adminHealth care may be a real challenger to tech this year, a business that can actually grow faster than most of tech and has the possibility of a comeback from the Covid straitjacket that so many of these companies got caught up in. The pandemic obscured so much of the growth as Abbott Labs , for example, poured money into BinaxNOW tests, and Regeneron developed a rapid response drug. Pfizer went after vaccines and rapid responses, and the drug stores shifted resources to Covid immunity shots. Now, with Covid behind them, we are seeing the true earnings power of so many terrific companies. For our newest Bullpen additions , we focused on Abbott Labs, Novartis , Amgen and Walgreens Boots Alliance . We will go over them – but first, let me talk about what I learned at last week’s JPMorgan Health Care Conference that I attended in San Francisco, and what it means to your portfolio. We have not spent too much of our resources on this sector because it wasn’t right to do so. You have Covid eating up time and resources not just to develop sources of immunity and treatment but also because you did not have patients coming and asking for treatment for more elective surgery, especially the elderly. That’s what felled UnitedHealth taking our now-disappointing Club name Humana down with it. So, we have focused on the best performer, Eli Lilly , with its best-in-class GLP-1 drugs and its Alzheimer’s formulation, donanemab. CEO Dave Ricks reiterated at the conference that Lilly expects donanemab to receive Food and Drug Administration clearance in the first quarter of 2024. This strategy has been correct. While Novo Nordisk now has the lead in GLP-1s for both diabetes, Ozempic, and weight loss, Wegovy, Lilly’s recently approved Zepbound has a superior weight loss profile, and the company is rapidly expanding production. Mounjaro for diabetes has been on the market since getting FDA clearance in 2022. All four drugs are once-per-week injectables. These are hard drugs to make, and they must be done in a clean room similar to that of semiconductor manufacturing facilities. They use the self-injection needle from Becton, Dickinson Co., or BD as it’s also known, is another terrific company that makes everything in a hospital including catheters and blood drawing equipment. Lilly has two plants in North Carolina meant for the drugs and one in Europe. Regeneron is liked because it is developing a vaccine that gives you weight loss reduction, but it attacks the fat, not the muscle and fat. The GLP-1s from Novo Nordisk and Lilly reduce body mass so if you drop, say, 20 pounds, eight of those pounds could be muscle, which has devasting consequences if you don’t stay in shape. One of the reasons why, for example, we like Abbott so much is its protein supplements for seniors. It’s not talked about much, but the elderly can get very frail from these drugs and don’t get enough protein. We like Amgen because it is focused on both pill form — 60% of respondents do not like injecting shots — and on a long-form, once-a-month shot regimen rather than once a week. Roche spent $2.7 billion to buy Carmot last month, which is working on all of these. I am not sweating the competition because Lilly is working on all of these, too. We know health care has a lot of angles too it. There are so many companies that are working, for instance, on oncology everyone is looking for a Keytruda, Merck ‘s cancer franchise that is thought to be by far the strongest with Bristol-Myers Squibb a distant second with Opdivo. We have focused less on cancer drugs because we fear Keytruda’s power, even as we like Seagen’s cancer work, a company Pfizer spent more than $40 billion on to play a huge cancer role. ABT 1Y mountain Abbott Labs 1 year We also don’t want to be too hostage to any company that can be hurt by the GLP-1s even as we have found out that some really aren’t. We were concerned about Abbott’s exposure to the drugs because of its Libre diabetes product. After we spoke to CEO Robert Ford, we decided that Abbott is a beneficiary of the drugs. We also liked Abbott because you couldn’t see anything the company was doing whether it be in diagnostics or diabetes or infant formula — where it is back being No. 1 after being in Justice Department purgatory. It’s got four double-digit growing franchises that are unassailable. WBA 1Y mountain Walgreen 1 year What struck us first and made us make a move on Walgreens for the Bullpen was the extraordinary transformation of the company that I expect from Tim Wentworth. He’s an extraordinary pharmacy benefits manager-schooled CEO. His talents are so needed if Walgreens is going to pivot and go more to health. The previous CEO Roz Brewer was from Starbucks and struggled with the role that Walgreens plays in health care. Wentworth knows that the possibilities of Walgreens reconfiguring the store so it is a lot more health care and a lost less flotsam and jetsam that can be stolen from his stores or bought on Amazon just as easily. I see Walgreens as being “destinational,” and there will be nothing like it. The company has been struggling to find pharmacists but can pick them off via a bankruptcy-challenged Rite-Aid. If Rite-Aid has to liquidate, it could be a huge win for Walgreens. I think Wentworth might be willing to sell it stake in Cencora, the old Amerisource and get rid of its medical clinics to have the capital to reconfigure the stores, stay nimble, and get the lowest drug prices. Wentworth is liked among pharma, and that helps. It’s a tough group of CEOs he’ll be going up against. Wentworth is as much up to the task as Brewer wasn’t. Wentworth is going to move fast. Could this be a Foot Locker , something we got in way too early? It’s a thought but with the dividend cut two weeks ago and the disposals ahead of it, the time is now on Walgreens. AMGN 1Y mountain Amgen 1 year We came around to Amgen because it has about 18 drugs that could be billion-dollar formulations, which is great given how so many drug companies have too much focused on one drug such as Merck with Keytruda. Amgen CEO Bob Bradway is not a promotional CEO. He’s straight as an arrow. But he is excited about what he has seen for artificial intelligence, and he is downright thrilled about Amgen’s new anti-cholesterol drug, Repatha, which defeats all cholesterol by lowering it almost to zero. There is no such thing as good cholesterol and bad cholesterol. We are getting studies that show Repatha, an injectable, has no peer and could be the replacement therapy even for those who have just moderately high cholesterol. This could be a very big drug. Amgen recently bought Horizon Therapeutics to develop specialty drugs and it already has one for those who have a thyroid problem that produces a bulging eye disease. This acquisition, which was originally fought by the Federal Trade Commission, went through when the agency dropped concerns and showed realism as there was no overlap. My disdain for the FTC diminished when I saw they could listen to reason, and this change of heart on Amgen-Horizon has opened the floodgates for a host of deals. NVS 1Y mountain Novartis 1 year Finally, the oddity of our choices was Novartis. This is a company that has, over the last five years, since the new CEO Vas Narasimhan came in, has radically changed. He immediately sold the stake inherited in the company’s generic drug spinoff, and then he got rid of Sandoz, which had lower growth medicines, and now Novartis is entirely first in class, high growing drugs, that generate a huge cash flow, which is returned in a good dividend and a giant buyback. A pure pharma play with almost all young drugs is very hard to find. When I was interviewing these CEOs, I found myself almost joyous in seeing what they are up to. There was none of that swagger I have gotten used to out West, none of that “only off the record” gatherings. Just straight-out pride. Now here’s the tough thing about the group. Normally at this point in the cycle, when we are coming in for a soft economic landing, this is the last group you would want. But there is always a vocal, almost self-righteous group that says it can’t be done. That’s why pharma can play such a role and should play a bigger role in our portfolio. There are other companies on my radar screen. You have to be following the transformation of Bristol-Myers, which is opening its wallet to buy a host of drug companies, including anti-psychotic firm Karuna. Bristol-Myers is quite an exciting company if it can pull off its transformation into a cancer. But Karuna is a big gamble. There has never been an effective anti-psychotic invented in the last 70 years that did not have horrendous side effects, especially weight gain. If Karuna’s KarXT drug works, it can also be used for schizophrenia and bipolar: huge markets. You are being paid to wait with Bristol-Myers’ big dividend. When I spent time with BD I was blown away by how much the company owns lower-end devices. Medtronic has begun its comeback and can be pulled off provided its new anti-hypertension procedure will be used by the profession. It took more than ten years to be approved. Medtronic also says that, despite the GLP-1s, bariatric surgery will still be the standard of care for obesity. Medtronic has a robotic-assisted surgery system, Hugo, that is meant to rival Intuitive Surgical, which reported a terrific quarter last week. Medtronic could be one to watch. I wanted to be excited about CVS Health, but I do not really understand its expansion plans in health where it owns a pharmacy benefit manager (PBM) and a health insurance company as well as a series of specialty firms, ones that work with the elderly and ones that are strong in at-home care. These acquisitions seem expensive to me. I also can’t figure how they are shrinking their footprint by closing some stores in Target, which is supposed to be a terrific partnership. Call me confused. Overall, I sense that we could be in a period where people have finally stopped willing to pay up for all tech – and as you saw last week, you can’t be all that excited about the bank stocks if JPMorgan reports a great quarter, and the stock goes up and then finishes down. What the heck was that? Club name Morgan Stanley reports its quarter Tuesday following fellow Club holding Wells Fargo’s numbers this past Friday. Health care is the way to go. It’s just too easy to like after a tumultuous period where Covid hid so much of what these companies do well. (See here for a full list of the stocks Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Health care may be a real challenger to tech this year, a business that can actually grow faster than most of tech and has the possibility of a comeback from the Covid straitjacket that so many of these companies got caught up in. The pandemic obscured so much of the growth as Abbott Labs, for example, poured money into BinaxNOW tests, and Regeneron developed a rapid response drug. Pfizer went after vaccines and rapid responses, and the drug stores shifted resources to Covid immunity shots.
Now, with Covid behind them, we are seeing the true earnings power of so many terrific companies. For our newest Bullpen additions, we focused on Abbott Labs, Novartis, Amgen and Walgreens Boots Alliance. We will go over them – but first, let me talk about what I learned at last week’s JPMorgan Health Care Conference that I attended in San Francisco, and what it means to your portfolio.
We have not spent too much of our resources on this sector because it wasn’t right to do so. You have Covid eating up time and resources not just to develop sources of immunity and treatment but also because you did not have patients coming and asking for treatment for more elective surgery, especially the elderly. That’s what felled UnitedHealth taking our now-disappointing Club name Humana down with it.
Read the full article here
Post Views: 65
