Why Onyx Pharma breast cancer data took the Street by surprise (ONXX, GSK, DNA)
Onyx Pharmaceuticals Inc. (NASDAQ: ONXX) and partner Bayer Healthcare announced Wednesday an unexpected Phase II trial result for Nexavar in combination with chemotherapy for advanced breast cancer patients. More trials are likely, but the seemingly new opportunity in the very large breast cancer market is captivating the Street.
The company’s randomized Phase II trial of Nexavar in combination with chemotherapy met its primary endpoint of statistically significant progression-free survival extension, as compared to a placebo. The company expects to offer complete data from the study at a yet-to-be-determined scientific meeting.
More trials are likely, as only 299 patients were in the Phase II trial. Another larger trial will likely have to be organized. Also, the extension of progression-free survival was about four months; scientists and analysts may want to see better efficacy than that in a Phase III.
Existing markets for Nexavar are in liver and kidney cancer. It was known that Onyx was looking at Nexavar for a potential treatment for patients with breast cancer, as well as melanoma. But analysts were not expecting the Phase II trial results in breast cancer so soon.
The reason the stock is up roughly 25 percent in early trading is that progression-free survival is one of the keys to getting a cancer drug on the market. And breast cancer is the No. 1 cancer in women, with an expected 192,370 cases this year, according to the National Cancer Institute. It is second in total number of cancer cases only to prostate cancer in men.
Breast cancer may represent a way for Onyx to diversify, especially since new competitors may be coming in the liver cancer market. GlaxoSmithKline (NYSE: GSK), in particular, poses a potential market share threat with its candidate pazopanib.
There are many existing breast cancer drugs, with the leader being Genentech Inc.’s (NYSE: DNA) Herceptin. It blocks chemical signals that can stimulate breast cancer growth. Expected sales are $4.4 billion in 2009.
But Herceptin, like virtually all drugs in the class, does have side effects. Flu-like symptoms are common in 40 percent of patients who take it. And some patients have had lung problems, as well as a drop in heart function.
In cancers that Nexavar is approved to treat, a rare but serious effect reported in studies was heart problems and heart attacks.
In addition to how well it works, the safety data in late-stage trials may be important to potential Nexavar adoption in breast cancer. Even without outstanding efficacy, it may become an option for patients that are not good candidates for existing drugs.– Mike Tarsala
White House signals suport for biosimilars (NVS, AZN, AMGN, DNA, GENZ, GILD, CELG)
The Obama Administration in a letter released Thursday recommended that seven years is enough time to protect brand-name biotech drugs from cheaper generic competition, roughly half the time sought by industry lobbyists.
“Innovation is driven by appropriate competition, and the administration’s policy will spur that competition,” said the letter from Office of Management and Budget Director Peter Orszag and Nancy-Ann DeParle, director of the Office of Health Reform.
Making generic biotech drugs, called biosimilars, available to the masses is part of the Obama Administration’s strategy to lower the price of the prescription drugs, many of which can cost in excess of $20,000 a year per patient.
A shorter time of market exclusivity for brand-name drugs may be detrimental to some biotech companies. Brand-name biotech drug makers such as Amgen Inc. (Nasdaq: AMGN), Genentech Inc. (NYSE: DNA) and Genzyme Corp (Nasdaq: GENZ), Gilead Sciences Inc. (Nasdaq: GILD) and Celgene Corp. (Nasdaq: CELG) are fighting against biosimilars to protect exclusivity for their products.
The Biotechnology Industry Organization, which represents brand-name companies, “is extremely concerned” that seven years is not enough time, and may limit product development.
Yet it could be beneficial to generic drugmakers such as Novartis AG (NYSE: NVS), as well as drugmaker AstraZeneca plc (NYSE: AZN), which recently began targeting the biosimilars market.
See related story on biosimilars.
Genetech Merger Price Looks Locked (DNA)
It wass doubtful that Genentech Inc. (NYSE: DNA) would be able to fetch more than the agreed-to buyout price of $95.00, but certain legal developments probably just took the last hopes and put them in the trash. We figured the chance for a higher price was low. But, as always, there are some who want more even after all parties have agreed on terms. FULL DETAILS are available at 24/7 Wall St.
JON C. OGG
Genetech Re-Bid Puts Biotech ETF Weightings At Risk (DNA, BBH, BHH, AMGN, GILD)
There is a hidden twist in the increased merger tender offer price for Genentech Inc. (NYSE: DNA). That twist comes into play in the oldest ETF in the biotech sector. The Biotech HOLDRS (AMEX: BBH) has about 15 biotech stocks in it. This ETF, unlike others, may have a significant change in the components if the Genentech merger goes through.
If you go confirm the data at HOLDRS.COM, you will see that Genentech represents about 48% of the entire current weighting of this ETF. That is about to significantly change if this merger goes through. What is interesting is that HOLDRs DO NOT RECONSTITUTE. We think they can reconstitute upon a vote, but by and large these were created to hold baskets of stocks that can actually be collected in the form of the underlying shares and there is a “let it ride” history there. If you do not believe it, then look up the weightings of Biotech HOLDRS (AMEX: BHH) on the HOLDRS.COM site.
Shareholders also receive annual reports and proxy materials of each company which is inside the ETF. Holders of HOLDRS can also ONLY buy these in 100 share blocks. There are no odd lots and there are no normal lots plus odd lots.
The weighting of this will make the Biotech HOLDRs be called the “Genentech ETF” today. The next two largest constituents are Amgen Inc. (NASDAQ: AMGN) with a 18.4% weighting and Gilead Sciences Inc. (NASDAQ: GILD) with a 17.3% weighting. If Genentech’s buyout occurs, this particular ETF is going to see a monster change in its weightings.
JON C. OGG
Genentech Gets Higher Bid, Is More Still Needed? (DNA)
It appears that Roche has finally capitulated in its tender offer to win the acquisition of Genentech Inc. (NYSE: DNA). The $86.50 controversial offer is now a $93.00 offer. As of March 5, 2009, Roche said that only about 500,000 shares have been tendered in favor of the offer. Many still feel that Genentech is worth over $100 per share. We’ll see if this secures it.
Genentech shares are now trading up 10% at $89.90 on the news. FULL STORY at 24/7 Wall St.
Jon C. Ogg
Key Biotechs of Interest (DNDN, DNA, GENZ, PDLI)
Dendreon Corp. (NASDAQ: DNDN) has seen some unusual trading volume this morning when you consider that it has been putting in 52-week lows. There was a steady flow of buying this morning considering that it looked as though it was being forgotten about. The stock is up over 5% on pre-market trading. It was noted in TheStreet.com briefly but there is also talk about its FDA conversations that may be putting in a bid on the shares.
Genentech, Inc. (NYSE: DNA) is up over 1% at $82.60 and is trying to catch more of a bid this morning on the heels of yesterday’s meeting to woo shareholders away from tendering shares to Roche. Genentech is still trying to hold out for more money here. Genentech traded as high as $85.40 briefly on Monday.
Genzyme (NASDAQ: GENZ) is trading down almost 6% at $53.20 on an FDA delay action; FDA has said it needs additional data and conditions on the Lumizyme approval for the treatment of Pompe disease. The good news here is that the initial reaction had this stock down as much as 11% on the news last night.
PDL BioPharma, Inc. (Nasdaq: PDLI) was up 7% pre-market on very thin volume, but shares had been up 10% last night. The oncology and immunology biotech posted $0.26 EPS vs. $0.08 estimates; Revenues were $68.7 vs. $59.8 million estimates. It also plans to offer two $0.50 dividends to holders.
JON C. OGG
MARCH 3, 2009 (8:40 AM EST)
Genentech Still Wants More From Roche (DNA)
This may or may not be a surprise to the investment community. Genentech, Inc. (NYSE:DNA) has announced that its special committee of the company’s Board of Directors decided to unanimously recommended that shareholders reject the Roche tender offer.
The company said that the cash tender offer of $86.50 per share is inadequate and not in the best interests of stockholders. The special committee cited a thorough review with its independent financial and legal advisors.
Read more
Can Merck Defeat Biotech Leaders? (MRK, RDY, DNA, GILD, GENZ, CELG, AMGN, BIIB)
This morning was an interesting bit of pre-release data on Merck & Co. Inc. where the company gave its full financial forecasts the same as last week and where the company laid out its full pipeline and R&D plans for 2009 and into the next decade. There are a few key observations here and you can see the full summary to the company’s pipleline. The first observation is that it may be a wonder how Merck thinks it can actually be a major competitor to biotech companies. We have long argued that biotech companies are just future drug and pharmaceutical companies. But it is very difficult to argue that entrenched drug companies can become biotech leaders in the same manner.
Merck is launching Merck BioVentures, a new division to make both new, follow-on, or generic biotech drugs. Some generic biologic drugs have been in Europe but have for the most part absent to outlawed in the U.S. Generally speaking, these have longer patent exclusivity and in many cases are allowed to exist without competition.
This issue is not just one of humane aspects. It also has political aspects that could come full circle in the coming months. With a new administration and a new regime, it is unknown just how much competition these biotech operators will have. They have well over a decade of established case law in their favor, so any changes may require legal maneuvering on top of just the regular lobbying efforts.
But, back to Merck. Its BioVentures unit is supposed to utilize new science to speed up drug development. Merck acquired a technology called glycoengineering to more rapidly create antibodies and proteins for drugs in yeast rather than the traditional mammal cells used by many other companies.
What is interesting is that Merck said the unit will build a commercial factory by 2012 and will invest some $1.5 billion in research by 2015. The unit’s goal is to launch six or more generic biotech drugs between 2012 through 2017. The company’s dates are somewhat targeted at patent expiration dates for several big biotech drugs.
Merck has a market cap of roughly $56 billion and is expected to have somewhere around $24 billion in 2009 sales according to research estimates. Below are the major biotech players whose market capitalization rates are greater than $10 billion. We have also included the Thomson Reuters (First Call) estimate (rounded down) for the next fiscal year (2009). Here is that list:
COMPANY (TICKER) Mkt Cap 2009R~
Genentech (NYSE: DNA) $81.6 B $14.4 B
Amgen Inc. (NASDAQ: AMGN) $61.6 B $15.4 B
Gilead Sciences, Inc. (NASDAQ: GILD) $43.0 B $6.3 B
Celgene Corporation (NASDAQ: CELG) $24.1 B $2.9 B
Genzyme Corporation (NASDAQ: GENZ) $17.3 B $5.2 B
Biogen Idec Inc (NASDAQ: BIIB) $14.1 B $4.4 B
Merck may be able to pull a rabbit out of the hat at the magic show. And it might not. The company is slashing and burning right now as it gears for a slower and more competitive 2009. Dr. Reddys (NYSE: RDY) has been able to make some biotech copies and many AIDS drug patents have just been outright stolen or broken in some countries. This is an argument over “patent law” and “intellectual property” versus what is humane or what many consider as a God-given right under the humanitarian front. Regardless of any personal positions in that argument, there are many who argue that generic biotech drugs will by and large be failures and far less effective than their base-biotech.
Wall Street gave it a thumbs-down vote. Shares closed down about 2% today with a weak market. Having big blockbuster plans is one thing, but he time frame seems to be a reach based upon the cuts it has been making. This sales pitch also requires a bit more meat to it.
If Merck wants to be the biotech leapfrog shop, it might have to go do it the old fashioned way. It might have to acquire companies. It has before.
Jon C. Ogg
December 9, 2008
What Lies Ahead in Biotech Mergers & Buyouts?
We have been digging around and around for days and weeks in the biotech sector. Our goal is to determine which merger candidates can occur and to gather an opinion of the M&A outlook for 2009. This is not going to be easy because of the bear market and because financing is now elusive.
The Genentech (NYSE: DNA) buyout by Roche has long been under question. First the speculation was that it would have to come at an increased buyout price above the $79 offer. Now there are just questions about the merger in its entirety. because of the Dollar strength, the cost for Roche is now much higher in local currency terms.
Mike Huckman of CNBC just today gave a report showing many mergers and noting that companies like Schering Plough (NYSE: SGP) has called biotech cheap and compelling.
Huckman also outlined the Dendreon (NASDAQ: DNDN) event for 2009, but without a prediction on which way PROVENGE’s binary event would work out. We also believe that Dendreon will be acquired IF the FDA allows PROVENGE to go on the market.
The M&A front has totally skipped and forgotten Amylin Pharmaceuticals (NASDAQ: AMLN). 2009 is likely going to be the make or break year.
Whether you like Obama and the new administration or not, one key sector which has been getting speculative investments after a near-decade hiatus is stem cell stocks. These are very speculative, even for biotech stocks. But they also hold the potential answers to many regenerative cures against diseases such as Alzheimer’s and more.
The one issue that will affect mergers in 2009 is an easy one to overlook because it is not scientific at all. CURRENCIES…….. If the US Dollar stays strong, these smaller $500 million to $2 billion biotech companies no longer are dirt cheap to Japanese or European acquirers.
Jon C. Ogg
December 1, 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
