Mad Hedge Biotech and Healthcare Letter
November 2, 2021
Fiat Lux
Featured Trade:
(IS THIS THE BEST BUY AMONG THE VACCINE STOCKS)
(NVAX), (MRNA), (PFE), (BNTX), (SNY), (JNJ)
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Many investors have amassed a fortune since the pandemic started in the early months of 2020 by betting on COVID-19 vaccine candidates. Moderna (MRNA), for example, has skyrocketed to over 1,500% since last year.
However, there was an even bigger winner: Novavax (NVAX).
Novavax shares actually rose by a jaw-dropping 4,000% since the COVID-19 pandemic began, with the company’s wild rollercoaster ride still not reaching its end anytime soon.
In fact, Novavax has been quite volatile in 2021, rising by more than 180% in early February only to have most of those gains practically wiped out a mere three months after.
Then, the stock managed to show off a strong rebound over the following months. Since early September, though, Novavax’s share price has fallen by over 35%.
While these can be discouraging for some investors, I think that the befuddling gyrations that had us reeling in the past months tell a different story: We might have just discovered the biggest bargain among the leading COVID-19 vaccine stocks in the market today.
There are two possible reasons for the Novavax selloff recently.
The first is the company’s delayed filing of its own COVID-19 vaccine candidate, NVX-CoV2373. This is particularly frustrating considering that Novavax has failed to meet its deadlines multiple times now.
Nonetheless, I prefer to look at these delays as mere speed bumps than actual roadblocks that hinder the company from achieving its goal.
After all, the issue is not on the vaccine’s safety and efficacy—the results have been proven to be highly compelling—but on manufacturing concerns, which can eventually be resolved.
The second reason is the recent update from Merck (MRK) and its partner, Ridgeback Biotherapeutics, on their COVID-19 pill. Of the two, I find this reason to be an overreaction by the market.
None of the vaccine developers should ever be negatively affected by Merck’s oral treatment. While some people might choose not to get the vaccine if and when the pills become available, practically all governments worldwide are still committed to vaccinating their citizens.
Moreover, the COVID-19 vaccines will probably be necessary every year.
When Novavax gets the required authorizations, the company is set to generate a boatload of cash. The biotechnology company is anticipating to supply up to 200 million doses in the European Union alone.
The entire COVID-10 vaccine market is projected to be worth $115 billion by the end of 2021. Moderna is estimated to deliver up to 3 billion doses, while Novavax is expected to produce up to 2 billion doses by 2022.
The rest of the anticipated 14 billion doses will be divided among the other vaccine makers.
Among them, though, Novavax is expected to be the stand-out.
For one, its vaccine candidate appears to be the most robust and affordable at $16 per dose compared to Moderna’s $25.50 and Pfizer-BioNTech’s $22.80.
The growing number of reports on the side effects of mRNA vaccines, which are said to be of a higher rate than Johnson & Johnson’s (JNJ) candidate, can also be a turnoff for many people.
Since Novavax uses a more traditional and familiar vaccine technology—the same one used for the flu, HPV, and Hepatitis B—it causes lower side effects rates.
More importantly, these are mild symptoms like muscle pain and fatigue compared to the heart inflammation concerns raised among those jabbed with Moderna or Pfizer vaccines.
While the side effects from the other two occur in relatively small populations, Novavax is anticipated to be perceived as the more reassuring option, especially for people who are still uneasy with the new technology of mRNA vaccines.
More importantly, Novavax can offer a solution to the global problem of vaccine hesitancy for COVID-19.
To offer a context on how important this is, 48% of Russians and 27% of Americans refuse to take the vaccines.
As of September, only 181.2 million individuals in the US, or 55.1% of the country’s population, have agreed to be fully vaccinated. Needless to say, overcoming this hesitancy would be a massive relief for everyone.
Apart from its COVID-19 vaccine, Novavax has also been working on an influenza vaccine candidate, NanoFlu.
Recently, results from the NanoFlu clinical trials showed that it’s way more effective than the leading brand today, Sanofi’s (SNY) Fluzone Quadrivalent.
If NanoFlu gains approval, this will be another huge growth driver for Novavax.
To put it in perspective, Sanofi’s Fluzone generated $2.9 billion in sales in 2020—a market that Novavax can also tap into and might even dominate.
Meanwhile, the flu vaccine market in the US alone continues to expand.
From 2020 to 2021, the number of flu vaccines administered rose by 11% year over year to reach 193.8 million doses. That’s roughly 59% of the US population—a country that’s only 7th place in terms of the global rates of flu vaccination.
That signifies a colossal market opportunity worldwide for Novavax to capitalize.
At this point, Novavax has yet to secure any approval or official authorization for NVX-CoV2373 or NanoFlu—and that’s the best reason to add this stock to your portfolio.
Investors are given a chance to seize shares of the stock while it’s still in the stage where its most lucrative catalysts are just lurking around the corner.
Mad Hedge Bitcoin Letter
October 19, 2021
Fiat Lux
Featured Trade:
(TRANSCENDING ITS COVID-19 VACCINE POTENTIAL)
(SNY), (PFE), (BNTX), (MRNA), (JNJ), (GSK)
Another day. Another COVID-19 vaccine could be out on the market.
Although hundreds of millions of individuals across the globe have already received their shots from approved vaccines of Pfizer (PFE) - BioNTech (BNTX), Moderna (MRNA), and Johnson & Johnson (JNJ), there are still several COVID-19 vaccine candidates undergoing late-stage testing.
This is important news for the companies.
After all, the COVID-19 vaccine market is projected to become a fundamental driver of share price growth.
From what we know about the virus so far, there is a huge possibility that people will need to be vaccinated annually at the very least.
If that’s the case, then the demand for COVID-19 vaccines yearly would reach roughly 8 to 10 billion doses. This could translate to sales between $80 billion and $100 billion.
The latest to potentially join the list is the joint candidate of Sanofi (SNY) and GlaxoSmithKline (GSK), which is anticipated for approval by the fourth quarter of 2021.
While Sanofi and GSK are practically a year behind their competitors, the high efficacy of their vaccine candidate—roughly 95% to 100%—makes them potential frontrunners in the near future.
Given that we can expect many competitors to enter the fray in the coming months, we can conservatively assume that Sanofi takes at least 3% to 5% of the market.
That would generate approximately $2.4 billion to $5 billion in annual revenue.
Since Sanofi holds a number of competitive advantages, such as solid experience in manufacturing and development and a strong geographical presence across critical markets, the company can ease out the competition.
Riding the momentum of the COVID-19 vaccines, particularly the mRNA candidates, Sanofi has been working with Seqirus to develop flu vaccines as well.
As the world struggles to deal with the effects of COVID-19, the more common flu isn’t receiving that much attention these days.
However, the impact of this disease worldwide is shocking: 3 million to 5 million people suffer from severe cases annually, with up to 650,000 individuals dying from the flu.
More alarmingly, a new flu strain spreads from animals and causes a pandemic every few decades.
The death toll associated with the flu becomes even more staggering when you think about the fact that we’ve been working on vaccines to get rid of its for eight decades now.
Despite the ongoing and long-term efforts, all flu vaccines available in the market are mediocre at best.
In fact, a flu shot is only effective within a single flu season. Moreover, its effectiveness is only within the range of 40% and 60%. There were even years when the number was as low as 10%.
Now, though, we might have a better shot at developing more effective flu vaccines thanks to the emergence of mRNA technology.
In theory, mRNA vaccines can trigger a stronger response from patients' immune system compared to the traditional flu vaccines.
To date, two companies are working on mRNA-based flu vaccines: Moderna and Sanofi.
Sanofi is collaborating with England-based vaccine developer Seqirus, with the two companies aiming for another mRNA flu test by early 2022. This will be in addition to the four flu vaccine candidates they have in the pipeline.
While the results for Sanofi’s flu vaccine efforts remain to be seen, experts are optimistic that it can drastically lower the number of deaths and severe cases annually.
For context, the most popular flu vaccine in 2018-19 flu season only had an efficacy rate of 29%.
Even with such low effectiveness, this vaccine prevents roughly 4.4 million flu cases in the United States alone. It also prevented 58,000 hospitalizations and 3,500 deaths.
Now, imagine how many lives a stronger candidate can save.
Although Sanofi appears to be late to the party in terms of its COVID-19 vaccine, the sheer efficacy of the company’s promising candidate with GSK makes it a powerful future contender as the leader of the pack.
Moreover, Sanofi is on the verge of resolving a pain point in the healthcare sector: the absence of a robust flu vaccine.
With its lineup of mRNA-based flu vaccine candidates, Sanofi is poised to discover potential game-changers in the industry and save millions of lives in the process.
Overall, Sanofi is a promising company sold at a reasonable price. More importantly, it prides itself on remarkable dividend history, paying and increasing dividends for 27 consecutive years.
Therefore, this dividend aristocrat is a good addition for investors on the lookout for quality and dependable stocks.
Mad Hedge Bitcoin Letter
October 12, 2021
Fiat Lux
Featured Trade:
(AN ANTI-BUBBLE HEALTHCARE STOCK TO KEEP YOU SAFE)
(VTRS), (PFE), (SNY), (RHHBY), (REGN)
Some stocks bring red-hot gains. These companies are thrilling. Most investors flock to these businesses like bees to honey. Then, there are stocks such as Viatris (VTRS).
You won’t hear much buzz about Viatris.
After all, this company develops generic drugs—a fairly boring business. At times, it feels like nobody even talks about this stock at all.
However, Wall Street claims that several stocks have more room to expand soon. Interestingly, the names aren’t your usual list of growth stocks that most investors expect to ascend. The largest expected gainers are boring stocks.
This is where Viatris becomes interesting.
One of the possible reasons that Viatris isn’t generating as much buzz is that it was only established in 2020. The company is the product of a spinoff between Pfizer’s (PFE) Upjohn unit and generic drugmaker Mylan.
The spinoff allowed Pfizer to concentrate more on developing its pipeline candidates, while Viatris focused on off-patent and generic drugs.
However, Viatris has been off to a slow start, with the stock down by over 28% this year. In fact, the company has reported net losses for three quarters in a row.
Needless to say, both resulted in having the stock deeply discounted.
While these can cause other investors to shy away from the stock, I look at it as part of the company’s growing pains.
And it looks like things are about to turn around soon.
By the end of this year, Viatris expects to reach cost synergies of roughly $500 million. Through major restructuring, the company anticipates doubling this to more than $1 billion by 2023.
As an early-stage business, Viatris offers a stable long-term investment.
While it recorded a somewhat flat performance at $4.6 billion in sales in June, the company’s lineup of new products signals growth ahead.
For example, Viatris estimates to generate roughly $690 million in revenue for its new products—a highly achievable projection for the company.
Just last July, Viatris scored approval for a biosimilar product called Semglee. This is an insulin biosimilar to the high-selling Lantus of Sanofi (SNY), which peaked at $6.4 billion in sales in 2015 and lost patent exclusivity in 2014.
Semglee is reported to be fully interchangeable with the reference drug, which means that Viatris’ biosimilar is the exact equal of Sanofi’s previous blockbuster.
Moreover, Semglee is priced at about $148 for five pre-filled insulin pens, offering a whopping 65% reduction from Lantus’ cost.
The significant price difference is clearly difficult to ignore, especially at a time when politics has joined the fray in drug pricing.
The ability of Viatris to undercut the prices offered by Big Pharma definitely signals long-term benefits in terms of the company’s bottom line.
Aside from Semglee, Viatris has seven more approved biosimilars on the market.
The list includes Roche’s (RHHBY) breast cancer treatment Herceptin, which peaked at $6 billion in sales, and Regeneron’s (REGN) AMD drug Eylea, which generates an average of $8 billion annually.
It even has AbbVie’s (ABBV) megablockbuster immunology therapy Humira, which averages $20 billion in sales annually.
While Viatris won’t be the only company marketing a biosimilar for Humira, the company has the advantage since its candidate, Hulio, already gained approval in Canada, Europe, and even Japan.
Meanwhile, Viatris’ near-term pipeline candidates hold the potential to generate $57 billion in sales. Adding the rest of its 31 biosimilar candidates could push the figure to $224 billion.
The expansion of the biologics market is anticipated to outpace traditional pharma in the future. From $300 billion in 2020, the biologics segment is projected to reach $690 billion by 2027.
Aside from its biosimilar programs, Viatris has also been working on its internal development plans.
This would mean developing new high-margin brand names as well as diversifying its portfolio to include novel therapies.
Viatris is projected to reach at least $35 per share in the coming months, showing off a promising 155% jump from its current price.
On top of that, investors have been enjoying a juicy payout of 3.2%—higher than the average 1.3% of the S&P 500.
Considering the risks brought by market correction, Viatris emerges as a prime candidate for a safe haven among investors.
That is, they can easily lock in on this relatively anti-bubble business that’s available at practically a bargain bin price.
Mad Hedge Biotech & Healthcare Letter
October 5, 2021
Fiat Lux
FEATURED TRADE:
(A BIOTECH STOCK THAT LETS YOU SLEEP THROUGH THE NIGHT)
(AMGN), (AZN), (GSK), (REGN), (SNY), (MRK)
Great investors have learned that the critical element when it comes to long-term investing is concentrating on stocks that hold a profound presence in their fields and that will continue to grow in the decades to come.
In terms of trends, the best thing to do is to determine something that will affect the world by generating millions—if not billions—of steady customers.
Among the stocks in the biotech industry today, one stands out to benefit from solid future demand for its products: Amgen (AMGN).
Amgen is one of the biggest biopharmaceutical companies across the globe, holding an equity market capitalization of roughly $127 billion. Despite its size, it simply can’t quite catch a break, with its share price continuing to slide in the past week.
While short-term investors may see this as a weakness, it’s moments like these that distinguish genuine value investors from the rest.
Let’s take a look at a company that has been thrown in the bargain bin for no apparent reason, and understand why this could be our opportunity.
A recent promising addition to Amgen’s pipeline is its experimental asthma drug, Tezepelumab, which it’s co-developing with AstraZeneca (AZN).
There are approximately 2.5 million patients worldwide who suffer from severe, uncontrolled asthma, accounting for almost 50% of all asthma-related expenses in the healthcare system.
This is because the majority of the 439,000 asthma-related hospitalizations, as well as 1.3 million emergency room visits annually in the US alone, are caused by severe, uncontrolled asthma.
Moreover, it was found that 1 in 5 severe asthma patients tend to develop a benign growth called nasal polyps in the sinuses of their noses. These can end up blocking their nasal passages, worsening their breathing problems, and diminishing their sense of smell.
This is the very market that Amgen’s Tezepelumab targets to help.
Tezepelumab is the first and only treatment that focuses on the symptoms of severe, uncontrolled asthma patients.
Considering the positive results of its late-stage trials, Amgen and AstraZeneca are confident that Tezepelumab will receive regulatory approval from the US FDA by the first quarter of 2022.
When that happens, this will mark Amgen’s first-ever foray into the asthma treatment sector—and it’s entering the market with a potential blockbuster to boot.
The global asthma market is projected to grow from $20.6 billion in 2020 to $37.3 billion in revenue by 2030.
So far, the other names aiming to dominate this segment include GlaxoSmithKline (GSK), Regeneron (REGN), and Sanofi (SNY).
Considering the competition, a modest estimate is to expect Tezepelumab to seize at least 5% of the market share following its approval.
That would work out to roughly $1.9 billion in yearly revenue, divided between AstraZeneca and Amgen.
Taking into account that Amgen is forecasting its 2021 revenue to be within the range of $25.8 billion and $26.6 billion, the addition of $1 billion annually would surely move the needle.
Moreover, the cherry on top is that Tezepelumab is a clear indicator of the company’s efforts to diversify its revenue base and enter a market that it has yet to establish its presence.
Apart from Tezepelumab, Amgen has also been working on expanding its blockbuster lung cancer drug Lumakras, which generated $2.5 billion in annual sales.
To date, Lumakras is expected to emerge as a solid contender to unseat Merck’s (MRK) Keytruda in the lung cancer segment.
In addition, the company is studying how to utilize Lumakras as a potential treatment for colorectal cancer.
Amgen has also been expanding its pipeline of biosimilar candidates.
The most exciting candidates include its biologic version of Johnson & Johnson’s (JNJ) psoriatic arthritis and psoriasis medication Stelara, Regeneron’s chronic eye disease drug Eylea, and AstraZeneca’s rare disease treatment Soliris.
Even AbbVie’s (ABBV) impending loss of exclusivity for its top-selling rheumatoid arthritis drug Humira is under the company’s radar, with Amgen already prepared to launch its own biosimilar domestically in the form of Amjevita by 2023.
Getting the regulatory green light for these treatments would allow Amgen to poach on hundreds of millions, if not billions, in annual revenue from its competitors.
Apart from its pipeline candidates and strong performance in niche segments, Amgen has demonstrated a solid track record when it comes to capital returns via share buybacks.
In the second quarter of 2021 alone, the company has splurged on 6.5 million in shares repurchases. Amgen expects to reach a total of $3 billion to $5 billion in total repurchases throughout the year.
This strategy has pushed Amgen in its goal to continuously deliver market-beating returns in the past decade, as shown by its 451% total—overtaking the 384% return of the S&P 500.
Buying shares of a company when it’s declining can be an excellent step to set yourself up for future gains when the stock bounces back.
However, not all struggling stocks can recover.
So, it’s crucial to determine the reason for their fall. If the business itself is stable and solid, a decline in value might just be the opportunity you need to invest.
The truth is, nothing has actually changed when it comes to Amgen’s long-term stock growth prospects. It's still the company with a slew of top-selling products and more pipeline candidates expected to become blockbusters in the coming years.
All told, Amgen holds roughly 20 revenue-generating products in its diverse portfolio, and not a single drug accounts for over 20% of the company’s continuously rising top line.
Overall, I think Amgen is an A-rated company with a reasonable yield and a promising upside.
Mad Hedge Biotech & Healthcare Letter
September 16, 2021
Fiat Lux
FEATURED TRADE:
(RIDING THE COVID-19 VACCINE MOMENTUM)
(PFE), (BNTX), (MRNA), (JNJ), (SNY), (GSK), (TRIL)
The pandemic is exhibiting hints of easing, and one of the names playing a critical role in the vaccine rollout that has made this step towards normalcy possible is Pfizer (PFE).
Actually, Pfizer stock has hit an all-time high courtesy of its COVID-19 vaccine, Comirnaty, which it developed with German biotech firm BioNTech (BNTX).
While this is undoubtedly an exciting time for the company, many investors wonder whether this period also marks the spectacular of Pfizer, and things will go downhill from here. After all, several of its patents are set to expire starting in 2025.
My short answer to this question is no. This isn’t the beginning of the end for Pfizer. Looking at the company’s history, pipeline, and trajectory, I can say that Pfizer’s rise is just getting started.
One of the key reasons behind my belief is Pfizer’s robust pipeline.
To date, the company has roughly 100 drugs queued for regulatory clearance, while others are slated for late-stage clinical testing.
That means that regardless of the patent expirations in Pfizer’s horizon, the company’s strong and diverse pipeline can easily counteract the blow from the loss of exclusivity.
Just last month, Pfizer received full approval from the US FDA for Comirnaty.
Since fellow vaccine developers like Moderna (MRNA) have yet to achieve the same, this makes Pfizer the first COVID-19 vaccine to gain this endorsement from the regulatory committee.
Needless to say, Pfizer could capitalize on this massive opportunity to boost its profits in the quarters.
The availability of a fully approved COVID-19 vaccine could allow establishments to oblige mandatory vaccinations, which could obviously lead to higher demand for Comirnaty, as over 100 million Americans have yet to receive at least a single jab.
In the second quarter of 2021, the company reported $19 billion in revenue, indicating a 92% year-over-year climb thanks to the $7.8 billion raked in by its COVID-19 vaccine.
Pfizer now estimates Comirnaty revenue to reach roughly $33.5 billion, indicating an expected 2.1 billion doses to be delivered within the year.
Excluding Comirnaty’s sales, Pfizer’s revenue increased by 10%. This strong momentum led the company to raise its 2021 full-year guidance to somewhere between $78 and $80 billion.
Before Comirnaty, though, Pfizer had already been known as a prolific vaccine developer.
One of its prized creations is the pneumococcal vaccine Prevnar, which generated $2.52 billion in revenue in the first 6 months of 2021.
Meanwhile, its tick-borne encephalitis vaccine, marketed as TicoVac, gained FDA approval in July and could bring in roughly $1 billion per annum.
Riding this momentum, Pfizer has been busy developing another potential moneymaker in this segment in the form of its respiratory syncytial virus (RSV) vaccine candidate: RSVpreF.
And if the Phase 3 results for RSVpreF come anywhere near its Phase 2 trial, then Pfizer has another blockbuster in its hands.
This is because the RSV vaccine market is projected to grow to approximately $10 billion by 2030, and Pfizer’s candidate is targeting 72% of that population.
However, the RSV market will be a crowded space with the likes of Johnson & Johnson (JNJ), Sanofi (SNY), and GlaxoSmithKline (GSK) working to fill this unmet medical demand.
So, realistically, Pfizer’s RSVpreF has the potential to capture 20% market share, translating to $2.1 billion in annual revenue.
Apart from its vaccine-related efforts, Pfizer’s core businesses have been growing as well. Top contributors come from its oncology arm, specifically Eliquis and Ibrance.
Its recent acquisition of Trillium Therapeutics (TRIL) is anticipated to serve as a catalyst for Pfizer’s cancer segment in the next years as well.
Overall, Pfizer has a blockbuster drug pipeline and an impressively successful COVID-19 vaccine rollout. These provide the company with a long runway for solid and steady growth.
