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.
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JON C. OGG
Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) is a big winner today on news of its Wet Age-related Macular Degeneration drug. Bayer AG (NYSE: BAY) and Regeneron gave a report that top-line results of two Phase III studies with VEGF trap-eye in Wet Age-related Macular Degeneration were very positive. The reports showed that in both studies all regimens of VEGF Trap-Eye achieved primary endpoint compared to ranibizumab dosed every month. The companies noted that regulatory applications are planned in the first half of 2011 for marketing approval.
Regeneron shares are running up on news that its experimental eye drug worked better than Roche’s Lucentis with fewer doses. Today’s results are from the third and final stage of tests generally needed for U.S. approval. If results hold up as the company showed, it seems that doctors may want to switch to the less frequent treatment every other month rather than Lucentis each month.
Lucentis generated more than $1 billion in 2009 sales, making this a blockbuster potential as it could easily be a first-line treatment. There is a huge need here as this is the leading cause of blindness in the elderly and there are in the vicinity of 200,000 diagnosed each year.
Lucentis and Regeneron’s medicine aim to inhibit VEGF, which is blood vessel growth in the eyes. The VEGF Trap-Eye maintained the vision of 95% percent of patients on only 2MG every other month. Bayer’s trial had similar results in a second trial in Asia, Europe, and Latin America. The VEGF Trap-Eye studies improved patient vision at a higher rate than Lucentis, and thoise who took 2MG of VEGF Trap-Eye once a month were able to read 11 more letters on a vision chart over an extra 8 letters for those taking 0.5 milligrams of Lucentis each month.
There are some risks that are in-line with other eye injections, most frequently being retinal hemorrhage and eye pain, and there were also ‘floaters’ that are dark spots in patient fields of vision.
Lucentis costs a bit under $2,000. AgingEye.net noted a cost of $1,950 per dose. Roche’s Avastin is often off-labeled and its cost is down closer to $50 per dose. The cost of the drug is not yet being discussed, and it is a 2011 approval story.
Regenron shares are responding very favorably here today, as you would expect for a 52-week high. Shares are up 12.7% at $27.82 on nearly 3 million shares and the 52-week trading range is $18.04 to $30.58. Thomson Reuters shows a consensus analyst price target of $33.89 but many of the calls are stale and are being updated today.
Regeneron now has a market cap of $2.3 billion versus sales of $379.268 million in 2009 and versus Thomson Reuters estimates of $442.08 million in 2010 and $484.27 million in 2011.
Regeneron has been public since the early 1990′s and shares went above $30 in 2000 and 2001. The company is adequately capitalized as well as the September 30, 2010 balance sheet showed over $325 million in cash, over $153 million in short-term investments, and almost $38 million in long-term investments.
JON C. OGG
Seattle Genetics, Inc. (NASDAQ: SGEN) is one of those companies in the world of biotech and biohealth which some have believed would be an ultimate takeover target. The issue is that some companies either do not have enough funding on their own to secure a deal under the terms they would prefer. Other companies want to grow and thrive on their own in the quest to become the next mega-blockbuster producer on the block. So the news of an offering of common stock from Seattle Genetics, Inc. would now put the company in the second category, or so it may seem.
Seattle Genetics priced a secondary offering of 11,000,000 shares of common stock at $10.75 per share. The gross proceeds from the sale are expected to be approximately $118.2 million and should close on or about August 17, 2009. The good news is that all of the shares in the offering are being sold by Seattle Genetics. The other bit of good news is that the demand must have been strong. The announcement was made Monday that it would sell 9 million shares, yet this pricing is for 11 million shares.
The company said that the use of funds will be used to fund R&D, including manufacturing activities and clinical trials for its proprietary product candidates, build-out of a commercial infrastructure and for general corporate purposes, including working capital.
The company also has a very high profile group of companies as the underwriters.
J.P. Morgan and Goldman Sachs are the joint book-running managers; Needham, Oppenheimer, RBC Capital Markets, and William Blair are all listed as the co-managers of the offering. The underwriters have a 30-day option to purchase up to 1,650,000 additional shares of common stock to cover over-allotments.
Back in July this stock was under $10.00. Then came several developments. It reported earnings, Bristol-Myers Squibb (NYSE: BMY) announced the acquisition of Medarex (NASDAQ: MEDX), then the company announced the initiation of Phase II trials of brentuximab vedotin (SGN-35) for lymphoma. Then this week came the announcement that Seattle Genetics had achieved a milestone under its antibody-drug conjugate (ADC) collaboration agreement with MedImmune, LLC, a wholly owned subsidiary of AstraZeneca, after MedImmune’s initiation of a phase I clinical trial of MEDI-547 for solid tumors.
Seattle Genetics has an exclusive worldwide collaboration agreement with Roche’s Genentech for the development and commercialization of dacetuzumab (SGN-40). Under the agreement, Genentech paid us $60 million upfront, and has agreed to pay potentially more than $800 million in milestones and escalating double-digit royalties starting in the mid-teens on annual product sales. In addition, Genentech funds research, development, manufacturing and commercialization costs. Seattle Genetics also has an option for co-promotion rights on dacetuzumab in the U.S.
The company has licensed its antibody-drug conjugate (ADC) technology to Genentech, Bayer (NYSE: BAY), CuraGen Corp. (NASDAQ: CRGN), Progenics Pharmaceuticals Inc. (NASDAQ: PGNX), Daiichi Sankyo, AstraZeneca’s (NYSE: AZN) MedImmune, and Takeda’s Millennium. These collaborations all involve upfront cash payments, milestones and royalties on net sales of products incorporating Seattle Genetics’ ADC technology. The licensees are responsible for development, manufacturing and commercialization of any ADC product candidates that result from the collaborations.
Another deal is in place as a co-development agreement with Agensys, a wholly-owned subsidiary of Astellas Pharma. In this the companies will jointly develop ADC products where Agensys provides proprietary targets and monoclonal antibodies to be utilized with Seattle Genetics’ proprietary ADC technology. The companies share research and development costs on up to two ADC products, and share equally in any profits.
Shares closed down over 7% at $10.99 in anticipation of the secondary offering and the stock’s 52-week range is $6.81 to $13.40. The company has been public since 2001 and has spent the bulk of the time from early 2007 to now trading in a range of $8.00 to $12.00. Its market before the effects of any secondary offering was $947 million after Tuesday’s drop. SGEN is also a stock with a high short interest: in mid-July it had over 5.5 million shares in the short interest, about 13.9 days worth of average trading volume.
This is still very much a research and development stage company. Analysts are only looking for about $38 million in revenues for 2009 and about $54 million in revenues in 2010. Until its products are closer to commercialization, losses are expected well beyond this year and next.
JON C. OGG