2011′s Overvalued Big BioHealth Names (AMLN, BIIB, EXEL, ILMN, JAZZ, MDVN, OSIR, SQNM)

January 4, 2011 · Filed Under analyst calls, Cancer, Financial, Sleep Disorder, stem cells · 10 Comments 

It is already 2011 and we have begun the coverage of our annual outlook series.  We covered the best of 2010 and an outlook for big-biotech stocks with the most implied upside already. Sometimes it is important to know also which of the big biotech and biohealth names may be overvalued when it comes to analyzing the current price and valuation data.  We have compiled data on the active biotech stocks which have at least five analysts making price target calculations for a year ahead. What we found was that a whole slew of companies were trading above the Thomson Reuters mean consensus price target objectives.  That does not assure that the analysts are right, but it means that either the analysts will have to play catch-up with price hikes or that they will be considering downgrading their expectations.

Our screen generated the following names: Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), Biogen Idec Inc. (NASDAQ: BIIB), Exelixis, Inc. (NASDAQ: EXEL), Illumina, Inc. (NASDAQ: ILMN), Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ), Medivation, Inc. (NASDAQ: MDVN), Osiris Therapeutics, Inc. (NASDAQ: OSIR), and Sequenom, Inc. (NASDAQ: SQNM).

Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN) is way off its highs but may still be overvalued.  The company is seeking expanded approval for its BYETTA along with Basal insulin for diabetes but it may not be enough unless the analysts are missing the boat here.  At $14.80 and with a market cap of $2.1 billion, its 52-week trading range is $9.51 to $24.21.  The unfortunate issue is that Amylin’s consensus price target is $13.21 and the great huge hope here has yet to pay off for the company.  For whatever it is worth, Amylin’s CEO Dan Bradbury was given the honor of “The worst biotech CEO in 2010″ just last month.

Biogen Idec Inc. (NASDAQ: BIIB) has handily recovered from its past woes, perhaps recovered too much if analysts are anywhere close.  Shares are now trading at $67.20, with a market cap of $16.01 billion and a 52-week range of $45.96 to $68.60.  The consensus analyst target is listed as $62.83.  In early December Credit Suisse only gave a neutral rating but did assign a $68 target.  Biogen Idec was also reiterated Neutral but its target was raised to $70 at BofA/Merrill Lynch.

Exelixis, Inc. (NASDAQ: EXEL) may be overvalued to formal targets and maybe not… It came back in focus in November-2010 on news that Phase II clinical trial data on XL184 in ovarian and prostate cancer showed that the drug appears to be a help in both tumor types after it was effectively given back rights to the drug by Bristol-Myers Squibb earlier.  Share shave jumped and jumped and now trade at $8.49 with a market cap of $925 million and a 52-week trading range of $2.86 to $9.20.  Unfortunately, its consensus price target is $7.75 and there have been shares registered for sale by insiders over the last month.

Illumina, Inc. (NASDAQ: ILMN) was one of the best of the best in 2010, but that was then and this is about valuations.  The most recent price of $64.34 generates an $8.05 billion market cap and its 52-week trading range is $29.76 to $66.59.  We’ll be looking for analysts to catch up or for the stock to back off because the consensus target is listed as $60.34 still.  This is on the instrument side of the biohealth sector in integrated systems for the analysis of genetic variation and biological function.

Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ) appears on the list of ‘overvalued’ biohealth names apparently just over extreme end of year performance in November and December.  Jazz shares rocked higher from under $11.00 per share to right at $20.00 for its most recent $19.96 close.  The market cap is about $776 million and the 52-week range is $6.38 to $20.28.  The consensus target is $16.80. Its sleep-disorder treatment Xyrem recently won a new patent for narcolepsy and it has seven other Xyrem patents that expire between 2019 and 2024. It also raised guidance in November after swinging to a better profit.  Jazz is still greatly under-followed by analysts with only 5 real targets out there.  This may be a situation of catching-up that is needed by analysts rather than a major concern that something is wrong at Jazz.

Medivation, Inc. (NASDAQ: MDVN) imploded early in 2010 on an Alzheimer’s disappointment.  Shares are now around $16.09 with a $556 million market cap and a very wide trading range of $8.43 to $40.49.  Unfortunately, its consensus price target is $14.50 per share.

Osiris Therapeutics, Inc. (NASDAQ: OSIR) is tricky considering that it aims for the stem cell therapeutic segment.  At $7.77, its market cap is $255 million and its 52-week trading range is $5.39 to $9.24.  Unfortunately, its consensus target is $5.88.  Shares have been in a trading range for more than a year after a big sell-off and there is just an information gap that implies that Osiris could end up like “Ra” or “Rat” if you forgive the Egyptian mythology pun.

Sequenom, Inc. (NASDAQ: SQNM) is currently back up off its post-implosion lows.  The investing public has no idea how lucky they are that it is even still a public and traded company because it could have disintegrated entirely.  Shares are trading around $7.85 and have a market cap of almost $600 million and a 52-week trading range of $3.91 to $8.65.  The consensus price target is unfortunately $7.13

Sequenom was an interesting name in the screen even if it is more into diagnostics rather than cures.  It recently raised capital at $6.00 per share, so it has popped rather well.  The $7.85 price is trading above the $7.13 consensus price target.  Piper Jaffray initiated coverage with an Overweight rating in mid-December and gave it a $8.00 price target.

As you can see, being screened as ‘overvalued’ may be no fault of the company and may not even matter in the long-term development plans of a company.  Sometimes stocks outperform the market and they can outperform enough that the analysts have either not updated their coverage or maybe it was ‘too much too fast’ in that performance.

JON C. OGG

Somaxon (SOMX) Heads Biotech Rally With 15% Gain

July 14, 2010 · Filed Under Sleep Disorder · Comment 

Somaxon Pharmaceuticals, Inc. (NASDAQ: SOMX) was up $0.48 (15%) to $3.69 as biotech continued to correct from a major dropoff at the beginning of the month.

Somaxon Pharmaceuticals, Inc., a specialty pharmaceutical company, focuses on the in-licensing, development, and commercialization of  treatments of diseases and disorders in the central nervous system, as well as solutions for sleep disorders.

Somaxon, The Ten-Bagger Chase (SOMX, SNY)

March 18, 2010 · Filed Under fda, Sleep Disorder · 1 Comment 

There is a new weapon in the war on insomnia, and one which does not appear to have the drug dependence and the nasty side-effects associated with many other sleep aids.  Somaxon Pharmaceuticals, Inc. (NASDAQ: SOMX) announced this morning that the FDA has approved the New Drug Application for Silenor as a treatment of insomnia characterized by difficulty with sleep maintenance.  Somaxon calls this the “First and Only Prescription Sleep Aid to Provide a Full Night’s Sleep Without Abuse Potential.”

The company said it will focus on seeking a U.S. commercial partnership and will then build a U.S. commercial presence and will prepare to launch Silenor in the second half of 2010.

Silenor binds with high affinity to histamine (H1) receptors, which is believed to be the mechanism to promote the maintenance of sleep. The company noted that this mechanism of action is different from any other prescription medication currently approved for the treatment of insomnia.

  • Sanofi Aventis (NYSE: SNY) makes Ambien.  Drugs.com noted that Ambien CR was the #43 drug with sales of $865 million.    Sepracor Inc. makes LUNESTA, but this company has been acquired. Drugs.com notes that in 2008 Lunesta was the #47 drug with $771 million in sales.
  • Sleep maintenance difficulty is defined as waking frequently during the night and/or waking too early and being unable to return to sleep.  The company noted that this is the most commonly reported nighttime symptom of insomnia.

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