS), (RHHBY), (SNY), (ABBV), (PFE), (INCY), (MRK)

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