Somaxon, The Ten-Bagger Chase (SOMX, SNY)
There is a new weapon in the war on insomnia, and one which does not appear to have the drug dependence and the nasty side-effects associated with many other sleep aids. Somaxon Pharmaceuticals, Inc. (NASDAQ: SOMX) announced this morning that the FDA has approved the New Drug Application for Silenor as a treatment of insomnia characterized by difficulty with sleep maintenance. Somaxon calls this the “First and Only Prescription Sleep Aid to Provide a Full Night’s Sleep Without Abuse Potential.”
The company said it will focus on seeking a U.S. commercial partnership and will then build a U.S. commercial presence and will prepare to launch Silenor in the second half of 2010.
Silenor binds with high affinity to histamine (H1) receptors, which is believed to be the mechanism to promote the maintenance of sleep. The company noted that this mechanism of action is different from any other prescription medication currently approved for the treatment of insomnia.
- Sanofi Aventis (NYSE: SNY) makes Ambien. Drugs.com noted that Ambien CR was the #43 drug with sales of $865 million. Sepracor Inc. makes LUNESTA, but this company has been acquired. Drugs.com notes that in 2008 Lunesta was the #47 drug with $771 million in sales.
- Sleep maintenance difficulty is defined as waking frequently during the night and/or waking too early and being unable to return to sleep. The company noted that this is the most commonly reported nighttime symptom of insomnia.
Teva Could Be Seeking Mega-Cap Status (TEVA, PFE, NVS, MRK, SNY)
Teva Pharmaceutical Industries Limited (NASDAQ: TEVA) is slowly becoming one of the biggest drug makers in the world. This morning the company is up on the news that it won the bidding process to acquire German generic drug maker Ratiopharm GmbH. The price tag: 3.6 billion Euros, or about $5 billion today in a cash and debt deal. Had this been 2009, the price tag would have been closer to $6 billion in the Euro currency.
Ratiopharm is a top generic drug maker in Germany and Pfizer Inc. (NYSE: PFE) was supposed to be one of the other bidders as it has not frowned upon having generic drugs of its own. Ratiopharm had about 750 drugs and a solid pipeline.
Teva is now one of the top drug companies in the world with most operational sales in North America and in Europe. Teva’s last big transaction was Barr Pharmaceuticals Inc. for about $7.46 billion. The company said this deal will allow growth in Germany, as well as higher growth markets in Spain, Italy and France.
Usually companies buying other companies suffer a drop on dilution concerns. Not Teva. Shares are up 4% after the open and the $62.58 price hit today was not just a 52-week high. That marks an all-time high. Its $55 billion market cap is still far from the mega-cap status of the $100 billion mark. But there are only a handful of companies there at that level of a mega-cap status. Pfizer Inc. (NYSE: PFE), Novartis AG (NYSE: NVS), Merck & Co. Inc. (NYSE: MRK) and Sanofi-Aventis (NYSE: SNY) are all among those which have a $100 billion market cap and higher.
The last date you have to go back to see a TEVA stock double is December 2006 when the stock was just under $30.00. Calling for stocks to double yet again is tricky and that is not quite our intent here. But if the company continues to make acquisitions, the market cap can get there without the stock needing to double.
Teva has shown that it likes to do deals. Analysts are looking for 10% organic earnings growth ahead as the Thomson Reuters estimate for 2010 is $4.55 EPS versus $5.04 EPS in 2011. That is not considering the effects of this merger, and the deal is expected to close late this year.
As far as other top drug companies, here is how Teva’s $55 billion market cap compares:
- Pfizer Inc. (NYSE: PFE) $138.9B
- Novartis AG (NYSE: NVS) $124.7B
- Merck & Co. Inc. (NYSE: MRK) $118.6B
- Sanofi-Aventis (NYSE: SNY) $101.6B
- GlaxoSmithKline plc (NYSE: GSK) $95.9B
- Abbott Laboratories (NYSE: ABT) $84.6B
- AstraZeneca plc (NYSE: AZN) $64.9B
- Bristol-Myers Squibb Company (NYSE: BMY) $44.5B
- Eli Lilly & Co. (NYSE: LLY) $39.8B
JON C. OGG
Buffett & Berkshire Hathaway BioHealth Stocks (BRK-A, BDX, GSK, JNJ, SNY)
Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A) is still a holder of some drug companies and medical devices companies. Here are the Berkshire Hathaway biohealth positions as of September 30, 2009:
- Becton Dickinson & Co. (NYSE: BDX) 1.2 million shares, same as last quarter.
- GlaxoSmithkline (NYSE: GSK) 1.51 million shares, same as before.
- Johnson & Johnson (NYSE: JNJ) was just over 36.91 million shares; Same as last quarter and still well under the 62 million shares at one point in 2008… probably held more as a consumer goods rather than for medical device and drug exposure.
- Sanofi Aventis (NYSE: SNY) more than 3.9 million shares, same as before.
Warren Buffett’s newest full stock holdings in Berkshire Hathaway Inc. (NYSE: BRK-A) are available here.
JON C. OGG
Dendreon Merger Rumors Stay Alive (DNDN, SNY, AZN, RHHBY)
As far as whether a deal is really imminent for Dendreon Corp. (NASDAQ: DNDN) in this rumored buyout is coming is still a topic up for debate. We still have a Caveat Emptor flag here, but the trading in this name is just too hard to not notice now that the stock price and market cap is getting so high.
We saw a greater than 10% gain on Monday to where it closed at the highest closing of the year at $27.43. Of course it sold off, but throughout the day Dendreon shares have climbed and the stock is now up 9% at $29.23 on well above average volume.
We have seen over 30,000 options contracts trade hands for the September Calls alone against almost no Put volume. That is over 3 million shares on a fully leveraged basis. What is so interesting is that these options are all set to expire in just over 48 hours. If no deal is announced or leaked out early Friday, then those will all expire as worthless if out-of-the-money or at the intrinsic value if they are in-the-money. So again, this suggests that something is imminent if you only watch stock options.
Again, Sanofi-Aventis (NYSE: SNY) is the most widely thrown out name as a European buyer that can get companies on sale in the U.S. over a weak US Dollar. But Roche (RHHBY) for its Genentech unit and AstraZeneca plc (NYSE: AZN) have been pondered before.
PROVENGE is believed to be getting FDA approval, but this is still not a formally approved event. Roche already took that chance on Genentech ahead of a key independent study ahead of the panel releasing data that was shocking as Avastin turned out to not be good at using in patients with the aim of maintenance or future cancer prevention. The market cap here is now $3.3 billion, and the price is getting to be in the realm of gambling when considering the FDA-risk that is inherent in any pre-revenue stock in the biotech realm. And any merger has to come at a premium to get shareholder approval.
Caveat Emptor!
JON C. OGG
Exploring Chances of Dendreon Rumors (DNDN, SNY, AZN)
We have been digging into ‘rumors’ of a Dendreon Corp. (NASDAQ: DNDN) buyout. We would stress that Dendreon has been the subject of rumors before as both a partnership or stake-taken deal, and sometimes as merger-buyout bait, several times in the past. As with all rumors and with all ‘hope’ trades like this, Caveat Emptor!
That being said, the stock volume is exponential, but the most impressive activity is in the SEPT-2009 call options. The reason this is of such notice is because the September options expiration date is only four short days out, meaning that the bets for or against a deal would suggest an “imminent” timing if it was accurate.
We noticed a blurb out there today noting that Sanofi-Aventis (NYSE: SNY) was the likely party…IF… the rumor is correct. In the past we have also heard of Roche/Genentech as a potential rumored buyer. One name also thrown out as an acquirer of small to mid-cap biotech companies is AstraZeneca plc (NYSE: AZN). To date, all such rumors have been unfounded and never materialized. We would also note that with shares up above $26.50, they are also back very close to the old intra-day high of $27.40. The old high closing levels were $26.08 on June 19… On April 29 this hit the $27.40 intra-day high but the close was $22.94; and the last day this hit $27.00 was June 7, but it closed at $25.74.
The biggest hurdle to date is that a buyer would be forced to pony-up much more cash than today’s price. The buyer is also taking a big FDA event-risk as PROVENGE is still ‘believed to be approvable’ and has not received FDA approval as a last line of defense for men with advanced prostate cancer. Roche took that risk with Genentech, and while everyone believed that the endpoint was likely it turned out to not be the case.
Anything is of course possible in the land of the biotech rumor-mill. Again, Caveat Emptor!
JON C. OGG
Warren Buffett's Healthcare Stocks (BRK-A, SNY, GSK, JNJ, BDX, UNH, WLP)
Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A) still holds healthcare and medical and drug related companies in the Berkshire Hathaway portfolio. Of these, some are health insurance, two are drug, one is a medical and consumer products conglomerate, and one is medical products. Any changes in the position notes are during Q2 for the period ending June 30, 2009 and are compared to Q1.
Buffett’s got some drugs. Sanofi Aventis (NYSE: SNY) is more than 3.9 million shares, which looks same as Q1. He holds GlaxoSmithkline (NYSE: GSK) as 1.51 million shares, also the same as before.
Johnson & Johnson (NYSE: JNJ) is one we think Buffett holds for its consumer products mostly, but he has grown his stake here to rival what it once was. The new holdings are about 32.5 million. This is above the prior 28.6 million shares from Q1 but still way down from the 62 million last year.
Becton Dickinson & Co. (NYSE: BDX) appears to be a new holding over last quarter according to our records. Berkshire holds 1.2 million shares, even though the Fed Filing listed this one as “Beckton Dickson” in the filing. B&D is a medical technology company that develops, manufactures, and sells medical supplies, devices, laboratory equipment, and diagnostic products.
Buffett still has some health insurance operators, although he has lightened up here from a quarter ago. Wellpoint Inc. (NYSE: WLP) is 3.5 million, which is down from the 4.7773 million shares in Q1. United Health Group (NYSE: UNH) was listed as 4.5 million, down from over 6 million in Q1.
Since Buffett is getting closer and closer to 80 years old, he’s probably getting more interested in various aspects of healthcare as each day passes.
JON C. OGG
AUGUST 14, 2009
Fighting Swine Flu The Wal-Mart Way (WMT, AZN, GSK, NOVN, SNY)
You can just see the TV advertisements now… Wal-Mart and Uncle Sam are “rolling back” swine flu.
The retailer is in talks with federal officials about possibly putting vaccination sites in its stores this fall. It’s a smart idea that should boost Wal-Mart Stores Inc’s (NYSE: WMT) foot traffic, and give the federal government a fighting chance to reach aggressive its inoculation goals, especially in children.
The government has failed rather miserably in coaxing parents to get vaccinated against other illnesses. Only about 15 percent of kids get all their recommended shots, one of the main reasons why worries that there will not be enough swine flu vaccine to go around this fall likely are overblown.
It’s one of the reasons why companies not named AstraZeneca plc (NYSE: AZN), GlaxoSmithKline plc (NYSE: GSK), Novartis AG (Nasdaq: NOVN), Sanofi-Aventis SA (NYSE: SNY) and Australia’s CSL Ltd. might not see any business from providing swine flu vaccines this season.
About 140 million people shop at Wal-Mart each week. A deal with the retailer could certainly help the government reach its goal of getting about 159 million people the vaccination this fall, especially young children that CDC officials also want to see get a regular flu shot.
There’s been no talk of pricing yet, but count on Wal-Mart to make price a fixture of any outreach. Don’t be surprised if there are 2-for-1 specials for families, and special deals for kids that also get a regular flu shot. — Mike Tarsala
Why there will be more than enough swine flu vaccine to go around (AZN, GSK, NOVN, SNY, NVAX, SVA, INO, HEB, CVM, BPAX)
With federal health officials now stepping up efforts to be sure there is enough swine flu vaccine in the U.S., opportunities may be slimmer than the Street expects for all but five companies taking the lead in delivering them.
Count on Congress to take swift action when problems hit close to home. This week, six Senate pages are sick with flu symptoms that could be H1N1, or swine flu. It just so happens that this is the week the government suggested 159 million Americans get vaccinated.
Five companies are busy ramping H1N1 vaccine production for the U.S. market, in hopes of making them available in October.
Those companies are AstraZeneca plc (NYSE: AZN), GlaxoSmithKline plc (NYSE: GSK), Novartis AG (Nasdaq: NOVN), Sanofi-Aventis SA (NYSE: SNY) and Australia’s CSL Ltd.
Many also-ran companies also are preparing vaccine candidates, in the event they are needed. Those companies include Novavax Inc. (Nasdaq: NVAX), Sinovac Biotech Ltd. (Amex: SVA), Inovio Biomedical Corp. (Amex: INO), Hemespherix Biopharma Inc. (Amex: HEB), Cel-Sci Corp. (Amex: CVM) and BioSante Pharmaceuticals Inc. (Nasd BPAX).
Despite the big ramp in swine flu vaccine production, shares of most also-ran swine flu vaccine makers have been running for months, partly in anticipation that they, too, will see top-line benefits from major Western governments buying product from them, perhaps as early as this flu season.
A look at the numbers suggests the swine flu revenue available to the also- rans may be slim.
Federal health officials this week said pregnant women, health care workers and children six months and older should be first to get vaccinated — a group that totals about 159 million people. Bullish traders long many of the also-rans note that there will not be enough to go around: Only 120 million doses of the vaccine will be made available by the five approved manufacturers by fall.
But that may be more than enough to cover everyone who wants one. Many Americans either do not have access to the vaccines, or are happy to go without them. The CDC would like 90 percent of seniors and 60 percent of high-risk adults to receive flu shots. But in 2006-2007, only 66 percent of seniors and 35 percent of targeted young adults ever received them, despite that year being an active flu season.
For those who think that adults will make sure their kids get the shot, the data suggest otherwise. Children may be the population that lags most when it comes to getting inoculations. According to the CDC, fewer than 15 percent of kids in the U.S. get all of their recommended vaccines. According to the most recent CDC data available, the most aggressive state when it comes to inoculations is Massachusetts, where more than a quarter of kids received all the shots they are supposed to have.
Access to vaccinations is only part of the problem. Among the wealthy, there are parents who are choosing not to give their kids their recommended shots, for fear of side effects. Plus, some parents believe their kids are safe, because all the other kids are getting their inoculations (which the data suggest is not the case).
True, the CDC will likely put out an all-out press blitz to get kids immunized against swine flu. But based on past efforts, an aggressive adoption rate may be 60 percent of the targeted population — or about 95 million.
Adoption among senators likely will be high. For everyone else who needs one and makes the effort to get one, there likely will be more than enough to go around — Mike Tarsala
Why Byetta may be the efficacy leader among many diabetes candidates (LLY, ALKS, SNY, NVO, GSK)
Partners Eli Lilly & Co. (NYSE: LLY) And Alkermes Inc. (Nasdaq: ALKS) announced data Monday that further supports its weekly Byetta candidate, although the FDA still may have questions about the entire class of long-acting diabetes treatments.
The data in the anticipated Duration 3 trial of once-weekly Byetta was solid. The candidate demonstrated better efficacy in a head-to-head comparison to Sanofi Aventis’ (NYSE: SNY) Lantus once-daily injection, the class leader. In a trial involving 467 Type 2 diabetes patients, once-weekly Byetta showed a 1.5 percent reduction in A1c levels vs. the baseline, compared to a 1.3 percent reduction for Lantus.
An added benefit of taking the drug may be weight loss. The mean weight loss for once-weekly Byetta patients was 5.8 pounds during the 26-week trial. Mean weight loss was 3.1 pounds for study subjects taking Lantus.
There were no new safety concerns raised. Common side effects were respiratory infection and nausea.
It’s hard to compare all the drugs in the class against one another, but it appears based on the efficacy data that once-weekly Byetta may put it at the top of a class that includes Lantus, Novo Nordisk’s (NYSE: NVO) Victoza, and GlaxoSmithKline’s (NYSE: GSK) Avandia.
The big lingering question is the FDA’s view of all the diabetes drug candidates called GLP-1 analogs. The agency is reviewing heart-related safety data of candidates among many of the drugs in the class.
It also may be looking at possible cancer ties. The journal Diabetologia, associated with the European Association for the Study of Diabetes in late June published four studies that made a possible link between Sanofi’s Lantus and cancer. The studies fell short of making a direct link, but they raised plenty of questions. At the time, analysts became concerned that more questions could be asked about many drugs, if not the entire class of long-acting diabetes drugs.
The FDA’s view of Novo Norisk’s candidate could be important to the entire group. In April, its heart-related safety was seen as mostly favorable, based an 8-to-5 FDA panel vote. The decision was split, however, on if it should be put on the market. That company’s earnings report in early August might specify the FDA’s upcoming timeline. The drug received EU approval earlier this month.
The Novo Nordisk FDA timing may provide clues as to whether the FDA want to see more studies for many, if not all drugs in the class, which may extend the approval processes. — Mike Tarsala
New Eli Lilly drug may not be an early threat to Plavix (LLY, SNY, BMY)
Eli Lilly late Friday got the FDA’s OK to market its Effient blood thinner, but the black-box warning on its label is so strong that it’s hard to believe it can dent the market share of the Sanofi Aventis (NYSE: SNY)/ Bristol Myers Inc. (NYSE: BMY) drug Plavix.
Effient must carry a warning that tells of the potential for significant, sometimes fatal bleeding. The label recommends against its use in patients with a history of heart attack or stroke. And it’s not generally recommended for anyone over age 75.
The warning may be strong enough to put a scare into patients, and potentially doctors who must prescribe the drug. At first blush, it is hard to believe that some analysts believe it can generate as much as $2 billion a year in revenue for Lilly over time.
Plavix may be the older drug, and it even may be less effective, according to the study data. But it carries no such warning.
At minimum, adoption of Effient may be slow due to the warning. It’s certainly not a panacea for shareholders who saw Effient as way for Lilly to counter the effect of looming patent expirations. — Mike Tarsala
