- Biogen recently announced positive results from BAN2401's phase 2 trial that showed the potential to be the first disease-modifying drug on the market.
- Our current understanding of the underlying mechanisms of Alzheimer's Disease (AD) suggests that the removal of amyloid beta accumulation could slow the progress of AD. BAN2401 fits within this category.
- Investors and AD experts are debating the interpretation of the results. Study design and magnitude of the effect is in question, but overall results provide further validation of amyloid hypothesis. If successfully approved, the drug could generate $5+ billion in revenue.
- To better assess the odds of success, investors should look for more detailed BAN2401 results at the AAIC and monitor other drug developments for further validation, including aducanumab and crenezumab. Biogen also has another AD drug, elenbecestat that will be presented at the AAIC conference. Read More
- Allergan is under pressure from activist shareholders and other investors to formulate a clear strategic plan and make more drastic changes to the company
- Botox Aesthetics, Botox Migraine, and Restasis will all face upcoming competition which could hamper sales growth
- Critical catalysts are approaching that could materially change whether the company makes more drastic changes or not. Expect important readouts from ubrogepant, abicipar, and rapastinel over the next six to nine months Read More
- The primary debate is whether Pfizer can grow sales at mid-single digit growth rates into the next decade despite a growing number of loss of exclusivity headwinds.
- Notable revenue headwinds include upcoming Lyrica competition, Enbrel declines outside of the US, and sterile injectables (SIP) supply issues.
- Label expansions will be crucial to drive above-consensus growth. Key drugs that are often-cited include Ibrance, Xtandi, and Xeljanz. Biosimilar growth and resolution of SIP issues represent another potential area for outperformance.
- Recent spat with Trump largely seen as a non-issue among investors. Read More
- Fremanezumab Chronic Cluster Trial Failure Seen as Non-Issue, but Cluster Pathway Still Unclear
- Copaxone Has Proven More Resilient than Expected, but Longer-Term Outlook Remains In Question
- ProAir Competition Delayed; Estimates Move Up Read More
- Management set long-term financial targets at their Investor Day in early June, and investors are primarily focused on the 4%+ organic growth rate target. Diabetes is the only segment that management is calling for above-corporate level organic growth rates, and is therefore a key part to the company achieving its targets
- Medtronic recently provided an update to its Diabetes growth plan at the American Diabetes Association conference. The company expects the CGM market to grow rapidly, and provided a plan to fill several gaps in its CGM device
- The 670G continues to be the gem within the company's Diabetes segment and will be the primary driver of growth. While competition is heating up in the race for an artificial pancreas, MDT plans to stay ahead and will begin 690G trials soon. Read More
JNJ is a massive company with many products stretching across its three segments: Pharmaceutical, Consumer, and Medical Devices.
- The Pharmaceutical segment is the key to the bull and bear thesis, as it represents a majority of revenue and operating income. A number of drugs will face generic competition in 2019, and investors are watching to see if the pipeline is robust enough to fend off revenue erosion
- Consumer and Medical Devices have lagged Pharmaceuticals growth, but management outlined a robust plan to turn the businesses around over the next several years at a recent Investor Day on May 16. These segments may become a bigger part of the story should Pharmaceutical segment growth slow, and is essential for JNJ's multiple to recover Read More
On June 14, Etsy announced a seller transaction fee increase from 3.5% to 5.0% (which is also now inclusive of shipping costs). This was long thought to be one of the major revenue levers that management had to pull, and they will be doing so from a position of strength as gross merchandise sales (GMS) growth has now accelerated over the last four consecutive quarters. The stock is now up over 25%, but investors remain bullish on the company's future. The key topics that investors are talking about are:
- The other major areas of opportunity for Etsy, including more marketing, better discoverability, improved conversion rates, and more seller tools
- Possible seller backlash and competitive threats Read More
- Mylan's recently received approval of Fulphila, their Neulasta biosimilar. Analysts expect the drug to contribute to management's guidance and importantly, demonstrates the company's ability to bring complex generics and biosimilars to the market
- Investor focus now shifts to two upcoming, and sizable, opportunities: gAdvair on June 27, and gRestasis on July 31. Read More
1. Growth of high margin businesses providing upside to profitability expectations
2. Amazon's strategic use of Whole Foods to capture more share in groceries
3. The impact of a potential increase in shipping rates from the USPS Read More
Mylan has drifted down by about 14% since early March as institutional investor concerns have grown over that time. Concerns have specifically centered around risk to 2017 and 2018 guidance due to approval delays in the company's new product pipeline. Additionally, the company's core business (generics and Epipens) have had new developments that have raised concerns over their outlooks as well. Read More
Select Comfort has been a rollercoaster of a ride. The stock has had several huge swings, both up and down, that have probably had shareholders ready to throw up. The ups have been driven by a combination of a recovering consumer, a strong "specialty" mattress backdrop (specialty is essentially any non-innerspring mattress - memory foam, adjustable, etc), and Select Comfort's ongoing innovation. The downs have been driven by the competitive environment, execution issues, and volatility within the consumer environment. In the end, you get a stock that is up 25% over the last 5 years but is trying to find some stability in the midst of a major new product launch. Read More
Medtronic is a pure-play medical device company. The company is a mid-single digit revenue grower driven by product segment innovation, international growth, and acquisitions. Profitability is further boosted by integration of their acquisitions and growth within their high-margin segments. They also generate strong free cash flow and aim to return 50% of that to investors.
Within Medtronic, The Diabetes Group is the smallest, but fastest growing, segment and is arguably the most promising one among all of them. Much of the excitement comes from its upcoming 670G device, which can potentially upend diabetes treatment and boost growth rates for multiple years. Read More
1) What impact will the ad load drop have on ad revenue in 2H17?
2) Where will expense growth end up for the year?
3) Messaging is a huge opportunity Read More
Bed Bath and Beyond reported 1Q earnings that were drastically below what were already low expectations heading into the quarter. The company reported EPS of $0.53, which was well-below consensus of $0.66, and the stock declined 12% on Friday.
There have been some contrarians that have come out in defense of the company, arguing that Bed Bath & Beyond generates significant free cash flow and returns much of that in the form of share buybacks and dividends.
But here's why that argument is misguided. This sort of defense works for a company like Staples, where profitability is stable, and net income is flat. This is not the case for Bed Bath & Beyond, which has deteriorating fundamentals across the board. Free cash flow will eventually follow, meaning that share buybacks and repurchases are not sustainable.
To show this, I'll first walk through the deterioration in fundamentals. I'll then connect this to free cash flow and show how that hurts the free cash flow outlook going forward. Finally I'll address what I see as the bull case is for the stock. Read More
Lululemon was at one point on top of the world. The company's yoga pants became a huge hit - not just with hardcore yoga practitioners, but also with a more casual audience. The stock grew from ~$4 in 2009 to its peak of $82 in June 2013. However, that year, the company ran into a slew of quality-control issues (see-through pants, pilling), increased competition (Nike, Under Armour, and a bunch of copycats), and supply chain problems. And more recently, just as the company was beginning to return to a solid state of revenue growth and margin expansion, the company again ran into execution-related issues in 1Q17. As a result, the company now sits 34% off of its 2013 peak, which it had recently approached in August of last year. Read More
Gaming is becoming a bigger part of our lives. Whether it's over our phones while on the subway, on the Xbox on our TV at home, or on Twitch on our PC, more and more of our time is spent playing or watching games. Over the last five years, Activison's stock has risen steadily higher on this gaming wave. Read More
First and foremost, Chipotle's 1Q was better-than-expected on the two main metrics that matter - comps and restaurant-level margins. With national advertising just now turned on and digital performing strongly, the outlook now looks better than it did before the earnings report, and the stock is up ~3% on the day after.
With that said, the report was not enough to persuade bears to flip sides. Most of the discussion was focused on comps, which was distorted by several factors. And with some deeper digging, one could find enough wrinkles in the quarter to remain bearish on Chipotle's outlook. And that's why the stock has only had a modest gain despite such a strong quarter. You need thesis-changing operational results to drive 10%+ moves, and this wasn't it. Read More
It has been some time since I last wrote about Amazon. For a long period of time, between 2014 and 2015, Amazon stock was under heavy scrutiny as investors began to question the underlying profitability of the business. The problem was created primarily by a period of (what appeared to be) bad results, exacerbated by poor financial disclosures. Read More
As I wrote about ~6 months ago, the key debate on Chipotle was whether the company was going to return to prior restaurant level volumes over time as customers return to the store, or if it was going to see a smaller degree of recovery.
So what are the key debates on CMG today, almost 1 year into its recovery? Read More
Costco has largely traded sideways over the last year after a 92% run between April 2012 and December 2015. The stock's upward trajectory slowed as the company's core comps began to slow amid increasing food deflation, the removal of tobacco products, and an increasingly competitive retail environment. Today, the key question revolves around where same store sales will move from here - will they return to COST's historical mid-single-digit growth, or will they continue to remain pressured as competitors increasingly encroach on their territory? Read More