Editors Note:

The biotech sector is suddenly hot, and we need drugs. I am adding Gilead Sciences and Bristol-Myers Squibb.


GILD - Gilead Sciences - Company Profile

Gilead Sciences, Inc., a research-based biopharmaceutical company, discovers, develops, and commercializes medicines in the areas of unmet medical needs in the United States, Europe, and internationally. The company's products include Biktarvy, Descovy, Odefsey, Genvoya, Stribild, Complera/Eviplera, Atripla, and Truvada for the treatment of human immunodeficiency virus (HIV) infection in adults; and Vosevi, Vemlidy, Epclusa, Harvoni, and Viread products for treating liver diseases. It also provides Yescarta, a chimeric antigen receptor T cell therapy for adult patients with relapsed or refractory large B-cell lymphoma; Zydelig, a kinase inhibitor; Letairis, an oral formulation of an endothelin receptor antagonist for pulmonary arterial hypertension; Ranexa, a tablet to treat chronic angina; and AmBisome, an antifungal agent to treat serious invasive fungal infections. In addition, the company offers its products under the name Cayston, Emtriva, Hepsera, Sovaldi, and Tybost. Further, it develops product candidates for the treatment of HIV/AIDS and liver diseases, hematology/oncology, inflammation/respiratory diseases, and others. The company markets its products through its commercial teams; and in conjunction with third-party distributors and corporate partners. Gilead Sciences, Inc. has collaboration agreements with Bristol-Myers Squibb Company; Janssen Sciences Ireland UC; Japan Tobacco Inc.; Galapagos NV; Scholar Rock Holding Corporation; Tango Therapeutics; National Cancer Institute; Pfizer, Inc.; Sangamo Therapeutics, Inc.; Gadeta B.V.; HiFiBiO Therapeutics; Agenus Inc.; HOOKIPA Pharma Inc.; Goldfinch Bio, Inc.; and insitro Inc. The company was founded in 1987 and is headquartered in Foster City, California. Company description from FinViz.com.

Gilead just announced a partnership with Nurix Therapeutics to develop new ways to attack cancers and hematology. Nurix has developed a novel approach to destroy disease causing proteins. Gilead said there are many molecular targets involved in a disease pathway that have traditionally been challenging to manipulate using conventional approaches. Nurix has developed a protein degradation technology that will allow Gilead to target these diseases with that new technology. Nurix received an up front payment of $45 million and is eligible to receive up to $2.3 billion in progress payments as the drugs are developed. They will also share in future costs and sales. This is a good deal for both companies.

Shares are moving higher after six months of base building.

Earnings August 1st.

Buy August $72.50 call, currently $1.54, stop loss $66.00.

BMY - Bristol-Myers Squibb - Company Profile

Bristol-Myers Squibb Company discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. The company offers drugs in oncology, immunoscience, cardiovascular, and fibrotic diseases. The company's products include Opdivo, a biological product for anti-cancer indications; Eliquis, an oral inhibitor targeted at stroke prevention in adult patients with non-valvular atrial fibrillation, and the prevention and treatment of venous thromboembolic disorders; and Orencia, a biological product for adult patients with moderately to severely active RA and prostate-specific antigen, as well as reducing signs and symptoms in certain pediatric patients with moderately to severely active polyarticular juvenile idiopathic arthritis. It also provides Sprycel, a tyrosine kinase inhibitor for the treatment of Philadelphia chromosome-positive chronic myeloid leukemia; Yervoy, a monoclonal antibody for the treatment of patients with unresectable or metastatic melanoma; Empliciti, a humanized monoclonal antibody for the treatment of multiple myeloma; and Baraclude, an oral antiviral agent for the treatment of chronic hepatitis B. In addition, the company offers Reyataz, a protease inhibitor for the treatment of human immunodeficiency virus (HIV) and Evotaz; Sustiva franchise, a non-nucleoside reverse transcriptase inhibitor for the treatment of HIV; and Daklinza NS5A replication complex inhibitor, Sunvepra NS3 protease inhibitor, and Beclabuvir NS5B inhibitor. It sells products to wholesalers, retail pharmacies, hospitals, government entities, and medical profession. It has collaboration agreements with Nektar Therapeutics; Janssen Pharmaceuticals, Inc.; Biocartis Group NV.; and FameWave Ltd. The company was formerly known as Bristol-Myers Company and changed its name to Bristol-Myers Squibb Company in 1989. Bristol-Myers Squibb Company was founded in 1887 and is headquartered in New York, New York. Company description from FinViz.com.

Bristol Myers is acquiring Celgene (CELG) for one share plus $50 and a $9 CVR. The CVR is a lottery ticket that only pays off if three high profile Celgene drugs are approved by the FDA by March 31st, 2021. All three drugs have a good chance of approval. If they are approved Bristol Myers hits the billion dollar lotto with three new revenue screens.

Bristol Myers is buying a winner here with Celgene earnings of $2.55 beating estimates for $2.49 in Q1. Celgene is expected to earn $10.72 for the year and $17.12 billion in revenues. That is a 20.86% rise in earnings and a 12.08% rise in revenue. For next year Celgene expects to earn $12.45 per share on $19.23 in revenue. That is another 16.1% and 12.3% rise respectively.

Bristol is not doing badly on its own. They reported earnings of $1.10 for Q1 compared to estimates for 94 cents. Revenue of $5.92 billion increased 14% and beat estimates for $5.8 billion.

The combination of these two companies will create an earnings juggernaut with huge free cash flow.

The Celgene acquisition is expected to close in Q3 but Bristol was forced to extend the offer date because not enough people had tendered their shares. It could blow up at any time or they might have to sweeten the deal.

I considered playing Celgene as it makes 52-week highs but should the deal blow up and that $50 cash premium evaporate, Celgene would implode. Meanwhile, Bristol could rally on a canceled deal because there would be no debt incurred. If the deal concludes, BMY will be a stronger company. If the deal dies, BMY will still have strong earnings and less debt.

Earnings July 25th.

Buy September $50 call, currently $1.97, stop loss $46.85.


No New Bearish Plays