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.
Disappointment & Delay in Diabetes War (MNKD, LLY, NVO, PFE)
MannKind Corp. (NASDAQ: MNKD) is getting to learn more and more about disappointment, and the rumors and speculation that MannKind would not get its Afresa reviewed on time by a January 16 cut-off date turned out to be true. Afresa is designed to deliver a fast acting inhalable insulin that is supposed to be more effective than the injected products and it would put the company in competition for insulin with Eli Lilly & Co (NYSE: LLY) and Novo Nordisk (NYSE: NVO) for their insulin delivery. Pfizer Inc. (NYSE: PFE) discontinued its Exubera as an inhalable insulin, which is part of the reason for such a negative bias around MannKind’s Afresa.
MannKind’s Alfred Mann noted that the FDA has not yet completed its inspection of the insulin manufacturing facilities of N.V. Organon, a third-party supplier to MannKind; and he also noted that (to its knowledge) all other FDA inspections of third-party suppliers and clinical trial sites are complete and that there are no pending answers to any FDA questions or other deliverables due on MannKind’s part. And by the way, the FDA has accepted the name to now be AFREZZA as the trade name versus AFRESA before. MannKind has not yet been informed about the expected timing for the agency’s final determination on the NDA, which will be provided in an Action Letter.
We had hinted at this possible delay and speculation against MannKind during the week when we noted that the diabetes and insulin wars were about to heat up.
There was a big wave of selling at the end of the day. There have been rumors and reports that the FDA may not meet its deadline, so we won’t blatantly say that this was leaked out first. Still, the drop-off was at least something to be noticed, and you can see below the very active options trading and in the open interest for the JAN-2010 and FEB-2010 CALLS and PUTS.
JAN-2010 CALLS & PUTS
CALL$ Volume OpInt
7.50 5,370 24,648
10.00 1,971 23,608
PUT$ Volume OpInt
5.00 1,195 8,329
7.50 741 8,677
FEB-2010 CALLS & PUTS:
CALL$ Volume OpInt
5.00 2,961 8,845
7.50 1,960 18,475
10.00 8,307 38,668
12.50 771 17,132
15.00 1,035 11,626
PUT$ Volume OpInt
5.00 4,659 15,259
7.50 4,192 14,017
10.00 2,163 12,100
JON C. OGG
Diabetes & Insulin War About To Heat Up (MNKD, LLY, NVO, PFE, BMY, AZN, GERN)
MannKind Corp. (NASDAQ: MNKD) has not gone without its critics over the company’s inhaled insulin. The company has an upcoming review that will be a make or break event for the company. The company is about to face a potential do or die test next week as the FDA is set to decide the fate of the company’s inhaled insulin. MannKind’s Afresa is designed to deliver a fast acting insulin that is supposed to be more effective than the injected products. This would put the company in competition for insulin with Eli Lilly & Co (NYSE: LLY) and Novo Nordisk (NYSE: NVO) for their insulin delivery.
One of the biggest hurdles MannKind faces is that inhaled insulin products have been tried and tested by others, and they have failed or have fallen far short of the expectations set ahead of time. Pfizer Inc. (NYSE: PFE) discontinued its Exubera as an inhalable insulin.
- Lexicon Pharmacueticals (NASDAQ: LXRX) had a favorable Phase I reaction late last year in type 2 diabetes mellitus.
- These companies are all also fighting for their part of that next $170 billion market opportunity.
- Bristol-Myers Squibb (NYSE: BMY) and AstraZeneca (NYSE: AZN) already received FDA approval for Onglyza as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes.
- Geron Corporation (NASDAQ: GERN) is still a ways off for the stem cell angle here compared to its other stem cell endeavors, although you never know when stem cell companies will make periodic announcements.
The FDA is set to make a ruling on Afresa’s approval by January 16, which means that the JAN-2010 CALL options may or may not expire before such ruling is made. The FDA can always delay, and some reports hint at a later date now.
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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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Diabetes Bet Picks Up in MannKind (MNKD)
MannKind Corp. (NASDAQ: MNKD) does not look like much is going on if you just look at the stock today. But there is a key trade around the January PDUFA review date for its Afresa. We were just given a key heads-up by OptionsHawk.com this morning:
Joe at OptionsHawk.com noted to us just a moment ago: “seeing a very bullish purchase of 7,000 May $7.50 calls at the $2.50 offer with a $2/$2.50 spread. Implied volatility is up 6.7% to 127%. After selling off in early October shares formed a rounded bottom around $5. Shares could possibly be a takeover target, and with Merck recently saying it is looking to expand in diabetes, it could be a potential buyer. MannKind currently lacks a revenue stream but has a leading inhaled insulin product in Afresa for type 1 and 2 diabetes. The Afresa PDUFA date is scheduled for January 16th 2010. “
As always, options bets can be for many reasons and may seem either an exaggeration or something more counter-intuitive than anything solid. But these are all-in bets where traders and investors are putting up what usually amounts to a 100% risk-based capital transaction.
JON C. OGG
NOVEMBER 11, 2009
MannKind Delay Causing Pain (MNKD)
MannKind Corp. (NASDAQ: MNKD) is very active with downside trading this morning. There has not been an official news release but the SEC Filings discloses a delay in the marketing partnership of AFRESA, its ultra rapid-acting insulin product candidate.
The company issued an SEC filing this morning stating:
- We had previously disclosed that we had set a goal of entering a marketing partnership for AFRESA, our ultra rapid-acting insulin product candidate, before the end of 2009, with an internal objective of the end of the third quarter. We made substantial progress toward a definitive agreement with a lead potential partner; however, as the discussions progressed, we came to believe that it would be more productive to complete a partnership after we have received a response from the United States Food and Drug Administration, or FDA, regarding our new drug application for AFRESA. We believe that we and our potential partners will be better able to address appropriate deal terms and structure once the label for AFRESA is clarified. Since we do not expect a response from the FDA before January 2010, we believe that we will not conclude a deal before the end of 2009. We continue to believe that AFRESA represents a significant commercial opportunity.
In the first ten minutes of trading alone, we have seen 1.5 million shares trade hands and the stock is down even worse than at the open. Shares were down by 16% at $7.60 right after the open, but now shares are down a sharp 25% at $6.78 on about 1.6 million shares. Average volume here is 985,000 or so shares per day and the 52-week trading range is $2.00 to $12.30.
JON C. OGG
OCTOBER 6, 2009
Diabetes Drug War Heats Up (NVO, AMLN, LLY, MNKD, PFE, SPEX, VVUS, GNBT, BMY, AZN, ARNA, GERN, STEM, OREX, HDIX, PODD)
Over the last couple of weeks, there has been quite a bit of new data in the drug war in the fight against diabetes. New studies have been updated, earnings projections have been made, FDA dates have been telegraphed and more. While these are still far short of ultimate cures, the war against diabetes may have many new or improved treatments out sooner rather than later. We originally discussed one or two of the key upcoming treatments pending for the eight major diseases and conditions as “the next $170 billion opportunity” and this is a much deeper dig into that broad initiation. We have included many of the recent developments in the potential treatments for obesity as well, considering that Type II diabetes and obesity are frequently conditions tied directly to each other.
According to the Journal of Health Affairs, the figure on obesity for Americans is a whopping $147 billion per year in total medical costs. This comes to 10% of all healthcare spending. The figure from the U.S. Centers for Disease Control was some $116 billion spent domestically on treating diabetes in 2007. As this is a lengthy bit, we have not included some of the other treatments that have been in use or that were recently flagged because of reports of higher chances of cancer rates associated by the long-term use of these.
FDA & IMMEDIATE ACTION
There is a new diabetes hopeful that is supposed to be coming sooner rather than later. Novo Nordisk (NYSE: NVO) reported a 21% gain in earnings in the last week and said that it expects the FDA to make a decision on its next-generation diabetes drug Victoza (liraglutide) in a matter of weeks. The company’s CFO and CEO both indicated that the Danish company does expects a positive response from the FDA and we heard a August to September expectation. Novo Nordisk has already launched Victoza in England, Germany and Denmark last month and expects to release it in other European Union countries throughout 2009 and into 2010. The benefit is that this one doesn’t risk pushing blood glucose levels to counts which are dangerously low and it also helps users lose weight. Novo Nordisk said it has priced Victoza competitively with Byetta from Amylin Pharmaceutical, Inc. (NASDAQ: AMLN) and Eli Lilly (NYSE: LLY). After the earnings and after shares were still close to 52-week highs, we saw analyst downgrades on Friday for Novo Nordisk by both UBS and by J.P. Morgan.
The drug still expected the next big new release with Blockbuster potential is an inhalable insulin from MannKind Corp. (NASDAQ: MNKD). Afresa is to be its name. Despite past woes of inhalable insulin, MannKind shares were hitting 52-week highs in June and its shares are still up 20% from three months ago. A late-stage study showed that Afresa’s performance was similar to injectable insulin. The company recently sold a 7.4 million shares secondary offering to raise cash for this launch, and its CEO took 1 million shares of the offering. The thought was that MannKind would secure a partner for marketing and development, but the recent stock offering gives it more internal options ahead of what is believed to be a Spring-2010 FDA approval action. Pfizer Inc (NYSE: PFE) has been thought of as a partner as it moved Exubera inhaled-insulin patients to MannKind’s experimental product. The two companies had been partners until Pfizer pulled Exubera from the market in 2007.
There is also a huge opportunity for the once per week dosing. We are not yet convinced that this can be a universal next generation treatment, however this might be fine for many of the lower grade cases if you can refer to any diabetes cases as lower grade. Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), Eli Lilly (NYSE: LLY) and Alkermes Inc. (NASDAQ: ALKS) have had a recent New Drug Application accepted by the FDA for review. Exenatide is an investigational sustained release medication for type 2 diabetes that would be injected once per week and is the active ingredient in BYETTA. We are not alone in this thought, but Amylin is a company which many have thought would be acquired for years now when considering the link of diabetes and obesity.
VIVUS, Inc. (NASDAQ: VVUS) has a substantial shot here with Qnexa, its Type 2 diabetes treatment through weight loss assistance. The stock recently came off on worries of its risk factor language that may have to be disclosed, but it showed a 9.4% weight loss or over 20 pounds observed in patients. The DM-230 study was a 56-week study assessing the impact of Qnexa on glycemic management in 130 obese patients. The 10-site study was comprised of 90 females and 40 males with an average age of 50 who had Type 2 diabetes, and a majority of the patients had been diagnosed with diabetes for more the five years and were taking two or more oral diabetes medications. In the phase II and phase III clinical trials, Qnexa demonstrated glycemic control, significant weight loss, and an improvement in cardiovascular risk factors. VIVUS is also presenting data at a brokerage firm conference this coming Thursday. The company’s market cap is still just under $500 million and its most recent balance sheet had north of $144 million in cash and equivalents with very little long term debt.
Bristol-Myers Squibb (NYSE: BMY) and AstraZeneca (NYSE: AZN) have recently received FDA approval for Onglyza as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes. This Onglyza is a once-daily dipeptidyl peptidase-4 (DPP4) inhibitor that can be used in combination with commonly prescribed anti-diabetic medications or on a standalone basis as a monotherapy to significantly reduce glycosylated hemoglobin levels.
MORE OBESITY CANDIDATES COMING
Several biotechnology companies are working on the next wave of obesity candidates, as noted above in VIVUS’s Qnexa. Arena Pharmaceuticals, Inc. (NASDAQ: ARNA) has Lorcaserin, Orexigen Therapeutics, Inc. (NASDAQ: OREX) has Contrave, and Amylin Pharmaceuticals Inc. (NASDAQ: AMLN) has pramlintide. Orexigen’s Contrave has completed phase III trials and our time line for when the company will file for approval is in early 2010. The company is presenting data this Thursday at the Canaccord Adams Global Growth Conference. VIVUS’s Qnexa is currently in two phase III programs with a new drug application expected around the middle of 2010. Amylin’s pramlintide and metreleptin are currently in phase IIb.
We have the expectation that Arena will have a first-mover advantage with an NDA planned before the end of 2009. Certainly, any delays or advances could change the status of the front-runner category leadership. Arena’s near-term catalyst is the release of the phase III BLOSSOM data out in September 2009, which will be used as part of a supplemental NDA in late 2009 or into 2010. This still leaves a year or more for final FDA action from now. Arena shares surged in late-July after reporting that its obesity results met the three endpoints.
STEM CELLS
Stem Cell therapy offers a huge promise, but so far that looks to be years out and the promise is actually more of a hope for the time being. Geron Corporation (NASDAQ: GERN) is in the research stage of using stem cells in evaluation of Type 1 diabetes. The exact level of this study is not as far as along as some of its cancer and spinal studies, but this is one of the few stem cell companies that have dedicated part of their mission to diabetes. StemCells Inc. (NASDAQ: STEM) also has a Pancreatic Program concentrating its efforts on Type-I diabetes. Its goals are to identify, isolate, and culture pancreatic stem and progenitor cells, and to test their therapeutic potential.
While we at BioHealthInvestor would love to hold hope and promise for stem cells, we would not be hoping for stem cell treatments any time in the near future. While some positive notions have been noted in the stem cell sector, the National Institute of Health noted, “Over the past several years, doctors have attempted to cure diabetes by injecting patients with pancreatic islet cells—the cells of the pancreas that secrete insulin and other hormones. However, the requirement for steroid immunosuppressant therapy to prevent rejection of the cells increases the metabolic demand on insulin-producing cells and eventually they may exhaust their capacity to produce insulin. The deleterious effect of steroids is greater for islet cell transplants than for whole-organ transplants. As a result, less than 8 percent of islet cell transplants performed before last year had been successful.”
BioHealth Companies Keep Raising Cash (MNKD, IDIX, ISPH, ARIA, ONTY, NBY, SOMX, ARNA, OXGN)
The appetite for biotech and emerging pharmaceutical companies to raise cash is almost a never ending line of companies. We have some offerings today and have seen many offerings and filings from companies to offer shares. These are just some of the filings and offerings we have seen.
MannKind Corporation (NASDAQ: MNKD) priced a secondary offering this morning of 7,400,000 shares of its common stock, and while the press release did not say what price the deal came at the syndicate group told us this went out at $7.35 per share. Chairman, CEO, and principal stockholder Alfred E. Mann is purchasing 1,000,000 of these shares from the underwriters, which brought in over $54 million before fees and commissions. MannKind shares are down 9.5% at $7.37. Its 52-week trading range is $2.00 to $9.25.
Idenix Pharmaceuticals Inc. (NASDAQ: IDIX) priced a secondary offering this morning of 7,248,936 shares of common stock at $3.14 per share to clear roughly $22 million before fees and commissions. Its shares are down over 14% at $3.15 today and its 52-week range is $1.86 to $10.10.
Inspire Pharmaceuticals, Inc. (NASDAQ: ISPH) priced a 22.2 million share secondary offering of common stock this morning at a price of $4.50 per share. This raised close to $100 million. Share are down 6% at $4.66 and the 52-week trading range is $1.68 to $5.80.
Ariad Pharmaceuticals Inc. (NASDAQ: ARIA) on Tuesday priced its public offering of 19,000,000 shares of common stock at $1.75 per share; the company said net proceeds after fees and commissions was roughly $30.9 million.
Oncothyreon Inc. (Nasdaq: ONTY) announced on Tuesday that it had obtained commitments from several investors for $15 million in a direct offering. The agreement was to purchase approximately 2.28 million shares of common stock and warrants to purchase approximately 684,000 shares of common stock for gross proceeds of approximately $15.0 million. The company noted that investors agreed to purchase the shares and warrants for $6.5775 per unit with each unit being one share of common stock and a warrant to purchase 0.30 shares of common stock and an exercise price of $6.5775 per share.
NovaBay Pharmaceuticals, Inc. (NYSE: NBY) filed this week with the SEC to offer up to $20,000,000 of any combination of common stock or preferred stock upon conversion of debt securities, common stock upon conversion of preferred stock, or common stock, preferred stock or debt securities upon the exercise of warrants. It market cap is a mere $48 million.
Somaxon Pharmaceuticals, Inc. (NASDAQ: SOMX) filed this week to cover for the resale of up to 10,212,750 shares of common stock (roughly $23 million) from time to time for existing security holders and certain transferees of the selling security holders. Roughly 5.1 million of these shares were issued in a private placement that closed on July 8, 2009; the additional 5.1 million shares are issuable upon a warrant exercise sold in the private placement which expire on July 8, 2016. If sold, none of the proceeds go back to NovaBay.
Arena Pharmaceuticals, Inc. (NASDAQ: ARNA) filed on Monday to allow the resale from time to time of up to 28,000,000 shares of common stock by the selling stockholders from a July private placement. We will not receive any of the proceeds from the sale of these shares. If sold, none of the proceeds go back to Arena.
OXiGENE, INC. (NASDAQ: OXGN) filed this week for the resale of up to 10,000,000 shares of common stock from time to time by Symphony ViDA Holdings LLC. This was via an amendment dated as of July 2, 2009. If sold, none of the proceeds go back to OXiGENE.
JON C. OGG
AUGGUST 5, 2009
Many Laggards in Biotech Stocks Today (ACHN, CRXL, MNKD, SQNM, CYTR, CYTX, INGN, ATHX, MITI, GTOP)
There have been many mystery movers today in biomed land and some are news carry-on moves while others are head-scratchers. Out of the many names we follow in biotech, here are some losers as of 1:50 PM EST that stand out compared to the normal days:
Achillion Pharmaceuticals, Inc. (ACHN) $2.45 Down $0.30 Down 10.91%
Additional ‘positive’ top-line phase 2 data for Elvucitabine
Crucell NV (CRXL) $18.13 Down $0.64 Down 3.41%
No fresh news
MannKind Corp. (MNKD) $2.7999 Down $0.1801 Down 6.04%
No fresh news besides tied to Novo’s news yesterday.
Sequenom Inc. (SQNM) $12.17 Down $0.66 Down 5.14%
Sued yesterday by Beckman and partner Orchid.
CytRx Corporation (CYTR) $0.7733 Down $0.0567 Down 6.83%
Drop on second day after Lou Gehrig’s drug delay.
Cytori Therapeutics, Inc. (CYTX) $7.94 $Down 0.62 Down 7.24%
No fresh news today, post patent selling after big 2-day move.
Introgen Therapeutics Inc. (INGN) $1.68 Down $0.09 Down 5.08%
No news, thin volume
Athersys, Inc. (ATHX) $2.80 Down$ 0.29 Down 9.39%
No news yet out of diabetes and obesity conference, ahead of data but super thin volume
Micromet, Inc. (MITI) $2.42 Down $0.20 Down 7.63%
No news, but presented non-Hodgkins data last week.
Genitope Corp. (GTOP) $0.075 Down $0.013 Down 14.29%
Received NASDAQ letter on listing, but very low stock price so no surprise.
Jon Ogg
June 10, 2008
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