Cell Therapeutics, Inc. (NASDAQ: CTIC) is a controversial stock in the field of cancer and the company is still aiming for a 2012 debut market launch for its pixantrone drug candidate. In the last couple of weeks it had reported more positive data and the FDA had earlier this year noted that pixantrone would need a review using a new panel of independent radiologists. Pixantrone is to be a new treatment for non-Hodgkin Lymphoma.
This morning we saw a very unlikely and very unusual support or endorsement of Cell Therapeutics. This came from Zacks Investment Research where the outfit was called The Bull of The Day. That is generally considered a stock that has strong winds behind it and Zacks raised the rating to Outperform.
Zacks noted, “we believe pixantrone is getting closer to approval… We are encouraged by the FDA’s decision to allow Cell Therapeutics to re-submit the NDA for pixantrone for review without the need for an additional trial.” The report also noted that Opaxio is its second most advanced pipeline candidate as a potential maintenance therapy for women with advanced ovarian cancer who achieve complete remission following first-line therapy with paclitaxel and carboplatin.
The full Zacks report is available here. Shares are at $1.19 and the adjusted 52-week trading range is $0.95 to $3.30.
JON C. OGG
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
This last week brought an interesting move in shares of Prana Biotechnology Ltd. (NASDAQ: PRAN). On Friday we gave this coverage right at the open noting at 24/7 Wall Street that the stock was still worth a look for speculators despite a news pop followed by a capital raise that hurt the stock’s gain during the week. This ADR is of a company based in Australia and its focus is Alzheimer’s, Parkinson’s, and Huntingston’s Diseases. It is highly speculative by any measurement. Prana effectively has no revenues and our take is that it will be highly reliant upon grants from governments, agencies, and other foundations and organizations or it will have to rely upon the capital markets or a partnership for more funding down the road.
The company saw shares surge earlier in the week on reports that data was being published in the science journal PLoS ONE with the title “Metal Ionophore Treatment Restores Dendritic Spine Density and Synaptic Protein Levels in a Mouse Model of Alzheimer’s Disease.” Its PBT2 was shown to have repaired damage in an Alzheimer’s affected brain and that facilitated the restoration of cognition in Alzheimer’s Disease.
Then came news from the company that it was raising capital in Australia to the tune of $6.1 million (Australian Dollars), a move which investors often consider as pump and dump capital raises. What is interesting though is that right after we published “Still Worth a Look for Speculators” we saw an immediate 10% rise in the stock. Shares went from $2.78 or so up to $3.10 in very short order and then the stock rose again in a second leg up to as high as $3.34 before closing at $2.86 for a near three percent gain on the day.
Prana ADRs were under $1.50 before it published the news on Monday and shares closed at $2.86 on Friday, nearly a double for the week. We also saw shares hit a high of $4.50 on Tuesday and that was on a whopping 36.4 million shares that day. This was previously unheard of trading volume in a single day and there are many days where the stock has traded only a few thousand shares. The 52-week range is $1.09 to $4.50 and this stock once traded above $6.00 per ADR back in 2004 or 2005.
We would note that StockCharts.com offers a full gallery review for the charts on Prana, and its Point & Figure price target objective is all the way up at $7.50. That figure will change through time and was based upon March 25 prices and volume.
So, even at the low of $1.09, you may wonder why we call Prana an opportunity for a ten-bagger with that implied upside of 1,000%. Shares have never traded above $10.00 for its ADRs and technically this stock would have to rise to well above $11.00 before we could legitimately call this a ten-bagger. The whole issue surrounding the stock is that even at $2.86 the company’s market cap is a mere $69.2 million before considering the effects of its capital raise. For these ADRs to rise this high in ten-bagger land it would imply a market capitalization rate of what is still only about $266 million.
We believe that the company will continue to need more funds ahead in the coming months and years and it seems logical that the company will raise capital each time its shares rise significantly. There is no way to know yet whether PBT2 is going to be the Holy Grail or whether it will be yet another disappointing flash in the pan. The company noted, “After 11 days of treatment, the brains of the Alzheimer’s mice showed a statistically significant increase in the numbers of spines on the branches (or dendrites) of neurons in the hippocampus, a memory centre specifically affected in Alzheimer’s Disease.”
What we do know is simple. If it turns out that Prana has the next new real treatment candidate for Alzheimer’s, even a $266 million market cap will sound very small. It could quite literally end up being an “Off To The Races” scenario for investors. A Big Pharma company could either become an acquirer or it could become a partnership opportunity. Again, this is all around speculative analysis rather than using true fundamental and financial analysis based solely on today’s finances. There are no real US firms which cover Prana so we have no real benchmark to judge what could happen in just a bullish scenario rather than a runaway scenario. The company has a single research report posted on its site from 2009 by Southern Cross Equities and it is very bullish with a title “Unforgettable Opportunity” from that time.
Looking at potential ten-baggers is not for widows and orphans. After all, we are talking about study results conducted on mice and on a company which will need significant funding ahead by our count. A large partnership or other liquidity event from a Big Pharma player could also bring rewards and also bring risks down the road. Many companies rise on news and end up in a flame-out situation. All of the magic characteristics are in place for a possible ten-bagger scenario, and all of the risks are in place as well. Time will be the judge as to whether or not Prana will end up being he next ten-bagger in biohealth.
Here is that data published in PLoS ONE.
JON C. OGG
Beckman Coulter, Inc. (NYSE: BEC) is on fire after announcing that it is for sale. The company provides biomedical testing instrument systems, tests, and supplies for clinical laboratories worldwide. We wanted to see what it can fetch in a sale to see if investors should hang around for more or whether they should take the money and run.
Private equity firms are expected to be the buyers, although other industrial companies might have an interest. Reports are out the Beckman Coulter has hired Goldman Sachs to help it explore its options.
The shares closed at $57.09 Thursday and its market capitalization was just under $4 billion. Shares are now magically at $72.75.
2010 has been a very rough year as its summer guidance punished shares with more than a 20% loss. Its CEO also left after a five-year tenure and no real explanation was offered.
The stock is up over 27% this morning at $72.75 and shares put in a new high for 2010 today. The new 52-week range is $43.95 to $74.85.
We took a look at the stock options trading but investors will need to go out to FEB-2011 to get enough time value. The $75 CALLS are trading above $3.00, implying that shares need to be acquired for more than $78.00 for the options trade to work out.
As you saw elsewhere, this company had a monumental rise from 1990 to the early 2000s. The problem is that by 2005 shares peaked above $70.00 and the prices in the mid-$70′s acted as key resistance on the chart again in 2007, 2008, and again in 2009. Today’s move puts the stock above $70.00 for what appears to be the first time in 2010.
You never know what a buyer will pay if there is major interest or if a bidding war develops. This news today just created what some investors would call a phantom $1 billion in added share value by market capitalization alone.
If you average out the 2010 and 2011 estimates from Thomson Reuters, you get close to a $4.00 EPS target. There is also only an expected 4% revenue growth for 2011 to $3.82 billion in sales. The current share price comes to more than 18-times a blended 2010 to 2011 earnings estimate.
The most recent balance sheet as of 9/30/2010 showed more than $300 million in cash and long-term investments combined but it also comes with long-term debt of $1.33 billion and other liabilities of $533 million. The WSJ noted that this could fetch more than $5 billion in a buyout. We would caution that leaked rumors and leaked news is often a value of the enterprise with all equity AND debt rater than just equity as it is being treated today.
Analysts are cautious here on this one. Before the effects of this news, the consensus analyst target was just above $55.00 per share. The highest target was said to be $66.00 and the lowest target was $47.00.
For a company that has had problems and that has been volatile, this may be a gift at the current share price. Many investors will likely determine that today’s gains represent enough of a buyout premium to take the money and run. That may be even more so while we know 100% that the capital gains taxes are only 15% through December 31, 2010. A tax cut compromise was reached, but it is not signed and many key figures are fighting it.
Beckman Coulter could fetch a higher price depending upon who is the acquirer. Logic and common sense seems to lead to the conclusion that this big gain seen on Friday is a high enough premium already.
JON C. OGG
Top BioHealth Analyst Upgrades & Downgrades (AMGN, AZN, BAY, BIIB, CELG, EXAM, GILD, GSK, HGSI, LH, NVS, PFE, UTHR, WCRX)
We have seen many research calls from Wall Street analysts with upgrades, downgrades, and initiations this Tuesday in the world of biotech, pharmaceuticals, and biohealth. Some of the key calls we have seen are as follows:
Amgen Inc. (NASDAQ: AMGN) Started as Neutral w/ $58 target at Credit Suisse.
AstraZeneca (NYSE: AZN) Cut to Underperform at Credit Suisse.
Bayer AG (NYSE: BAY) Raised to Outperform at Credit Suisse.
Biogen Idec Inc. (NASDAQ: BIIB) Started as Neutral w/ $68 target at Credit Suisse.
Celgene Corporation (NASDAQ: CELG) Started as Neutral w/ $60 target at Credit Suisse.
Celgene Corporation (NASDAQ: CELG) Maintained Buy with $68 price target at BofA/ML.
Examworks Group Inc. (NASDAQ: EXAM) Started as Outperform w/ $22 target at Credit Suisse.
Gilead Sciences Inc. (NASDAQ: GILD) Started as Outperform w/ $52 target at Credit Suisse.
GlaxoSmithKline plc (NYSE: GSK) Raised to Neutral at Credit Suisse.
Human Genome Sciences Inc. (NASDAQ: HGSI) Started as Outperform w/ $31 target at Credit Suisse.
Lab Corporation of America (NYSE: LH) Started as Neutral w/ $89 target at Credit Suisse.
Novartis (NYSE: NVS) Raised to Outperform at Credit Suisse.
Pfizer Inc. (NYSE: PFE) Maintained Outperform at Credit Suisse.
United Therapeutics Corp. (NASDAQ: UTHR) Started as Neutral w/ $57 target at Credit Suisse.
Warner Chilcott plc (NASDAQ: WCRX) Reiterated Buy at BofA/ML.
You can join our free daily email distribution list from 24/7 Wall St. to hear more about broader analyst upgrades and downgrades, top day trader and active trader alerts, news on Warren Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.
JON C. OGG
Geron Corporation (NASDAQ: GERN) is taking its breast cancer study with stem cells to Phase II. The company announced this morning the enrollment of the first patient in a randomized Phase 2 clinical trial of its telomerase inhibitor drug, imetelstat (GRN163L), in combination with paclitaxel (with or without bevacizumab) in patients with locally recurrent or metastatic breast cancer.
The Phase I program and preclinical data that showed imetelstat’s activity against cancer stem cells from a broad range of tumor types, including breast cancer. The Phase I trial of imetelstat combined with paclitaxel and bevacizumab showed an encouraging preliminary response rate.
The Phase II trial is an open label, multi-center, randomized study to measure safety and efficacy. The primary efficacy endpoint is to estimate progression-free survival (PFS) for patients receiving imetelstat in addition to paclitaxel with or without bevacizumab. Secondary efficacy endpoints are objective response rate and clinical benefit of imetelstat when added to paclitaxel with or without bevacizumab. Safety and tolerability will also be assessed.
Enrollment is estimated at 150 patients at approximately 80 clinical sites across the U.S. and Canada.
It was back on November 11, 2010 when Geron relreased data showing that two publications demonstrating results of its telomerase inhibitor and shares rose to $6.08 from $5.80 the prior day.
Geron closed Wednesday at $5.96 and its 52-week trading range is $4.37 to $6.67.
JON C. OGG
Goldman Sachs is taking a very cautious view on many of the large biotech leaders in a new coverage call. While there is a silver lining call in one, the bulk of the research has a very cautious stance due to revenue woes that could lie ahead for the large biotechs.
Amgen Inc. (NASDAQ: AMGN) started with a “SELL” rating.
Biogen Idec Inc. (NASDAQ: BIIB) started with a “SELL” rating.
Celgene Corporation (NASDAQ: CELG) started with a “NEUTRAL” rating.
Gilead Sciences Inc. (NASDAQ: GILD) started with a “NEUTRAL” rating.
Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) is the standout stock this morning and the exception to the rule. Alexion shares were started on the CONVICTION BUY LIST and the stock is up 2% at $71.94 and close to challenging the 52-week high of $72.45.
JON C. OGG