Fountainheadinvesting

Fountainhead Investing

Menu
Menu

Category: Pharmaceuticals

Categories
Pharmaceuticals Stocks

Pfizer (NYSE:PFE) Maintaining Pfizer As A Buy On Declines.  

The dividend yield of 5.4% is good and Q2 results beat expectations…. 

Pfizer (NYSE:PFE) topped expectations with its second quarter results and raised its full-year outlook, driven by strength in its oncology portfolio and continued efforts towards realigning its cost base. 

The New York-based pharma giant generated adjusted earnings of $0.60 a share on revenue of $13.28B that grew 2.2% year-over-year. 

This marked Pfizer’s (PFE) first quarter of topline revenue growth, on a year-over-year basis, since the fourth quarter of 2022 when our COVID revenues peaked. Both metrics topped analysts’ projections for the quarter. 

Revenues grew 3% operationally year-over-year despite anticipated decline in revenues from its COVID-19 products, Comirnaty and Paxlovid. Comirnaty vaccine marketed with BIoNTech (BNTX) added $195M in revenue with a ~87% drop while COVID-19 pill Paxlovid generated $251M indicating a ~79% YoY growth. 

Excluding contributions from Comirnaty and Paxlovid, revenues grew 14% operationally to $12.8B, amid a strong performance from blood thinner Eliquis, which Pfizer (PFE) markets with Bristol Myers (BMY). Pfizer (PFE) also achieved exceptional growth in its oncology portfolio, with strong revenue contribution from its legacy-Seagen products. 

The drugmaker raised its full-year 2024 revenue guidance by $1B at the midpoint to a range of $59.5 to $62.5 billion (consensus estimate: $60.58B) and adj. diluted EPS guidance by $0.30 at the midpoint to $2.45 to $2.65 (consensus estimate: $2.37). Including the contribution from Seagen and excluding revenues from Comirnaty and Paxlovid, the firm now expects to achieve full-year 2024 operational revenue growth of 9% to 11% Y/Y. 

The company also said it is on track to deliver at least $4B in net cost savings by the end of 2024 from its previously announced cost realignment program. 

Categories
Pharmaceuticals Stocks

Galapagos Faces Uncertain Future Amidst CAR-T Therapy Pivot

Galapagos (GLPG) $27 pivots to CAR-T therapy, divesting Jyseleca; faces clinical, market risks amidst investor skepticism. Divestiture of its Jyseleca business reflects a significant shift in its business strategy. There are dissenting opinions on whether this was a good move.

Revenue up 9% YOY; operating losses reduced; strong cash reserve at $4.2B; 

  • Negative enterprise value and underperforming stock; high short interest and bearish investor sentiment.
  • A lot of uncertainties in CAR-T strategy, competitive landscape, and market skepticism. The CAR-T therapy landscape is intensely competitive, and the success of Galapagos’ key candidates, GLPG5101 and GLPG5201, is imperative.
    • Pipeline and R&D Success Rate: Concentrating on CAR-T therapies, particularly GLPG5101 and GLPG5201, presents significant risks. Nevertheless, the EUPLAGIA-1 study’s preliminary data reveals encouraging results. In the study, 75% of CLL patients (12 out of 16) who received GLPG5101 achieved Complete Response with no report of serious adverse effects. In contrast, the GLPG5201 treatment group faced more severe outcomes, with 2 out of 14 patients encountering fatal (Grade 5) events, and a few others experiencing life-threatening or disabling (Grade 4) complications.

This is from a biotech analyst, he’s bearish but a couple of other biotech specialists were bullish in 2023, but haven’t published any updates.

Wall Street has a hold rating.

Categories
Pharmaceuticals

Arcus Biosciences, Inc. (NYSE:RCUS) $20.50

Good support from Gilead: Drug giant Gilead Sciences (GILD) paid just over $300 million to up its stake in this developmental firm to 33%, paying some $21 a share to do so. 

Gilead also upped its members on the board of Arcus from two to three. However, the shares are trading approximately 25% under what Gilead just paid to increase its holdings in Arcus, which could be an opportunity.

Broad Portfolio: The company’s lead product candidate is called Domvanalimab, which is an anti-TIGIT investigational monoclonal antibody. It has a broad portfolio of several other compounds in development as well.

The recent additional funding/equity investment from Gilead is not surprising as it just part of approximately $1.7 billion Arcus has received from the drug giant in recent years. It is also just one of several developmental partnerships Arcus has with larger pharma concerns, which allowed the company to build a diverse and large pipeline with three late-stage programs.

This is led by the development of Domvanalimab which is currently being evaluated in a half dozen Phase 2 and Phase 3 studies to treat NSCLC and upper GI cancers. Most of these are within a combination therapy with its in-house anti-PD-1 antibody called Zimberelimab. If any of these are successful, this could lead to a large potential market.

Arcus Biosciences seems a solid ‘sum of the parts’ investment at current trading levels. The company certainly has multiple ‘shots on goal‘, several partnerships with larger drug development concerns, upcoming trial milestones and is quite well-funded. 

Risks

As outlined in the risks for the other biotech companies, successful completion of trials and FDA approval are the two main risks. Additionally. successfully marketing and profitable sales takes a huge effort, so the go to market strategy has to be almost perfect. 

Categories
Pharmaceuticals Stocks

 Intellia Therapeutics Inc (NTLA) $22 and BeiGene Are High Risk High Reward Investments

Top tier gene editing company, therefore High Risk, High Reward. I think the best bet for Intellia would be a takeover from the bigger pharma/biotech companies.

STRENGTHS

Strong pipeline of in vivo and ex vivo CRISPR-based therapies for life-threatening diseases with high unmet need. Their In vivo therapy is more advanced.

CRISPR gene editing is a leading therapy and likely to succeed. Intellia has a collaboration with Regeneron Pharmaceuticals, which is a stronger Bio Tech company.

Good cash balance to fund operating plans into late 2026.

With nice liquidity and three cutting edge clinical programs in or near pivotal stage, Intellia has garnered a nice following. Wall Street Analysts are excited about its prospects, however sizable revenue starts only in 2026, 2027.

RISKS

FDA has only approved one ex vivo CRISPR/Cas9 therapeutic for human use and none in vivo.

Even after approval the commercial viability is still to be proven and also importantly profitable, even if it takes time – Wall Street estimates call for sizable revenue in 2026-2027.

There have been several failures including the giant Gilead’s after FDA approval.

BeiGene (BGNE) $164

Chinese biotech giant with $3.24Bn estimated sales in 2024. Also, High Risk / High Reward.

BeiGene is a much larger company with an anti-cancer blockbuster, Zanubrutinib. By the end of 2023, it had been approved in more than 65 markets, although U.S. demand remains dominant with annual sales there rising nearly 143% to $946 million.

Zanubrutinib contributes nearly 62% of BeiGene’s overall product revenue. It was the first China-developed innovative drug to gain approval in the United States, initially to treat a type of lymphoma. The the company’s investment in R&D, the biggest in China’s pharmaceutical sector, has brought another star product to market, the injectable drug Tislelizumab. The drug, which boosts the body’s immune defenses against cancer cells, has just been launched in Europe. It brought in $537 million in 2023, a year-on-year rise of almost 27%, although sales notably fell 12.5% in the fourth quarter to $128 million from the same period a year earlier.

This is a matter of prestige for the Chinese government and businesses, I suspect that the government will not hesitate to pump in more cash since biotech needs a vast amount of capital.

Weaknesses and Risks

  • Still Losing money: Having proved its ability to develop novel drugs, BeiGene now needs to show it can come up with multiple blockbusters that will finally deliver profits for shareholders. The earliest estimate of profits is 2027 – chances are the stock could remain a show me story, till then or not get a better multiple / rating.
  • In the cash-hungry biotech business, even a blockbuster drug with annual sales of more than $1 billion may not be enough to cure an excess of red ink. Besides, BeiGene now has 17 commercial products and a pipeline of more than 50 candidate drugs, which are gobbling up cash for R&D, promotional activities and sales.

It’s a bit of a double edged sword – the Chinese government is likely to continue support without regard to profits, but on the other hand the markets are less likely to support a continuously loss making company.

Categories
Pharmaceuticals

Eli Lilly (LLY) Analysis: A Buy on Declines with Strong Growth Prospects

source:lilly

Eli Lilly – (LLY) $740 Buy on declines, Long term annual return 11-16%.

Eli Lilly’s forecasted earnings and revenue growth for the next three years are very impressive at a CAGR of 28% and 16%, respectively. To put that in context, it’s a lot higher than the 11% and 6%, 10-year average. 

Why?

Three blockbuster drugs mainly

Mounjaro, weight loss grew 8X 

Verenzio, Breast Cancer grew 56%

Jardiance, Blood Sugar grew 33%.

A big chunk of this is already priced into the stock, which has doubled from last year and quotes an expensive 58x earnings or a PEG of over 2. So we’re late to the party. However, given the higher multiples afforded to Big Pharma, specially the ones with massive pipelines that keep bringing new drugs to the market, Eli could still quote 35-40X 2027 earnings of $29, or between $1,015 to $1,160. That translates into an annual gain of 11% to 16%. That’s still quite good given the pedigree and size.

Eli is also very profitable with great operating margins of 30%.

This should also give us some diversification from the heavy reliance on tech and semis, two sectors that are getting overpriced.