The Facet Biotech Buyout Saga (FACT, BIIB, ABT, PDLI)
Facet Biotech Corporation (NASDAQ: FACT) is a buyout saga that seemed as though it would never end in 2009. The company is now finally being acquired, but not by Biogen Idec (NASDAQ: BIIB). Abbott Laboratories (NYSE: ABT) announced last night that it entered into a definitive agreement for $27.00 per share in a cash buyout. The deal is valued at $722 million, but that includes about $272 million in cash and equivalents.
The net cost will be about $450 million. In late-2009, Facet turned down a second unsolicited offer from Biogen Idec of $17.50 a share after having rejected a lower offer before that.
Facet has discovery and development partnerships with Biogen Idec for MS, and it also has partnerships with PDL BioPharma (NASDAQ: PDLI) and Roche.
Facet shares are up 66% at $26.96 this morning after last night’s deal. Its prior 52-week trading range was $5.86 to $18.35.
JON C. OGG
Top 2010 Established Biotech Stock Picks for Upside (MNKD, THRX, DNDN, INCY, ILMN, ALNY, GILD, SVNT, AMGN, ONXX, PDLI, OSIP, CELG)
BioHealthInvestor.com wanted to put together a list of key biotech and BioHealth-related stocks that had the most upside for 2010 according to consensus analyst price targets. This is of course no exact science for many reasons, but getting a lot of consensus price targets together is often a sign of at least where to start when looking for upward price targets in stocks. And we all know that BioHealth and biotech stocks often offer the upside of the century as these companies all hold a bit of your own personal lottery ticket in all of their share prices.
After taking a look at our normal universe of biotech and biohealth related stocks. it was obvious that MannKind Corp. (NASDAQ: MNKD) still has the most upside from the consensus price targets IF it is hit. Then in order of expected share price appreciation comes Theravance Inc. (NASDAQ: THRX), Dendreon Corp. (NASDAQ: DNDN), Incyte Corporation (NASDAQ: INCY), and then came Illumina Inc. (NASDAQ: ILMN), Alnylam Pharmaceuticals, Inc. (NASDAQ: ALNY), and Gilead Sciences Inc. (NASDAQ: GILD).
The stocks above all had upside of over 25%. The other stocks here are the ‘lower rung’ of upside expectations but are all still offering over 20% upside to the consensus analyst price targets (again IF they are hit). Of the 13 stocks with markets caps of $750 million (or almost $750 million) which we cover, these still had upside of over 20% except a few: Savient Pharmaceuticals, Inc. (NASDAQ: SVNT), Amgen Inc. (NASDAQ: AMGN), Onyx Pharmaceuticals Inc. (NASDAQ: ONXX), PDL BioPharma, Inc. (NASDAQ: PDLI), OSI Pharmaceuticals Inc. (NASDAQ: OSIP), and Celgene Corporation (NASDAQ: CELG).
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Quest For 10-Baggers in BioHealth in 2010 (JAZZ, TRGT, VNDA, DNDN, HGSI, CGEN, BNVI, QCOR, ACHN, PSDV, ATHX, SNSS, AVNR, BIOD, ALXA, CTIC)
If one thing was noticed in biotech stocks, or BioHealth stocks as we often say, it was that investors, traders, and speculators all piled into the chase for the next ten-bagger late in the year. When you have as many biotech and BioHealth stocks that ran over 1,000% in 2009 that is only to be expected…. hence the 10-bagger comments. We had many biotech and biohealth shares rally from their lows significantly this year, with companies such as Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ), Targacept, Inc. (NASDAQ: TRGT), Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA), Dendreon Corp. (NASDAQ: DNDN), and Human Genome Sciences, Inc. (NASDAQ: HGSI) all being in or having been in the 10-bagger club this year.
But late in 2009 we started seeing an onslaught of low-priced stocks with small cap or micro-cap values running rapidly higher on news. In some cases these faded, and in some not. We saw the traders run up shares of Compugen Ltd. (NASDAQ: CGEN), Bionovo, Inc. (NASDAQ: BNVI), Questcor Pharmaceuticals, Inc. (NASDAQ: QCOR), Achillion Pharmaceuticals, Inc. (NASDAQ: ACHN), pSivida Corp. (NASDAQ: PSDV), Athersys, Inc. (NASDAQ: ATHX), Sunesis Pharmaceuticals, Inc. (NASDAQ: SNSS), and AVANIR Pharmaceuticals, Inc. (NASDAQ: AVNR) on news late in 2009. Also covered as potentials for this are Biodel Inc. (NASDAQ: BIOD), Alexza Pharmaceuticals, Inc. (NASDAQ: ALXA), and Cell Therapeutics, Inc. (NASDAQ: CTIC).
We have reviewed each of these and given a synopsis for each to see if these could be the 10-baggers for 2010.
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Biogen Idec Has To Look Beyond Facet (FACT, BIIB)
Facet Biotech Corporation (NASDAQ: FACT) is outright rejecting the buyout offer from Biogen Idec Inc. (NASDAQ: BIIB). The company issued a press release stating that the stockholders rejected Biogen Idec’s unsolicited tender offer for $17.50 per share. Furthermore, it noted that Biogen Idec has terminated its tender offer after the company recently raised its offer as a “last and final offer.”
Facet management also called the Biogen Idec $17.50 offer as being “inadequate and did not fairly value our company and its prospects.” The company further noted that it will continue pursuing opportunities. Furthermore, it also noted that the company has requested that its financial advisor, Centerview Partners, solicit additional third parties that may have an interest in a transaction that our board would find in our stockholders’ best interests.
The company did note that it offers Biogen Idec the opportunity to conduct due diligence discussions to see if a materially increased offer could be made. Facet has a pipeline of five clinical-stage products and is seeking to identify and develop new oncology drugs and applying its proprietary protein engineering technologies to potentially improve the clinical performance of protein therapeutics. Its main targets are in oncology for cancers, which could have opened a new pipeline up for Biogen Idec. Facet’s market cap is $417 million, and Biogen noted that it was offering to pay $493 million for it when it raised its tender offer to $17.50 from $14.50.
Facet shares are finding the price down 2% at $16.00 in pre-market trading, and the 52-week trading range is $5.86 to $18.35. One problem Facet had was that it came public in late 2008 when the markets were in serious question. That is when it hit as high as $18.00, but shares were down under $10.00 in early September when Biogen Idec made its first offer.
Facet may want to hold out for money. It may get it, and it may not. As for Biogen Idec and its desire to buy a new drug pipeline that diversifies its dependence on MS drugs, it has already signaled that it is willing to pay almost $500 million for a company with very low revenues (Thomson Reuters estimate is $82+ million in revenues for all of 2010 for Facet).
JON C. OGG
Value Stocks in Drugs & Biotech (AMGN, BIIB, CBST, CEPH, PDLI)
This weekend we ran screens of several drug and biotech companies in our quest for ‘cheap stocks’ in the BioHealth sector. The intent is not solely for buyout targets because we prefer to look at value stocks rather than just picking buyout hopefuls. The obvious issue that makes most of these cheap is because there have been problems or have been issues that made these look cheap on the surface. To look for sub-market valuations, we used Thomson Reuters estimates for 2009 and 2010 earnings. We then set a maximum target of 15-times earnings and screened out the companies that gave the ‘false positives’ as there were many.
Amgen Inc. (NASDAQ: AMGN), Biogen Idec Inc. (NASDAQ: BIIB), Cephalon Inc. (NASDAQ: CEPH), Cubist Pharmaceuticals Inc. (NASDAQ: CBST), and PDL BioPharma, Inc. (NASDAQ: PDLI) all made the cut. We initially wanted to look for market caps over $1 billion, but we set the bar at $500 million and tried to focus on companies with growth. We included valuation data, performance, and some color on each name. Some, but not all of these, are also in our upcoming biotech buyout targets for 2010.
Amgen Inc. (NASDAQ: AMGN) is one we have long noted during its waves of problems and as it was under future reimbursement pressure that may be more like an old fashioned drug company now as it has matured. The company’s market cap is $56 billion, which is actually now the largest market cap since Genentech is now Roche. Its stock trades at $55.48 and its 52-week trading range is $44.96 to $64.76. Because of the pressure and past issues, it trades at only about 11-times earnings for 2009 ($5.03 est.) and 2010 ($5.14 est.) both. It also trades at under 4-times 2009 and 2010 revenue expectations and it sits with an arsenal of almost $14 billion in cash and equivalents, yet has over $10.5 billion in long-term debt.
Biogen Idec Inc. (NASDAQ: BIIB) is no stranger to issues… another activist was just out this week calling for more action and the company has not been able to get out from under the TYSABRI PML despite the notion that this is a very low risk. At $46.38, its market cap is $13.4 billion and its 52-week trading range is $37.21 to $55.34. Biogen has over $3.1 billion in cash if you include its short-term and long-term investments and it carries just under $1.1 billion in long-term debt. Biogen also trades at 11.6-times the $3.99 EPS target for 2009 and only 10.5-times the $4.42 target for 2010; and Biogen trades at 3-times 2009 expected sales. The risk is here is of course the TYSABRI risks. You never know if they will have to pull it again. This is an opinion rather than a formal target, but TYSABRI is good enough in treatments of MS that it could quite literally have two or three times the number of patients using it if the PML risk can either be quantified better or could be mitigated. Another issue is that it is trying to acquire Facet Biotech Corporation (NASDAQ: FACT) as a diversification and added pipeline move.
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Activist Going Back After Biogen Idec (BIIB, CELG, GILD, GENZ, AMGN)
Biogen Idec Inc. (NASDAQ: BIIB) is not exactly new to the world of activist investors as there have been problems inside the company for years. An SEC filing this morning was filed by a fund called HealthCor Management, L.P. located in New York. It turns out that the fund is not a new entrant here, but the revelations are rather specific rather than broad and non-specific compared to other activist complaints. More importantly, the fund has CC’d in the following entities:
- PRIMECAP Management
- ClearBridge Advisors LLC
- Barclay’s Global Investors UK
- Fidelity Management & Research
- Icahn Capital LP
- Goldman Sachs Group
- State Street Corporation
- Vanguard Group Inc.
- Capital Research Group Investors
- Invesco Ltd.
Yep, you knew Carl Icahn was going to be in there. After all, the most recent Icahn holdings still showed Icahn holding a significant number of shares.
What is interesting is the data that HealthCor provided. It is calling for a specific buyback plan of $500 million to $1 billion worth of stock PER YEAR. It noted that Biogen Idec outspends and is expected to outspend all of its major large-cap biotech peers.
The activist group here compared the statistics (most of which include items) to Celgene Corporation (NASDAQ: CELG), Gilead Sciences Inc. (NASDAQ: GILD), Genzyme Corp. (NASDAQ: GENZ), Amgen Inc. (NASDAQ: AMGN), and Genentech-Roche.
R&D MARGINS (HISTORICAL AND CONSENSUS)
2007A 2008A 2009E 2010E 2011E
CELG 24% 24% 26% 24% 24%
GILD 12% 12% 12% 13% 13%
GENZ 18% 17% 18% 16% 16%
AMGN 21% 19% 18% 18% 18%
DNA 20% 20% 20% 20% 19%
AVERAGE 19% 18% 19% 18% 18%
BIIB 29% 26% 27% 27% 26%
HealthCor also noted that Biogen has failed to maximize its earnings and cash generation potential. There is a complain that CEO James Mullen has sold approximately $85 million worth of stock.
Now that the market has stabilized, there are likely to be more activist filings made in realm of underperforming biotech stocks.
JON C. OGG
NOVEMBER 20, 2009
PML Side Effect Concerns Moving Beyond MS to RA (RHHBY, BIIB)
PML, or progressive multifocal leukoencephalopathy, is moving beyong TYSABRI as a side effect in the world of drugs and pharmaceuticals. Yesterday the FDA posted a ‘Dear Doctor letter’ from Genentech, now part of Roche (OTC: RHHBY). Unfortunately, this involves Biogen Idec, Inc. (NASDAQ: BIIB) as well. The two companies notified healthcare professionals about a third case of PML, the first case of PML in a patient with rheumatoid arthritis treated with Rituxan who has not previously received treatment with a TNF antagonist.
The companies noted that information to date suggests that patients with RA who receive Rituxan have an increased risk of PML and that doctors should consider PML in any patient being treated with Rituxan who presents with new onset neurologic manifestations.
You can read the full letter and explanations here. Unfortunately, PML risks are likely to come more front and center in the coming weeks and months.
It is worth noting that this is not the first of the potentially fatal side effects of Rituxan. There have been prior warnings of brain disorders and other warnings including cardiac arrest, reactivation of Hepatitis B, kidney failure, and more. And PML is already a noted risk in Rituxan.
It JON C. OGG
New MS Drug Hits Delay (ACOR, BIIB)
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 (ACOR) Up 50% On Trial News
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 Spends FDA Review Day in Penalty Box (ACOR, BIIB)
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
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