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
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
Pharma-Biotech Major Research Alerts (TEVA, AMGN, ACOR, CELG, HGSI, BIIB, GILD, EXAS, ZGEN, DYAX, IDXX, VPHM)
Biotech and pharma research calls from Wall Street research firms have come out of the wood work this Thursday.
Teva Pharmaceutical Industries Limited (NASDAQ: TEVA) is one of our recent “Defensive Stocks for the Next Bear Market” picks based upon valuation. This morning Oppenheimer raised the rating to OUTPERFORM on hope and expectations that it will see a big boost in the second half from its Effexor sales.
STIFEL NICOLAUS started many key biotech stocks with coverage this morning:
- Amgen Inc. (NASDAQ: AMGN) and Acorda Therapeutics, Inc. (NASDAQ: ACOR) and Celgene Corporation (NASDAQ: CELG) and Human Genome Sciences Inc. (NASDAQ: HGSI) were all started with BUY ratings;
- Biogen Idec Inc. (NASDAQ: BIIB) at SELL;
- Gilead Sciences Inc. (NASDAQ: GILD) at HOLD.
EXACT Sciences Corp. (NASDAQ: EXAS), a molecular diagnostics company focused on the early detection and prevention of colorectal cancer, is soaring by 13% after being started with new coverage as a Buy rating by Jefferies ahead of next week’s presentations at the Rodman & Renshaw 12th Annual Healthcare Conference and at the Baird’s 2010 Health Care Conference.
ZymoGenetics Inc. (NASDAQ: ZGEN) was hit with a cut to Neutral at UBS, but that is because of the Bristol-Myers Squibb buyout.
Dyax Corp. (NASDAQ: DYAX) and IDEXX Laboratories, Inc. (NASDAQ: IDXX) were both started as MARKET PERFORM and ViroPharma Inc. (NASDAQ: VPHM) as OUTPERFORM at Leerink Swann.
JON C. OGG
Very Few 52-Week Highs in BioHealth (ACOR, ALTH, ARIA, AUXL, KERX, NPSP, PPDI, PPHM, PBE, PRX, SUPG)
The market has been putting new highs and new highs and yesterday there were about 1700 stocks (including warrants, ETFs, and other publicly traded non-common entities). What is interesting is that biotech and pharma stocks are few and far between that are actually putting in new 52-week highs. Many of the key biotechs are having “issues” and many are very far from 52-week highs. We compiled a brief list today of the biotechs and related pharma stocks that we saw hitting 52-week highs via name, exchange-ticker, the high, the last print, the change, and the volume:
The Changing Landscape of Biotech Valuations (ACOR, CBST, MNKD, INCY, SGEN, ITMN, IPXL, MRX, SVNT, VPHM)
The biotech and biohealth universe is changing in size. In 2008 and 2009, partly due to mergers and partly due to market valuations, there had become a surprisingly small number of biotech stocks which had market capitalization rates of more than $1 billion. At one point there were only about 10 or 11 in our universe of biotech stocks that actually had market caps which were very far north of $1 billion, or at least out of the biotech stocks which followed at BioHealth Investor.
We have recently seen Acorda Therapeutics, Inc. (NASDAQ: ACOR), Cubist Pharmaceuticals Inc. (NASDAQ: CBST), MannKind Corporation (NASDAQ: MNKD), Incyte Corporation (NASDAQ: INCY), Seattle Genetics, Inc. (NASDAQ: SGEN), InterMune, Inc. (NASDAQ: ITMN), Impax Laboratories Inc. (NASDAQ: IPXL), and Medicis Pharmaceutical Corporation (NYSE: MRX) either get into or get back into the $1 billion market cap club. And then we have Savient Pharmaceuticals Inc. (NASDAQ: SVNT) and ViroPharma Incorporated (NASDAQ: VPHM) that have been in the club and are currently just short of it.
Due to waves of big emerging drug news and due to strong performance we now have 16 of the biotech and related stocks (at least of those which we cover as pure biotechs) which have market caps north of $2 billion. More importantly, the biotech news flow and he bull market has suddenly helped many stocks rise or at least get back above the $1 billion mark. Many of these had been there before, but the market has helped many new names get back above the $1 billion market capitalization level. And waves of mergers in the last two and three years sort of thinned out the group.
In these we did not take into consideration revenues, earnings, and not even cash. This has largely been news-driven and momentum-driven. Below is a review of each.
Biogen Idec Inc. (NASDAQ: BIIB) is feeling the pain of regulatory review this morning. And Elan Corp. plc (NYSE: ELN) is feeling it even worse. The reason these are under pressure this Friday is because a European panel has begun a review of Biogen’s controversial yet effect multiple sclerosis drug TYSABRI. The review is over higher rates of PML brain infections (progressive multifocal leukoencephalopathy) than had been disclosed.
The European Medicines Agency’s Committee for Medicinal Products for Human Use showed some 23 PML cases since the launch of TYSABRI. Previous data showed that there were 13 cases since TYSABRI came back on the market in 2006 after the company voluntarily removed it to study the PML data. The European panel will discuss additional measures, if needed, to ensure a safe use of the drug and how to measure risks.
Biogen Idec is already in U.S. talks with the FDA over the TYSABRI label. Most recent data showed more than 46,000 people were taking TYSABRI, and over 13,000 patients had been taking TYSABRI for more than two years and were classified under long-term use.
It is impossible to pre-judge this situation, but personal discussions have given a personal belief here that the reason people keep taking TYSABRI is because many think it is the best MS drug on the market. As far as a 1 in a thousand risk, that is a very low incident ratio compared to other drugs that treat other diseases and many are willing to take that risk.
Biogen Idec is down 5.7% at $44.50 and Elan is down almost 17% at $5.35. Acorda Therapeutics, Inc. (NASDAQ: ACOR) has been noted this week as having an MS drug candidate pending under priority review date and that has been extended out to January 2010 by the FDA.
JON C. OGG
OCTOBER 23, 2009
Acorda Therapeutics, Inc. (NASDAQ: ACOR) announced this morning that the FDA has extended its review period of the company’s Fampridine-SR as a multiple sclerosis treatment. The PDUFA goal date was moved out to January 22, 2010 for its review of the New Drug Application. The original date for the priority review was October 22, 2009.
Following the Peripheral and Central Nervous System Drugs Advisory Committee meeting, Acorda said that it has submitted additional information on its proposed risk evaluation and mitigation strategy program. It further noted that the FDA accepted this submission as a solicited major amendment to the new drug application.
The FDA can extend the PDUFA goal date when a sponsor submits a major amendment that provides a substantial amount of new data not previously reviewed by the FDA.
The good news for Acorda is that this does not appear to derail the ultimate approval. This one has been very volatile based upon an FDA comment period followed by a panel recommendation that gave the stock its mojo back.
As a reminder, Biogen Idec Inc. (NASDAQ: BIIB) is the multiple sclerosis benchmark company in the sector. Any real delays or ultimate changes to an application policy allow Biogen’s Avonex and TYSABRI that much more leading time.
JON C. OGG
OCTOBER 22, 2009
Acorda Therapeutics (NASDAQ:ACOR) is up 50% to $25.20 on news that the U.S. Food and Drug Administration (FDA) Peripheral and Central Nervous System Drugs (PCNSD) Advisory Committee voted 12 to 1 that clinical data on Fampridine-SR 10 mg twice daily demonstrated substantial evidence of effectiveness as a treatment to improve walking in people with multiple sclerosis (MS) and voted 10 to 2 (1 abstention) that it is clinically meaningful and can be safe for use.
The news is promising but ACOR now has a market cap of $960 million. The company had revenue of $12.5 million and a loss of $23.3 million last quarter. Maybe the revenue from Fampridine-SR will start to kick in soon.
Douglas A. McIntyre
Acorda Therapeutics, Inc. (NASDAQ: ACOR) is going to be in the penalty box all day even if it did not catch a penalty. Shares are going to be halted all day as the FDA Advisory Committee is reviewing Acorda’s Fampridine-SR for improvement of walking ability in people with multiple sclerosis. The FDA Peripheral and Central Nervous System Drugs Advisory Committee is meeting today in order to review and discuss Acorda’s New Drug Application.
While we do not know what the review outcome is yet, this one was hit hard last week after the FDA issued a negative opinion that questioned the safety and efficacy of Acorda’s multiple sclerosis drug. Shares were above $22.00 last week and traded to under $17.00 on the FDA note last week. And the stock went briefly under $16.00 yesterday before closing at $16.74.
Needless to say, with a whopping $12.5 million in quarterly revenues and a $637 million market cap, today could be the make-it or break-it day. The company does have over $200 million in cash and liquidity.
Today’s big announcement from the panel will also highlight shares of Biogen Idec Inc. (NASDAQ: BIIB) as it has both AVONEX and TYSABRI as the leading MS treatments.
JON C. OGG
This has been a quiet trading day, but not in the land of biotech and medical technologies that comprise the BioHealth sector. These are this morning’s top movers in the group:
Acorda Therapeutics, Inc. (NASDAQ: ACOR) is down over 15% after the FDA made public the background material over Acorda’s Fampridine. Full data can be found at:
AVANIR Pharmaceuticals, Inc. (NASDAQ: AVNR) is up 6.5% at $2.45 and it was one of the top gainers this morning, but has since come off of highs of $2.68. The company announced additional detailed results from the confirmatory double-blind Phase III STAR trial evaluating two doses of the investigational drug Zenvia™ in the treatment of pseudobulbar affect among patients with underlying multiple sclerosis (MS) or amyotrophic lateral sclerosis (ALS). Zenvia met the primary efficacy endpoint by reducing PBA episode rates by an incremental 11.9% beyond placebo. The lower dose Zenvia group did not achieve a statistically significant reduction in PBA episode rates compared to placebo.
Cardium Therapeutics Inc. (AMEX: CXM) is one of the top winners of all stocks today with a 19% gain to $1.82. This one is set to make a presentation soon, but the move today appears to be based upon a positive recommendation from a boutique firm called Skymark Research.
Lexicon Pharmaceuticals, Inc. (NASDAQ: LXRX) is getting tooled after a secondary offering. The company sold some 33,333,333 shares of common stock at $1.50 per share after a $1.77 close yesterday. We have shares down about 13% at $1.53. It turns out that 19,894,076 shares are being offered through the underwriters and 13,439,257 shares are being offered to Invus, L.P., Lexicon’s largest stockholder.
Savient Pharmaceuticals, Inc. (NASDAQ: SVNT) is seeing a surprise 7% gain to $14.28 this morning. This is surprising considering that its secondary offering of 4.3 million shares priced at $13.29. One item helping more is that this stock was also Raised to Outperform over at Oppenheimer.
Sequenom Inc. (NASDAQ: SQNM) is running again on no news and is up another 9.8% at $3.67 today. Traders keep touting that there may be no intentional wrongdoing from management and the recently fired staffers. This is still very much an at-risk company, although making any predictions at this point would be based entirely upon incomplete data that still has many unknowns.
Spectrum Pharmaceuticals, Inc. (NASDAQ: SPPI) is down some 17% at $5.12 after it received a complete response letter from FDA for FUSILEV in advanced metastatic colorectal cancer noting that it did not demonstrate that FUSILEV is non-inferior to leucovorin. The response also recommended that it meet with them to discuss options for continuing to seek approval of FUSILEV in advanced metastatic colorectal cancer.
JON C. OGG