ViroPharma Scores, Recession-Proof (VPHM)
ViroPharma Inc. (NASDAQ: VPHM) is bucking the trend of bad earnings, which you might expect considering that the biotech company should be somewhat independent of growth or recession. The company has also just last week closed its merger with Lev Pharmaceuticals, and those numbers are not in the past quarter earnings.
The company reported Q3-2008 earnings of $0.33 EPS on a 29.4% year/year revenue gain to $65.9 million. First Call had estimates at $0.23 EPS and $59.2 million in revenues.
More importantly than the past, the company is also giving upside guidance of $235 to 245 million for the year in Vancocin sales vs. estimates of $233.3 million. Guidance on R&D and general and administrative expenses for 2008 is roughly $115 to $125 million.
Regarding additional payments due to Lilly in connection with the Vancocin acquisition, the company said that net sales as of September 30, 2008 exceeded the threshold of $45.0 million and it recorded additional purchase price of $7.0 million to intangible assets in 2008.
ViroPharma commercializes Vancocin, which is approved for oral treatment of antibiotic-associated pseudomembranous colitis caused by Clostridium difficile and enterocolitis caused by Staphylococcus aureus. This includes methicillin-resistant strains. ViroPharma commercializes Cinryze(TM) for routine prophylaxis against angioedema attacks in adolescent and adult patients with hereditary angioedema, also known as C1 inhibitor deficiency.
The primary drivers were the increase in net sales and a lower effective tax rate.
Shares are up over 7% at $11.95 and the 52-week trading range is $7.11 to $15.16.
Jon C. Ogg
October 29, 2008
Thoratec And The Wrath of Recalls (THOR)
Thoratec Corporation (NASDAQ: THOR) is getting some negative reaction this morning after issuing a Urgent Medical Device Correction to doctors. The maker of the HeartMate II LVASheart failure device announced a product recall on Friday. Thoratec issued a worldwide medical device correction of all serial numbers of the HeartMate II Left Ventricular Assist Systems having Catalogue No. 1355 or 102139, which have been distributed since the beginning of clinical studies in November 2003.
It said that over time, wear and fatigue of the percutaneous lead connecting the HeartMate II LVAS blood pump with the System Controller may result in damage or injury. It said that this could interrupt pump function, require reoperation to replace the pump and potentially result in serious injury or death. It also said that the estimated probability of the need for pump replacement due to percutaneous lead damage is 1.3% at 12 months, 6.5% at 24 months and 11.4% at 36 months.
Here is part of the excerpt:
Patients who are currently being supported by a HeartMate II LVAS should contact their doctors, who can assess the wear and fatigue of the percutaneous lead as well as provide proper instruction on management and care of the lead.
Thoratec is voluntarily issuing an Urgent Medical Device Correction notice after confirming 27 reports where wear and fatigue to the percutaneous lead necessitated pump replacement. These reports occurred over five years of clinical experience with 1,972 implants. All patients who have undergone a replacement of the HeartMate II pump survived the operation and were alive at least 30 days postoperatively. In five cases, pump replacement was not feasible and the patients expired.
The affected systems were distributed to 153 hospitals and distributors throughout the United States, Europe, Canada and other countries. The HM II LVAS can be identified by the catalogue number located on the label of the package.
The real problem with recalls and product defects in medical device companies is that a recall isn’t exactly a auto recall from tires or windshield wipers. Patient generally have to undergo a new surgical procedure to have the recalled item removed and have to have new devices inserted. While procedures are almost always done at the same time, it can come with a high price and inconvenience to the patient. Recalls can destroy the image medical device company which issued a recall over a defective product. How many patients want defective heart devices?
Recalls can also turn doctors away to competing products or encourage them to stop use of the recalled product even if the replacement is fine. Doctors are frequently not immune to public opinion and are rarely immune to product defect news.
Thoratech shares are down 16% at $21.00 at 10:15 AM EST and we have already seen the stock trade its average daily volume in just 45 minutes. The only good news here is that this is not worse.
Here is a link where you can hear the full details of the recall and the implied impact from teh company.
Jon C. Ogg
October 27, 2008
Can Dynavax Survive In A Post-Merck World (DVAX, MRK)
Dynavax Technologies Corp. (NASDAQ: DVAX) is in serious trouble and is now just looking like the latest biotech implosion. The company gave an update on an FDA clinical hold on its investigational vaccine HEPLISAV for a Hepatitis B vaccine with partner Merck & Co. (NYSE: MRK), and the outlook is grim. There is also the belief here that the company doesn’t have the financial strength to survive or thrive.
Dynavax and Merck have received communication from the FDA regarding their response to the agency’s request for safety information pertaining to the clinical hold on the two Investigational New Drug Applications for HEPLISAV. The FDA advised that the balance of risk versus potential benefit no longer favors continued clinical evaluation of HEPLISAV in healthy adults and children, which might as well be the kiss of death for a trial program.
The FDA did advise that there may be potential for an acceptable risk versus benefit profile for HEPLISAV in patients with renal failure. For that effort the FDA has requested additional information from the companies before considering further pursuit of clinical studies in those patients.
Dynavax and Merck are going to evaluate the FDA’s response in considering the next steps, but the clinical hold on the two U.S. IND Applications for HEPLISAV remains in effect.
At the last quarter-end, Dynavax had almost $64 milion in cash and equivalents and its total assets were $96.9 million after adding in $5 million for goodwill and intangibles. Its total liabilities were listed as $83.1 million. It has also been burning about $15 million in R&D per quarter on average for the last year. Remove the liabilities and deduct the cash and the intangible assets. What is left?
One major reason this looks so bad is that Merck has been reviewing all of its clinical trial relationships to focus on those which will have the greatest upside and the greatest chance for broad acceptance. Even if this would be able to be a profitable product for Dynavax, the fear is that Merck may determine it isn’t worth its efforts.
Oppenheimer downgraded the rating here to “Perform” from “Outperform” but you wonder if that is even a fair rating after tallying everything up.
At the start of 2007 this was above $8.00 in share price. That appears to be ancient history at this point.
Jon C. Ogg
October 22, 2008
Forget Earnings, Genentech Is Still All About Merger Status
We ran a full earnings preview for today’s earnings out of Genentech (NYSE: DNA) over at 24/7 Wall Wall St. Here you can see all the details and can compare today’s individual drug sales to the prior quarter for some inference. But we still feel that today is mostly going to boil down to whether or not that merger with Roche is deemed as on or off and whether or not the credit markets are posing an issue to the merger for the rest of the stake Roche doesn’t already own. Here was the full data we addressed recently covering the merger and the current credit environment.
Jon C. Ogg
October 14, 2008
Bear Market and Credit Risks For Genentech & Roche Merger?
The new bear market and lack of credit and capital globally may have yet a new victim: Genentech (NYSE: DNA). Even if the $89.00 per shares cash deal from Roche is not at risk, you would never know it by the reaction we have seen in Genentech’s stock. Shares are down 5% at $75.00 in early morning trading.
Genetech’s stock was trading at $80.00 just on Wednesday, and shares were north of $90.00 at the end of September. Here is why you have to wonder about the risks to the buyout above and beyond the recent trading action in the stock: This deal to acquire the minority stake at $89.00 per share in cash is a $43.7 billion sum of cash.
Roche shares also look like they are trading at fresh year lows in Switzerland. At the half-year report for June-2008, Roche listed its net cash at 10.115 billion Swiss Francs and its equity was listed as 49.176 billion Swiss Francs. 1 US Dollar today buys right at 1.12 Swiss Francs. The dollar has strengthened, so this merger is going to cost Roche more on a Swiss Franc currency conversion. Earlier this month, Citigroup’s analyst covering this sector said that the deal was now 8% more expensive due to the rise in the Dollar. While that means Roche would make more as Genentech’s revenues are in US Dollars, it still requires coughing up more cash upfront.
If you have been watching this global credit crisis unfold, you already know that banks do not want to lend to each other. They sure as hell don’t want to lend funds for mergers right now. IBM (NYSE: IBM) just paid 8% for a 30-year bond issuance (was a 3-part maturity totaling $4 billion). Recently General Electric (NYSE: GE) and Goldman Sachs (NYSE: GS) just had to pay rates which you could argue were running at 10% for financing from Warren Buffett.
To make matters worse, Genentech wants more money. Roche doesn’t want to pay more money. Shareholders want more money. And now there is a small issue that there just might not be enough money to go around to allow this to close.
Roche already holds the majority stake in Genentech. This global financial crisis might be creating a scenario where holding the majority stake will just have to be good enough.
Jon Ogg
October 10, 2008
Taking Pandemic Flu Vaccine to Japan, Maybe
Vical Incorporated (NASDAQ: VICL) has signed a non-binding Letter of Intent with AnGes indicating the companies mutual interest to license the development and marketing rights for Vical’s pandemic influenza DNA vaccines in Japan to AnGes.
Both parties intend to negotiate terms and conditions (potentially) leading to a license, subject to completion of a mutually satisfactory definitive agreement.
Japan’s geographic proximity to many of the avian influenza outbreaks in recent years puts the country at high risk for future outbreaks. The Japanese Ministry of Health, Labor and Welfare has offered estimates showing that the emergence of a new strain of influenza could lead to infections in 13 to 25 million people and and ultimately could lead to 170,000 to 640,000 deaths in Japan.
Vical shares are not trading up on this news at all as these often tend to be long-term pacts with little immediate impact on the company. Shares are dowmn 2.5% at $1.55 on thin volume after the open. Its 52-week trading range is $1.50 to $5.23.
Jon C. Ogg
October 7, 2008
Breaking Down Dendreon’s Move (DNDN)
Dendreon Corp. (NASDAQ: DNDN) is one biotech stock where traders and investors alike also join groups of patients in their march toward to the company. The stock was an incredible performer today, and one which makes you wonder how well it would have done had the stock market not been so ugly.
Dendreon traded up 33% today to $6.93 on more than 35 million shares. At one point its stock traded north of $9.00. It traded more than 40,000 Call Option contracts today for the October current month expirations, it traded over 37,000 call option contracts for November expiration, and traded over 90,000 call option contracts for the January-2009 expiration. If you add all that up on a fully leveraged basis, you would see that this is equivalent to more than another 16.7 million shares.
- Over at 24/7 Wall St. we gave our expectations ahead for the stock, and below is all the data from the company.
Its interim data from Phase III PROVENGE IMPACT trial showed that the IDMC observed no safety concerns, and it recommended that the study continue. The company itself has completed the planned interim analysis of the Phase III, randomized, double-blind, placebo-controlled IMPACT clinical trial designed to assess the safety and efficacy of PROVENGE in men with metastatic androgen-independent prostate cancer. We do want to outline how that despite this data being good, Dendreon is not suddenly a slam dunk and still has many risks associated with it.
Dendreon remains blinded to the data, but the independent data monitoring committee reported to Dendreon a 20% reduction in the risk of death in the PROVENGE arm relative to placebo and observed no safety concerns and recommended that the study continue to its final analysis.
The final analysis is expected in the middle of 2009 and if the study demonstrates approximately a 22% reduction in the risk of death (based on 304 events), the company would expect the study to meet its primary endpoint of overall survival.
Jon C. Ogg
October 6, 2008
Major Biotechs on the Move (OSIP, DNA, IMCL, LLY, BMY, CRXX)
There is suddenly quite a bit going on in the land of biotech and drug stocks. We have a higher merger, a disappointing “add-on” possibility out of the magical Avastin, and an outright biotech implosion.
OSI Pharmaceuticals Inc. (NASDAQ: OSIP) is getting hit hard in early trading this morning. The biotech has released data showing that a Phase III trial of Genentech’s (NYSE: DNA) Avastin combined with Tarceva in certain patients with advanced non-small-cell lung cancer did not meet the primary endpoint of increasing overall survival compared with Tarceva plus placebo.
In a separate note, Roche and Genentech over the weekend noted that the two companies are joining forces to work with Switzerland’s GlycArt to develop and commercialize one of the Genentech’s oncology agents.
Carl Icahn scored a win for holders of ImClone Systems (NASDAQ: IMCL) is trading up around $69.00 per share this morning. The biotech maker of EBRBITUX and Carl Icahn have formally scored as Eli Lilly (NYSE: LLY) is jumping in front of Bristol-Myers Squibb (NYSE: BMY) with a higher $70.00 buyout rather than the revised $62.00 buyout which Bristol-Myers was hoping to secure. Will a bidding war come into play?
CombinatoRx, Incorporated (NASDAQ: CRXX) has gotten even worse since our first biotech implosion alert after it released data from its Phase IIb study of Synavive (CRx-102) for Knee Osteoarthritis showing that its Synavive test was not statistically significant. The company said that it is a setback for the Synavive program and it will continue to evaluate and analyze the data.
Jon C. Ogg
October 6, 2008
BioHealth Morning Daily, Wednesday, October 1, 2008
Cepheid Inc. (NASDAQ: CPHD) received FDA clearance for the first on-demand diagnostic test for life threatening MRSA and staphylococcus aureus from patient positive blood cultures. No shares have traded yet.
Emergent Biosolutions, Inc. (NYSE: EBS) announced that the U.S. government will purchase an additional 14.5 million doses of BioThrax as part of the anthrax shield under a new contract valued at up to $404 million. Its market cap is $390 million and its 2007 revenues were $182.9 million in total.
Johnson & Johnson (NYSE: JNJ) won a rather large judgment after a U.S. District Court in Delaware entered a final judgment including accrued interest, which comes to approximately $1.2 billion in favor of J&J’s Cordis unit. It won this against Medtronic (MDT) and Boston Scientific (BSX) in cases involving the original balloon expandable stent patent.
Universal Health (NYSE: UHS) is among some hospital downgrades by UBS this morning. It seems that the hospital sector is not immune from a rapidly weakening economy. Its rating was cut to Neutral from Buy. FULL HOSPITAL DOWNGRADE LIST.
Jon Ogg
October 1, 2008