Analyst Bulls Up on Dendreon (DNDN, AMGN)

February 23, 2011 · Filed Under analyst calls, Cancer, dendreon · Comment 

A bullish research call on Dendreon Corporation (NASDAQ: DNDN) by Gleacher & Co. has so far been unable to prevent some pullbacks along with a broader market that is spooked by international geopolitical events.  Still, the research does lend credence to further upside for Dendreon based on its Provenge.  While not a target in the research call, we would throw out that there is some new indication from Amgen Inc. (NASDAQ: AMGN) in the war against prostate cancer as well.

Gleacher & Co. this morning initiated coverage of Dendreon with a “Buy” rating and assigned a $42.00 price target.  The report from analyst Ying Huang notes, “we are encouraged by the survey results indicating that 40%-50% of castration-resistant prostate cancer (CRPC) patients in the US will be treated with Provenge.”  Furthermore, the call indicates that Provenge will become a blockbuster drug with sales north of the $ 1 billion mark, with a projected peak of roughly $2.2 billion in worldwide sales for Provenge.  This based on no off-label usage as well.

The firm surveyed 47 physicians, 35 urologists and 12 medical oncologists, who collectively treat more than 17,000 patients with metastatic castration-resistant prostate cancer.  The indication is that medical oncologists give higher ratings to the safety and efficacy of Provenge than urologists.  The oncologists projected that the use of Provenge will be in 50% of eligible CRPC patients versus a 39% projection by urologists.

All in all, Huang sees a 30% U.S. market penetration and a 15% E.U. market penetration.  Huang sees FDA approval of a new manufacturing plant and believes that the CMS will ultimately approve the $93,000 cost for the approved label usage but not for off-label usage.

Dendreon shares are currently down 1.2% at $32.17 but the stock was in positive territory this morning above $33.00 per share.  The implied upside from today’s level would be more than 30% to the Gleacher & Co. target price of $42.00 per share.

As a reminder, Dendreon has been called a takeover candidate by some.


Cell Therapeutics Back at the Capital Well (CTIC)

February 18, 2011 · Filed Under Cancer, Financial, Secondary Offering · 1 Comment 

Cell Therapeutics, Inc. (NASDAQ: CTIC) is one that many will have forgotten about or one that many wish they had forgotten about.  Now the company is in the news after announcing a  securities purchase agreement to sell securities in a registered offering to a single life sciences institutional investor.

The company said that it may use a portion of the net proceeds to fund possible investments in, or acquisitions of, complementary businesses, technologies or products.  Cell Therapeutics noted here that it has recently engaged in limited discussions with third parties regarding such investments or acquisitions, but has no current agreements or commitments with respect to any investment or acquisition.  It may also use the proceeds for general corporate purposes, such as paying interest on and/or retiring portions of its outstanding debt, funding research and development, preclinical and clinical trials, the preparation and filing of new drug applications and general working capital.

This sale is listed as being for “up to approximately $25.0 million of shares of its Series 10 Non-Convertible Preferred Stock,” warrants to purchase up to approximately 25.9 million shares of common stock and an additional investment right to purchase up to approximately $25 million of shares of its Series 11 Convertible Preferred Stock.  Details are as follows:

  1. The shares of Series 10 Preferred Stock will accrue annual dividends at the rate of 10% from the date of issuance, payable in the form of additional shares of Series 10 Preferred Stock.  The shares of Series 10 Preferred Stock are redeemable at the option of the Company at any time after issuance, in whole or in part, either in cash or by offset against recourse notes fully secured with marketable securities, which may be issued by the Investor to the Company (the “Notes”) in connection with the exercise of the Warrants and the Additional Investment Right.
  2. The Warrants have an exercise price of $0.337 per share of common stock.  The Warrants are exercisable immediately and expire two years from the date of the Purchase Agreement.  The exercise price of the Warrants may be paid in cash or by the issuance of Notes.  The Warrants are subject to cancellation and mandatory exercise under certain conditions, in whole or in part.  The total potential additional proceeds to the Company upon exercise of the Warrants for cash are approximately $8.7 million.
  3. The Additional Investment Right has an exercise price of $1,000 per share of Series 11 Preferred Stock.  The Additional Investment Right is exercisable immediately and must be exercised no later than March 19, 2011.  The exercise price of the Additional Investment Right may be paid in cash or through the issuance of Notes.  The Additional Investment Right is subject to cancellation under certain conditions, in whole or in part.  The total potential additional proceeds to the Company upon exercise of the Additional Investment Right for cash are approximately $25.0 million.
  4. Each share of Series 11 Preferred Stock is convertible at the option of the holder, at any time during its existence, into approximately 2,967 shares of common stock at a conversion price of $0.337 per share of common stock, for a total of approximately 74.1 million shares of common stock.
  5. The closing of the issuance and sale of the Series 10 Preferred Stock is expected to occur on the 10th trading day following the date of the Purchase Agreement, subject to certain closing conditions.  Additional details regarding the offering can be found in the prospectus supplement relating to the offering to be filed with the Securities and Exchange Commission (the “SEC”) on February 18, 2011.


Defining the Contingent Value Rights in Genzyme (GENZ, SNY)

February 16, 2011 · Filed Under M&A · Comment 

By now you already know about the confirmed acquisition by Sanofi-Aventis (NYSE: SNY) for Genzyme Corporation (NASDAQ: GENZ).  The companies have finally entered into a definitive agreement where Sanofi-Aventis will pay $74.00 per Genzyme share in cash along with a contingent value right.

The deal comes to about $20.1 billion before the consideration of the contingent value right.  Genzyme shareholders will receive one Contingent Value Right for each share they own.  These are referred to as CVRs by the investment bankers and each CVR gives each holder the right to receive additional cash payments if specified milestones are reached related to Lemtrada™ or if a milestone related to production volumes in 2011 for Cerezyme® and Fabrazyme® is achieved.

The value to each CVR is as follows:

  • $1.00 per CVR if specified Cerezyme®/Fabrazyme® production levels are met in 2011
  • $1.00 per CVR upon final FDA approval of Lemtrada™ for multiple sclerosis (MS) indication
  • $2.00 per CVR if net sales post launch exceed an aggregate of $400 million within specified periods per territory
  • $3.00 per CVR if global net sales exceed $1.8 billion
  • $4.00 per CVR if global net sales exceed $2.3 billion
  • $3.00 per CVR if global net sales exceed $2.8 billion

We had highlighted that the total workout could come to about $80.00 after the effect of the CVR, but we also gave a list of other buyout targets that could be up for consideration as well.


AcelRx IPO: New Pain Management on the Way (ACRX)

February 11, 2011 · Filed Under Cancer, IPO, Pain · Comment 

AcelRx Pharmaceuticals Inc. (NASDAQ: ACRX) has its IPO priced for at least 8 million shares at $5.00 per share.  The company is pre-revenue and makes a treatment systems for sudden pain management.  The interesting aspect is that more shares were sold than expected, but at a lower price.

The company will use the proceeds from the offering for ongoing development and for the marketing efforts of its hand held painkiller delivery device. AcelRx is as also developing drugs to treat and manage pain associated with cancer as well as for mild sedation to be used by doctors for office treatments and procedures.

Piper Jaffray & Co. is the sole book-running manager and Cowen and Company, Canaccord Genuity, and JMP Securities are the co-managers for the offering.  AcelRx has granted to the underwriters a 30-day overallotment option to purchase up to an additional 1,200,000 shares of common stock at the offering price.

AcelRx’s lead product candidate is ARX-01 Sufentanil NanoTab™ PCA System and it completed Phase 2 clinical development.  This is designed to solve the problems associated with post-operative intravenous patient-controlled analgesia which harms patients after surgery due to the side effects of morphine, the invasive IV route of delivery, and the inherent potential for programming and delivery errors associated with the complexity of infusion pumps.

After the effect of the offering, the four largest venture groups will still own close to 80% of the outstanding shares.


Highlighted Trouble at Celgene, Yet Value is Near (CELG)

February 3, 2011 · Filed Under analyst calls, Cancer · Comment 

Celgene Corporation (NASDAQ: CELG) is having a rough day.  There are some concerns being brought to light. This morning came a report from detailing Celgene as a current member of the exclusive Zacks #5 Rank List.  In short, Zachs named it as one of the “Stocks to Sell Now.”

Zacks pointed out, “Celgene posted fourth quarter earnings of 65 cents per share on January 27, which came in 3% short of the average forecast. The Zacks Consensus Estimate for 2011 declined 7 cents to $3.02 per share over the past month as 6 analysts out of 11 cut back on expectations. Estimate for 2012 dipped 10 cents to $3.71 per share in a span of a week.”

Last month, the company gave a longer-term forecast for 2011 earnings of $3.30 to $3.35 EPS on $4.4 to $4.5 billion in revenues.  Even after a 6% drop to $50.00 today, Celgene trades at about 15-times expected earnings and about 5.5-times revenues.  Not really expensive at all, but not screaming dirt cheap either.  The Thomson Reuters estimates for 2012 are currently $4.06 EPS and $5.1 billion in revenues.

Here is the good news, despite an analyst downgrade.  The valuation is finally becoming fair here, something which has long been a problem for the cancer player.  The 52-week trading range is $48.02 to $65.79, and shares were just at $60.00 briefly right after the start of 2011.  Shares were expensive then, now they are getting more reasonable.  The market value is $23.5 billion today.

The big risk is always a timing risk.  Chances are that Celgene won’t suddenly get away from investors due to the current weakness. Analysts have cooled to the name in recent days and the weakness here is so close to 52-week lows that it seems more likely a fresh year low will be seen rather than not seen.


After Orexigen’s Implosion, Now What? (OREX, VVUS, ARNA, ABT)

February 1, 2011 · Filed Under Cardiac, Depression, Diabetes, fda, obesity · 1 Comment 

Orexigen Therapeutics, Inc. (NASDAQ: OREX) is beyond ugly after the FDA said that the company must now submit more trial data before its new diet pill Contrave may be cleared for sale.  The vote was 13-against versus 7-for votes and now the FDA is asking for another study on the drug’s cardiovascular risks.

Outside FDA advisers said back in early December that the benefits of the weight loss exceed the dangers of a higher pulse and blood pressure, with the indication that a larger study targeted on risks of the heart might until after the final drug approval.  That wasn’t so.

Both VIVUS Inc. (NASDAQ: VVUS) and Arena Pharmaceuticals Inc. (NASDAQ: ARNA) have been in a race with Orexigen to introduce the first approved diet pill for weight loss in a about a decade.  Now all of these products are on the back-burner and approval will not likely be seen in the near-term on any of these drugs.

Orexigen is down 71% at $2.63 and shares hit a new year low and the new 52-week range is $2.50 to $11.15.  VIVUS is down 15% at $7.57 and its 52-week range is $4.69 to $13.68.  Arena shares are flat at $1.58 as its hope was already diminished.

Abbott Laboratories (NYSE: ABT) recently pulled its Meridia weight loss pill off of the market due to heart risks.  Orexigen was expected to receive royalties from partner Takeda if it was approved.  At issue with all these drugs is that they all have the possibility of becoming blockbuster drugs with more than $1 billion in annual sales from America alone. The competing drugs Qnexa from VIVUS have concerns about birth defects tied to one of the ingredients, while lorcaserin from Arena has tumor risks associated with it.

Contrave uses two approved drugs as a cocktail and the target areas are different parts of the brain which influence appetite and influence cravings.  One is an antidepressant and one is a treatment for alcohol and opioid addictions.  While patients lost generally 5% of their weight after a year, the weight loss group had a higher pulse and higher blood pressure than the placebo.

What just happened is that Orexigen was put in a situation where it has to evaluate what to do with its lead candidate.  A new trial will easily run into the millions and millions of dollars and the time frame could easily run well over a year.  Just how big the costs and how long the time would be, well that is still up for debate.  Orexigen had just over $100 million in cash and short-term investments at the end of September-2010.  Chances are that this is not enough cash.

Things went from maybe to awful here.  Now it is dire.


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