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.
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Human Genome Sciences: Sifting the Good from the Bad (HGSI, GSK, NVS)
Human Genome Sciences, Inc. (NASDAQ: HGSI) is down today after presenting data at the JPMorgan Healthcare conference today. Frankly, it was not really bad data. More important than just ‘another down day’ is that this price action would make for the fifth consecutive trading day on the heels of yesterday’s guidance.
Today’s drop is on the heels of yesterday’s ‘lower guidance’ ahead of key data presentations. Some may try to merely say that after a more than 1,000% return last year that today’s selling is now just because it is a leveraged market-play. Yesterday’s guidance was a disappointment, but if the guidance was really so bad then why was it only down less then 4% on the day? The real issue is that as of now, and for the near-term, is that ‘ongoing good news’ is not likely to be received as good news from the investment community.
First, let’s get yesterday’s news out of the way. The lower guidance on Monday morning ahead of the conference may have been somewhat taken out of context based upon headlines after an analyst downgrade from Goldman Sachs last week based upon valuation. The company noted that $163 million in revenue was recognized from the first 20,000 doses delivered to the Strategic National Stockpiles, but that was completed in April 2009. The company noted that approximately $151 million is expected from a second order for 45,000 doses to be delivered over three years. The company’s goal was for 15,000 doses this year, which has led some to believe that it won’t see an added ramp up in product revenues this year. The problem with this notion is that anthrax is deemed a minimal societal threat at this point, so it is an all or none. If there is a giant anthrax scare, then HGSI cleans up. The company noted, “Even with our expected ramp of investment in commercial build-out and pre-launch manufacturing, we expect to end 2010 with between $840 million and $890 million in cash and investments.”
Second, the ‘ongoing’ aspect above refers to its Benlysta drug application with the FDA as the first new treatment for lupus in more than a generation. The company’s summary was “First Drug for Lupus to Succeed in Phase 3 Trials; On Track for Second Quarter 2010 Submission of U.S. and European Marketing Applications; Potential U.S. Approval Fourth Quarter 2010″ and that offers actually very little for any ramped up instant FDA approval. In short, it is ongoing news. Some have been hoping for an approval of the drug in the earlier part of the first half or even the first quarter. Could this be delayed? Anything is possible out of the FDA.
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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
Novartis Expands China Vaccine Investments (NVS)
Novartis AG (NYSE: NVS) wants to get larger in teh realm of vaccines. In China for that matter. The Swiss drug giant has announced plans to buy an 85% majority stake in a privately held Chinese vaccine maker called Zhejiang Tianyuan. The purchase price is roughly $125 million.
This is a tiny scratch on the surface for Novartis as far as its overall size, but this is a clear move further into China, which is now the world’s third-largest market for vaccines but has the world’s largest population. The deal is of curse subject to regulatory approval in China.
This week Novartis had already indicated that will invest up to $1 billion to make its Chinese R&D efforts a top target as the huge nation could easily become one of the Swiss drug maker’s top target markets.
Jon C. Ogg
Do Flu Vaccines Need to Worry About Pain Killers? (GSK, AZN, SNE, NVS)
There is an interesting release out today showing that research from the University of Rochester Medical Center shows an inverse relationship between some of the more common pain killers or relievers and the effectiveness of flu shots. While this does not impact the need for flu vaccines and while this probably won’t impact the sale of flu vaccines by any doses, it does highlight that flu vaccines might not be as effective under a very common circumstance. It also shows how these pain killers might inhibit some of the body’s defenses in general. The study shows that the use of common pain killers to the likes of Advil, Tylenol, and aspirin at the time of a flu shot injection may actually blunt the effect of the shot. It also noted a negative immune system response.
This has been studied for years by a Dr. Richard Phipps and the findings were presented at an international conference on inflammatory diseases. The study data also corresponds to a report in The Lancet from last month by researchers out of the Czech Republic.
The companies most tied to seasonal flu vaccines are large diversified international conglomerates GlaxoSmithKline Plc (NYSE:GSK), AstraZeneca Plc (NYSE: AZN) via MedImmune, and Sanofi-Aventis (NYSE: SNY). Novartis (NYSE: NVS) also recently said that the backlog Of Swine-Flu vaccine orders would be filled by January, but unfortunately that is after many flu contractions will have been seen. It is a flu vaccine supplier.
Again, this won’t likely have any impact on the sales of vaccines that are already in very short supply. But it is important to consider if you are taking a flu vaccine or if you are ill. Particularly so when you consider that many ill and not so ill people take these three pain relieves and pain killers routinely.
JON C. OGG
HGSI Takeover Chances: Financial Math vs. Hype (HGSI, GSK)
Human Genome Sciences Inc. (NASDAQ: HGSI) was up for a second day, on what keeps coming across as takeover hopes. Today’s 11.7% gain to $19.20 follows yesterday’s 4% gain to $17.18. Its partner in its development program for lupus is GlaxoSmithKline (NYSE: GSK), and that is the company which has been rumored to be the acquirer. Without just making a guess or panning a deal for the sake of panning another rumor, what we want to review is the reality of the chance of a buyout in the actual math and fundamentals versus the hype and momentum of the moment.
Until recently, Human Genome Sciences was treated by investors as just another down and out old genomics stock until news hit in July. But then came two bits of data. It reported another large U.S. government order for its anthrax treatment and it reported positive results for its experimental lupus drug. As lupus is so difficult to treat, the interest has been very high because no new significant treatments have hit the market in years and years. Its other partner in a hepatitis C treatment is Novartis.
The company recently juiced up its offering of stock to raise nearly $358 million, and the equity-related pullback after an exponential rise was very brief. Many companies get penalized with selling after a secondary offering on the heels of positive study data. That was not the case here.
Human Genome Sciences is now north of $19.00, which takes the stock even further above its average analyst price target. We won’t even bother making any chart citations here, because this is a 7-year high in the stock.
But where this gets interesting is that the call options pricing and the trading in those options does show an above-normal premium because of the rumor mill and because of its exponential run. The SEPT-2009 $20 CALLS were priced at $2.00 (or more than 10% of the stock price) and closed out at $1.85, which is very high considering that this is the current run of options expiration. This is a significant premium, no pun intended.
As far as options volume, we saw over 30,000 CALLS trade in various strikes for September and we saw over 15,000 contracts trade for the month of October. This is very active options trading by any measurement for this type of stock. We have also seen that the July 31 short interest has some 23.5 million shares listed as the short interest.
It would be easy to just say that any partner or acquirer should have recognized at least some value back in July before the stock went from under $3.00 to north of $10.00 and then north of $15.00. But it would would also bee foolish to just blindly pan a merger rumor because of price alone. That being said, we’d like to pan the notion that this is a takeover candidate just because of the price comparisons. But the amount of capital chasing the stock and chasing this notion is just too great to get in front of without having any more information from industry insiders close to the companies involved.
If we had to make some odds in Vegas on this, it would be tough. A guessing gut-take feel here puts the odds as being very low based on the exponential price rise already seen. But the math from the options, the consolidation in the sector, and the desire for established companies to expand would have us assign at least a 25% chance for a deal to come. And if the price became more reasonable in the coming weeks and months, we might assign an even higher possibility that that.
Jon C. Ogg
August 25, 2009
Opexa (OPXA) Sells Off
A week after Opexa (OPXA) cut a deal to sell stem cells to Novartis (NVS) and its shares reacted with a massive rally, it appears that investors are taking profits. Opexa received an upfront payment of $3 million as part of the transaction. The firm needed the cash badly to keep operating. Shares are down almost 10% to $1.30.
Opexa reported a net loss for the three months ended June 30, 2009, of approximately $0.9 million, or $0.07 per share (basic and diluted), compared with a net loss of approximately $3.6 million or $0.36 per share (basic and diluted), for the three months ended June 30, 2008.
Douglas A. McIntyre
Novartis Puts Opexa On The Map (OPXA, NVS)
Opexa Therapeutics, Inc. (NASDAQ: OPXA) has just done more than gotten itself on the map. It now is on the map and everyone wants to take a trip there. Shares are up exponentially based upon a deal that could ultimately give it ten-times yesterday’s value.
The company’s market cap was around $6 million yesterday, yet Novartis (NYSE: NVS) is acquiring the company’s stem cell technology. The gains from this are astronomical. Opexa was up 377% at $2.25 on over 5 million shares of stock mid-day. This micro-cap stock trades close to 60,000 shares on most days and it only crossed over 100,000 shares in nine trading sessions over the last 3 month period.
Novartis is paying $3 million to Opexa up front, and it is paying out another $1 million over six months.
But the milestones and royalties are where the real kicker is. Upon the successful development and marketing of the stem cell technology, Opexa could collect commercial milestone payments which might ultimately be worth more than $50 million.
As far as what is left now, the CEO of Opexa said that the deal will also allow Opexa to focus its attention its key clinical asset called Tovaxin as an anti-T-cell therapeutic vaccine which could be used in cancer treatments.
This looks like just one more exception to the unofficial investor rule that penny stocks never really work out.
JON C. OGG
AUGUST 7, 2009
Amgen beats Q2 estimates, announces Glaxo partnership for denosumab (AMGN, NVS, GSK)
Amgen Inc. (Nasdaq: AMGN) shares are up about 3 percent to $62.66 after hours, on better-than-expected top and bottom-line result that helped to overshadow disappointing sales of its blockbuster Neulasta.
Next up for the company is an August FDA panel meeting to discuss its osteoporosis drug candidate denosumab. The candidate did so well in a head-to-head Phase III trial vs. the current standard drug, Novartis Inc.’s (NYSE: NVS) Zometa earlier this month that the Amgen’s drug may become the new standard for osteo patients with breast cancer.
“We are optimistic about our financial performance in 2009 and are focused on making denosumab a success,” said Kevin Sharer, chairman and chief executive officer.
Separately, Amgen announced it will collaborate with GlaxoSmithKline (NYSE: GSK) to commercialize denosumab in Europe, Australia, New Zealand and Mexico for postmenopausal osteoporosis.
Financial terms of the partnership include an initial payment and near-term commercial milestones to Amgen totaling $120 million, as well as ongoing royalties.
In Europe, Amgen and GlaxoSmithKline will share profits after accounting for expenses associated with the partnership.
In emerging markets, GlaxoSmithKline will be responsible for all commercialization expenses and purchase denosumab from Amgen to meet demand.
The strong trial results earlier this month appear to be raising hopes that Denosumab also will perform well in two upcoming Phase III trials. One is for solid tumor/multiple myeloma in which results could be available later this year. The other is a trial of prostate cancer patients in which the disease has spread to the bone.
Amgen posted earnings of $1.29 a share, or 13 cents better than analyst expectations. Revenue fell 1.4 percent vs. year-ago results to $3.71 billion, aove the $3.58 billion analyst consensus.
The company guided higher for fiscal 2009, and now sees per-share earnings in a range of $4.80 to $4.95 a share, above the $4.57 analyst consensus. It also sees revenue for the fiscal period trending toward the upper end of its previously provided guidance range of $14.4 billion to $14.8 billion, which is above consensus of $14.33 billion.
One of the only disappointments was with sales of Neulasta, which often is prescribed for chemotherapy patients to boost their white cell counts. Quarterly sales were $831 million, vs. $875 million analyst expectations.
Most of its other best-selling drugs, including Enbrel for rheumatoid artritis, came in with results above or near analyst estimates. — Mike Tarsala
H1N1 Fighters Get More Business (MEDI, GSK, NVS)
The H1N1 Flu, or the Swine Flu, is going to have more vaccine quantities for when flu season breaks out in 2009 and into 2010. Today, the HHS announced the department will commit $884 million to purchase additional supplies of two key ingredients for potential H1N1 vaccine. The funds will be used to place additional orders for bulk H1N1 antigen and adjuvant on existing contracts with Sanofi Pasteur, MedImmune (NASDAQ: MEDI), GlaxoSmithKline (NYSE: GSK) and Novartis (NYSE: NVS).
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