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
Drug & BioHealth: How Worries May Hurt More Than News (MRK, PFE, BMY, TEVA, AMGN, BIIB, DNA)
It seems that the differences between old Big Pharma key drug powerhouses and established biotech players is becoming more and more of a blur rather than any firm lines. Before you consider this lunacy, remember the analogy that all biotech companies are seeking to become established drug companies. If you have watched Big Pharma mergers with biotechs, you’d wonder why there are any biotechs with drugs or pipelines left on the market.
Today we are seeing pressure on Merck & Co.(NYSE: MRK) after UBS issued some cautious stance on Gardisil sales. What is interesting about this call is that its primary competition on the U.S. drug market was just last week pushed out at least 6 months beyond what most were expecting.
It seems we almost never see a day without Pfizer Inc. (NYSE: PFE) not hitting a 52-week low or not at least being down on concerns that patents will expire and the company’s pipeline looks more like a pie in the sky line.
Bristol-Myers Squibb Co. (NYSE: BMY) has many of the same concerns as Pfizer as many of its investors have thrown in the towel here, but it has the added uncertainty of what this will look like beyond 2008 after the company goes through a miniature break-up.
If you think that generics coming on market is an issue, you may appreciate the irony as we see generics come under pressure from two arena. Big Pharma companies are taking the stance of slashing their prices to meet or come very close to generics as the generics get launched. This causes fears that generic margins will go to hell in a hand basket. Now take Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA). This one was hit hard recently after Mylan Labs (NYSE: MYL) signed a licensing pact in India to produce a generic version of Teva’s COPAXONE for MS treatment. Yep, that is the generic’s number one name brand drug it makes on its own. Go figure, a generic maker challenged by a generic.
But this doesn’t stop at Big Pharma and doesn’t stop at generics. Even many of the key biotech leader stocks have been under fire of late.
Amgen Inc. (NASDAQ: AMGN) has gone from its own cycle of boom to bust to rust. It ENBREL and other franchises have peaked for the time being over reimbursement rate concerns and Black Box warnings on its drugs with extreme warnings. While the worst is likely behind it and while we feel this is merely priced like a drug stock, there are very few traders looking for a major move in the near-term.
Biogen-Idec (NASDAQ: BIIB) is a worry that almost hasn’t gone away. Sure, the weakness after the post-TYSABRI withdrawal has been overcome, but this stock is believed to have very few prospective buyers based upon the size and target markets with today’s $17+ Billion market cap. We still believe the company mishandled its TYSABRI withdrawal because the treatment benefits looked so much better than the PML side effect percentages.
Take the giant Genentech (NYSE: DNA) for an example. The largest biotech is rapidly becoming a dead money stock. It keeps growing but concerns that its Avastin won’t continue to get perpetual approval to cure all cancers. Throw in the point that its individual drug sales seem to disappoint analysts routinely.
So where do we go from here? We are in an election year and it doesn’t take a rocket scientist to look at the health insurers and other medical-related sectors to determine that caution is going to prevail over extreme bullish sentiment of the past. We still think there will be many substantial mergers in small-cap and mid-cap biotechs and among many of the smaller providers that fit into safe niches. But there is going to be some added pain and caution as the most likely scenario(s) throughout the summer and into the fall in many of the key players in this field of drug and biotech.
At some point we’ll realize how cheap some of the names have gotten, but every effort to identify this as an inflection point has been met with added pain. Many of these companies will start reporting earnings over the next couple of weeks. You can bet that traders will be looking closely to start picking their spots or deciding to stay on the sidelines.
Jon Ogg
July 7, 2008
Med-Bio Analyst Upgrades & Downgrades (BMY, EHTH, IMCL, BABY, NUVA, ONXX, OSIP, ZMH)
These are some of the analyst calls that have been seen in medical and biotech this Friday morning:
- Bristol-Myers (NYSE: BMY) raised to Outperform at Bernstein.
- EHealth (NASDAQ: EHTH) Raised to Overweight at Thomas Weisel.
- ImClone Systems (NASDAQ: IMCL) Started as Overweight at Thomas Weisel.
- Natus Medical (NASDAQ: BABY) Started as Buy at UBS.
- NuVasive (NASDAQ:: NUVA) Raised to Overweight at Thomas Weisel.
- Onyx Pharmaceuticals (NASDAQ: ONXX) Started as Market Weight at Thomas Weisel.
- OSI Pharmaceuticals (NASDAQ: OSIP) Started as Overweight at Thomas Weisel.
- Zimmer (NYSE: ZMH) Downgraded to Market Weight from Overweight at Thomas Weisel.
Jon C. Ogg
June 27, 2008
JPMorgan Issues Coverage on Big Pharma Sector (BMY, LLY, PFE, WYE, MRK, SGP)
JPMorgan has come out with a relatively lackluster coverage in the Big Pharma sector, although not all calls are cautious.
Bristol-Myers Squibb (NYSE: BMY), Eli Lilly & Co. (NYSE: LLY), Pfizer Inc. (NYSE: PFE), and Wyeth (NYSE: WYE) were all started in new coverage with “Neutral” ratings.
Merck (NYSE: MRK) and Schering-Plough (NYSE: SGP) were started as “Overweight” in new coverage this morning.
Jon Ogg
June 25, 2008
Is Lilly’s Loss Really Others’ Gain? (LLY, PFE, BMY, SNE)
Eli Lilly & Co. (NYSE: LLY) is following the lead of Pfizer…. in need of a new breed of drugs, and with shares on the 52-week low list and on a multi-year low list.
The FDA has pushed back a decision regarding its anti-clotting blood thinner with its partner Daiichi Sankyo in Japan. Prasugrel is called EFFIENT and the drug had original been fast tracked at the FDA. But there are issues over excessive bleeding from the blood thinner, which means too much efficacy. While part of the problem may stem from the raw amount of data for the delay, you have to wonder if there will be some dosing issues with such large amounts of bleeding. We now won’t know until late September for the next potential FDA decision.
Bristol-Myers Squibb Co. (NYSE: BMY) is up 2% at $20.10 late in the day and Sanofi-Aventis (NYSE: SNY) is up 1.7% at $32.75 as this puts off that much more time that Plavix will be the number one blood thinner on the market.
So far we have seen over 19,500 of the JUL08 $50 CALLS and over 25,400 of the JUL08 $45 PUTS in Lilly trade hands today.
If you want to know the size of the market up for grabs, we noted before that Bristol-Myers saw some $3.4 Billion in sales of Plavix in the first 9-months of 2007 alone.
Jon Ogg
June 24, 2008
Kosan Acquired For Huge Premium (KOSN, BMY)
Bristol-Myers Squibb (NYSE: BMY) has just announced a definitive merger pact where it will acquire Kosan Biosciences Inc. (NASDAQ: KOSN). Bristol-Myers Squibb will pay $5.50 per share in cash for each share of Kosan. The biotech’s stock was only at $1.65 yesterday and its 52-week trading range is $1.28 to $6.49.
This will equate to a purchase price of approximately $190 million after deducting Kosan’s projected net cash balance at June 30, 2008. The deal has also been unanimously approved by the boards of directors of both Bristol-Myers and Kosan.
The acquisition of Kosan will enhance Bristol-Myers Squibb’s pipeline will get to enhance its pipeline with compounds in two important classes of anticancer agents, called novel Hsp90 (heat shock protein 90) inhibitors and epothilones.
The company believes this will result in new treatment options for patients as another important milestone in becoming a next-generation BioPharma leader. Kosan evolved from a research platform to a development company and this should offer a timely opportunity to place its clinical programs in the hands of a much larger company to bring innovative cancer treatment options to patients.
Epothilones are microtubule stabilizers with multiple therapeutic applications in various cancers and potentially in neurodegenerative diseases.
The Hsp90 program includes a Phase III compound for the treatment of patients with multiple myeloma, which is still an unmet need.
Kosan has agreed to a provision not to solicit any competing offers for the company. Both companies also announced that they have entered into a separate license agreement where Kosan granted Bristol-Myers Squibb an exclusive worldwide license to Kosan’s epothilone compounds and related intellectual property. Kosan will assign to Bristol-Myers Squibb its epothilone investigational new drug applications for an initial payment of $25 million and is entitled to milestone payments in connection with the development of epothilone product candidates and royalty payments on net sales of such products. Credit Suisse Securities is serving as financial advisor to Bristol-Myers Squibb in this acquisition, and Lazard Freres & Co. LLC is the financial advisor to Kosan.
Jon Ogg
May 29, 2008