Something Brewing At Dendreon? (DNDN)
We just noticed a large options volume alert over at Volume Spike today, and it is one that biotech investors may care about quite a bit more because of the timing. We have witnessed a flurry of trading in Dendreon Corp. (NASDAQ: DNDN) November stock options activity today.
We have seen what would represent more than 2 million shares in a risk reversal trade, although it could be called a myriad of terms depending upon your sophistication in trading. Frankly, most would call it a synthetic straddle.
As far as our calendar is concerned, we didn’t have any major event risk scheduled on the calendar until 2009.
After looking around there is actually some data coming out as soon as October, but the biggest data is still out into next year. This is probably simple to explain. Either someone put on a massive belief trade or they are hedging a large position of stock.
Jon C. Ogg
July 31, 2008
Forget ImClone, Cadence Pharma Is Today’s Biotech Winner (CADX, IMCL)
You’ve already seen and read all over the web about Carl Icahn receiving a letter from Bristol-Myers that the company is offering $60.00 to acquire Imclone Systems Inc. (NASDAQ: IMCL). There is a stock moving far more than ImClone, yet it is no buyout.
Cadence Pharmaceuticals, Inc. (NASDAQ: CADX) has received written guidance from the FDA noting that one post-operative pain trial and one fever trial are sufficient to meet the pivotal clinical trial requirements for its New Drug Application for Acetavance
This pertains to the company’s intravenous formulation of acetaminophen to treat acute pain and fever in adults and children. Both studies have already been completed with positive outcomes and it is not required to initiate any additional clinical trials of Acetavance for its NDA submission.
What is crucial here is that teh company is pre-revenue stage and has only been spending cash on R&D. Cadence is up 75% in early trading at $11.28, which is actually styill not a new high.
52-Week range: $4.84 to $15.70
Avg. Volume: 115,000 shares
Market Cap: $433 million (after huge gains)
Options: N/A
Jon Ogg
July 31, 2008
Wyeth & Elan: More Questions in Alzheimer’s Study Results (WYE, ELN)
Today was the long awaited Alzheimer’s drug data presented from Elan Corporation, plc (NYSE: ELN) and Wyeth (NYSE: WYE). The companies presented detailed results from their 18-month Phase II study of bapineuzumab in patients with mild to moderate Alzheimer’s disease.
The study was on 234 randomized with findings reported on 229 patients, and efficacy was measured from a baseline of 78 weeks. The data looked very positive on the surface with safety and efficacy results supporting the design of an ongoing global Phase III program.
Some data is mixed and shares were hit as a result. It showed statistically significant and clinically meaningful effects were observed in multiple endpoints in ApoE4 non-carriers. The company also noted that pre-specified efficacy analysis did not reach significance in the total population.
Favorable directional changes were seen in some endpoints in ApoE4 carriers, warranting further study. The post-hoc anlysis showed statistically significant and clinically meaningful benefits in important subgroups.
You can read about the full results here. There were measurements of less or slower brain shrinkage combined with better memory test results observed in the study, and if our data is correct that would be superior to any existing treatments and is probably above other study reports to date.
The problem is the pre-specified efficacy analysis as well as a few deaths in the trial (which were noted as “unbelieved to be from the drug” despite no deaths in teh placebo group.
This data was shown at the Alzheimer’s Association’s International Conference on Alzheimer’s Disease 2008 in Chicago, Illinois.
Shares are getting slapped down in after-hours. Wyeth stock is down 8.5% at $41.25 and Elan stock is down 15% at $28.49 in after-hours trading. Both stocks had been higher initially ahead of the data. This looks more and more like mixed data, and unfortunately it looks like Alzheimer’s patients have a long way to go before even any meaningful help will arrive.
Jon C. Ogg
July 29, 2008 (5:45 PM EST)
When Biotechs Run Out of Cash… Or Go At-Risk (ISTA, VNDA)
Investors are in love with biotechs right now and it is hard to argue against it with the attractive pipelines that can be purchased. Throw in a cheap US Dollar that allows foreign buyers to buy at a 25% to 35% discount, and the argument grows even stronger.
But there are many biotech zombies that have imploded to nothing but cash, a few employees, and a hope and prayer to find the next drug candidate being shopped around on the cheap. There is a second group second group of troubled biotechs that have product candidates but are on the race to zero cash.
Enter, Ista Pharmaceuticals (NASDAQ: ISTA)…
ISTA Pharmaceuticals stock is down almost 14% today after the company shares were downgraded at Jefferies with a new UNDERPERFORM rating. Jefferies is growing more and more concerned that ISTA is on a path that will make it run out of cash by early-2009. The research note also notes that the holders of $40 million in convertible debt may use their rights to PUT the securities back to the company. That would only chew up more liquidity.
ISTA isn’t a biotech zombie though. The company has two product candidates in teh development pipeline. In fact, Jefferies believes these could make the company attractive to a more speculative buyer. This would likely generate higher shareholder returns rather than investing in this for looking at an independent company.
Unfortunately, the liabilities at the end of last quarter were $73.561 million versus total assets of $60.03 million (with only about $35 million available in raw cash and equivalents). Some companies go zombie and trade at a discount to cash prices because of the cash burn rates that will take it under book value.
Vanda Pharmaceuticals (NASDAQ: VNDA) yesterday imploded to the point that it trades well under its perceived net cash value. That is because the longer review and extra trials are likely to erode that cash faster than a lotto winner out of the trailer park.
JON OGG
JULY 29, 2008
Biotech Implosion: Vanda Pharmaceuticals (VNDA)
Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA) is seeing a major implosion this morning. The company has disclosed that it received a dreaded FDA not-approvable letter on its iloperidone. This was its late-stage schizoprenia candidate as well. The drug candidate is apparently too close to other drugs already on the market and the FDA said more safety data would be required to consider another application.
Vanda shares are down 59% at $1.35, which has gone from the good to the bad to the ugly. Its prior 52-week trading range was $2.70 to $19.62. Its current market cap after the drop is about $36 million. While that is well under its cash levels on the books, it will burn through much cash to fulfill its FDA obligations to proceed.
This one isn’t a biotech zombie yet, but you’d never know it if you just looked at its stock chart.
Jon Ogg
July 28, 2008
Trader Take: J&J (JNJ)
There has been some interesting pricing action of late in DJIA component Johnson & Johnson (NYSE: JNJ) as shares are right at 52-week highs after getting above a 4-year trading band. A trader we speak with frequently has keyed in on this to show where he thinks this can rise to or where it could settle in if gains aren’t sustained.
Today’s analysis is brought by Alan J. Brochstein, CFA, of AB Analytical Services which provides research and consulting to institutional investment managers and also provides services to individual investors through www.InvestByModel.com. Here’s Alan’s take below:
Johnson & Johnson (JNJ), the $194 billion market cap Healthcare giant, moved to the top of its almost 4 year trading range, setting a new 52-week high of $69.25 on Thursday and closing above 69 on Friday.
The stock has improved slightly since year-end and about 13% over the past year, in both cases substantially outperforming the market (see the relative performance in the graph above – the black line). The company also pays a dividend and yields 2.7%, which is a bit better than that of the S&P 500. As the bottom panel shows, the growth in the stock price has been due almost entirely to earnings growth, as the PE multiple has remained below 15. The chart below highlights the PE over the past decade:
(chart unavailable)
The current PE of 14.9 is about as low as it has been in the past decade (actually since 1994). Note that the stock price has been consolidating as earnings (the green line) have continued to grow. The pattern of higher lows and a constant resistance level (ascending continuation triangle) usually yields a breakout, so keep your eye on JNJ here. I don’t personally own it, but I did recently include it in my Conservative Growth/Balanced Model Portfolio that I launched in Mid-July. Besides the low valuation and the nice chart pattern, investors can take encouragement from the 35+ year history of raising dividends, the very strong balance sheet (net debt of just $300mm) and a strong business model. Many investors fail to appreciate how “unPharma” the company actually is: JNJ earns less than ½ its profits from drugs. While it is the largest segment, the medical devices segment contributes almost as much, while the Consumer Products segment kicks in about 10%. JNJ is extremely balanced. In fact, its two largest drugs account for less than 11% of sales. The company is not plagued as much as its peers by patent expiration issues.
How high can JNJ go? I believe that the company can attain a 17 PE over the next year, which would yield a price of 83 and return about 23% including dividends. Not bad for a company that dates back to the 19th century! I think that if the stock fails to break out of the range, it could test 63, perhaps 59 in a really bad market. Something tells me, though, that this is a classic consolidation of a very long-term up-trend that should yield continued gains for investors.
Alan J. Brochstein
July 27, 2008
TRADER DISCLOSURE: NO DIRECT POSITION CURRENTLY
Amgen Gets The Gorilla Off Its Neck (AMGN)
Amgen Inc (NASDAQ: AMGN) came out with its much awaited data after the close and shares are rocking higher on the news. The biotech giant said that its pivotal 3-year trial of experimental osteoporosis drug Denosumab met the target goals by significantly reducing the risk of bone fracture in post-menopausal women.
The patients treated with denosumab showed a statistically significant reduction in the incidence of new vertebral fractures over the arm given the placebo.
Amgen also noted that the group receiving Denosumab also experienced a statistically significant reduction of new non-vertebral and hip fractures.
The groups receiving Denosumab and the placebo also saw similar side effects and at roughly the same frequency, with side effects including serious infections and malignancies.
Shares are up a monster 11% and back over $60.00 for the first time in more than a year.
Jon Ogg
July 25, 2008
GE Expands Healthcare Unit With Vital Signs Buyout (GE, VITL)
General Electric Co. (NYSE: GE) is finally doing a health care acquisition, albeit this one is smaller than some may have guessed (we are included). The company is acquiring Vital Signs Inc. (NASDAQ: VITL) for $860 million in cash or $74.50 per share.
Vital Signs will become part of the existing GE Healthcare’s Clinical Systems business. GE is essentially buying a portfolio to expand medical operations in monitoring, anesthesia, sleep therapy, and respiratory care.
If you review the 247wallst.com exclusive interview with GE’s CFO Keith Sherin, he outlined the hurdles and benchmarks for the company to do a deal and he also noted that medical did have the “green light” to do a deal in the sector. This is one that flew under our radar and the radar of others who were trying to peg which company GE would acquire.
Jon Ogg
July 24, 2008
Is BioMarin the Next Biotech Takeover Candidate? (BMRN)
Everyone is looking fo rthe next biotech takeover candidate for their investment portfolios, but you can’t look at just market caps nor just at sales. Those are critical because many aren’t worth the time for larger players, but you also have to consider the pipeline and have to consider its partnerships and total reach that can be attained (among other issues).
BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) is one of the biotech players that has come up over and over in the last couple of years over its market cap and with 2008 being the year that its revenues finally start to ramp up. It showed $121 million in 2007 revenues, and analysts are looking for $312 million in 2008 and over 4420 million in 2009. This is also the year its P/E is finally supposed to go positive with analysts looking for $0.49 EPS for 2008 and $1.13 EPS for 2009.
It also has partnerships with the following:
- Genzyme (NASDAQ: GENZ) for the development and commercialization of Aldurazyme® (laronidase) for MPS I;
- Alliant Pharmaceuticals for the North American commercialization of the Orapred product line, including Orapred ODT (prednisolone soduim phosphate orally disintegrating tablets)’
- and Merck Serono for the development and ex-U.S./ ex-Japan/ ex-Canada commercialization (pending regulatory approvals) of BioMarin’s Kuvan and 6R-BH4 for other indications.
The company also just yesterday announced that Summit plc signed a worldwide licensing agreement for Duchenne Muscular Dystrophy program.
This was mentioned as a potential buyout candidate yesterday by an analyst on CNBC. Shares closed up $1.21 at $31.40 yesterday and shares are up 1.5% at $31.90 at 9:54. Its 52-week trading range is $17.63 to $41.00.
Whether or not this is the next biotech to fall is still an unknown. But it fits the bill and this is one that traders seem to be putting funds toward over the last couple of weeks.
Jon Ogg
July 23, 2008
When Drug Firms Add ex-FDA Chiefs to Payrolls
GlaxoSmithkline (NYSE: GSK) has appointed Dan Troy as Senior Vice President and General Counsel for the company with an effective hire date of September 2, 2008.
Normally a general counsel hiring doesn’t mean much, but this one is a headline grabber if you believe that drug companies have to have a good clear line into the FDA. Mr. Troy was formerly Chief Counsel for the US Food and Drug Administration, where he served as a primary liaison to the White House and the US Department of Health and Human Services.
He led an office of attorneys who reviewed and approved all major regulations, and oversaw the legislative implications of many of the most important issues facing the pharmaceutical industry. Some issues were the reform of the Hatch-Waxman Act and subsequent legislative ratification, and his office also approved and managed all agency litigation and established new procedures for the FDA legal team to follow in preparing and then litigating high-profile cases.
We usually call this “bringing in the former enemy.”
Jon Ogg
July 22, 2008