Rare Analyst Calls With Huge Upside in Vical and VIVUS (VICL, VVUS, BMY)

November 4, 2011 · Filed Under analyst calls, Cancer, Diabetes, Heart, obesity · 19 Comments 

Vical Inc. (NASDAQ: VICL) and VIVUS, Inc. (NASDAQ: VVUS) are both running higher this Friday on news that Credit Suisse initiated both biotech outfits with “Outperform” ratings.  What matters more than the call are the price targets and the inferences made in the research calls.

Vical Inc. (NASDAQ: VICL) is rarely given huge analyst calls due to what is a small $250 million or so in market cap.  The team at Credit Suisse initiated Vical with an “Outperform” rating this morning but more important is its price target of $7.00 per share.  This represents more than a 100% move compared to the $3.45 close on Thursday.   What was more impressive was the $7.00 price target versus a $3.45 close before, indicating just over 100% upside.

Credit Suisse noted that Vical’s lead product Allovectin is in a Phase III trial for the treatment of metastatic melanoma but noted that it also has a pipeline of other vaccine product candidates. The firm’s discounted cash flow target is based solely on Allovectin, which the firm noted “makes Vical a high risk investment because Allovectin still needs to successfully complete Phase 3 and the FDA approval process.”  The firm went on to note impressive Phase II data with overall survival of chemo-naïve and experienced patients as being 18.8 months.  It further noted that the drug did even better in chemo-naïve patients with a median overall survival of 22.5 months versus 11.2 months from Bristol-Myers Squibb Company (NYSE: BMY) Yervoy+DTIC in chemo naïve patients. 

VIVUS, Inc. (NASDAQ: VVUS) was also started as “Outperform” with $15 target at Credit Suisse.  The firm noted the title “The Road to a New Obesity Drug Is Tough, but
It Ain’t Over ‘Til the…”  The firm believe that VIVUS’ weight loss pill Qnexa will be approved in the United States as a drug to treat obesity with a restricted label in the second quarter of 2012 and then will be approved in Europe in the third quarter of 2012.  Credit Suisse’s discounted cash flow based target price is driven entirely by Qnexa.  The firm went on to note, “which makes Vivus a high risk investment because our target price is dependent on US approval.”

Vical is up 5% at $3.62 on normal trading volume and VIVUS is up 4.5% at $9.92. Bristol-Myers Squibb Company (NYSE: BMY) is down 1.5% at $31.26 on the day.

JON C. OGG

Top Biotechs With Upside Ahead of Earnings (GILD, AMLN, ARIA, INCY, JAZZ, DNDN, HGSI, ILMN, AMGN, CELG, BIIB, BMRN, LIFE, REGN, AMLN, CBST, ONXX, THRX, VPHM)

October 19, 2011 · Filed Under analyst calls, Cancer, dendreon, Financial, M&A, R&D · 8 Comments 

Earnings season is afoot and we wanted to see how the analysts are ranking the top biotech stocks before these companies begin their earnings reports.  We pulled the top biotech and biohealth related stocks which have market caps of $1 billion and higher and we broke these out into three separate groups by size.  The large-cap biotechs are ranked in descending order by size.  The stocks under $10 billion in market cap and then under $3 billion were broken out in alphabetical order. 

We have compiled some color on selected names, but we also listed the current trading prices, the implied price targets from Thomson Reuters, gave multiples of earnings estimates (from Thomson Reuters) for the forward year (2012 in most cases), showed the trading history and listed a price-to-book ratio.  We did not take any merger news into consideration so that we could just show an as-is model here.

Of the large cap stocks in biotech, Gilead Sciences, Inc. (NASDAQ: GILD)  was the leader.  Several other standouts in the biotechs under $10 billion with a high degree of expected upside were as follows: Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA), Incyte Corporation (NASDAQ: INCY), and Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ).  Other biotechs such as Dendreon Corporation (NASDAQ: DNDN), Human Genome Sciences, Inc. (NASDAQ: HGSI) , and Illumina, Inc. (NASDAQ: ILMN) also screen out as those with the most upside, but that is because of huge share price drops of late.

THE $10 BILLION AND OVER IN MARKET CAP

Amgen Inc. (NASDAQ: AMGN) is the largest of the independent biotechs and it remains stuck like Chuck.  At $56.71, the consensus target is $64.85 and the stock trades at a mere 10-times 2012 earnings estimates.  Its 52-week range is $47.66 to $61.53 and its market cap is north of $52 billion.  It is also worth about 2-times book value.  Implied Upside: 14.3%.

Gilead Sciences, Inc. (NASDAQ: GILD) trades around $40.37 and estimates have a consensus price target of $47.96.  This forward earnings multiple is only about 9.0 now.  The 52-week range is $35.28 to $43.49, the market cap is $31.1 billion and the company trades at more than 5-times book value.  Implied Upside: 18.5%.

Celgene Corporation (NASDAQ: CELG) trades at $64.97 and the consensus price target is about $71.86.  This one is more expensive than many of the established biotech players at more than 15-times forward earnings.  Celgene’s 52-week range is $48.92 to $67.01, its market cap is $29.8 billion, and it trades at nearly 5-times book value.  Implied Upside: 9.8%.

Biogen Idec Inc. (NASDAQ: BIIB) remains the big-cap recovery stock of biotech.  At $102.00, its consensus price target is $110.36, and it trades at close to 16-times forward earnings.  The market cap is about $24.7 billion, the 52-week range is $57.58 to $109.63, and the company is worth about 4-times book value. Implied Upside: 8.5%.

UNDER $10 BILLION IN MARKET CAP

BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) trades at $33.05 and analysts have a consensus price target of $36.25. Unfortunately, this one is expected to lose money this year at -$0.31 EPS and next year’s earnings are expected to be -$0.04.  The 52-week range is $21.70 to $34.50, its market cap is $3.7 billion, and it is listed as trading at close to 5.0-times book value. Implied Upside: 9.6%.

Illumina, Inc. (NASDAQ: ILMN) trades around $26.56 and the consensus price target is about $42.90.  The company trades at more than 18-times next year’s earnings estimates, its 52-week range is $25.57 to $79.40, its market cap is about $3.3 billion, and it trades at almost 2.9-times its book value.  Implied Upside: 62%.

Life Technologies Corporation (NASDAQ: LIFE) may be difficult to compare after a huge run higher followed by a recent tank in the share price. It is also on the equipment side. Shares are back down around $37.24 and the consensus analyst price target is now down to $52.66.  The company now trades at barely 9-times forward earnings, if you trust the “E” in that P/E ratio.  LIfe’s 52-week trading range is $35.30 to $57.25, its market cap is about $6.7 billion, and the stock is worth about 1.5-times the stated book value. Implied Upside: 41%.

Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) trades around $60.00 after a large drop due to a $400 million convertible note offering.  The consensus price target is about $66.14.  The company is also expected to lose as much as $2.00 per share in 2012.  It has a 52-week trading range of $24.29 to $79.90, its market cap is $5.5 billion, and it trades at more than 12-times its previously stated book value.  Implied Upside: 10.1%.

UNDER $3 BILLION IN MARKET CAP

Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN) trades around $10.14 and the consensus price target from analysts is $13.44.  The 52-week trading range is $8.03 to $21.23, its market cap is about $1.5 billion, and it is worth about 4.6-times book value. Implied Upside: 32.5%.

ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) trades around $10.25 and the consensus price target is $15.44.  The company is expected to have losses this year and next.  Its 52-week trading range is $3.51 to $13.50, its market cap is $1.35 billion, and the book value at the last report was barely positive.  Implied Upside: 50%.

Cubist Pharmaceuticals, Inc. (NASDAQ: CBST) was another big winner earlier in the year and its shares are now at $36.71 versus a consensus price target of $40.82.  This used to be a value stock but now trades at closer to 22-times next year’s earnings estimates.  The 52-week range is $20.81 to $39.29, the market cap is $2.24 billion, and it trades at just over 3-times book value.  We once considered this a biotech buyout target, but that is in the past. Implied Upside: 11%.

Dendreon Corporation (NASDAQ: DNDN) shares are now around $9.40 and the consensus analyst target has come down all the way to $13.72.  The company has no forward P/E ratio now as it is expected to lose money.  The 52-week range is $7.81 to $43.96, its market cap is down to $1.4 billion, and it is listed as being worth more than 3-times its own stated book value.  Implied Upside: 45%.  Shares have fallen far from grace, so analyst targets and the ratios may all look a bit off.  We also cannot count on estimates since the analysts and the company got this one so wrong on the end demand for Provenge.  Now we have to hope that Provenge can have many more expanded uses outside of prostate cancer or this is a hard one to follow.  What is odd is that Provenge is being tested for other uses and those could reignite interest if more promising data ever comes out.  If not, let’s just say this was a painful lesson in biotech.

Human Genome Sciences, Inc. (NASDAQ: HGSI) is now up around $12.81 after buyout rumors and the consensus target is still listed as being roughly $24.00.  The company trades at about 24-times next year’s earnings estimates, its 52-week range is $10.40 to $30.15, its market cap is now under $2.5 billion, and it is worth about 5.3-times its book value. Implied Upside: 87%.

Incyte Corporation (NASDAQ: INCY) trades around $14.04 and anlaysts have a consensus price target of $22.92 on the stock.  It is expected to lose money this year and next year and the 52-week range is $12.58 to $21.15. While there is a $1.77 billion market cap, Incyte’s is listed as having a negative book value as laibilities exceed assets.  Implied Upside: 63%.

Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ) trades around $40.00 after a sharp drop due to an FDA warning.  That may make the figures a bit distorted.  The consensus price target is $54.00 but that does not include the FDA impact.  Jazz trades at only about 10.6-times next year’s earnings estimates. Its 52-week range is $10.51 to $47.88, its market cap is almost $1.7 billion, and the company trades at close to 16-times an implied book value. Implied Upside: 35%.

ONYX Pharmaceuticals, Inc. (NASDAQ: ONXX) trades at close to $34.50 and the consensus target is closer to $44.60.  It is one which is also expected to lose money this year and next year.  The 52-week trading range is $26.17 to $45.90, its market cap is $2.2 billion, and the stock trades at close to 3.5-times its book value. Implied Upside: 29.2%.

Seattle Genetics, Inc. (NASDAQ: SGEN) trades around $20.50, above the $19.15 consensus analyst price target.  The company is expected to lose money in 2011 and 2012. With a 52-week range of $12.29 to $22.37, its market cap is $2.35 billion, and it trades at close to 9-times book value.  Implied Upside: NEGATIVE by -6.5%.

Theravance, Inc. (NASDAQ: THRX) trades around $21.40 and analysts have a price target of $27.43 for the stock.  The company is another one expected to lose money this year and next.  The 52-week range is $16.44 to $28.95, the market cap is $1.8 billion, and it is another one that trades with a negative tangible asset level.  Implied Upside: 28%.

ViroPharma Incorporated (NASDAQ: VPHM) trades around $19.00 and the consensus price target is $23.54. Due to an expected drop in royalties, its earnings are expected to be halved in 2012 versus 2011.  Its 52-week range is $14.39 to $22.16, its market cap is about $1.45 billion, and it trades at about 1.5-times its stated book value with a large portion of assets as intangible assets.  How this one looks on a standalone basis through time is a guess.  Implied Upside: 24%.
*******

On all of these implied upsides, please be sure to do your own research.  We encourage our readers to challenge Wall Street analysts rather than merely following them blindly.  Many cases have been there before were the analysts were just dead wrong.  We also cannot help but notice how the biotech sector often has two very same observations based upon the exact same set of data, yet one analyst will say “Buy” and the other will say “Sell.”

JON C. OGG

Unusual Analyst Upgrade & Endorsement for Cell Therapeutics (CTIC)

October 13, 2011 · Filed Under analyst calls, Cancer, fda, R&D, Research · Comment 

Cell Therapeutics, Inc. (NASDAQ: CTIC) is a controversial stock in the field of cancer and the company is still aiming for a 2012 debut market launch for its pixantrone drug candidate.  In the last couple of weeks it had reported more positive data and the FDA had earlier this year noted that pixantrone would need a review using a new panel of independent radiologists.  Pixantrone is to be a new treatment for non-Hodgkin Lymphoma.
 
This morning we saw a very unlikely and very unusual support or endorsement of Cell Therapeutics.  This came from Zacks Investment Research where the outfit was called The Bull of The Day.  That is generally considered a stock that has strong winds behind it and Zacks raised the rating to Outperform.

Zacks noted, “we believe pixantrone is getting closer to approval… We are encouraged by the FDA’s decision to allow Cell Therapeutics to re-submit the NDA for pixantrone for review without the need for an additional trial.”  The report also noted that Opaxio is its second most advanced pipeline candidate as a potential maintenance therapy for women with advanced ovarian cancer who achieve complete remission following first-line therapy with paclitaxel and carboplatin.

The full Zacks report is available here.  Shares are at $1.19 and the adjusted 52-week trading range is $0.95 to $3.30.

JON C. OGG

Beyond the Dendreon Implosion… What To Look For Next (DNDN)

August 4, 2011 · Filed Under analyst calls, Cancer, dendreon, fda, Financial, M&A · Comment 

This morning we gave a full preliminary analysis of the implosion happening at Dendreon Corporation (NASDAQ: DNDN) at 24/7 Wall St.  What is obvious as a heart attack, or as obvious as metastatic prostate cancer, is that the market is bracing for far worse news than what has been seen so far.  The price drop after withdrawal of guidance and the cost cutting only happens this far when another shoe is expected to fall.

We have seen many analysts come in on this today, mostly calls which are blow-ups.  To say that Dendreon caught most of the market off balance would be a severe understatement. We also believed that this was going to become the standard for final-stage prostate cancer care.

Here is what Wall Street analysts are making calls on today:

  • Raised to Neutral at Credit Suisse, but the target was cut to $22.00 from $29.00 as they were actually very negative ahead of the blow-up here.
  • Robert W. Baird downgraded Cut to Neutral from Buy and the new target is $20.00.
  • Collins Stewart cut the rating to Neutral from Buy and the new target is $19.00.
  • RBC Capital Markets cut the rating to Sector Perform from Outperform and took the target down to $15.00 from $50.00.
  • Needham cut the rating to Hold from Buy.
  • Cowen & Co. cut its rating to Neutral from Outperform.
  • Gleacher & Co. cut the rating to Neutral from Buy.
  • Canaccord Genuity lowered the price target 70% to $19.00 from $65.00 on “significantly diminished expectations for Provenge commercial penetration” but the company maintained a ‘Buy’ rating.
  • Bank of America Merrill Lynch cut the rating to Underperform from Buy and cut the target to $16.00 from $50.00 previously.
  • Brean Murray lowered the rating to Sell from Buy and issued a dismal $6.00 target.  Ouch!

After only 40 minutes of trading (plus pre-market trading), Dendreon shares are down a whopping 64% at $12.92 and shares hit a new low of $12.48 this morning.  We are now at ten-times volume on Dendreon as more than 24 million shares have already traded hands.

Again, withdrawing guidance and cutting the costs with employees and more is one thing, even if it is a really bad thing.  What the market is telling you is that more negative news is going to put a lid on this one in the near future.  Otherwise, Dendreon would be down ‘only’ 25% or so.

Many considered this to be a buyout candidate.  That will not be met by much enthusiasm today as investors worry about worse news yet to come.

As far as what to expect next, lawsuits are the first thing to expect.  Shareholders can accuse the company of over-inflating expectations.  Medicare and Medicaid pricing might be an issue, or maybe more doctor reports of considering alternative treatments will come.  Picking the next shoe to drop is difficult, but a drop of this magnitude is rarely a one-time event.  Most people got this one very wrong.

JON C. OGG

Medicare Coverage Capitulation, A Win For Dendreon & Provenge (DNDN)

July 1, 2011 · Filed Under Cancer, dendreon, fda, Medicare · 2 Comments 

Dendreon Corporation (NASDAQ: DNDN) is indicated higher this morning on news that came out last night.  The company announced support for broad availability for on-label use of Provenge for asymptomatic or minimally symptomatic metastatic castrate resistant prostate cancer.  The FDA also this week approved Dendreon’s Los Angeles immunotherapy manufacturing facility with 36 workstations.  The big win is Medicare coverage.

Dendreon reported that the Centers for Medicare and Medicaid Services issued a final coverage decision for PROVENGE that will require Medicare contractors to cover the use of PROVENGE for treatment of asymptomatic or minimally symptomatic metastatic castrate resistant prostate cancer. The coverage decision will standardize coverage processes across the country for all Medicare patients in need of the drug.

The move provides local Medicare Administrative Contractors the specific criteria, which is said to be “consistent with the label,” on how PROVENGE should be covered. PROVENGE was also issued a product specific Q-code effective July 1, 2011.

Dendreon will also support programs to provide comprehensive assistance for eligible patients seeking access to treatment with PROVENGE.  This will include grants to independent foundations and establishment of a patient assistance program for uninsured patients.

PROVENGE was approved by the FDA in April 2010, but what had been under attack was the $93.000 price tag for the treatment.  Many felt that was too high.  We do not have a formal “sale price” per treatment yet under Medicare coverage that will be paid to Dendreon but this is being treated as a win for PROVENGE and a win for Dendreon.

Dendreon shares closed at $39.44 on Thursday and the 52-week trading range is $25.78 to $43.96.  Volume is thin so far with more than two hours until the market opens but shares are indicated up around $41.00 in pre-market trading.

In early May came a report that Dendreon was given an “Underperform” rating by Credit Suisse; late in May came a “Buy” rating from ISI Group.  Goldman Sachs also initiated coverage with a “Buy” rating in early June.

JON C. OGG

Cancer IPO Filing: Clovis Oncology (CLVS, CELG, PFE)

June 24, 2011 · Filed Under Cancer, IPO · Comment 

Clovis Oncology, Inc. has filed for an initial public offering.  The company plans to list on the NASDAQ Global Market under the stock symbol “CLVS.”  Financial terms were not disclosed, but Clovis listed that the proposed maximum to be sold in shares is up to $149,500,000.00.

Book-runners are listed as J.P. Morgan and Credit Suisse; and the co-manager is Leerink Swann.

Clovis is a biopharmaceutical outfit focused on acquiring, developing and commercializing innovative anti-cancer agents in the United States, Europe and additional international markets.  The target arena are development programs in subsets of cancer populations.

The company currently is developing three product candidates where it holds global marketing rights:

  • CO-101, a lipid-conjugated form of the anti-cancer drug gemcitabine, which is in a pivotal study in a specific patient population for the treatment of metastatic pancreatic cancer;
  • CO-1686, an orally available, small molecule epidermal growth factor receptor, or EGFR, covalent inhibitor that is currently in preclinical development for the treatment of non-small cell lung cancer, or NSCLC, in patients with activating EGFR mutations, including the initial activating mutations, as well as the primary resistance mutation, T790M;
  • and CO-338, an orally available, small molecule poly (ADP-ribose) polymerase, or PARP, inhibitor being developed for various solid tumors that is currently in a Phase I clinical trial.

The company was founded in April 2009 by former executives of Pharmion Corporation, which developed and commercialized oncology products and which was ultimately acquired by Celgene Corporation (NASDAQ: CELG) in 2008.

Pfizer, Inc. (NYSE: PFE) was listed as a beneficial owner by name, but no actual shares were mentioned.

The company’s full IPO prospectus filing is available here.

JON C. OGG

Key 2011 ASCO Plays (AGEN, ARIA, BPAX, CELG, GHDX, RXII, SGEN, SNSS, VICL)

June 6, 2011 · Filed Under Cancer, fda, Financial · Comment 

When you hear about the oncology conference of the American Society of Clinical Oncology annual meeting in Chicago each year, you are probably drawn to what may be the next Genentech.  This is the conference that if good cancer and oncology study data can come out then it is likely to be presented here.

We have broken down some of the key ASCO news bits, but these are in very abbreviated summaries in order to keep it from going on and on.   Antigenics Inc. (NASDAQ: AGEN), ARIAD Pharmaceuticals Inc. (NASDAQ: ARIA), BioSante Pharmaceuticals, Inc. (NASDAQ: BPAX), Celgene Corporation (NASDAQ: CELG), Genomic Health Inc. (NASDAQ: GHDX), Geron Corporation (NASDAQ: GERN), Incyte Corporation (NASDAQ: INCY), Oxigene Inc. (NASDAQ: OXGN), RXi Pharmaceuticals Corporation (NASDAQ: RXII), Seattle Genetics Inc. (NASDAQ: SGEN), Sunesis Pharmaceuticals Inc. (NASDAQ: SNSS), and Vical Incorporated (NASDAQ: VICL) are just some of the companies reacting to ASCO and oncology news this morning.

Antigenics Inc. (NASDAQ: AGEN) has disclosed data on from Phase 2 Brain Cancer Study with Prophage Series G-200 (HSPPC-96) showing improved overall survival as a vaccine in glioblastoma multiforme at ASCO.  Trial results showed that 93% of the patients were alive at greater than or equal to 26 weeks after surgery and a median overall survival of 47.6 weeks. Results from pre-defined exploratory analyses showed a median progression free survival of 20 weeks. Measures of immune response post vaccination demonstrated a significant tumor-specific CD8+ T-cell response and also showed an innate immune responses as marked by a significant increase in levels of circulating NK cells.  Unfortunately, shares are now in the red and down almost 5% at $0.964. Update after 4 PM EST: shares closed down 11.4% at $0.895.

ARIAD Pharmaceuticals Inc. (NASDAQ: ARIA) is higher after coming on CNBC saying it is not for sale after presenting data that its sarcoma drug with Merck reduced the risk of the disease progressing. Merck & Co. (NYSE: MRK) is its marketing partner and it plans to apply for FDA and E.U. approval this year.  ARIAD shares are up 1.9% at $8.04 after the open. Update after 4 PM EST: shares closed up only 0.25% at $7.91.

BioSante Pharmaceuticals, Inc. (NASDAQ: BPAX) is more general cancer news than ASCO but important nonetheless…. The company announced the lifting of clinical hold on its GVAX prostate cancer vaccine by the FDA. Manufacturing is complete and planning for a Phase II clinical trial at the Johns Hopkins Kimmel Cancer Center is underway. Shares are up 2.6% at $3.09 after the open.  Update after 4 PM EST: shares closed down 0.3% at $3.00.

Celgene Corporation (NASDAQ: CELG) is not reacting to news that Abraxane has improved the response rate in non-small cell lung cancer patients compared to the generic chemotherapy drug paclitaxel.  It appears that Abraxane did not delay tumor growth or help lung cancer patients live longer in phase III study data.  The company believes that increasing the rate of tumor shrinkage will be enough to get FDA approval in 2012. Shares are down $0.09 at $58.77 right after the open. Update after 4 PM EST: shares closed down 0.7% at $58.46.

Genomic Health Inc. (NASDAQ: GHDX) is supposed to be a winner on the front of personalized cancer care but we are not seeing that today.  It presented 10 New studies in breast, colon and prostate cancers.  The results included a second large validation study confirming the performance of the Oncotype DX colon cancer recurrence score.  The goal is to make a test for biopsy specimens available in 2013.  Shares are actually down 1% at $26.23 right after the open. Update after 4 PM EST: shares closed down 1.6% at $26.07.

Geron Corporation (NASDAQ: GERN) is the stem cell leader and it reported presentations at the ASCO/AACR joint session regarding Telomeres and Telomerase in Cancer are taking place today at the 2011 ASCO Annual Meeting.  Shares are only up $0.01 at $4.28 right after the open.  Update after 4 PM EST: shares closed down 0.9% at $4.23.

Incyte Corporation (NASDAQ: INCY) has two bits of news.  It announces Ruxolitinib (INC424) showed a significant clinical benefit for Myelofibrosis patients in two Phase III studies at ASCO.  The company also announced this morning that it did submit a new drug application for Ruxolitinib in Myelofibrosis to the FDA.  Shares are up 4% at $17.17 right after the open. Update after 4 PM EST: shares closed up 2.3% at $16.90.

Oxigene Inc. (NASDAQ: OXGN) presented updated safety and clinical activity data from the FALCON trial, a stratified randomized, controlled Phase 2 study of ZYBRESTAT in patients with non-small cell lung cancer at ASCO.  An updated analysis conducted approximately 11 months after the enrollment of the last patient in June 2010 showed that the combination regimen of ZYBRESTAT plus bevacizumab, carboplatin and paclitaxel (ZYBRESTAT Arm) was observed to be well-tolerated with no significant cumulative toxicities when compared with the control arm of the study.  Shares are up 16% at $4.96, but it also regained NASDAQ compliance. Update after 4 PM EST: shares closed up 7.5% at $4.59.

RXi Pharmaceuticals Corporation (NASDAQ: RXII) is one of the larger ASCO winners so far.  It showed positive NeuVaxTM Phase 2 efficacy results for the adjuvant treatment of low to intermediate HER2 expressing breast cancer. The Phase II trail did show statistically significant increase in disease free survival at 36 months versus the control group for the planned Phase 3 patient population.  The new timeline is to initiate the Phase 3 trial in the first half of 2012 to accelerate this treatment for women who are not eligible for other HER2 directed therapies.  Shares are up 14% at $1.495 after the open. Update after 4 PM EST: shares closed down 8.5% at $1.17.

Seattle Genetics Inc. (NASDAQ: SGEN) is marginally after presenting SGN-75 clinical data… two patients achieved a partial response, eight patients had stable disease, 11 patients had progressive disease and four patients were not evaluable for response in non-Hodgkin lymphoma patients.  The every-three-week dosing schedule has been selected for further study.  Shares are up 1.5% at $19.23. Update after 4 PM EST: shares closed up 2.2% at $19.37.

Sunesis Pharmaceuticals Inc. (NASDAQ: SNSS) is down after its presentation of its adaptive study design for Vosaroxin Phase 3 VALOR trial in acute myeloid leukemia.  VALOR is expected to enroll 450 evaluable patients at leading sites in the U.S., Canada, Europe, Australia and New Zealand. Shares are down 12% at $2.63 after the open. Update after 4 PM EST: shares closed down 17.9% at $2.47.

Vical Incorporated (NASDAQ: VICL) was initially up 3% after the open but is now flat.  The company showed reports of a positive correlation between the response and survival for completed Allovectin melanoma trials at ASCO.  Update after 4 PM EST: shares closed up 0.25% at $3.87.

Unfortunately, 2011 has so far failed to yield any massive winners.  Our view is that the personalized angle will probably continue to draw the most interest.  Keep in mind that any large or small company comments throughout the conference can make or break a stock.

JON C. OGG

The Other Side of the Coin: Big Caution in Dendreon (DNDN, JNJ)

May 27, 2011 · Filed Under analyst calls, Cancer, dendreon · Comment 

Dendreon Corporation (NASDAQ: DNDN) is one we have been very positive about before the FDA approval of Provenge for metastatic prostate cancer.  We often like to feature both sides of the coin, and the other side of the coin is one of caution from Credit Suisse this week.  If this research call is right, shareholders could face some competitive pressure in shares of Dendreon.

Credit Suisse has been very cautious when it comes to Dendreon Corporation (NASDAQ: DNDN).  The firm noted that an editorial in this week’s New England Journal of Medicine was published based upon Johnson & Johnson (NYSE: JNJ) and its abiraterone post-chemotherapy trial results.  What made the concern is the focus on results which validate abiraterone’s action. 

Some may consider one article not a strong enough basis for this week’s caution.  Credit Suisse believes that the results can imply off-label pre-chemotherapy use as a competing agent against Provenge from Dendreon.  Another bit was the combination data of abiraterone and other agents as lacking, but the firm believes that its concerns about abiraterone as a competitor are currently under-appreciated.

The belief is that these trial results show that abiraterone might possibly be used in all patients with metastatic castration-resistant prostate cancer.  This is a longer-term concern rather than near-term, but and the firm is not assuming either “a pre-chemo approval in 2011 or significant off-label use ahead of an approval.”  Still, it does seem to enhance compeitive risks to Provenge.

The article from the NEJM suggests that this could impact both how new drugs are developed and used.  There is also a concern that a lack of combination data could eventually impact how Provenge is used in combination with other therapies.

Credit Suisse’s official rating Underperform with a discounted cash flow model price target obkective of $29.00 per share.  The firm is much more cautious on the risks here than most Wall Street analysts based upon competitive threats and based upon lower E.U. pricing and penetration.

Credit Suisse has modelled $0.59 EPS for 2012 on about $877.2 million in revenues and it sees 2013 estimates of $1.68 EPS and $1.162 billion in sales.

Sadly, this call is one that is very expensive to hedge against.  The call is long-term rather than short-term, so we looked at longer-dated LEAPS in options.  Going all the way out to the JAN-2013 $35 PUTS is almost at $6.50 per contract, implying that a sub-$29 share price is the breakeven point on your contract. 

Reuters noted that of the analysts following Dendreon, the ratings were as follows:

  • BUY- 11
  • OUTPERFORM- 6
  • HOLD- 5
  • UNDERPERFORM- 1
  • SELL- 1

Thomson Reuters has a consensus price target objective of $49.72 and Dendreon shares are currently trading around $42.25 with a 52-week range of $25.78 to $44.85.

AFTERTHOUGHT…… I have already been receiving some emails that need to be considered regarding abiraterone’s side-effects.  These were not really covered in the report summary and they are very important to consider.  I also kept the comments mostly to what this report was simply because it was one of the only standout research calls from the rest of the pack. 

JON C. OGG

Quest+Celera… Value With Growth (DGX, CRA)

May 18, 2011 · Filed Under Cancer, Cardiac, genomics, M&A · Comment 

Quest Diagnostics Inc. (NYSE: DGX) is a stock we have recently screened out for value investors who are looking for exposure to healthcare and now in genomics.  Some investors might not recognize the value on the current trailing 12-month P/E ratio, but there is value here in this diagnostics player.  Now the company has announced that it has completed its acquisition of Celera Corporation (NASDAQ: CRA).

Many areas in healthcare are no longer as feared by investors as in 2008 and 2009.  It turns out that Obamacare has actually not crippled as many healthcare segments as feared.  If one area is going to remain afloat in the healthcare treatment segment it is diagnostics.

Quest’s dividend is still less than 1% and that $0.10 quarterly payout has been in place since early-2006.  With the dividend growth theme that investors are seeking, it would make sense that Quest will grow its dividend through time and come more in-line with peers.

Thomson Reuters has estimates of $4.33 EPS for 2011 and $4.87 EPS for 2012., indicating over 10% earnings growth on about 5% revenue growth.  The value-boost here that remains unlocked and which acts as a hidden value that will generate future growth is Quest’s acquisition of Celera Corporation (NASDAQ: CRA).  That is a $671 million acquisition, on the surface until you consider that almost half of Celera’s value was in cash.   The revenue and earnings estimates will not be greatly changed for a few years on Quest after the addition of Celera but this is a key future growth mechanism that is being acquired on the cheap.

Celera has no real debt and carried over $325 million in cash and liquidity on its books.  Quest will have a broader personalized genetic testing business for heart condition, cancer and more via genomics and proteomics after it integrates Celera. The old saying is that beauty is in the eye of the beholder, but it is feasible to think that Celera could possibly become a multi-billion value in the coming decade.

Quest recently paid $241 million in a settlement to get a Medicaid suit behind it. While the company has a larger debt load with over $3.5 billion in long-term debt versus a $89 billion market cap, Quest’s earnings ahead should be more than sufficient to offset leverage. 

Shares closed Tuesday at $57.93, its 52-week range is $43.38 to $59.39, and Thomson Reuters has a consensus share price target of $64.28.  A combined 2011 to 2012 blended earnings estimate puts a forward earnings multiple at only about 12.5-times expected earnings.

JON C. OGG

Ahead of Earnings: Analysts Fight Over Dendreon (DNDN)

May 2, 2011 · Filed Under analyst calls, Cancer, dendreon · 2 Comments 

Dendreon Corporation (NASDAQ: DNDN) was just highlighted on Saturday morning as being on of the top analyst calls of the week because ThinkEquity had initiated coverage of Dendreon with a “Buy” rating at the firm with a price target objective of $50.00 per share.

This Monday came a new analyst call from Credit Suisse that is almost the exact opposite.  Credit Suisse started coverage with an “Underperform” rating and only a $29.00 price target objective. 

What makes both of these calls so important is that this is ahead of this week’s expected earnings report.  Credit Suisse was cautious on peak-Provenge sales, while ThinkEquity was positive on peak-Provenge sales.
Dendreon earnings are due shortly and remains a story around guidance for late-2011 and into 2012 rather than it is an earnings story for the last quarter. Provenge sales are just getting going and Thomson Reuters has estimates of -$0.70 EPS and $28.86 million in revenues; next quarter estimates are -$0.69 EPS and $58.3 million in revenues.

The Thomson Reuters estimates for 2011 are -$2.24 EPS and $369.7 million in revenues, but the 2012 estimates are $0.30 EPS and about $860.5 million in revenues.

This is one of those instances where research teams basically have access to the same data yet have differing conclusions.  That is what makes a ball game.

Shares closed at $43.43 on Friday and the stock is down 1.2% at $42.90 in pre-market trading this Monday.

JON C. OGG

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