High Hopes on Ariad (ARIA, MRK)
Ariad Pharmaceuticals Inc. (NASDAQ: ARIA) is seeing elevated trading today after a presentation and ahead of earnings. The difference here is that Ariad’s increased trading is in both the stock and in the bonds.
Joe Kunkle of OptionsHawk.com noted, “implied volatility is 10% higher to 87.8% as shares gain 2.7%, 4,140 calls trading, 4X average, with buyers of April $3 and May $3.50 calls. Shares are at 52 week highs and breaking a long term downtrend, trading as high as $7.50 in 2005. The Company is expected to announce earnings on March 16th and presented at the Cowen Healthcare Conf. This morning. Ariad’s leukemia drug recently received orphan drug status adn is expected to announce Phase 3 results for its soft tissue and bone sarcoma drug, ridaforolimus. Ariad has a $1B+ collaboration agreement with Merck & Co. (NYSE: MRK), potentially making it a takeover target.” (NOON EST)
Ariad’s shares are higher by 4.4% at $3.09 on over 3 million shares with more than an hour to the close. Average volume is only about 1.7 million shares per day and the 52-week trading range is $1.15 to $3.48. Today’s added gain may be as there was another biotech merger as well.
24/7 Wall St.
Contribution from optionshawk.com
More Drug and BioHealth Dividends (MRX, WCRX, AMGN, MRK, PFE, PPH, BBH)
Medicis (NYSE: MRX), a specialty pharmaceutical company in treatments of dermatological and aesthetic conditions, has the talk going again about dividends in the drug and biotech sector. The company declared a quarter-end cash quarterly dividend of $0.06 payable on April 30, 2010 for holders of record at the close of business on April 1, 2010. This dividend hike is a 50% increase versus the previous $0.04 dividend and the last hike was in March 2008. But what is more important than Medicis is that this brings up the focus on dividends in both the pharma sector and potentially in the biotech sector.
Many investors have seen scores of dividend hikes since the end of December, which is the yardstick for a vote of confidence issued by a company. We have noted two more dividend candidates which are not currently paying dividends:
- Amgen Inc. (NASDAQ: AMGN) as the world’s largest independent biotech stock;
- Warner Chilcott plc (NASDAQ: WCRX) as perhaps the newest and best up and comer in the pharmaceuticals sector.
Neither pay a dividend. Not yet. It would seem that the most likely candidate of the two would be Warner Chilcott because companies like Merck & Co. (NYSE: MRK) and Pfizer Inc. (NYSE: PFE) do pay dividends with roughly a 4% yield. Here is a full dividend analysis we gave earlier on the sector.
So far Amgen is opting for share buybacks right now and it has not indicated that it will pay a dividend.
The two key ETF products we use to follow the biotech/drug sector are the Pharmaceutical HOLDRs (NYSE: PPM) and the Biotech HOLDRs (NYSE: BBH). Both have irregular dividends and he biotech is far more sporadic than the pharma HOLDR.
More dividends coming!
JON C. OGG
Winning from Boosting Good Cholesterol (RVXCF, RVX, PFE, AZN, MRK)
BioHealthInvestor usually sticks to US companies or at least sticks to ADRs for investors. But sometimes there is a much larger bit of data either north of the border or in Europe. There is a company called Resverlogix Corp. which trades in Canada under the ticker ‘RVX’ and the stock also trades in the US on the Pink Sheets under the ticker ‘RVXCF.’ The stock is soaring today after Bloomberg gave a very positive article highlighting the merits of the company’s RVX-208. This potential drug candidate is targeting atherosclerosis in acute coronary syndrome patients. The target is to raise HDL levels to effectively reverse arterial plaque buildup. The company noted that there are approximately 350 million patients that require treatment for atherosclerosis.
We wanted to take a look at the potential for this drug candidate outside of what the article has to offer. Resverlogix is a clinical stage Canadian company which currently has no real products. The company has been public since late 2004. It has traded well under $5.00 and at ome point briefly rose to north of $20 per share in 2007.
Late in February, the company officially activated the first site for the ASSURE 1 trial and commenced enrollment of patients for dosing of RVX-208. This is the second Resverlogix Phase 2 clinical trial, led by Cleveland Clinic, and it will examine and evaluate this oral small molecule therapy for the treatment of atherosclerosis in patients with acute coronary syndrome.
As per the trial data:
This IVUS study is comprised of 15-20 US sites will dose approximately 120 ACS patients on standard of care therapy and examine lipid effects by RVX-208 compared to placebo control. In half of the patients a change in atherosclerosis will be assessed, i.e. change in plaque volume and plaque composition. The primary objective of this study is to determine the 3 month effect of RVX-208 on change in the plasma levels of ApoA-l in patients with a recent ACS event who require coronary angiography versus placebo. The secondary objectives for this study include assessing the safety and tolerability of the drug through evaluation of adverse events as well as to evaluate the effect of RVX-208 on other lipid parameters.
Here is the catch, and the ultimate factor which makes this a potential Holy Grail… Most cholesterol medications today are used as preventative medicine rather than just for treating those who have already had a stroke or heart attack or those who already have severe blockage. Statins and other lipid lowering agents account for billions and billions of dollars per year in revenues for Big Pharma. If this drug is ultimately approved for preventative measures the sky is the limit.
AstraZeneca (NYSE: AZN) has Crestor; sales of Crestor are forecast to reach $6.5 billion in 2013, up from $4.5 billion in 2009, per Thomson Reuters.
Pfizer Inc. (NYSE: PFE) has Lipitor; Lipitor brought in approximately $11.4 billion in revenue in 2009.
Merck & Co. (NYSE: MRK) has Vytorin; Annual worldwide sales for 2009 were $2.2 billion for ZETIA and $2.1 billion for VYTORIN.
The statin market is also coming under some generic pressure.
There are risks here. Many have tried this HDL raising tactic and targeting plaque. None of the existing drugs have effectively proven to be the ultimate plaque-eater. Pfizer has so far spent billions. This is a hopeful treatment but it is going to be some time before the results of a larger study are known and it will be far longer before the side effects are known.
Stay tuned.
JON C. OGG
Dividends Coming In Biotech & Pharma? (WCRX, AMGN, MRK, PFE, PPH, BBH)
Many investors have been focusing on the number of dividend raises we have so far seen since the end of December. It is the perfect vote of confidence issued by a company, much more so than a share buyback plan. The dividend means “we will be able to this rate over and over” for investors. There have been very few big moves in the BioHealth arena. We have two very interesting dividend candidates. Amgen Inc. (NASDAQ: AMGN) as the world’s largest independent biotech stock, and Warner Chilcott plc (NASDAQ: WCRX) as perhaps the newest and best up and comer in the pharmaceuticals sector.
Neither pay a dividend. Not yet. It would seem that the most likely candidate of the two would be Warner Chilcott because companies like Merck & Co. (NYSE: MRK) and Pfizer Inc. (NYSE: PFE) do pay dividends with roughly a 4% yield. Amgen is opting for share buybacks right now and its peers are not known for being thge greatest of the world’s dividend candidates. We wanted to take a look at each in a deep review of the basics that allow for dividends.
There is a precedent here. The two key ETF products we have used to follow the sector are in the HOLDRs family, which are the oldest of the drug and biotech ETF products. And they are liquid, mostly and usually. The Pharmaceutical HOLDRs (NYSE: PPM) pays dividends, but these are irregular and are dependent upon which shares are making quarterly distributions through each quarter. Then there is the Biotech HOLDRs (NYSE: BBH), which are currently less liquid than what we have seen in the past. Dividends are more sporadic here, but they are present.
WARNER CHILCOTT
Warner Chilcott plc (NASDAQ: WCRX) seems to quietly and rapidly emerging as one of the greatest drug companies on the scene in years. Many pharma and biohealth investors still do not even really know the company. If all goes well and according to plan, the company may be one of the best value stocks out there in the land of pharma and biotech. The company pays no dividend, but after we get a couple of more quarterly adjusted balance sheets and earnings reports behind us it seems as though the company will want to join Merck & Co. (NYSE: MRK) and Pfizer Inc. (NYSE: PFE) with a dividend to help further get on the map.
The stock has done very well since it completed the acquisition of the global branded pharmaceutical business from The Procter & Gamble Company (NYSE: PG) on October 30, 2009. Its most recent guidance is as follows for 2010: Adjusted total revenue for 2010 after the impact of its distribution agreement with LEO Pharma A/S in range of $2.9 to $2.95 billion; Adjusted gross margin of 88% to 89%; Total SG&A expenses in the range of $1.2 to $1.25 billion; total R&D in the range of $180 to $200 million; net income of $190 to $215 million; adjusted cash net income in the range of $842 to $867 million; and using 255 million ordinary shares adjusted cash net income per share of $3.30 to $3.40 per share for the full year 2010.
We would think it is safe to assume that the company wants to get a couple more quarters to pass before a dividend is launched, but barring any other mergers we would expect the company to get on the map with a dividend. With shares close to $25.00, a 4% yield would be about $1.00 per year of that $3.30 to $3.40 per share in 2010 earnings. Thomson Reuters has estimates of $3.37 EPS and that would give a forward P/E ratio expected of less than 8-times earnings. An estimated guess is that the dividend will start at about $0.60 to $0.75 per year, for now.
AMGEN INC.
Amgen Inc. (NASDAQ: AMGN) is the world’s biggest independent biotech by market cap. Yet the stock has been stodgy enough and its anemia franchise has been under fire enough that Amgen almost feels like a good old-fashioned Big Pharma stock now. It seems like an unlikely dividend stock on the surface and not just because it wants to be thought of as a biotech that does not pay dividends. So far, the company has chosen to conduct share buybacks to deploy cash and it is not in a hurry to begin paying a dividend.
In the investor Q&A of its investor relations site, the phase is there: “Amgen does not pay a dividend on stock, and does not foresee doing so in the immediate future.” There is an issue though and that is that the expected earnings growth leaves more and more room for Amgen to begin rewarding its shareholders. It recently announced a $5 billion share buyback, on top of the $1.2 billion remaining at the time still authorized for buybacks. But share buybacks were the shareholder-friendly actions of 2007 to 2009. In the new normal, the dividend may matter more to holders who want to get money back from companies. Amgen trades at a mere 11-times 2010 estimates from Thomson Reuters.
We do not want to say that Amgen has been dead money for five years, but it has been very quiet money. For more than 3 years the stock has had a hard time staying above $60 for very long. And for some time we have noted that Amgen is effectively valued more like a Big Pharma stock than a biotech stock. With $5 billion in cash flow and with a mountain of cash, it can afford a dividend on top of its debt and on top of its buyback plans. Both Merck & Co (NYSE: MRK) and Pfizer Inc. (NYSE: PFE) yield close to 4%, and Amgen could easily afford to pay close to 2% or $1.00 per share for its initial dividend rate.
There are two issues which would keep Amgen from paying a dividend for years. The first is a big acquisition, but the company likely knows that this would likely take its stock lower as we have seen in most buyer situations. Amgen could also embark on a huge debt pay-off in the future. That is also shareholder friendly. But initiating a dividend, and a noticeable one, might be the best effort the company could make.
JON C. OGG
FEBRUARY 11, 2010
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
CEL-SCI Corporation (CVM) Pending Presentation
CEL-SCI Corporation (AMEX:CVM) will present at the 7th Annual Vaccines: All Things Considered Conference. The presenter is Dr.Daniel Zimmerman, Ph.D., Senior Vice President Research and Development
Novartis (NYSE:NVS), Sanofi Pasteur, and Merck (NYSE:MRK) are also expected to attend.
CEL-SCI is up 11% to $1.36 on heavy volume
Douglas A. McIntyre
BioHealth Earnings Floodgates Opening (BSX, BIIB, GILD, ISRG, PFE, DGX, SYK, AMGN, ELN, LLY, GENZ, STJ, BMY, MRK, SGP, ZMH)
Next week is going to be the mother of all earnings reports for the BioHealth community. We have included the key device companies as well in this calendar with the routine top drug and biotech companies. As a reminder, these estimates may change between now and when some of the players report earnings. In the screens for earnings we have the estimates included listed as the Thomson Reuters consensus figures.
MONDAY OCTOBER 19
- Boston Scientific Corporation (NYSE: BSX) $0.14 EPS on $2.04 billion in revenues
TUESDAY OCTOBER 20
- Biogen Idec Inc. (NASDAQ: BIIB) $1.04 EPS on $1.11 billion in revenues
- Gilead Sciences Inc. (NASDAQ: GILD) $0.67 EPS on $1.76 billion in revenues
- Intuitive Surgical, Inc. (NASDAQ: ISRG) $1.46 EPS and $256.44 million in revenues
- Pfizer Inc. (NYSE: PFE) $0.48 EPS and $11.4 billion in revenues
- Quest Diagnostics Inc. (NYSE: DGX) $0.96 EPS and $1.89 billion in revenues
- Stryker Corp. (NYSE: SYK) $0.69 EPS and $$1.62 billion in revenues
WEDNESDAY, OCTOBER 21
- Amgen Inc. (NASDAQ: AMGN) $1.27 EPS and $3.79 billion in revenues
- Elan Corporation, plc (NYSE: ELN) -$0.13 EPS on $285.18 million in revenues
- Eli Lilly & Co. (NYSE: LLY) $1.01 EPS and $5.4 billion in revenues
- Genzyme Corporation (NASDAQ: GENZ) $0.44 EPS and $1.11 billion in revenues
- St. Jude Medical, Inc. (NYSE: STJ) $0.58 EPS and $1.16 billion in revenues
THURSDAY, OCTOBER 22
- Bristol-Myers Squibb (NYSE: BMY) $0.51 EPS and $5.5 billion in revenues
- Merck & Co., Inc. (NYSE: MRK) $0.83 EPS and $6 billion in revenues
- Schering-Plough Corporation (NYSE: SGP) $0.39 EPS and $4.45 billion in revenues
- Zimmer Holdings Inc. (NYSE: ZMH) $0.86 EPS and $953.6 million in revenues
JON C. OGG
OCTOBER 16, 2009
Ligand's Largest Holder BVF Lightens Up Stake (LGND, NRGN, MRK)
LIGAND PHARMACEUTICALS INC. (NASDAQ: LGND) has been one of the small cap low-priced biotech stocks for some time, and it is a fraction of what it once was. This week the company said that it would acquire Neurogen Corporation (NASDAQ: NRGN) for $11 million plus some contingent value rights. But what is interesting is that Ligand’s largest holder, a BVF Partners (BVF Investments and BVF Inc.), trimmed its stake by roughly one-third. The sale of 4,552,550 at $2.57 per share took place on August 24, 2009.
Ligand’s news this week was that it entered into a definitive merger agreement where Ligand will acquire Neurogen, where Neurogen holders would receive an estimated $11 million in Ligand common stock and will be granted Contingent Value Rights under four agreements. The CVR’s entitle Neurogen shareholders to cash payments for the sale or licensing of certain assets and the achievement of a specified clinical milestone. The deal has also been approved by both boards of directors.
Ligand stockholders will gain access to a partnership with Merck (NYSE: MRK) for Vanilloid Receptor Subtype 1 (VR1) Antagonists, additional pipeline assets and drug discovery resources, and approximately $7 million in net cash. Neurogen also has more than $180 million in net operating loss carryforwards. Today’s filing shows that on August 24, 2009, which is roughly when the news came out about the merger, BVF Inc. sold some 4,552,550 at a price of $2.57 for a value of about $11.7 million. If you review the entire day’s trading volume, there were only about 5.8 million shares that traded all day and you have to go to the end of June before you can find a single day where 1 million shares or more traded hands.
Current filings with data as of June 30, 2009 show that WELLINGTON MANAGEMENT COMPANY, LLP is now the largest holder of Ligand with some 15,814,671 coming to a take of 13.99%. The FORM 4 filed with the SEC shows that BVF now holds some 10,617,400 shares of direct/indirect ownership. We have placed a call into BVF to see if further sales are coming or if this was over any specific reasons. BVF sold shares worth back in June worth some $2.4 million as well.
JON C. OGG
August 27, 2009
Interest Growing in ARIAD Cancer Medicine (ARIA, MRK)
In the coming weeks, ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) will have some key drug data that could make or break the perception of the company. There is a mixed opinion on this stock, but it is being well received today after an analyst gave a call that would imply a double in share price. There have been several issues contributing to the interest here. Today’s major interest comes as Oppenheimer’s analyst team gave it an “Outperform” rating with a $4.00 price target.
This is ahead of interim data analysis for Ariad’s Phase III trial for ridaforolimus, its mTOR inhibitor therapeutic indicated for soft tissue and bone cancers. These are aggressive sarcomas and are less common forms of cancer which attack healthy connective tissue.
Oppenheimer believes that this past positive Phase II data and pending Phase III data may lead to an approval late in 2010. The Phase II data showed almost a doubling of survival rates and Merck & Co. (NYSE: MRK) is a partner on this one and details can be found here.
It appears that some believe that ridaforolimus has the ability to become a blockbuster drug, but the number proposed by Oppenheimer was eventually annual sales of about $350 million.
ACCORDING TO BioMedReports.com…. “Based on my analysis of past outcomes from other successful cancer drugs, I am willing to wager that the Phase 3 results will confirm that rida is a safe and effective oral cancer treatment. From all existing data, there is a high probability that rida will obtain FDA approval after initial review. Absent any regulatory delays, rida could be made available for underserved Americans suffering from soft tissue and bone sarcomas by the end of 2010. Fingers crossed.”
Some are not so optimistic. Merriman Curhan Ford issued a SELL rating at the end of July on this one. Also worth note is that the short interest ahead of the data has seen a massive increase from the Mid-July report to the end of July reports. Short sellers had the following short interest based on these settlement dates:
Settlement.. Short Interest
7/31/2009. 4,281,466
7/15/2009. 3,992,899
6/30/2009. 3,480,434
ARIAD does have stock options that trade, but that is nearly of no use because of the $2.00 share price. There is an open interest of over 13,000 contracts for the Jan-2010 $2.50 CALLS. The problem is that these options are thinly traded and at $2.00 a share it already looks and acts like a call option.
It was earlier this month that ARIAD sold shares at $1.75 and raised approximately $35.6 million after underwriting discounts and commissions and estimated expenses when you consider the overallotment shares that were also included. Guess who the lead underwriter was on this offering….. Oppenheimer. Lazard Capital Markets was co-manager.
It was also just in early August that ARIAD announced that its partner had initiated a Phase I/II clinical trial in advanced prostate cancer using its technology:
- Bellicum Pharmaceuticals, Inc. announced dosing of the first patient in a Phase I/II clinical trial of BP-GMAX-CD1, a novel pharmacologically regulated dendritic cell vaccine for the treatment of prostate cancer. The disease-specific trial is being conducted under a Bellicum Investigational New Drug Application allowed by the FDA in 2008.
Shares are up 3.5% at $2.02 mid-day. We have also seen 5.8 million shares trade today, well above the 1.8 million on average. The 52-week trading range is $0.72 to $3.55 and the market cap today is listed as roughly $175 million.
JON C. OGG
Cash worries we raised about Ariad now look even worse (ARIA, MRK)
The cash situation we were worried about at Ariad Pharmaceuticals Inc. (Nasdaq: ARIA) looks even worse after its second-quarter earnings report.
Earlier this week, we raised concerns about the cash burn at Ariad that threatened to derail the optimism for early-stage candidates that were igniting a rally in the stock. We warned about the potential of a secondary stock offering, and how that might hurt the stock price.
Now, partner Merck & Co. (NYSE: MRK) does not want to proceed with a Phase III trial of Ariad’s lead candidate in combination with Herceptin in breast cancer patients. As a result, a $27 million milestone payment expected from Merck in the first half of 2010 likely will be delayed, making an already tight cash situation significantly tighter.
The company used up about $19 million in operating activities in the second quarter, more than the $11.7 million average it used in the previous five quarters. Now, the company has about $39.5 million in cash left.
Even at a conservative cash burn, it’s likely enough for only the next three quarters. A secondary offering or some type of cash-raising now appears much more likely.
The company is still moving ahead with its Phase III trial of its lead candidate ridaforolimus for the treatment of sarcoma. Data is expected in the first half of 2010. But now, it appears that Ariad will have to do something to raise cash ahead of that trial data.
Other than a secondary, the company could theoretically get funds if it were to start a partnership for its less-mature candidates such as the investigational compound that showed anti-cancer activity in drug-resistant blood cancer patients earlier this week. But that particular candidate is fairly early stage; prospective partners might want to see more data before jumping in.
Another possibility is that the company taps a credit facility from Merck that could help keep it going, although living on credit probably isn’t likely to inspire much Wall Street confidence. Also, that credit facility only applies to what they are developing in partnership, so it could not be used for other candidates or for general corporate purposes.
Then there’s always a secondary — something that would have been more appealing to the company a few days ago, when the stock was juiced. — Mike Tarsala
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