Abraxis Looks Promising in Lung Cancer War (ABII)
Abraxis BioScience, Inc. (NASDAQ: ABII) is one of the top biotech gainers this morning. The company announced that its key ABRAXANE met the primary endpoint in a Phase 3 trial for advanced non-small cell lung cancer.
The company’s randomized Phase 3 clinical trial comparing ABRAXANE, the company’s protein-bound paclitaxel, along with with a Taxol injection, in combination with carboplatin met the study’s primary endpoint. ABRAXANE showed a significant improvement in overall response rate compared to Taxol alone as a first-line treatment for advanced non-small cell lung cancer patients.
The 1,052 enrolled patient study as of July 2009 was at 102 centers. The company noted that NSCLC is 85% of lung cancer diagnosis and noted that more than 200,000 are diagnosed with lung cancer each year with about 159,000 deaths per year.
The study was assessed by independent radiologist review and is the subject of a special protocol assessment with the FDA. Abraxis further noted that the design, clinical endpoints and statistical data and analysis have been previously agreed upon by the FDA. In that regard it said that the FDA agreed that the demonstration of a statistically superior response rate of the ABRAXANE and carboplatin combination over the Taxol and carboplatin combination is sufficient for the company to submit a supplemental new drug application for approval of ABRAXANE in combination with carboplatin as a first-line treatment of advanced non-small cell lung cancer.
Abraxis is surging. Shares opened at $46.45 this morning after a $39.85 close yesterday. The stock has run further and is now up almost 28% at $50.95 on the day. The problem here is that volume is very thin despite a $2 billion market cap. The 52-week high is $57.60. The company is also under-followed by Wall Street and that makes information less reliable or less covered by investors.
Today will b a near-term volume record if it continues. There has only been one day this calendar 2010 where it had 300,000 shares or more trade. In 2009, its most active day was 240,000 shares.
JON C. OGG
OSI Can’t Stay Indpendent Forever (OSIP)
OSI Pharmaceuticals Inc. (NASDAQ: OSIP) is holding up yet again, despite the notion that Astellas Pharma, Inc. of Japan wants to acquire the company. OSI decided to formally reject the $52.00 per share tender offer and is recommending that its shareholders reject the offer while it contacts other parties. Today we have a counter-response from Astellas. The profitable maker of Tarceva either wants to remain independent regardless of its notion that it will contact outside parties, or it wants to fetch a much higher price. Based upon a $52.00 deal offer and a current price of about $58.00 after the fact, take a guess what the market is thinking.
Astellas has said that it is pleased that OSI’s board of directors has finally instructed its management to explore a transaction for the Company. But it also noted that the Astellas offer gives OSI Pharma shareholders the opportunity to get a full and fair value immediately in cash. The market is paying $58.00, not $52.00, at least as of this afternoon.
But what Astellas did note was that its offer is not subject to any financing conditions nor to due diligence. The deal only contains customary conditions to close, as per its own words.
Astellas decided that its best route is to take its offer directly to shareholders of OSI Pharma. Astellas said that it will also nominate a full slate of directors for OSI’s upcoming shareholder meeting, although it is not likely to get a warm reception. The company further noted that the $52.00 per share cash offer was a 40% premium from the last trading day before Astellas made its offer public. It further said the deal is a 53% premium to the 3-month average and a 31% premium to the 52-week high.
The problem is wider than today’s share price. OSI has been public long enough that it is one of the oldest in its class. For a brief period in 2000 to 2001 its shares hit $80 a share. Then it even more briefly went up to almost $100.00 per share in 2006 and spent several months north of $60.00 on its own.
EDAP TMS, Back on the Map (EDAP)
EDAP TMS SA (NASDAQ: EDAP) is a French company which makes medical devices for the treatment of urological diseases and the company’s stock is soaring after the company was granted marketing approval of its newly designed, high-end Sonolith I-Sys lithotripsy device by the Japanese Administration. Because this market is still under-served, we wanted to look into the news despite this not being a drug or biotech company.
The Japanese equivalent of the FDA in the US granted marketing approval of EDAP’s Sonolith I-Sys lithotripsy device. What makes this unique is that the lithotripsy market in Japan is supposed to rank as the number one market in the world in total lithotripsy sales volume and in the installed base. The company also noted that Japanese physicians have traditionally been fast adopters of products in this field.
The Sonolith I-Sys is an easy to use high-end system that the company called an effective tool to deliver benefits to both patients and physicians with integrated and robotized features. The company noted that the device successfully obtained marketing clearance by the U.S. FDA in August 2009.
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.
More Biotech Buyout or M&A Targets (OSIP, VRTX, AUXL, ITMN, HGSI, CELG, DNDN, ENZN, FACT, PBE, XBI)
After today’s hostile Astellas offer for OSI Pharmaceuticals (NASDAQ: OSIP), we have investors and traders alike looking for ‘the next takeover target’ in biotech. Buy now you know that there are many pitfalls in simply looking for biotech stocks to buy because they will be taken over. We have taken a look through our own recent stocks noted as takeover candidates and even gone through some sites of our partners looking through potential takeover candidates in the space.
Morningstar just last week had a short video with some key potential buyout targets in the biotech space. It noted Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX), Auxilium Pharmaceuticals Inc. (NASDAQ: AUXL), and InterMune Inc. (NASDAQ: ITMN). Those are all names that have come up as takeout targets before.
But two that are on Morningstar’s list for buyouts are Human Genome Sciences Inc. (NASDAQ: HGSI) and Celgene Corporation (NASDAQ: CELG) for its REVLIMID franchise. The problem with Human Genome is that it is in the same boat we have addressed on multiple occasions: its size got away from the potential realm of buyers. And Celgene has just become too big at a $28 billion market cap for most potential buyers to consider it and the sales growth from $2.689 billion in 2009 is expected to go to $3.26 billion in 2010 and $3.75 billion in 2011 per Thomson Reuters estimates.
After looking around elsewhere, we went back to some Dendreon Corp. (NASDAQ: DNDN) rumors from last month we covered. This was based somewhat on options trading, and we think this company may have to wait for a suitor. Taking the risk of buying the company out before the FDA approves PROVENGE for advanced prostate cancer is something companies are seeming to shy away from.
Enzon Pharmaceuticals, Inc. (NASDAQ: ENZN) is another name that comes up routinely in the rumor mill. We noted this one hitting 52-week highs in January on fresh rumors.
Facet Biotech Corporation (NASDAQ: FACT) has also fought off attempts from Biogen Idec (NASDAQ: BIIB) as a new add-on for its MS franchise. Biogen has been rebuffed and it supposedly will not have an interest anymore.
ETF investors are chasing up names in the sector as well. PowerShares Dynamic Biotech & Genome (NYSE: PBE) is up 4% at $18.48 and the SPDR S&P Biotech (NYSE: XBI) is up 4.7% at $58.98.
Jon C. Ogg
Hostile Mergers Back in Biotech (OSIP)
Mergers are back in biotech…. Astellas Pharma Inc., a global pharmaceutical company in Japan, announced that it will commence a tender offer to acquire all outstanding shares of common stock of OSI Pharmaceuticals (NASDAQ: OSIP). The direct tender is nothing short of a hostile merger after Astellas said that OSI has refused to discuss terms.
The offer is for $52.00 per share in cash valued at approximately $3.5 billion on a fully diluted basis. Astellas notes that this offer is premium of over 40% to the recent closing stock price and it is a 53% premium over the three-month average share price. The deal is also said to not be suject to any financing terms or conditions.
In the deal, Astellas hopes to build a world-class oncology platform and expects to invest in OSI’s business and employees. Here is how Astellas describes the deal:
The acquisition of OSI – a biotechnology company primarily focused on the discovery, development and commercialization of molecular targeted therapies addressing medical needs in oncology, diabetes and obesity – would support Astellas’ growth strategy of becoming a Global Category Leader in oncology. OSI manufactures and sells Tarceva as a leading cancer medication and has several prospective new oncology medications in its R&D pipeline.
This is a hostile takeover rather than an approved and friendly merger. Astellas noted that it has made numerous attempts to engage in substantive discussions to acquire OSI. The company first raised its interest in acquiring OSI during a meeting with OSI’s CEO in January 2009. It noted that it then made its first written proposal in February 2009. It then sent letters reiterating its interest in March and June 2009 and several face-to-face meetings, including a meeting between the two CEOs on February 12, 2010. The company has maintained that OSI has refused to engage in a meaningful discussion, so Astellas is going directly to OSI stockholders.
This may not be the only or last deal either, because Astellas said it will consider all means necessary to secure a completed transaction. Astellas also intends to nominate directors at OSI’s upcoming annual meeting to give stockholders a voice in the outcome.
Stay tuned.
JON C. OGG
Cell Therapeutics Facing Tougher FDA (CTIC)
Cell Therapeutics, Inc. (NASDAQ: CTIC) is getting clipped on Pixantrone this morning. The company was told by the FDA that there is limited clinical data on its proposed cancer drug, and that there were higher side effects and higher death incidents. Unfortunately, this comes ahead of a panel review date that is set for Wednesday, February 10, 2010. We have late April, on or about April 23, 2010, as the final decision date from the FDA for Pixantrone.
Pixantrone is the company’s pending treatment of relapsed and refractory non-Hodgkin’s lymphoma, although this is indicated for those who have seen their disease progress after having received treatment with at least two other therapies.
Cell Therapeutics had raised about $30 million in January via securities sales. Pixantrone was under FDA Fast Track and it has an Orphan Drug designation under EMEA in Europe.
The FDA noted that the main trial arm ended early due to a smaller number of enrollment, which is always a concern. This may not be a dead outcome yet, but this sets a bias of extreme caution going into Wednesday’s event.
At 9:45 AM EST we have shares down 29.4% at $0.743 on 23 million shares. Average volume is 12 million shares and the 52-week trading range is $0.05 to $2.23.
JON C. OGG
Pfizer Outlines New Drug R&D Pipeline (PFE, MRK, NVS, GSK)
Pfizer Inc. (NYSE: PFE) is making a pipeline presentation today, and it is meant to address a serious and potentially severe issue affecting all Big Pharma companies from Merck & Co. (NYSE: MRK) after its Schering-Plough deal all the way down to where drug companies become biotech companies: That is the billions and billions of dollars that may disappear from profits as key drug patents expire in the coming years. This is also affecting Roche and companies like Novartis AG (NYSE: NVS) and GlaxoSmithKline plc (NYSE: GSK) on an international basis, which is why you have seen them make their own partnerships and acquisitions where possible.
Pfizer is giving a pipeline update showing its own efforts to address a whole new class of potential blockbuster drugs in the years ahead. Today’s pipeline update from Pfizer is the first real update since the company close the acquisition of Wyeth back in October, 2009.
The new development pipeline has potential drugs from both legacy companies. Pfizer is noting that this includes 133 programs from phase 1 studies through pipeline candidates in the registration process.
Pfizer is also noting that it has identified its six “Invest to Win” areas of research where there exist significant opportunities for innovation and market leadership. The new pipeline demonstrates focused investment in these areas of significant unmet medical need as well as growth in the critical technologies of vaccines and biologics. The six arena are as follows:
- oncology;
- pain;
- inflammation;
- Alzheimer’s disease;
- psychoses;
- and diabetes.
The combined Pfizer-Wyeth pipeline had 600 projects ranging from discovery through registration, and the new portfolio is roughly 500 projects. Pfizer’s goal is to become a top-tier biotherapeutics company by 2015, meaning effectively that it wants to take over some of the dominance currently held in several areas by pure-play biotech companies. Its pipeline now includes a total of 6 vaccines and 27 biologics in development.
Read more
Is Enzon a Real-Real Takeover Target, Again? (ENZN, PFE)
Enzon Pharmaceuticals, Inc. (NASDAQ: ENZN) is not your normal biotech and emerging pharma company. It is a name that has been tossed around in the rumor mill in the past, and that is the case this week. That is part of why the stock is at 52-week highs today. Pfizer Inc. (NYSE: PFE) is the rumored buyer this time around, although other companies have been rumored on and off in the past. While it is an $11+ stock today, this stock used to trade at an exponential share price and it has nearly a 20-year history as a public company now.
What makes this an interesting ‘buyout story’ is that Enzon already has a special meeting on deck on Wednesday, January 27, 2010, as the date of its special shareholder meeting to vote on the proposed sale of its specialty pharmaceutical business to the sigma-tau Group in Italy. That sale is valued at $327 million plus royalty payments. New holders have no say here as the cut-off date for the record-date in order to vote is December 9, 2009.
The new-Enzon will focus on experimental cancer drugs and technology and it currently has a Phase II metastatic breast cancer trial. The company also has Phase I studies for solid tumors and lymphomas. Its balance sheet as of September 30 had over $90 million in long-term investments and listed another $110 million in cash and short-term equivalent investments. It also has $250 million in long-term debt, versus total assets including intangibles of $337.67 million.
Enzon’s market cap today is now north of $500 million in its current market capitalization and its 52-week trading range is $4.70 to $11.37. Again, this one has been a rumor mill stock on and off in the past. It also has a pending deal in the works for its specialty pharma business on the table and up for a shareholder vote.
Anything is possible in today’s world, and the question of whether a development-stage and earlier clinical-stage biotech pipeline should be acquired by a Big Pharma company always comes down to need versus desire.
JON C. OGG
MDRNA & Rosetta Play Three Card Monte on Traders (ROSG, MRNA)
There is an old game that you probably have seen played on the streets of New York, and that is Three Card Monte. Any time you see small-cap and micro-cap biotechs issues very great sounding news, but then they turn around and immediately announce a secondary offering or a capital raise, this feels like you just got suckered into a game of Three Card Monte. This is the case in both Rosetta Genomics, Ltd. (NASDAQ: ROSG) and in MDRNA, Inc. (NASDAQ: MRNA).
Yesterday was a huge day for Rosetta Genomics, Ltd. (ROSG). The company issued a release showing “Rosetta Announces that Johns Hopkins University Researchers Demonstrate miRview squamous Classifies Non-Small Cell Lung Cancer with Extremely High Degree of Accuracy”… This stock closed at $1.85 on Tuesday, yet the stock ran to $3.09 yesterday on a whopping 1.2 million shares. Not bad considering average volume was barely 30,000 shares. Then after the close yesterday came the announcement that it was raising $5.1 million in a registered direct stock offering.
MDRNA, Inc. (MRNA) rose sharply yesterday after the company announced ‘potent anti-tumor activity against multiple targets in liver and bladder cancer.’ This closed at $1.39 yesterday on a whopping 29 million shares, up from a close of $0.95 the day before. Then this morning came the announcement that it is raising $5.5 million in a registered direct stock offering.
It is no shock that both stocks are getting shelled and drummed this morning. They deserve it. Rosetta is down 32% at $2.09 and that MDRNA is down 22% at $1.08 right after the open today.
The only good news here is that good news followed by a secondary doesn’t mean that no more good news can come. It just feels that way if you get suckered in by the news and then see the drop this much. If you have seen a game of Three Card Monte played on the street of New York, have you ever seen anyone really win? Exactly.
JON C. OGG
January 14, 2010
