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.
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Vical Inc. (NASDAQ: VICL) and VIVUS, Inc. (NASDAQ: VVUS) are both running higher this Friday on news that Credit Suisse initiated both biotech outfits with “Outperform” ratings. What matters more than the call are the price targets and the inferences made in the research calls.
Vical Inc. (NASDAQ: VICL) is rarely given huge analyst calls due to what is a small $250 million or so in market cap. The team at Credit Suisse initiated Vical with an “Outperform” rating this morning but more important is its price target of $7.00 per share. This represents more than a 100% move compared to the $3.45 close on Thursday. What was more impressive was the $7.00 price target versus a $3.45 close before, indicating just over 100% upside.
Credit Suisse noted that Vical’s lead product Allovectin is in a Phase III trial for the treatment of metastatic melanoma but noted that it also has a pipeline of other vaccine product candidates. The firm’s discounted cash flow target is based solely on Allovectin, which the firm noted “makes Vical a high risk investment because Allovectin still needs to successfully complete Phase 3 and the FDA approval process.” The firm went on to note impressive Phase II data with overall survival of chemo-naïve and experienced patients as being 18.8 months. It further noted that the drug did even better in chemo-naïve patients with a median overall survival of 22.5 months versus 11.2 months from Bristol-Myers Squibb Company (NYSE: BMY) Yervoy+DTIC in chemo naïve patients.
VIVUS, Inc. (NASDAQ: VVUS) was also started as “Outperform” with $15 target at Credit Suisse. The firm noted the title “The Road to a New Obesity Drug Is Tough, but
It Ain’t Over ‘Til the…” The firm believe that VIVUS’ weight loss pill Qnexa will be approved in the United States as a drug to treat obesity with a restricted label in the second quarter of 2012 and then will be approved in Europe in the third quarter of 2012. Credit Suisse’s discounted cash flow based target price is driven entirely by Qnexa. The firm went on to note, “which makes Vivus a high risk investment because our target price is dependent on US approval.”
Vical is up 5% at $3.62 on normal trading volume and VIVUS is up 4.5% at $9.92. Bristol-Myers Squibb Company (NYSE: BMY) is down 1.5% at $31.26 on the day.
JON C. OGG
VIVUS Inc. (NASDAQ: VVUS) is getting yet one more sign of life for its Qnexa drug aimed at treating obesity. The emerging drug outfit has reached an agreement with the FDA on resubmitting its new drug application as an obesity treatment.
Here is the plan: “VIVUS intends to resubmit the QNEXA NDA by the end of October 2011, prior to completion of the FORTRESS study. Top-line results from FORTRESS are expected in December 2011, with validation of FORTRESS expected in the third quarter of 2012. The FDA also stated that an Advisory Committee meeting for QNEXA will be held in the first quarter of 2012.”
It was also just earlier this week that its Avanafil phase III study results were shown again to be positive in its REVIVE study in diabetes.
What helps VIVUS here is that treating obesity also in effect treats diabetes, heart and respiratory conditions, hypertension, dyslipidemia, allows for more active lifestyles, and more. It also needs to be noted that the FDA has treated most obesity treatments as taboo due to side-effects and and due to a lack of results in many instances. The history of obesity drugs is a marred one.
Orexigen Therapeutics, Inc. (NASDAQ: OREX) and Arena Pharmaceuticals, Inc. (NASDAQ: ARNA) are also both up a limited amount as they are “the other obesity drug contenders” by Wall Street’s eyes. Those are not as close, not by a mile, if you note the share prices. Orexigen is up 2.5% at $1.41 and Arena is up 3% at $1.43.
VIVUS stock is up almost 8% at $9.14 but the stock was up in the double-digits at $9.62 earlier. As of 11:15 AM EST there have also been more than 2.7 million shares traded when the average volume is only 1.5 million shares.
Before the effects of this news pop, Thomson Reuters had a consensus price target objective of $11.69 on VIVUS and the 52-week trading range has been $5.28 to $11.48.
JON C. OGG
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
M&A Bonanza For Drug & Biotech in 2011 (MRK, PFE, ALXN, DNDN, HGSI, CEPH, UTHR, CADX, AMAG, SNY, GENZ, AMGN, BEC, TEVA, SGMO, LLY, ALTH, CBST, VVUS, AUXL, VRTX)
The game of predicting mergers and acquisitions in the biotech and in pharma sectors is not a new one. The talk heats up, then it dies down. A deal comes, followed by another deal, and the activity goes quiet. This next week is likely to have at least more chatter in the biohealth sector for possible mergers and acquisitions after Barron’s gave a cover story called “The New Doctor in the House: Consolidation.”
Barron’s noted that “as big drug firms buy up smaller, specialty outfits and their most innovative products, better pipelines and sales-force efficiency will boost profits.” Here is the thing to consider: Barron’s did not really offer anything new or ground-breaking this weekend. It will have rekindled some hope that M&A is coming in the space. At issue: pipeline fatigue. A note we’d throw in as well, dead-dead stocks. We are going to at least address some of the Barron’s roster, but we want to show you many others which are just as or even more likely acquisition targets. Some of ours have even been in-play before.
Barron’s threw in Merck & Co. (NYSE: MRK) and Pfizer, Inc. (NYSE: PFE) as the largest of the Big Pharma players and it threw out biohealth names with stock-market values below $10 billion:
- Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) with a $7.5 billion value after a hueg run-up;
- Dendreon Corporation (NASDAQ: DNDN) for Provenge for prostate cancer (and future cancers) with a $5 billion market value today;
- Human Genome Sciences, Inc. (NASDAQ: HGSI) for its Benlysta in patients with severe active lupus nephritis and CNS lupus and a $4.5 billion market cap;
- Cephalon, Inc. (NASDAQ: CEPH) is one we have rarely looked as since things quieted down there;
- United Therapeutics Corporation (NASDAQ: UTHR) for its treat pulmonary arterial hypertension and an almost-$4 billion value;
- Cadence Pharmaceuticals Inc. (NASDAQ: CADX) was noted for its pain medication without the addiction aspects of morphine and its value is only $369 million;
- AMAG Pharmaceuticals, Inc. (NASDAQ: AMAG) was called a value stock despite its recent weak sales and despite its cash burn with a $368 million market cap.
Much of the biotech M&A game hinges on Sanofi-Aventis (NYSE: SNY) in its chase to acquire Genzyme Corporation (NASDAQ: GENZ). The latest talk is that a work-out could come to $80 all-in if certain milestones were achieved but the deal is still south of there officially. As noted above, we have our own opinions on which biotech companies and drug companies could find their way into the hands of a larger acquirer.
Amgen Inc. (NASDAQ: AMGN) is likely to continue being an acquirer. The company recently announced a deal worth potentially $1 billion to acquire privately-held BioVex. Last year the company said it was aggressively looking for new targets and its $52 billion market cap is the largest of all the independent biotechs in America. The company has more tricks up its sleeve.
Beckman Coulter Inc. (NYSE: BEC) went into play in early December with private equity firms being the likely acquirers of the portfolio of biomedical testing equipment and supplies. We argued at the time of the premium that it seemed shares fully reflected that value, and shares are actually lower now.
And don’t forget Sangamo Biosciences Inc. (NASDAQ: SGMO), where shares rallied in November on rumors of a potential bid interest from Eli Lilly & Co. (NYSE: LLY). It had good news on ZFP Therapeutic program to develop SB-509, a zinc finger protein transcriptional activator (ZFP-TF) of the vascular endothelial growth factor (VEGF)-A gene as a treatment for ALS and the news flow has continued to propel shares higher. It went above $4.50 on the rumors but now shares trade at $7.39. The market cap is still low here at $334 million.
Allos Therapeutics, Inc. (NASDAQ: ALTH) has been another name floated out there for M&A possibilities, but things are looking less and less bright for the company. Shares hit a 52-week low just on Friday.
Cubist Pharmaceuticals Inc. (NASDAQ: CBST) has not really gone anywhere as it is deemed a mature company, but it is one we thought for sure that would find its way into being part of a larger company. Its Cubicin is on the market and it fights severe hospital-induced infections and the market cap is $1.3 billion here.
VIVUS Inc. (NASDAQ: VVUS) remains a wild card due to the FDA. Diet and weight-loss pills have not been given any real love by the FDA. The exception here is that Qnexa does have serious benefits. There are side effects, particularly in cases of pregnancy. We would ask this though: How many pregnant and soon-to-be-pregnant women really diet? Most doctors don’t even want pregnant women taking supplements, let alone drugs. IF the FDA approves Qnexa, that $680 million market cap may be worth far more.
Teva Pharmaceutical Industries Limited (NASDAQ: TEVA)… We have also noted Teva’s mega-cap ambitions, and making more acquisitions would generally get there.
Last year, Morningstar put out a list of three favorites that it sees as acquisition targets in the biohealth space: Auxilium Pharmaceuticals Inc. (NASDAQ: AUXL), Human Genome Sciences Inc. (NASDAQ: HGSI), and Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX). FULL ARTICLE
This should at least give you a better and more concise list of possible deals and deal-makers for 2011. Just remember this, regardless of what Barron’s or other media outlets try to tell you: not all biotechs have to be acquired, not at all.
JON C. OGG
As you have grown accustomed to, the FDA is hitting a company before its PDUFA date. Orexigen Therapeutics, Inc. (NASDAQ: OREX) is under pressure after FDA briefing documents ahead of next Tuesday’s FDA panel meeting that is meant to recommend whether the FDA should or should not approve Orexigen’s diet drug called Contrave.
Orexigen shares are down as FDA staff comments question whether or not the diet pill is safe and effective. Contrave has reportedly satisfied only one of two efficacy measures in the FDA studies. The safety profile is also under the microscope as Contrave has been linked to higher blood pressure, dizziness, psychiatric events and kidney dysfunction.
The concerns here seem to be more legitimate concerns than others. It also feels like it is just Orexigen’s turn to be inside the barrel as Arena Pharmaceuticals, Inc. (NASDAQ: ARNA) and VIVUS, Inc. (NASDAQ: VVUS) have both faced some of the same FDA hurdles at the panel reviews.
About 5 minutes after the market open, Orexigen is down 9.9% at $4.93 on more than 800,000 shares versus an average volume of 1.467 million shares and versus a 52-week range of $3.81 to $8.88. Arena shares are up less than 0.7% at $1.40 and VIVUS shares are up 3.3% at $6.95.
Abbott Laboratories (NYSE: ABT) recently withdrew its diet pill Meridia in the U.S. and in Canada due to higher risk profiles of heart attack and stroke.
The diet saga continues. Maybe the reality is that the cure relies more on diets and visits to the gym rather than just in a pill.
JON C. OGG
CorMedix, Inc. (AMEX: CRMD) increased $0.40 (19.96%) today in trading to $2.40.
CorMedix, Inc. is a biopharm company which creates and markets medications used in the prevention and treatment of cardiorenal disease in addition to products which keep patients’ central venous catheters free of infection and clots in between hemodialysis sessions. CorMedix, Inc. was incorporated in 2006 and filed to go public in 2009.
The newest initial public offering in the realm of biotech and biohealth has just been filed by a company called Ikaria Inc. While terms were not disclosed, it plans to sell up to $200 million in common stock per the SEC filing.
The New Jersey-based biotherapeutics company plans to take the ticker “IKAR” on NASDAQ. The underwriting group is rather large: Goldman Sachs, Morgan Stanley, Credit Suisse, Lazard Capital Markets, Cowen & Co., and Wedbush PacGrow Life Sciences.
Unlike many BioHealth pre-public companies which file to come public, Ikaria has revenues. 2009 sales were $274 million. The company also had had net income of $13 million and EBITDA of $109 million in 2009.
Ikaria is focused on developing and commercializing new therapeutics and interventions designed to meet the significant unmet medical needs of critically ill patients.
Its net sales are generated from INOtherapy, most of which come from the medical gas called Inomax used to treat a certain type of respiratory failure and is approved for hypoxic respiratory failure in term-infants and in premature infants. INOtherapy is sold in the United States, Puerto Rico, Canada, Australia, Mexico and Japan. Inomax is also in clinical trials for other indications.
Other focal areas are Hepatorenal Syndrome, where kidneys start to fail, as well as treating post heart attack patients.
OTHER PROPOSED TREATMENTS:
- LUCASSIN, a Terlipressin/vasopressin receptor agonist, is for Hepatorenal Syndrome Type 1 with a pivotal phase III expected to start in 2010;
- IK-5001, a sodium alginate and calcium gluconate/mechanical support of infarcted heart muscle, targeted for cardiac remodeling and subsequent congestive heart failure following a heart attack with an expected Pivotal phase II/III expected to commence in 2011.
- IK-1001, a sodium sulfide to treat conditions characterized by tissue ischemia is in the clinical program in planning stage.
- IK-6001, is a Fibrinogen Bb15-42/anti-inflammatory indicated for conditions characterized by vascular leakage and is in pre-clinical stages.
JON C. OGG
ARCA biopharma, Inc. (NASDAQ: ABIO) was not just the big winner of the trading day. It was an exponential gainer. You rarely see this unless there is a major biotech announcement regarding cancer or other other disease cures. But in the quest for ten-baggers in biohealth, ARCA Bio at least formed a start for a ten-bagger or 1,000% run as shares were up over 200% today.
This morning came the announcement that the U.S. Patent and Trademark Office issued a patent on methods of treating heart failure patients with bucindolol based on genetic testing.
The patent, “Methods for Treatment with Bucindolol Based on Genetic Targeting” was given patent #7,678,824. If all goes as the plans detail, then this would be a new approach to treating heart failure. The company also expects that this will extend its pharmacogenetic intellectual property protection around bucindolol.
BioHealthInvestor usually sticks to US companies or at least sticks to ADRs for investors. But sometimes there is a much larger bit of data either north of the border or in Europe. There is a company called Resverlogix Corp. which trades in Canada under the ticker ‘RVX’ and the stock also trades in the US on the Pink Sheets under the ticker ‘RVXCF.’ The stock is soaring today after Bloomberg gave a very positive article highlighting the merits of the company’s RVX-208. This potential drug candidate is targeting atherosclerosis in acute coronary syndrome patients. The target is to raise HDL levels to effectively reverse arterial plaque buildup. The company noted that there are approximately 350 million patients that require treatment for atherosclerosis.
We wanted to take a look at the potential for this drug candidate outside of what the article has to offer. Resverlogix is a clinical stage Canadian company which currently has no real products. The company has been public since late 2004. It has traded well under $5.00 and at ome point briefly rose to north of $20 per share in 2007.
Late in February, the company officially activated the first site for the ASSURE 1 trial and commenced enrollment of patients for dosing of RVX-208. This is the second Resverlogix Phase 2 clinical trial, led by Cleveland Clinic, and it will examine and evaluate this oral small molecule therapy for the treatment of atherosclerosis in patients with acute coronary syndrome.
As per the trial data:
This IVUS study is comprised of 15-20 US sites will dose approximately 120 ACS patients on standard of care therapy and examine lipid effects by RVX-208 compared to placebo control. In half of the patients a change in atherosclerosis will be assessed, i.e. change in plaque volume and plaque composition. The primary objective of this study is to determine the 3 month effect of RVX-208 on change in the plasma levels of ApoA-l in patients with a recent ACS event who require coronary angiography versus placebo. The secondary objectives for this study include assessing the safety and tolerability of the drug through evaluation of adverse events as well as to evaluate the effect of RVX-208 on other lipid parameters.
Here is the catch, and the ultimate factor which makes this a potential Holy Grail… Most cholesterol medications today are used as preventative medicine rather than just for treating those who have already had a stroke or heart attack or those who already have severe blockage. Statins and other lipid lowering agents account for billions and billions of dollars per year in revenues for Big Pharma. If this drug is ultimately approved for preventative measures the sky is the limit.
AstraZeneca (NYSE: AZN) has Crestor; sales of Crestor are forecast to reach $6.5 billion in 2013, up from $4.5 billion in 2009, per Thomson Reuters.
Pfizer Inc. (NYSE: PFE) has Lipitor; Lipitor brought in approximately $11.4 billion in revenue in 2009.
Merck & Co. (NYSE: MRK) has Vytorin; Annual worldwide sales for 2009 were $2.2 billion for ZETIA and $2.1 billion for VYTORIN.
The statin market is also coming under some generic pressure.
There are risks here. Many have tried this HDL raising tactic and targeting plaque. None of the existing drugs have effectively proven to be the ultimate plaque-eater. Pfizer has so far spent billions. This is a hopeful treatment but it is going to be some time before the results of a larger study are known and it will be far longer before the side effects are known.
JON C. OGG