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

Quest for $1,000 Genome: Complete Genomics Raises Expansion Capital (GNOM)

May 10, 2011 · Filed Under genomics, Secondary Offering · Comment 

COMPLETE GENOMICS, INC. (NASDAQ: GNOM) has filed to raise up to $75 million in cash in a public stock offering.  The filing is for 4.5 million shares, or it would be 5.175 million shares if the overallotment is exercised. The book-runners are Jefferies and UBS Investment Bank, and co-managers are Baird and Cowen & Co.

Based upon the company’s name, you already figured out that they are in the genomics business.  It has a DNA sequencing platform and its goal is to “become the preferred solution for complete human genome sequencing and analysis” via its proprietary Complete Genomics Analysis Platform.  This allows academic and biopharmaceutical researchers a quality, cost-efficient and scale-efficient platform without having to invest in the expensive in-house sequencing instruments and equipment and personnel.  Its service launched in May 2010, it has sequenced over 1,400 complete human genomes, and its count was over 600 in the first quarter of 2011.  At March 31, 2011, it claimed an order backlog of over 2,000 genomes.

The use of proceeds (approximately $62.0 million) is as follows:

  • Approximately $20.0 million will go for capital expenditures to expand the sequencing and computing capacity in its Mountain View and Santa Clara leased facilities;
  • Approximately $15.0 million to finance the further development of its sequencing technology and services;
  • Approximately $15.0 million for sales and marketing activities;
  • The remainder of cash will be for working capital and other general corporate purposes.

The company stated in its IPO filing, “Our goal is to be the first company to sequence and analyze high-quality complete human genomes, at scale, for a total cost of under $1,000 per genome.”

The present facility has the capacity to sequence and analyze over 400 complete human genomes per month, and the company seeks to a capacity boost of between two- and three-fold by the end of 2011 as it deploys additional sequencers and increases the throughput its sequencing process through software refinements and component upgrades.

The company just reported earnings yesterday and showed to have revenues of $6.8 million for the first quarter.  That compares to about $0.3 million in the first quarter.  Operating expenses were $18.9 million, up from $14.6 million a year earlier.  The company said that it believes its backlog will be worth some $15 million over the next twelve months.  Pricing of genome services starts at $9,500 per genome for small order sizes to between $5,000 to $7,500 per genome for orders in the hundreds of genomes.

Complete Genomics ended the quarter with $68.8 million in cash, which reflects the completion of a $20 million loan agreement with Oxford Finance Corporation. $7.4 million of the Oxford loan was used to repay the balance of an existing loan with Comerica.

The market cap before the effects of this offering was listed as $364 million.  The stock has less than a year of trading and its range has been $6.60 to $17.25 and the average daily volume is 150,000 shares.

JON C. OGG

Why Celera’s Buyout Makes Sense (CRA, DGX, HGSI, AFFX, GHDX, GNOM, ROSG, HLCS)

March 18, 2011 · Filed Under Acquisitions, Financial, genomics, M&A, R&D · Comment 

If you would have said ten years ago that Celera Corporation (NASDAQ: CRA) would be acquired by Quest Diagnostics Inc. (NYSE: DGX), most investors would have said that you were off your rocker.  Celera was a leader in genomics at the time and it had a huge mountain of cash that made up much of its value.

Celera’s Berkeley HeartLab unit has a proprietary lipid testing technology, esoteric testing capability, advanced therapy guidelines and patient support services.  The company is also focused on personalized disease management where it is “developing tests and services that identify a person’s inherent risk for a disease and may also characterize its biological basis, aiding selection among treatment options and monitoring treatment effectiveness.”

The value of the buyout is $657 million based upon an $8.00 buyout price.  Interestingly enough, the buyout cost is actually much lower because Celera has roughly $327 million in cash and short-term securities on its balance sheet.  Quest expects only a 1% revenue boost in 2011 revenues.

Celera was deemed by some to have some of the next-generation testing that goes back to when investors were all gung-ho on genomics.  Think testing for personalized medicine.  That day is not yet here but it is getting closer.  The promise goes back to the late-1990s and early 2000s.

What Quest is getting is a deal on the cheap that could offer huge upside when you consider that Quest is much more dominant and prominent than Celera.  Quest was almost 20-times its size in market cap and somewhere around 50-times its size in revenues.

We would perhaps highlight several other genomic stocks out there based in part on this deal.  Human Genome Sciences, Inc. (NASDAQ: HGSI) is now in the drug phase and we all know that it has risen from the ashes back to the genomics days.

Affymetrix, Inc. (NASDAQ: AFFX) is in genetic analysis in the life sciences and clinical healthcare markets and it has been considered a buyout target in the past.

Genomic Health Inc. (NASDAQ: GHDX) has breast cancer testing and is worth $675 million in its market capitalization.

Complete Genomics, Inc. (NASDAQ: GNOM) develops and commercializes a DNA sequencing platform for human genome sequencing and analysis and it worth nearly $190 million in market cap.

Rosetta Genomics Ltd. (NASDAQ: ROSG) develops microRNA-based diagnostic and in Israel, but its market cap is so small that most may forget that it is even there.

HELICOS BIOSCIENCES (HLCS) is pink-sheet listed now, but it is the one that was aiming for the $1,000 genome map.

JON C. OGG

Benlysta Approval Cheat Sheet: What You Need to Know (HGSI, GSK)

March 9, 2011 · Filed Under analyst calls, Cancer, fda, genomics, Lupus · Comment 

It is official… The FDA has approved Benlysta as the first new drug regimen for systemic lupus in  over 50 years.  Human Genome Sciences, Inc. (NASDAQ: HGSI) and partner GlaxoSmithKline plc (NYSE: GSK) are sure to have a Blockbuster on their hands.  The treatment is for the treatment of adult patients with active, autoantibody-positive systemic lupus erythematosus who are receiving standard therapy.

We want to stress that analyst data is going to change greatly and we want a snapshot here of what this looks like before the change.  The side-effects have taken a lot of space, and those are just verbatim.  The rest after that is where the guts of the outlook is.  We have been keeping tabs on a few side-bar issues going into this approval and here is are some of the key issues we think you need to know:

First is that we have been expecting Human Genome Sciences to win approval.  Not everyone was, but this is not an issue we see being negative for Human Genome regardless of how this stock acts in the first few days.  By now you know FDA approval stocks can have mega-moves up down and back and forth. The cost is currently aimed at $35,000 per patient per year.  There will be discounts and exceptions but this is within the range we were expecting.

THERE ARE SOME LIMITATIONS… The efficacy has not been evaluated in patients with severe active lupus nephritis or severe active central nervous system lupus.  It has not been studied in combination with other biologics or intravenous cyclophosphamide. Use is therefore not recommended in these situations.  What you need to know: Like it or not, off-labeling will occur here.  Think about it, 50+ years since the last approval…

TIMING & REVENUE HOPES… The companies are aiming for deliveries to begin to doctors within a couple of weeks, which of course will be an average.  That means that revenues can actually start sneaking in during this first quarter.  Do not expect much… Thomson Reuters only had estimates of $21.77 million in Q1 and $30.64 million in Q2 for revenues.  The current estimates of $172.37 million for 2011 revenues are fair and the estimates of $495.96 million for 2012 may need to be adjusted.  For 2012 the range is $295 million to $736 million, so it is not like there aren’t some differing opinions.  Our guess is that estimates on the lower end will come up.

SIDE-EFFECTS & MORTALITY RISKS… “Out of 2133 patients in 3 clinical trials, a total of 14 deaths occurred during the placebo-controlled, double-blind treatment periods: 3/675 (0.4%), 5/673 (0.7%), 0/111 (0%), and 6/674 (0.9%) deaths in the placebo, belimumab 1 mg/kg, belimumab 4 mg/kg and belimumab 10 mg/kg groups, respectively. No single cause of death predominated. Etiologies included infection, cardiovascular disease, and suicide. Serious and sometimes fatal infections have been reported in patients receiving immunosuppressive agents, including belimumab. In controlled clinical trials, serious infections occurred in 6.0% of patients treated with belimumab and in 5.2% of patients who received placebo. The most frequent serious infections included pneumonia, urinary tract infection (UTI), cellulitis, and bronchitis. The most frequent infections (≥5%) were upper respiratory tract infection, UTI, nasopharyngitis, sinusitis, bronchitis, and influenza.” Hypersensitivity reactions were reported in 13% of patients receiving belimumab and 11% of patients receiving placebo, and included anaphylaxis (0.6% with belimumab and 0.4% with placebo). Infusion-associated adverse events were reported in 17% of patients receiving belimumab and 15% of patients receiving placebo. Psychiatric events (primarily depression, insomnia, and anxiety) were reported more frequently with belimumab (16%) than with placebo (12%). Serious psychiatric events, serious depression and two suicides were also reported (0.8% for belimumab and 0.4% for placebo).

Analyst estimates… Thomson Reuters has a consensus price target objective of about $34.00 today, with a low of $23 and a high of $45 per share from analysts.  Over the last year shares have traded in a range of $20.56 to $34.49.  Earnings estimates are -$0.43 EPS and $21.77 million in revenues for this quarter; -$0.41 EPS and $30.64 million in revenues next quarter; -$1.47 EPS and $172.37 million in 2011; and -$0.60 EPS and $495.96 million in revenues in 2012.

Buyout or independent… Some still consider HGSI a buyout candidate.  We ONLY consider it a buyout target if GSK wants to acquire it.  Buying the company only gives a half-share of Benlysta and come-along partners do not always work as well in biotech and drug deals.

Company stats… The market cap is $4.85 billion.  Assets in cash and other we are looking at as hard assets are $155.7 million in cash and equivalents, $282 million in other short-term investments, and $448.6 million in long-term investments.  It also has $253 million in plant and equipment. Long-term dent is $434.7 million.

Trading patterns… Average daily volume is down to only 2.3 million shares and March 1 was the most recent day with 5 million shares traded.  That volume will be explosive Thursday.  March options show an open interest of over 100,000 CALLS for MARCH and over 70,000 contracts for MARCH only.

More analyst calls… Gleacher was very positive at the end of December.  Cowen & Co. took a very negative stance.

We will get to see how this begins trade indications early-early tomorrow after the NASDAQ releases its halt time.  Again, trading may very well be all over the place for the next few days.

The links throughout will offer more insight to individual sales targets, but hopefully this offers a bit of a cheat sheet. By morning, much of the analyst data will have changed… that part never changes.

JON C. OGG

Big Biotechs With The Most Upside for 2011 (AMGN, GILD, CELG, HGSI, DNDN, INCY, ACOR)

December 29, 2010 · Filed Under analyst calls, Cancer, fda, Financial, genomics, Lupus, M&A · Comment 

Bioheath Investor is creating some ongoing outlook pieces as 2010 ends so we have an outline of what to expect for 2011.  We have already given the “Best of Big Biotech in 2010″ and now we want to focus on “The Big Biotechs With The Most Upside for 2011.”  Using “Big Biotech” implies market caps of those with a market cap of $1 billion or higher.  It was surprising that many of those big biotechs are actually trading much higher than their projected price targets.

Our screen generated 7 of the pack with implied upside of more than 15% for 2011.  Those making the screen were Amgen Inc. (NASDAQ: AMGN), Gilead Sciences, Inc. (NASDAQ: GILD), Celgene Corporation (NASDAQ: CELG), Human Genome Sciences, Inc. (NASDAQ: HGSI), Dendreon Corporation (NASDAQ: DNDN), Incyte Corporation (NASDAQ: INCY), and Acorda Therapeutics, Inc. (NASDAQ: ACOR) made the grade for those with the most implied upside to the average analyst price targets with a one-year horizon.

We did create a brief table showing the tickers, the current price, the implied analyst consensus price target from Thomson Reuters, the implied upside to that target, and the 52-week trading range.  More importantly, we gave an added breakdown on each with supporting data and color for building such an outlook.

Stock Current Target Implied Gain 52-Week Range
AMGN $56.13 $65.39 16.5% 50.26 – 61.26
GILD $36.54 $44.67 22.2% 31.73 – 49.50
CELG $60.28 $70.48 16.9% 48.02 – 65.79
HGSI $24.63 $35.17 42.8% 20.56 – 34.49
DNDN $35.81 $52.73 47.2% 25.78 – 57.67
INCY $16.81 $21.08 25.4% 8.50 – 17.48
ACOR $27.60 $33.58 21.6% 24.99 – 40.48

Amgen Inc. (NASDAQ: AMGN) has been range-bound for so long that we have called it a Big Pharma company masquerading as a biotech.  It is THE largest of all U.S.-based biotechs out there.  The 16.5% implied upside to a consensus target of $65.39 would mean a multi-year high as this one has been greatly range-bound in a $50 to $60 range.  We’ll be looking forward to more data on its prostate cancer indication possibilities.  The market cap here is well over $50 billion and it has so far survived its political risks and reimbursement risks from Washington D.C.  What else is there really to add?

Gilead Sciences, Inc. (NASDAQ: GILD) has a high implied upside of more than 22% and it ranks among the biggest biotechs in the world with its $29.6 billion market cap.  The implied target of $44.67 has already been breached before as the 52-week high is $49.50.  Gilead even peaked at $55 back in 2008 before the meltdown.  Its recent loss may have become InterMune’s gain.

Celgene Corporation (NASDAQ: CELG) has become harder and harder to evaluate on its valuation versus growth, but grown it has… even if shares have been range-bound.  Its market cap is north of $28 billion based on REVLIMID, THALOMID, and others.  If it makes that near-17% upside to $70.48, that will be a new 52-week high and will be within striking distance of the 2007 and 2008 highs.

Human Genome Sciences, Inc. (NASDAQ: HGSI) is the #2 stock of the implied upside stocks worth more than $1 billion.  The implied event is the FDA review of Benlysta for lupus in March 2011 and if approved it would be the first lupus treatment in the last 50 years.  While the implied upside is almost 43% to $35.17, Human Genome shares have already traded as high as $34.49 over the last year.  Two recent analyst calls could not have been more opposite.

Dendreon Corporation (NASDAQ: DNDN) won the pole position as #1 with the most implied upside.  Dendreon is a 2011 story as it telegraphed that its Provenge is likely to see a later in the ramp up and back-ended growth cycle as more capacity comes on line.  The company is also seeking expanded Provenge manufacturing approval.  While the implied upside is 47% to the $52.73 target, shares have traded north of $57.00 this year.  We recently saw a very bullish outlook from a research report here.

Incyte Corporation (NASDAQ: INCY) is expected to have some 25% upside to its $21.08 consensus target, and it should be noted that it has a 52-week high of only $17.48.  Thomson Reuters expects a decline in 2011 revenues and the story is still one that can go either very well or could backfire as its losses mount.  Incyte’s market cap is still north of $2 billion and its cash is in excess of $400 million as of its September 30, 2010 balance sheet.  Keep in mind that at the time of that balance sheet, debt and deferred liabilities already offset that cash balance.  Incyte is one that could be a huge wild card ahead.

Acorda Therapeutics, Inc. (NASDAQ: ACOR) is one that is close enough to the 52-week lows that the implied upside may not be believed by many investors.  The implied upside to the $33.58 target is still over 21%, but shares have come off the yearly highs by more than 30% so far in 2010.  Its market cap is barely over the $1 billion line at $1.08 billion and we’d rate this another wild card for biotech investors.

As far as how these big biotech targets compare with a fresh initiation from Credit Suisse, that can be seen here.  Keep your eyes out for both Human Genome Sciences and Dendreon in 2011.  Those are both exponential winners and were up for review in late 2010 as they were among the field of ten-baggers with implied gains of 1,000% or more.

JON C. OGG

An Option Trader’s Take on Human Genome Sciences (HGSI)

January 7, 2010 · Filed Under fda, Financial, genomics, Lupus · 1 Comment 

Human Genome Sciences (NASDAQ: HGSI) has become a one of the biggest and widespread stocks literally out of the blue over the last year.  This company went from what was originally a genomics stock with few significant and ongoing revenue prospects on the immediate horizon to a biotech stock with a very promising lupus treatment candidate in very short order.  Now it has a market cap of over $5 billion and it has active share volume and its options are frequently active with a large open interest.  We were just given an option alert from Joe Kunkle over at OptionsHawk.com, who relayed the following trading data to us:

  • “Human Genome Sciences, with a bullish price, bearish volatility bet as a large call butterfly spread trades in February.  The trader bought the $28 and $35 wings for 2,500 contracts, and sold 5,000 of the $33 body strike for a net debit  of  around $1.25.  February implied volatility in HGSI stands at 46%.  The trade comes ahead of a January 11th presentation at the big JP Morgan Healthcare Conference.  HGSI is expecting FDA approval for Benlysta, it’s blockbuster Lupus drug int he first half of 2010, but this trade is not expecting that event by February and instead sees modest upside ahead of the anticipated approval.”

Today’s options trading data is activity that does not frequently get daily color.  But generally speaking, trades of this nature and similar trading patterns are what individual investors and smaller institutional investors love to look for.  It is also easy to miss or overlook.  At the end of the day, options bets frequently signal significant moves.  We have been shown many such pre-move notifications from OptionsHawk like this one today.

Our own review has focused out to April 2010, where this is effectively the last month with a large options open interest until the Janauary-2011 Puts and Calls from our own data seen.  From our checks on what to expect, most consider that Human Genome will receive FDA approval.  The Lupus treatment reports show safety and efficacy, but the other notion is that Lupus has had no new real treatments in a generation.  Still, predicting FDA outcomes has proven over and over  to be very risky business.

Human Genome was recently reviewed as we looked for the end of 2009 trading patterns showing how investors and speculators were looking for the next 1,000% returns in the realm of biotech and BioHealth stocks.

JON C. OGG

Top 2010 Established Biotech Stock Picks for Upside (MNKD, THRX, DNDN, INCY, ILMN, ALNY, GILD, SVNT, AMGN, ONXX, PDLI, OSIP, CELG)

BioHealthInvestor.com wanted to put together a list of key biotech and BioHealth-related stocks that had the most upside for 2010 according to consensus analyst price targets.  This is of course no exact science for many reasons, but getting a lot of consensus price targets together is often a sign of at least where to start when looking for upward price targets in stocks.  And we all know that BioHealth and biotech stocks often offer the upside of the century as these companies all hold a bit of your own personal lottery ticket in all of their share prices.

After taking a look at our normal universe of biotech and biohealth related stocks. it was obvious that MannKind Corp. (NASDAQ: MNKD) still has the most upside from the consensus price targets IF it is hit.  Then in order of expected share price appreciation comes Theravance Inc. (NASDAQ: THRX), Dendreon Corp. (NASDAQ: DNDN), Incyte Corporation (NASDAQ: INCY), and then came Illumina Inc. (NASDAQ: ILMN), Alnylam Pharmaceuticals, Inc. (NASDAQ: ALNY), and Gilead Sciences Inc. (NASDAQ: GILD).

The stocks above all had upside of over 25%.  The other stocks here are the ‘lower rung’ of upside expectations but are all still offering over 20% upside to the consensus analyst price targets (again IF they are hit).  Of the 13 stocks with markets caps of $750 million (or almost $750 million) which we cover, these still had upside of over 20% except a few: Savient Pharmaceuticals, Inc. (NASDAQ: SVNT), Amgen Inc. (NASDAQ: AMGN), Onyx Pharmaceuticals Inc. (NASDAQ: ONXX), PDL BioPharma, Inc. (NASDAQ: PDLI), OSI Pharmaceuticals Inc. (NASDAQ: OSIP), and Celgene Corporation (NASDAQ: CELG).
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Quest For 10-Baggers in BioHealth in 2010 (JAZZ, TRGT, VNDA, DNDN, HGSI, CGEN, BNVI, QCOR, ACHN, PSDV, ATHX, SNSS, AVNR, BIOD, ALXA, CTIC)

If one thing was noticed in biotech stocks, or BioHealth stocks as we often say, it was that investors, traders, and speculators all piled into the chase for the next ten-bagger late in the year.  When you have as many biotech and BioHealth stocks that ran over 1,000% in 2009 that is only to be expected…. hence the 10-bagger comments.  We had many biotech and biohealth shares rally from their lows significantly this year, with companies such as Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ), Targacept, Inc. (NASDAQ: TRGT), Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA), Dendreon Corp. (NASDAQ: DNDN), and Human Genome Sciences, Inc. (NASDAQ: HGSI) all being in or having been in the 10-bagger club this year.

But late in 2009 we started seeing an onslaught of low-priced stocks with small cap or micro-cap values running rapidly higher on news.  In some cases these faded, and in some not.  We saw the traders run up shares of Compugen Ltd. (NASDAQ: CGEN), Bionovo, Inc. (NASDAQ: BNVI), Questcor Pharmaceuticals, Inc. (NASDAQ: QCOR), Achillion Pharmaceuticals, Inc. (NASDAQ: ACHN), pSivida Corp. (NASDAQ: PSDV), Athersys, Inc. (NASDAQ: ATHX), Sunesis Pharmaceuticals, Inc. (NASDAQ: SNSS), and AVANIR Pharmaceuticals, Inc. (NASDAQ: AVNR) on news late in 2009.  Also covered as potentials for this are Biodel Inc. (NASDAQ: BIOD), Alexza Pharmaceuticals, Inc. (NASDAQ: ALXA), and Cell Therapeutics, Inc. (NASDAQ: CTIC).

We have reviewed each of these and given a synopsis for each to see if these could be the 10-baggers for 2010.
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BioHealth IPO Focus: Tengion, Organ Replacements (TNGN)

December 24, 2009 · Filed Under Cancer, Financial, genomics, stem cells · 2 Comments 

If you have heard horror stories about real human kidney theft, that may be a thing of the past.  If this actually works.  An IPO filing this week revealed a rather interesting company that we will look forward to how it prices in 2010.  Tengion, Inc. filed for an initial public offering of its common stock.  While no terms were indicated for its IPO, the filing notes a sale of up to $40.25 million in common stock and Piper Jaffray was designated as he underwriter.  This is not quite stem cells, not RNAi, and not quite genomics.  The company is focusing on a range of replacement organs and tissues.

Here is how Tengion desrcibes itself:

We believe we are the only regenerative medicine company focused on discovering, developing, manufacturing and commercializing a range of replacement organs and tissues, or neo-organs and neo-tissues. We currently create these functional neo-organs and neo-tissues using a patient’s own cells, or autologous cells, in conjunction with our Organ Regeneration Platform. We believe our proprietary product candidates harness the intrinsic regenerative pathways of the body to regenerate organs and tissues that are native-like, or substantially similar to native organs and tissues. We manufacture our product candidates in our scalable facilities using efficient and repeatable proprietary processes and we have implanted our neo-organs in clinical trials. We intend to develop our technology to address unmet medical needs in urologic, renal, gastrointestinal and vascular diseases.

Our lead product candidate, the Neo-Urinary Conduit, is an autologous implant that catalyzes regeneration of native-like bladder tissue for bladder cancer patients requiring a urinary diversion following bladder removal, or cystectomy. This tubular conduit passively transports urine from the ureters, through a hole in the abdomen, or stoma, into a removable, disposable bag, or ostomy bag. We have an effective investigational new drug application, or IND, and expect to start a Phase I clinical trial for this product candidate in the first half of 2010 in bladder cancer patients. We have also applied our technology in two Phase II clinical trials for our Neo-Bladder Augment for the treatment of neurogenic bladder, or dysfunctional bladder due to some form of neurological disease or condition. Our Neo-Urinary Conduit leverages recent advances in our technology platform that enable us to produce this product candidate more quickly and efficiently, and less expensively, than our Neo-Bladder Augment, enabling us to address larger market opportunities. Our product pipeline includes several candidates in early stage development, such as our Neo-Kidney Augment for patients with advanced chronic kidney disease, or CKD.

It also lists the following steps for the platform:

  • Isolation and expansion. We receive a small tissue sample, generally by routine biopsy, and isolate the necessary committed progenitor cells, which are relevant to a specific organ or tissue type. Committed progenitor cells have not yet developed into a single cell type and retain the ability to promote regeneration. We then use our proprietary cell growth process to grow, or expand, the progenitor cells.
  • Seeding and growth. We place, or seed, these expanded cell populations on a bioabsorbable scaffold and put the seeded structure in a bioreactor, or a closed container used for enhancing biological growth under controlled conditions.
  • Implantation. The neo-organ or neo-tissue is shipped by a standard overnight courier service and implanted by a surgeon using standard surgical procedures.
  • Regeneration. Based on clinical and preclinical data, we believe that our implanted product candidates serve as templates for the body to regenerate native-like organs and tissues. Blood vessels and nerves grow into the implanted neo-organ or neo-tissue and the scaffold is gradually absorbed by the body. In preclinical tests, we have observed that the newly grown tissue integrates with its surroundings and becomes substantially indistinguishable over time from the native organ. Clinical results indicate that the body regulates the growth and development of the organ to ensure that it is not under- or over-developed.

The company’s Organ Regeneration Platform is based on work that began in the early 1990s at Children’s Hospital Boston and Massachusetts Institute of Technology, and continued at the Wake Forest Institute for Regenerative Medicine and at the company.  5% stockholders are listed as follows:

  • Oak Investment Partners XI, Limited Partnership 18,034,824 shares for a 19.6% stake.
  • HealthCap Venture Capital 13,153,457 million shares for a 14.3% stake.
  • Johnson & Johnson Development Corporation 11,522,503 shares for a 12.5% stake.
  • Brookside Capital Partners Fund, L.P. 7,930,273 shares for a 8.6% stake.
  • Bain Capital Venture Entities 7,850,970 shares for a 8.5% stake.
  • Quaker BioVentures 7,671,363 shares for a 8.3% stake.
  • L Capital Partners SBIC, L.P. 5,900,528 shares for a 6.4% stake.

The full SEC Filing is here.  Tengion plans to list on the NASDAQ under the stock ticker “TNGN.”

JON C. OGG

Could Affymetrix Be Next Takeover in BioHealth? (AFFX, CALP, LIFE, QGEN)

December 9, 2009 · Filed Under Financial, genomics, M&A, R&D · Comments Off 

Everyone wants to know which stocks in biotech and medical technology will be the next buyout target.  It is rare that research reports or interviews from traditional brokerage firms point out an obvious takeover candidate, but that is exactly what came about in shares of Affymetrix Inc. (NASDAQ: AFFX) this morning.  We first saw a move today in the company’s stock options volume on the heels of an analyst’s comments today.

The company is into consumables and systems for genetic analysis in the life sciences and clinical healthcare markets with its integrated GeneChip microarray platform including disposable DNA probe arrays consisting of nucleic acid sequences.  It also operates or sells in North America, Europe, Latin America, India, the Middle East, China and the Asia Pacific regions. It has collaboration partnerships with Caliper Life Sciences (NASDAQ: CALP), CapitalBio Corporation, Life Technologies Corporation (NASDAQ: LIFE), Pathwork Diagnostics, and Qiagen (NASDAQ: QGEN).  Of these partnerships, Qiagen and Life Technologies are both far larger than Affymetrix.
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