Outlook 2011, Part II: 2010 BioHealth Winners (AMRN, ILMN, INHX, JAZZ, NBIX, NPSP, THRX, VPHM)

November 30, 2010 · Filed Under analyst calls, daily, fda, Financial · Comment 

2011 is getting closer and closer, and we wanted to review some of the standout BioHealth winners for 2010 to see what their  prospects are for 2011.  The rounds of exponential gains seen in 2009 were not repeated as frequently in 2010 for the severity  of gains. The FDA has been difficult to  predict in 2010 and many companies with high expectations managed to become flops which either saw denied FDA approval or were given severe delays.  We wanted to review the companies that are up more than 100% from their lows of the last 52-weeks to see which have prospects out into 2011 or beyond.

Amarin Corporation plc (NASDAQ: AMRN), Illumina Inc. (NASDAQ: ILMN), Inhibitex Inc. (NASDAQ: INHX), Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ), Neurocrine Biosciences Inc. (NASDAQ: NBIX), NPS Pharmaceuticals, Inc. (NASDAQ: NPSP), Theravance Inc. (NASDAQ: THRX), and ViroPharma Inc. (NASDAQ: VPHM).

Amarin Corporation plc (NASDAQ: AMRN) rose to $5.85 and its new 52-week trading range is $0.93 to $6.00.  Its market cap is now $578 million.  This one owes Monday to its exponential gain status.  the stock was up big on Monday and was only at $3.55 before news that its AMR101 met pivotal phase 3 study endpoints with lower triglycerides and no statistically significant increase in LDL-C and safety profiles.  Real revenues are expected to still be beyond 2011.

Illumina Inc. (NASDAQ: ILMN) is more on the instrument side of the biohealth sector in integrated systems for the analysis of genetic variation and biological function.  At $60.26, it is one of the only multi-billion market cap stocks on the 2010 list.  The 52-week range is $26.87 to $61.77, it has a $7.5 billion market cap, and trades about 1.2 million shares per day.  Thomson Reuters expects $887.73 million in 2010 revenues and sees $1.08 billion in 2011 revenues.

Inhibitex Inc. (NASDAQ: INHX) trades at $2.90 versus a 52-week range of $0.67 to $2.95; its market cap is $180 million and it trades only about 200,000 shares per day.  The company’s opportunity comes in Hapatitis C, although it is development stage and no real revenues are expected through nextr year.  About a month ago it was awarded $489,000 in grants under the Therapeutic Discovery Tax Credit Program.

Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ) trades at $16.72 and its 52-week trading range is $6.38 to $17.06.  Shares are up right at 100% for 2010.  The market cap is $650 million and it trades  close to 730,000 shares per day.  Jazz describes its self as a company which identifies, develops and commercializes innovative treatments for important, underserved markets in neurology and psychiatry. Its two products are Xyrem for narcolepsy and Luvox as an anti-depressant.  The company is already generating revenues, with $128.4 million in 2009 and Thomson Reuters looking for $168.45 million for 2010 and $237.95 million in 2011.

Neurocrine Biosciences Inc. (NASDAQ: NBIX) trades at $7.05 against a 52-week range of $1.94 to $8.69, and shares have nearly tripled so far in 2010.  The market cap here is $387 million and average trading volume is about 550,000 shares per day.  Neurocrine develops drugs for the treatment of neurological and endocrine-related diseases and disorders.  Its pipeline partnerships are with Abbott Labs (NYSE: ABT) in men’s and women’s health, GlaxoSmithKline (NYSE: GSK) in anxiety and depression, and Boehringer for Type II diabetes.  The company is just in the first year of real revenue stages and Thomson Reuters expects $32.9 million in 2010 revenues and $68.8 million in 2011 revenues.  June was its first quarter of revenues at $4.64 million, followed by $14.448 million in the September quarterly revenues.

NPS Pharmaceuticals, Inc. (NASDAQ: NPSP) trades at $6.15 versus a 52-week range of $2.99 to $7.75;  its market cap is $411 million and it trades more than 400,000 shares per day.  The company is developing Gattex to treat short bowel syndrome that prevents patients from absorbing nutrients from food. NPS is also developing NPSP558 for hypoparathyroidism in adults. Revenue rose to $21.1 million on increased royalty fees, although R&D costs are up as well.  Both are in later-stage studies and Thomson Reuters has revenue estimates of $88.7 million in 2010 and $103.46 million in 2011.

Theravance Inc. (NASDAQ: THRX) trades at $25.00 and its 52-week range is $9.62 to $25.44; the market cap here now $1.85 billion and it trades more than 500,000 shares per day.  Shares were under $14 at the start of 2010 but fell to under $10 in February.  The company recently raised $129 million from GlaxoSmithKline PLC (NYSE: GSK), a vote that its joint-development of Relovair as a new lung disease and asthma drug is going well.  The companies noted back in September that Relovair met its goals in mid-stage studies, and many view this is a potential replacement drug for Advair.  The company is still pre-revenues with $22 to $24 million in revenues in each of the last three years; Thomson Reuters sees only $23.6 million in 2010 revenues and $29.3 million in 2011 revenues.

ViroPharma Inc. (NASDAQ: VPHM) trades around $15.70 versus a 52-week range of $7.40 to $15.79.  Its big gains came  in 2005 and the stock is still well under its 1999 and 2000 peak above $60.00.  Its market cap is $1.22 billion and it trades about 900,000 shares per day.  Products include Cinryze for routine prophylaxis against angioedema attacks and Vancocin for treatment of antibiotic-associated pseudomembranous colitis caused by Clostridium difficile and enterocolitis caused by Staphylococcus aureus and MRSA strains.  2009 revenues were $310.449 million and Thomson Reuters has estimates of $ 422.1 million in 2010 and $332.4 million  in 2011.

Yesterday’s first edition  of the stand-out BioHealth names for 2010 included Ariad Pharmaceuticals Inc. (NASDAQ: ARIA), Chelsea Therapeutics International Ltd. (NASDAQ: CHTP), Cyclacel Pharmaceuticals, Inc. (NASDAQ: CYCC), EntreMed Inc. (NASDAQ: ENMD), Exact Sciences Corporation (NASDAQ: EXAS), Exelixis, Inc. (NASDAQ: EXEL), Amicus Therapeutics, Inc. (NASDAQ: FOLD), and Idenix Pharmaceuticals Inc. (NASDAQ: IDIX).  FULL DETAILS


Outlook 2011: 2010 BioHealth Winners Part 1 (ARIA, CHTP, CYCC, ENMD, EXAS, EXEL, FOLD, IDIX)

November 29, 2010 · Filed Under daily · Comment 

2010 has so far lacked all of the juice that drove many biotech stocks exponentially higher in 2009.  For starters, the start of this year was not initiated with a deadly round of panic selling and followed by a major recovery in share prices with a hard V-bottom.  We have also had what feels like fewer FDA blockbuster approvals at the same time that many key drugs expected to be approved were either denied approval outright or were given severe delays.  We wanted to review the companies that are up more than 100% from their lows of the last 52-weeks to see which have prospects out into 2011 or beyond.

Some of the key bioheath stand out names for 2010 are Ariad Pharmaceuticals Inc. (NASDAQ: ARIA), Chelsea Therapeutics International Ltd. (NASDAQ: CHTP), Cyclacel Pharmaceuticals, Inc. (NASDAQ: CYCC), EntreMed Inc. (NASDAQ: ENMD), Exact Sciences Corporation (NASDAQ: EXAS), Exelixis, Inc. (NASDAQ: EXEL), Amicus Therapeutics, Inc. (NASDAQ: FOLD), and Idenix Pharmaceuticals Inc. (NASDAQ: IDIX).  A second list will post on Tuesday.

Ariad Pharmaceuticals Inc. (NASDAQ: ARIA) is around $3.93 and its 52-week range is $1.94 to $4.49.  The market cap is almost $500 million and average volume is about 1.27 million shares per day.  The company will present updated clinical data from a fully enrolled Phase 1 trial of its investigational, pan-BCR-ABL inhibitor, ponatinib, at the 52nd Annual Meeting of the American Society of Hematology (ASH) being held in Orlando, Florida, December 4-7, 2010. These Phase 1 findings in patients with resistant and refractory chronic myeloid leukemia will be featured in an oral presentation.

Chelsea Therapeutics International Ltd. (NASDAQ: CHTP) has been very volatile this year.  At $5.26, it has a market cap of $258 million and its 52-week range is $1.94 to $7.00.  The company has raised cash by selling equity and it is currently in a phase III hypertension study, a Phase III Parkison’s study, and a Phase II R.A. and a Phase II fibromyalgia study.

Cyclacel Pharmaceuticals, Inc. (NASDAQ: CYCC) has a long history of price volatility.  Around $1.85, its 52-week trading range is $0.75 to $4.08, although the low close was under $3.00.  The market cap is still under $85 million and average volume is close to 725,000 shares per day.  It is developing oral therapies that target the various phases of cell cycle control for the treatment of cancer and other serious diseases, and it will show Phase II clinical trial results of sapacitabine for the treatment of myelodysplastic syndromes at a poster presentation during the 52nd Annual Meeting of the American Society of Hematology (ASH) in Orlando, on Saturday, December 4, 2010.

EntreMed Inc. (NASDAQ: ENMD) has been wildly volatile after falling from over $10 to almost $2 before its recovery of late.  Around $6.25, its 52-week range is $2.26 to 13.64, its market cap is about $60 million, and its average volume is about 70,000 shares.

Exact Sciences Corporation (NASDAQ: EXAS) focuses on the early detection and prevention of colorectal cancer, and sometimes it feels more ‘exact’ than others.  With shares around $5.71, its 52-week range is $2.43 to $9.24.  The company has a $231 million market cap and its average volume is in excess of 1.3 million shares per day.  From July to October it ran from $3.50 to $9.24 but the $9.00 level was not a closing high.  The company recently raised about $64 million in cash, so the numbers on its market cap may now be different.

Exelixis, Inc. (NASDAQ: EXEL) was out of focus but came back in focus in November after data from a Phase II clinical trial testing XL184 in ovarian and prostate cancer showed that the drug appears to be a help in both tumor types.  It was effectively given back rights to the drug by Bristol-Myers Squibb earlier.  At $5.80, its 52-week range is $2.86 to $8.00 and the market cap is $631 million.  This remains a wild card as it is still actually down in 2010 so far.

Amicus Therapeutics, Inc. (NASDAQ: FOLD) is close to new near-term highs at $4.30 versus a 52-week range of $1.88 to $4.53.  The market cap is roughly $119 million and average volume is only about 30,000 shares.  It was in late-October that it entered into a License and Collaboration Agreement with Glaxo Group Limited to develop and commercialize Amigal, which is currently in Phase III studies for the treatment of Fabry disease.

Idenix Pharmaceuticals Inc. (NASDAQ: IDIX) has also been one that has cut both ways in 2010.  After an 8% drop, shares are down around $4.03, its 52-week range is $1.83 to $6.11, its market cap is just shy of $300 million, and its average volume is just over 400,000 shares per day.  The most recent pop higher came from announcing a $20 million milestone payment from ViiV Healthcare for the initiation of Phase IIb trial of its ’761 for the treatment of HIV/AIDS.

For part two you can read: Outlook 2011, Part II: 2010 BioHealth Winners (AMRN, ILMN, INHX, JAZZ, NBIX, NPSP, THRX, VPHM)


Very Few 52-Week Highs in BioHealth (ACOR, ALTH, ARIA, AUXL, KERX, NPSP, PPDI, PPHM, PBE, PRX, SUPG)

April 15, 2010 · Filed Under daily, Financial · 1 Comment 

The market has been putting new highs and new highs and yesterday there were about 1700 stocks (including warrants, ETFs, and other publicly traded non-common entities).  What is interesting is that biotech and pharma stocks are few and far between that are actually putting in new 52-week highs.  Many of the key biotechs are having “issues” and many are very far from 52-week highs.  We compiled a brief list today of the biotechs and related pharma stocks that we saw hitting 52-week highs via name, exchange-ticker, the high, the last print, the change, and the volume:

Read more

Talking Biotech ETFs: iShares Nasdaq Biochnology to $100 (IBB, OSIP, MDVN)

March 3, 2010 · Filed Under alzheimer's, daily, Financial · Comment 

Today’s price moves in the biotech sector are quite different from what we saw earlier this week.  A hostile merger via tender from Astellas for OSI Pharmaceuticals Inc. (NASDAQ: OSIP) got everyone up in arms this week.  So much that other investors were going back over buyout candidate notes.  We also gave a list of those recently noted biotech buyout candidates this week.

But today’s news out of Medivation, Inc. (NASDAQ: MDVN) severely missing its endpoints in the Phase III targets for Dimebon as a new potential blockbuster to treat Alzheimer’s Disease has everyone reminded of the risks in betting on speculative biotech stocks with no products on the market.  That has a sentiment reversal taking place, and unfortunately Dimebon has become Dime-Bag.

But before this morning’s blow-up there was an interesting call that may have more merit than just the bet against the sector.  A chart analysis from OptionsZone.com on the iShares Nasdaq Biotechnology (NASDAQ: IBB) showing a potential break-out pattern on its chart.  If these levels hold, the call is for the “IBB” to head to $95 to $100….


10-Bagger Watch: Cyclacel Meets Biotech Trophy Hunters (CYCC)

January 7, 2010 · Filed Under Cancer, daily, Financial, R&D · 2 Comments 

Cyclacel Pharmaceuticals, Inc. (NASDAQ: CYCC) was the latest example of trader, speculators and investors running out to pile into the next low-price small cap biotech stock in the quest for the ten-bagger to catch the next 1,000% run-up.  The news was good in that this was the publication of two peer-reviewed journal articles featuring the company’s seliciclib drug candidate.

We wanted to delve into the article summaries, give a brief financial prognosis, see where the company has been in the past, see what the company said, see what else has the company has up its sleeve, and then give a quick trader-take mindset and some other recent data on this.


An article published in Clinical Cancer Research reports that seliciclib was found to be effective in killing lung cancer cells, through a novel apoptotic mechanism or induction of cancer cell suicide. The article noted that nearly all lung cancer cell lines against which seliciclib was most effective had Ras-activating mutations, which make lung cancer cells highly resistant to approved drugs such as those targeting epidermal growth factor receptors.

The second article was entitled “R-roscovitine (seliciclib) affects CLL cells more strongly than combinations of fludarabine or cladribine with cyclophosphamide: Inhibition of CDK7 sensitizes leukemic cells to caspase-dependent apoptosis”.  In ex vivo studies, seliciclib was compared to fludarabine and cladribine given in combination with cyclophosphamide and was the most effective at inducing programmed cell death in malignant B-CLL cells while resulting in significantly less apoptosis induction in “normal” peripheral blood mononuclear cells.

Seliciclib has been administered to approximately 420 patients in Phase 1 and Phase 2 trials and is currently being evaluated in the APPRAISE trial, which is a Phase 2b study as a possible treatment in non-small cell lung cancer patients who failed at least two prior therapies and in a randomized Phase 2 study as a single agent in patients with nasopharyngeal cancer.


What we want to do is to conduct a very early analysis of the market.  At this point, it is impossible to know the exact size of the market because it is not known what the total aim can be.  If it was automatically deemed to be a first line of treatment for lung cancer this would be instant blockbuster with well over $1 billion in annual sales.  That could still be possible depending upon a myriad of scenarios.  But that part is not known.

The stock rose 152% or $1.61 to $2.67 today on many multiples of its normal 1.5 million shares.  The 52-week range is $0.26 to $2.74 and the market cap at today’s close is only $65.3 million.  The company had over $25 million in liquidity a year ago, but as of the last quarter that was down to just over $14.4 million.  About 5 years ago this stock fell from over $25.00 down to under $5.00 and it then traded between $5 and $10 per share from 2006 to 2008.  Then it slid and slid some more, and today’s price of $2.74 on an intra-day high was the highest share price since May of 2008.


The company’s chief scientist noted that this shows a high correlation between Ras mutations and sensitivity to seliciclib.  Of 52 cell lines of NSCLC origin tested, 2 of the lines (almost 4%) were relatively insensitive to seliciclib and 21 (about 40%) displayed modest sensitivity.  The big data showed that 29 lines (about 56%) showed marked sensitivity. Of the 13 lung cancer cell lines which had the highest sensitivity to seliciclib, 12 (about 92%) had Ras-activating mutations, including K-RAS and N-RAS. However of the 15 lung cancer cell lines which were least sensitive to seliciclib, none had Ras-activating mutations.  It also reported that inhibition of CDK2 by seliciclib suppressed lung cancer growth both in vitro and in vivo of lung cancer cells addicted to CDK2/cyclin E; and lung cancer cells underwent apoptosis or cell suicide by induction of a novel mechanism called anaphase catastrophe, as illustrated in the journal’s front cover.  Combining seliciclib with microtubule-targeting agents, such as paclitaxel or docetaxel, was found to be an attractive clinical regimen to consider in patients with lung cancer.


Cyclacel has three orally available Cyclacel drugs in clinical development:

  • 1.  Sapacitabine is a cell cycle modulating nucleoside analog in Phase 2 studies for the treatment of acute myeloid leukemia in the elderly, myelodysplastic syndromes and lung cancer. The Company plans to submit a Special Protocol Assessment (SPA) request for a pivotal study with sapacitabine during the first quarter of 2010.
  • 2.  Seliciclib (the big news winner Thursday) is a cyclin dependent kinase inhibitor in Phase 2 studies for the treatment of lung cancer and nasopharyngeal cancer and in a Phase 1 trial in combination with sapacitabine.
  • 3.  CYC116 is a Aurora kinase and VEGFR2 inhibitor in a Phase 1 trial in patients with solid tumors.

Cyclacel’s ALIGN Pharmaceuticals subsidiary markets Xclair Cream in the U.S. for radiation dermatitis, Numoisyn Liquid and Numoisyn Lozenges for xerostomia.


The market is in bull market mode even if there has been a dud of a time in the large cap biotech stocks.  Traders are currently chasing up low-priced small cap stocks on any news, and today’s news-reaction looks to be no different.  We would note that the company already gave one peer-reviewed article for Seliciclib on December 30, and this news magically follows the notion that the company received a NASDAQ potential delisting notice for not meeting the minimum $10 million stockholders’ equity requirement.  Merriman Curhan Ford  initiated coverage with a “BUY” rating in late-October, but that was when the stock was under $1.00 and it appears to have a $2.00 target.

The company also released FDA meeting data in mid-December:
“held a Type A meeting with the U.S. Food and Drug Administration (FDA) to discuss a randomized Phase 3 study design for Cyclacel’s oral sapacitabine capsules in acute myeloid leukemia (AML) and separately in myelodysplastic syndromes (MDS)…. Based on the FDA’s confirmation that the proposed study design would be acceptable for a Special Protocol Assessment (SPA), Cyclacel plans to submit a SPA request during the first quarter of 2010.”

The company’s CEO is presenting at OneMedForum 2010 Finance Conference taking place in San Francisco on Wednesday, January 13, 2010 at 10:00 AM Pacific Time (1:00 PM EST).

In fact, a pop of this magnitude, even if followed by additional near-term gains, is usually followed up with a securities sale or a private placement to raise capital.  That is particularly the case when a company is not meeting listing requirements.

This won’t be the last you have heard from Cyclacel, but this is also just another incident of traders chasing gains and chasing gains.  Technically this has already gone up 10-times from the absolute lows.

JANUARY 8, 2010

Vanda (VNDA) Leaps On Novartis Pharma News

October 13, 2009 · Filed Under daily · Comments Off 

Vanda Pharmaceuticals (NASDAQ:VNDA) moved up 14% to as the company disclosed that it has entered into an agreement with Novartis Pharma AG to commercialize and develop Fanapt (iloperidone), Vanda’s anti-psychotic, in the U.S. and Canada. Fanaptwas approved by the U.S. Food and Drug Administration on May 6, 2009 for the acute treatment of schizophrenia in adults. Fanapt is a mixed dopamine D2 / serotonin 5HT2A receptor antagonist. The U.S. anti-psychotic market is approximately $14 billion. Read more

Friday’s Top BioHealth Movers (ACOR, AVNR, CXM, LXRX, SVNT, SQNM, SPPI)

October 9, 2009 · Filed Under daily, fda, Financial · Comments Off 

This has been a quiet trading day, but not in the land of biotech and medical technologies that comprise the BioHealth sector.  These are this morning’s top movers in the group:

Acorda Therapeutics, Inc. (NASDAQ: ACOR) is down over 15% after the FDA made public the background material over Acorda’s Fampridine.  Full data can be found at:

AVANIR Pharmaceuticals, Inc. (NASDAQ: AVNR) is up 6.5% at $2.45 and it was one of the top gainers this morning, but has since come off of highs of $2.68.  The company announced additional detailed results from the confirmatory double-blind Phase III STAR trial evaluating two doses of the investigational drug Zenvia™ in the treatment of pseudobulbar affect among patients with underlying multiple sclerosis (MS) or amyotrophic lateral sclerosis (ALS). Zenvia met the primary efficacy endpoint by reducing PBA episode rates by an incremental 11.9% beyond placebo. The lower dose Zenvia group did not achieve a statistically significant reduction in PBA episode rates compared to placebo.

Cardium Therapeutics Inc. (AMEX: CXM) is one of the top winners of all stocks today with a 19% gain to $1.82.  This one is set to make a presentation soon, but the move today appears to be based upon a positive recommendation from a boutique firm called Skymark Research.

Lexicon Pharmaceuticals, Inc. (NASDAQ: LXRX) is getting tooled after a secondary offering.  The company sold some 33,333,333 shares of common stock at $1.50 per share after a $1.77 close yesterday.  We have shares down about 13% at $1.53.  It turns out that 19,894,076 shares are being offered through the underwriters and 13,439,257 shares are being offered to Invus, L.P., Lexicon’s largest stockholder.

Savient Pharmaceuticals, Inc. (NASDAQ: SVNT) is seeing a surprise 7% gain to $14.28 this morning.  This is surprising considering that its secondary offering of 4.3 million shares priced at $13.29.  One item helping more is that this stock was also Raised to Outperform over at Oppenheimer.

Sequenom Inc. (NASDAQ: SQNM) is running again on no news and is up another 9.8% at $3.67 today.  Traders keep touting that there may be no intentional wrongdoing from management and the recently fired staffers.  This is still very much an at-risk company, although making any predictions at this point would be based entirely upon incomplete data that still has many unknowns.

Spectrum Pharmaceuticals, Inc. (NASDAQ: SPPI) is down some 17% at $5.12 after it received a complete response letter from FDA for FUSILEV in advanced metastatic colorectal cancer noting that it did not demonstrate that FUSILEV is non-inferior to leucovorin.  The response also recommended that it meet with them to discuss options for continuing to seek approval of FUSILEV in advanced metastatic colorectal cancer.


Unusual Number of 52-Week Highs in BioHealth Stocks (BCRX, CRIS, NKTR, OGXI, SCLN, SVA, SPPI, TRGT, VICL)

August 31, 2009 · Filed Under daily, flu · Comments Off 

As you will see, there are many new 52-week highs out there in some drug and biotech names…. Some of this is on swine flu news despite a big drop in the stock market today, but here goes:

  • BioCryst Pharmaceuticals Inc. (BCRX) hit $13.24 today…. 52-week low is $0.85.
  • Curis Inc. (NASDAQ: CRIS) hit $2.25 today, the drug discovery company has a small cap at $140 million; 52-week low is $0.68.
  • Nektar Therapeutics (NASDAQ: NKTR) hit 8.29 but on very low volume, 52-week low is $8.29.
  • OncoGenex Pharmaceuticals, Inc. (NASDAQ: OGXI) hit a high of $42.99, also on fairly thin trading volume…. The 52-week low is all the way down at $2.00 on this cancer company.  In 2007, this was over a $100 stock…
  • SciClone Pharmaceuticals, Inc. (NASDAQ: SCLN) is up big on heavy block trading as it hit $4.90 vs. a 52-week low of $0.63.
  • Sinovac Biotech Ltd. (AMEX: SVA) is what led the flu names today after securing Chinese approval for its swine flu vaccine.  Shares are up over 40% at $8.90… but it hit $9,44 today versus a 52-week low of $0.75.
  • Spectrum Pharmaceuticals, Inc. (NASDAQ: SPPI) is up over 7% and hit $8.32 on strong volume… 52-week low is $0.55.
  • Targacept, Inc. (NASDAQ: TRGT) hit $14.69 today, but on thin trading volume, compared to a 52-week low of $1.40.
  • Vical Inc. (NASDAQ: VICL) hit a high of $4.93 versus a low of $1.04.  This is on strong volume and is after a rise of flu awareness stocks in China.

August 31, 2009

BIO Survey Shows Expected Opportunities Abound in Biotech

August 13, 2009 · Filed Under Cancer, daily, R&D · Comments Off 

There is a very interesting study out of Biotechnology Industry Organization (BIO) which was conducted with Thomson Reuters to look at the investor views of the biotech sector and the expectations for 2009.  The study was intended to inform and improve communication between biotech executives and investors.  There is a small problem with the data in that it was from December 2008 to January 2009, but that was at least before the February and very early-March slide had the world in a tailspin.  The data was also taken from interviews and surveys from more than 80 biotech analysts, investors, and portfolio managers, and it did show a continued optimism for 2009.

Of those in the group, 64% believed that it was a “good” or “very good” time to invest in biotech.  Also, 81% of the group said that market volatility and the credit crunch has changed the approach to investing in biotech. The biotech sector was also classified as undervalued by 59% of those surveyed.  As far as the best opportunities in the Biospace, that was mostly put in the mid-cap range with 43% preferring valuation there and small-cap coming in at 26%.  But as far as which stage of the pipeline, that was overwhelmingly (85%) put in the late-stage pipeline.  Most surveyed (62%) also preferred profitable companies, and an overwhelming percent of 93% preferred the U.S. over Europe and 94% preferred the U.S. over Asia.

While most preferred biotech over “the rest of healthcare” most investors (53%) said that when they invest in biotech that they compare biotech stocks to other biotech and other healthcare stocks rather than just to other biotech stocks alone.

But the overall investment process does not actually look that different from traditional investment analysis. 72% of methodology did vary by market capitalization, 85% of the methodology did vary by stage of development, 63% did vary by therapeutic classes, 39% did vary by geography and some 80% did vary by profitability versus unprofitable.  The other analysis is actually very similar to traditional growth stock analysis in profitable companies as the the first most important notion was revenue growth and the second was a Price/Earnings analysis followed by earnings growth.  In unprofitable companies, the most important notion was still revenue growth.

Companies with high cash reserves are definitely preferred over those with low cash reserves.  Of those companies with 6 months of cash on hand, 68% said they would not invest. The lines blur between those with 12 and 18 months of cash, but 76% said they would invest in a company with 24 months of cash.  Behold, cash is still king.

The more speculative side of the cycle is also interesting.  In companies with no products, 61% would not invest in companies just beyond Phase I studies, but then 48% said yes to investing beyond Phase II.  On stocks under $1.00, only 26% said they would invest and 43% said no.  But under $5.00 stocks, 74% said they would invest.  This also looks like the same notion… small cap or low price is fine, but penny stocks are still too risky for most.  Market caps are also important as well and as the market cap goes down so does the interest: 55% said they prefer $100 million but when you get to $10 million the yes group was only 15% and the no group rose to 64%.  Unsurprisingly, the same thing was noticed in liquidity and volume per day: 64% would invest in a stock that traded 500,000 shares per day and actually 0% said no to that; when you get down to 100,000 shares per day you get to only 34% that said YES.  The risk of stocks trading PINK SHEETS looks the same as investor risk aversion to regular Pink Sheet stocks: 11% said they would invest in Pink Sheets but 53% said that they would not invest.

Of the index drop at the time, Mergers and acquisitions was the top catalyst to move the sector with 47%. Also, 66% believed that biotech would outperform the rest of healthcare and 70% believed biotech would outperform the overall market in 2009.  51% believed that Big Pharma would invest in biotech via acquisitions.

The three most important research methods for investment opportunities in biotech were meetings with management (60%), and then sell-side research and medical/industry conferences coming in at a tie at 45%.  Interestingly enough, only 9% said that looking at filings to see where the smart was invested was listed as “very important.” But then the largest method of finding new biotech investor ideas was medical and industry conferences at 40% and 59% of those surveyed listed medical and industry conferences as being of significant value.  As far as where the two largest investment opportunities lie, Oncology was overwhelmingly the winner followed by autoimmune and immunology opportunities.

The full 36 page study is available here if you wish to see more detailed notes on other aspects of the survey.

AUGUST 13, 2009

Sequenom's Quality of Life: Cash Versus Burn Rates (SQNM)

August 7, 2009 · Filed Under daily, R&D · Comments Off 

Sequenom Inc. (NASDAQ: SQNM) gave an earnings report that only highlights its cash on hand versus a total expected cash burn rate.  The troubled diagnostics is down over 11% at $5.35 right after the open.  The company posted a loss of $20.2 million or -$0.33 EPS on a 29% drop in revenues to $9.17 million. Thomson Reuters had consensus estimates at -$0.27 EPS and $8.2 million in revenues.

R&D spending rose to $10.2 million from $6.4 million, while its SG&A expenses rose to $8.2 million from $4.3 million a year ago. Those SG&A costs are directly tied to legal expenses and to costs associated with a salesforce.

To add insult to injury, the quarter also included roughly $1 million in restructuring costs.  The company also gave projections saying that it would lose $65 million for all of 2009.

The company’s MassArray sales have continued to take a hit.  We think some is genuinely from the economy and soft sales in medical devices, but we think there is also a cloud over it from the related fallout because of its problems in the Downs Syndrome test data earlier this year.  The company’s legal costs are running much higher and of course the reevaluations needed are driving up its research and development costs.

System-related revenue was essentially halved to $3.3 million, services fell to $677,000 in revenues from $1.2 million.  There was at least a gain in the consumables revenue, as that figure rose to $5.2 million from $4.9 million.

As far as that annual loss projection of -$65 million, it had previously offered a range of -$62 to -$65 million.  The annual target of $32 to $35 million in revenues from genetic analysis was left intact, but we did not get guidance for its molecular diagnostics revenue. This loss expectation for the year is largely in-line with estimates, but it also dashes any quick hopes of a sudden fix after its earlier problems this year.

Sequenom ended the quarter with cash, cash equivalents and short- and long-term marketable securities of $69.3 million and it said accounts receivable were $7.5 million.  Effectively, the company just outlined its cash burn rates versus cash on hand.

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