Shouldn’t VIVUS Raise Capital Now? (VVUS)

February 23, 2012 · Filed Under Diabetes, fda, Financial, Heart, obesity, Secondary Offering · 5 Comments 

While we have started mostly using The Wire at 247wallst.com for our biotech and active trader posts (among many other aspects 50 to 100 times per day), we have a question for BioHealthInvestor readers after VIVUS, Inc. (NASDAQ: VVUS) has basically doubled on news of Qnexa getting a recommendation for approval from a FDA panel…

If you were the CEO or CFO of VIVUS, wouldn’t you immediately go out and raise capital now?

Our take is not just “yes” but a resounding yes.  With $150 million or so in net tangible assets as of September 30, 2011, with a ten-year history, and for many more reasons, this would seem like a shoe-in for a capital raise.

FULL ANALYSIS HERE  

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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

Odds-Making on a Human Genome Sciences Acquisition (HGSI, GSK, BIIB, MRK)

October 18, 2011 · Filed Under Financial, Lupus, M&A, Rumor · 3 Comments 

Human Genome Sciences Inc. (NASDAQ: HGSI) is surging on reports that GlaxoSmithKline PLC (NYSE: GSK) could be set to make a $25.00 per share offer to acquire the company.  The report surfaced in the Daily Mail out of the United Kingdom, and we would note that this publication pushes out enough rumors that it could be called the Daily Rumor (or Rumour for the Brits).  It also has a spotty track record.

The reason for the speculation is simple… GSK was long thought of to be the natural buyer because of the long pacts that are in place already.  The two already have Benlysta as the lupus treatment under a collaboration pact.  Then there is the issues of HGS’s pipeline.

What is interesting is that the Daily Mail also threw out Biogen Idec Inc. (NASDAQ: BIIB) and Merck & Co. (NYSE: MRK) could also be suitors.  Our caution here is that those companies would have to want to be involved in collaboration pacts with GSK either way.

It is always interesting when you see a rumor of a 100% buyout premium.  Sadly, even a 100% premium is not an assured price that would get a deal done.  It would seem likely, but others may still fight it as the 52-week high is $30.15.  The thing that would make a deal simple is that the market cap is only about $2.4 billion. 

One issue that current investors could make for undervaluing the company is that the consensus price target from analysts is still above $24.00.  If the stock is worth that on its own, investors could argue a buyout should make it worth even more. 

A deal would make sense for GSK here, but we would be a bit more cautious on betting the farm that another large player would want to buy the company.  It would be normal that GSK would not allow itself to be stuck in a new deal under a change of control if it found the buyer to be difficult or incompetent.  That being said, anything is possible.  This is not the first time buyout rumors have circulated around Human Genome Sciences.

Shares are up almost 13% at $12.68 and the 52-week trading range is $10.40 to $30.15.

Since this is probably the fourth or fifth time we have heard “HGSI Buyout Rumors,” our odds would automatically put the chance under 50% that a deal is imminent just because of the history of rumors.  Still, an acquisition would make sense for GSK or for a large player that GSK would want to work with.  That being said, we’d assign a 33% to 40% chance of a deal… 1-in-3 or 2-in-5.

JON C. OGG

Private Equity Changes CRO Landscape With PPD Buyout (PPDI, CRL, CVD, PRXL)

October 3, 2011 · Filed Under Financial, M&A, R&D, Research · 4 Comments 

The world of contract research organizations is changing.  The unexpected news hit the wire this Monday that Pharmaceutical Product Development, Inc. (NASDAQ: PPDI) is being acquired.  This was no gobble-up acquisition where a larger public company preyed on a smaller company.  This was a private equity transaction.

PPD has entered into a definitive merger agreement to be acquired in a $3.9 billion cash buyout by affiliates of The Carlyle Group and Hellman & Friedman.  The terms of the deal call for the assumption of liabilities and for the common holders to receive $33.25 per share in cash.  Before today, the trading range had effectively been $25 to $32 but the stock closed at $25.66 on Friday and that implies a near-30% premium.

PPD has also been north of $40 in the last 5-year period.  That being said, the board of directors has unanimously approved the deal and is recommending that shareholders vote for the transaction.

The attraction here is the CRO business, which aims to help pharmaceutical and biotech companies develop new drugs at lower costs and with less inside oversight.

As you would expect, the deal is subject to approvals and to regulatory reviews, but the transaction is not subject to any financing conditions. The funds combined between Hellman & Friedman and Carlyle were listed as nearly $22 billion and it was also noted that external debt financing is being provided by Credit Suisse, JP Morgan, Goldman Sachs and UBS.

PPD does have a “Go Shop” provision as the terms allow the company to go solicit acquisition proposals from third parties for a period of 30 calendar days from the date of the merger agreement.  PPD can also respond to unsolicited proposals that the board “determines are reasonably likely to result in a superior proposal.”  Carlyle and Hellman & Friedman were given a “right to match” term and the current merger is expected to close in the fourth quarter of 2011.

PPD has offices in 44 countries and more than 11,000 professionals worldwide.

Charles River Laboratories International Inc. (NYSE: CRL) is up 1.5% at $29.05 and its 52-week range is $27.76 to $42.84.

Covance Inc. (NYSE: CVD) is up 1.3% at $46.07 and the 52-week trading range is $43.00 to $63.86.

Paraxel International Corp. (NASDAQ: PRXL) is up 3% at $19.45 and its 52-week range is $15.26 to $27.91.

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

The Next Blockbuster Drug (PFE, BMY, BAYRY, JNJ, SNY)

June 23, 2011 · Filed Under fda, Financial, Heart, R&D · Comment 

Against a backdrop of falling stock prices, Pfizer Inc. (NYSE: PFE) and Bristol-Myers Squidd company (NYSE: BMY) have bucked the trend of the day and both are seeing a rise in their share prices after reporting that “apixiban” has tested as being superior to and safer than the generic drug “warfarin.”   Both drugs are intended to aid in preventing strokes in patients with dangerously irregular heart rhythms.  “Apixiban” is the experimental blood thinner being developed by both Pfizer and Bristol Myers.  “Warfarin” is the generic version of Coumadin, whose patent expired more than 10 years ago.

The hope is that this will lead to another blockbuster drug with more than $1 billion in sales.  The timing couldn’t be better for the two companies as Big Pharma companies are generally facing an industry-wide patten cliff, where a number of significant pattens will soon expire.  As a result, less expensive and far-less-profitable generics will soon displace proprietary pharmaceuticals along with much off the revenues these products generate.  This has so far not managed to keep these companies from being able to offer extremely high dividends.

The news of apixiban’s successful tests negatively impacted the prices of companies manufacturing competing blood thinners.  Bayer AG (BAYRY.PK) and Johnson & Johnson (NYSE: JNJ ) are seeking FDA approval for “xarelto,” their own blood thinner, traded lower.  In mid-day activity, Bayer traded at $77.15, down 7.26%, while Johnson and Johnson traded at $64.85, down 1.85%. Sanofi-Aventis (NYSE: SNY) who partners with Bristol-Myers in co-marketing, the hugely successful blood thinner, “Plavix” traded down over 2% at $37.08. “Plavix” will lose its patent protection in the near future.

The successful tests of “apixiban” effectively make Bristol-Myers a double winner by compensating for the impending expiration of its proprietary position with a promising new blood thinner.  In mid-day activity, shares of Bristol-Myers traded up 5.4% at $29.25, while Pfizer traded up 2.1% at 20.72.  Shares of both companies are near their highs for the day.

Before today’s announcement, the consensus price target for Pfizer was $23.37 per share, giving the shares an implied upside a tad less than 13%.  With today’s gains, Bristol-Myers Squibb has essentially surpassed its posted consensus target price.  Keep in mind that unforeseen and significant new product introductions like “apixiban” have the potential of powering upside adjustments in consensus price targets, earnings and revenue estimates, and even in the overall bias.  The question is, how much of a game changer will “apixiban,” prove to be . . . not merely in “targets” but in realized revenues and profits.

Morgan Stanley has now boosted its rating on Bristol-Myers Squibb to Overweight and said they win from this much more than Pfizer due to relative size.

JON C. OGG

Gilead’s DOJ Subpoena, Criminal Aspects At Hand (GILD)

June 10, 2011 · Filed Under fda, Financial, HIV · Comment 

Gilead Sciences, Inc. (NASDAQ: GILD) has been fighting an image of being “dead money” for biotech investors for a year.  Now the company has disclosed after the close on Friday that it has received a subpoena from the Department of Justice.

The exact office is the United States Attorney’s Office for the Northern District of California.

We actually have very little as to what the details are but the company said that the DOJ has requested documents related to the manufacture, and related quality and distribution practices of the company.  Specifically noted were Atripla®, Emtriva®, Hepsera®, Letairis®, Truvada®, Viread® and its investigational fixed-dose combination of Truvada and EdurantTM.

Here is where the issues is going to arise… Gilead said that it “is cooperating in this civil and criminal investigation.”

CRIMINAL?????? When investors see a civil charge that is one thing.  Including “criminal” in the wording  with the documents pertaining to just about all of its major products and some of its research candidates is not going to fly well.

That is not exactly what shareholders want to hear about.  Shares closed down 2.26% at $40.23 and its 52-week trading range is $31.73 to $42.93.  The after-hours has shares trading down some 2.25% more around $39.25.

It appears that someone was concerned, or worse, today in the options trading.  There was not a highly unusual share trading volume in stock during the trading day but there is elevated trading in the following PUT options:

  • JUNE $40 PUTS 2,264 contracts versus a prior open interest of 2,552 contracts;
  • JULY $38 PUTS 2,295 contracts versus a prior open interest of 1,361 contracts;
  • JAN12 $37.00 PUTS 500 contracts versus a prior open interest of    500 contracts.

This is not highly unusual options contract trading but it does stand out at least some.

JON C. OGG

Large Fund Manager Sticks With Valeant (VRX)

June 9, 2011 · Filed Under analyst calls, Financial · Comment 

Valeant Pharmaceuticals International, Inc. (NYSE: VRX) is trading higher this morning by 1.5% at $53.15 against its 52-week range of $13.84 to $55.00.  This company is one which does not show up on most drug, biotech, and Pharma screens because its shares have risen, its analyst coverage is mixed, and its value is massive at $15+ billion.

Fund managers often can influence investing decisions by the public and one top fund at the moment is the $4+ billion Sequoia Fund (SEQUX).  That fund has performed very well, it makes concentrated equity bets, and its biggest bet at the moment is Valeant.  This fund goes after companies that it believes have attractive long-term economic prospects in America or internationally.

Waiting on a FDA decision is always tricky, but the FDA has a pending review on Potiga for epileptic seizures along with GlaxoSmithKline (NYSE: GSK).

The fund’s manager just made a brief CNBC appearance this morning and he gave some quick hits on why Valeant the fund’s largest holding.  He noted that the company is more focused on acquisitions rather than being focused on expiring patents as many other giants.  As this fund have averaged almost 14.5% through time versus 10.6% for the S&P 500 Index, investors care.  It should be noted that the fund sometimes has large overperformance or big underperformance due to its concentrated bets.

Our only concern here is that the performance has been massive and the stock is now trading above the consensus analyst target of $52.38.

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

Alkermes & Elan, Game-Changing Deal For Both Companies (ALKS, ELN, JNJ, ACOR, AMLN, LLY)

May 9, 2011 · Filed Under Diabetes, Diagnostics, Financial, M&A, multiple sclerosis, R&D · Comment 

The biotech sector has been full of consolidation and mergers of late, but now we have a new model whereby a smaller company is set to grow by taking a part of a larger company.  We cannot exactly call it a reverse merger. Alkermes, Inc. (NASDAQ: ALKS) and Elan Corporation, plc (NYSE: ELN) have signed a definitive pact where Alkermes will merge with Elan’s unit called Elan Drug Technologies.

The drug technologies unit is profitable and is the drug formulation and manufacturing unit.  The cash and stock transaction is valued toda at roughly $960 million and Alkermes and the unit will be combined under a new holding company structure that is incorporated in Ireland called Alkermes plc.

Alkermes says this deal will be immediately accretive to cash earnings.  It also is said to accelerate Alkermes’ path “to building a sustainably profitable biopharmaceutical company with expertise in developing treatments for central nervous system diseases and a broad, diversified portfolio of products and pipeline based on proprietary science and technologies.”

The deal is a game-changer because on a standalone basis Alkermes was set to have a loss of -$0.31 EPS on $213.27 million in its fiscal year March-2012. The combined company is said to see a growing product, royalty and manufacturing revenues in excess of $450 million annually.  Alkermes said it will also become immediately profitable on a cash earnings basis.  In short, Alkermes instantly transforms. Now the company will have a revenue stream from 25 commercialized products and its 5 growth products will now be from RISPERDAL CONSTA, INVEGA SUSTENNA, AMPYRA, VIVITROL, and BYDUREON.

For Elan, it gets to cut the debt on its balance sheet and will get to improve its capital structure, increase its operating leverage, and this will allow for additional focus and disciplined investments.  It also gets a stake in Alkermes plc that can drive its value ahead.

RISPERDAL CONSTA and INVEGA SUSTENNA are both commercialized by Johnson & Johnson (NYSE: JNJ) as long-acting injectable atypical antipsychotic medications for schizophrenia and bipolar I disorder.  Ampyra is an MS drug under Acorda Therapeutics, Inc. (NASDAQ: ACOR). Bydureon is an extended release Typy-II diabetes treatment that Alkermes is in with Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN) and Eli Lilly and Company (NYSE LLY).

Elan is set to receive $500 million plus it will also receive 31.9 million ordinary shares of Alkermes plc common stock.  The companies will also enter into a shareholder agreement that contains a lockup, standstill and voting agreement for Elan’s shares of Alkermes plc.

As far as existing Alkermes holders, they will receive one ordinary share of Alkermes plc per each share of Alkermes, Inc. owned at the merger date.  The new Alkermes plc shares will be registered in the United States and are expected to trade on NASDAQ. Alkermes plc will be headquartered in Dublin, Ireland  The company did note that this transaction is expected to be taxable to existing Alkermes holders and it has obtained a commitment from Morgan Stanley & Co. and HSBC to provide up to $450 million of term loans to finance the transaction.

Revenues are expected to grow in fiscal 2012 and is expected to reach double-digit growth rates in fiscal 2013 and beyond. Pro forma Adjusted EBITDA margins in fiscal 2012 are projected at 15% to 20%, pro forma Adjusted EBITDA is put at $70 million to $90 million, and pro forma adjusted EBITDA margins should expand to 30% to 35% in fiscal year 2013 and beyond.  Also noted was that it has identified about $20 million of annual synergies in U.S. operations that can be fully realized by fiscal 2013.

JON C. OGG

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