tag:blogger.com,1999:blog-343640802024-03-05T10:59:30.267-05:00Biotechnology StockThese are my opinions on some stocks that I follow and/or own. They are not to be considered as investment advice. I will try to post as many accurate facts as I can. If you disagree with my opinions or have noticed an error in my statements feel free to send me your comments. Please do not follow my advice unless you are willing to lose money without blaming me or taking legal actions! I encourage you to do your own homework and understand the risks before making any investments.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.comBlogger50125tag:blogger.com,1999:blog-34364080.post-73426712821412909912009-07-25T12:23:00.018-04:002009-07-25T13:13:24.714-04:00Decoupled moves in Biotech indices highlight opportunities and challenges<div style="text-align: left;">The chart below shows returns for the last 6 months of the two Biotech indices that I follow: BTK and NBI.</div><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgCrGHSvsb-rbeWAIUItuGKDJk-_Z4hulTTNKhX1hwjtH_cSgBtmorLU3zyXL4fvUs067Yo_fP04sxm6QB45twCv1MUZbYFTc3H3UfQM6_ORQrxriW8vnL-2P2eByPxNlvJSpcS/s400/index-july+2009" style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 225px;" border="0" alt="" id="BLOGGER_PHOTO_ID_5362435439953446322" /><div><br /></div><div>After a significant and equivalent downside move in March, both indices have turned positive with an explosive move since middle of July. I speculate that the March downside move was a response to concerns over Obama's health care proposal and its impact on Medicare. However, upon further examination, the adjustments in Medicare rebates would translate to no more than a double digit change in revenues. Moreover, the biotech story is in large a product story where launch of a new product has a much higher impact on revenues than any adjustments in rebate system which can be overcome with cost and price adjustments and while keeping healthy profit margins.</div><div><br /></div><div>The explosive returns in July are rather interesting and may be indicative of things to come. The divergence in the charts of two indices (35% return for BTK vs. 12% for NBI) underlying story of the biotech industry. This trend indicates a value disparity between mid-large cap biotechs and smaller companies. The BTK move can be contributed to recent earnings and product advancement reports coming out of Celgene (CELG), Gilead (GILD), Amgen (AMGN) and other pharma companies that highlight decent earnings growth despite a challenging environment in addition to value added product development successes. </div><div><br /></div><div>The M&A activity over the last few quarters have just contributed positively to perceived value of these stocks as the recent acquisition of Medarex (MDRX) highlights a larger trend of big pharma acquiring biologics assets and capabilities. This has resulted in speculative run-ups in shares of other companies such as Elan(ELN) and Seattle Genetics (SGEN) who have biologic portfolios. This trend, however, could reverse as rapidly if no new deals are announced in the next few months.</div><div><br /></div><div>The muted returns in the NBI index highlights the financing concerns that still remain for smaller companies which may cause a wave of consolidations, bankruptcies and asset sales at depressed values.</div><div><br /></div><div>My favorite large cap names are Genzyme (GENZ) and Amgen(AMGN) and Biomarin (BMRN) and Vertex (VRTX) among mid-sized companies.</div><div><br /></div><div>Disclosure: The author has no direct stock or option positions in any of the stocks mentioned in this article.</div>JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com1tag:blogger.com,1999:blog-34364080.post-31750936465572745252009-07-11T13:10:00.010-04:002011-04-24T23:09:48.083-04:00Rigel's Phase II Rheumatoid Arthritis drug data are good but financing remains a challengeOn July 9th, Rigel Pharmaceuticals (RIGL) announced the results of TASKi2, a 457 patient Phase IIb Rheumatoid Arthritis study that in most part showed R788 ( a Syk kinase inhibitor) has efficacy similar to existing injectable anti-TNF medications (although it was not a head-to-head comparison). There were some safety issues associated with neutropenia that were somewhat expected and transient.<br /><br />Despite multiple multi-billion dollar products on the market (Enbrel, Remicade and Humira), there is still room for products that are easier to use and have better efficacy/safety profile. R788 has addressed the ease-of-use problem by being an oral therapy; giving it a large competitive advantage. The pending Taski3 study may shed some light on whether Syk inhibition, with a mechanism of action that is more upstream than Anti-TNF therapy, can be proven to be efficacious in patients who do not respond to Anti-TNFs. This is a large hurdle to pass. Inhibiting Syk enzyme, an intracellular signal transduction enzyme, may affect many inflammatory pathways and may result in a more potent response, however for the same reason, it may me more toxic.<br /><br />There is low probability that Taski3 data will be overwhelmingly successful. Given the patient population and existing safety issues of the product, it is more prudent to expect a mixed set of results. The results of this study should be considered an upside option on the product. Even if it is not succesful, R788 has a clinical path to market (perhaps a less expensive one!).<br /><br />Financing is a big hurdle that Rigel and other biotechs are facing this year. With less than one year of cash on hand ( about $100 million with a $100 million plus burn rate and increasing!), the company has to either partner or raise capital through equity offering. The company has already disclosed willingness to partner the product. However, this will most likely not happen until Rigel has met with FDA in october regarding its Phase III clincical trial plans.<br /><br />So who are the most likely parnters? Amgen (AMGN), J&J (JNJ) and Abbott (ABT) seem obvious as they have existing products in this therapeutic area ( mentioned earlier) and have exisitng sales force serving the physicians and plenty of cash to fund the trials.<br /><br />So what should we expect of a partnership deal? Given Rigel's cash position, it will not be able to spend much money on development costs and therefor should expect to give most of the sales revenues away. Recent deals involving phase II/III products imply an upront cash payment of $50-100 million, with additional $100-400 milion in development milestones and double digit tiered royalty. The payments may be significantly larger if the deal includes all possible indications (other inflammation, cancer?) and geographic territories. This may sound like a great deal but it may not be a home-run most investors are expecting. A large value builder would be a deal, or a series of deals, that would result in large profit shares in the future.<br /><br />Eariler, the company had announced a decrease in work force and programs. I consider these annoucnements as events that lower value as they most often mean that the company can not sustain its investments in multiple programs and is relying on one drug to make it. But this potential partnership deal would add to Rigel's cash position and would verify R788, and syk inhibitors, as a credible commercial drug. And if you believe R788 is at least a billion dollar drug, it would result in a few hundred million in revenues.<br /><br />One point of caution is competition; although I am not aware of other syk inhibitors in the clinic, this data may result in more competition from this and other kinase inhibitors. There are also many injectable and oral RA products in development.<br /><br />In summary, R788 Phase IIb results are impressive and Taski3 may provide an indication for this drug with limited competition. With a recent restructuring, it is obvious that the future of the company now solely rests on success of R788. The stock will have volatility depending on Taski3 results and a lucrative parntership deal in Q4. I would recommend to buy RIGL shares, trading around $13 , considering the speculative nature of the impending binary events, and to take profits within a year or if the company's valuation significantly advances beyond $750 million as I still see development and financial risks to the company and do not see much value in earlier pipeline program without further funding and partnerships. I would not be surprised if the company announces dilutive financing through offering shares in Q4 2009 or 1H 2010.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh2c4JraqglTA9eefn3K1roVPyvHfx8imLLBM7GYH18aHQuMLBo5eMCLjjKQQswlVcmmNZALpAwVRyhXk0XZKheTFZGClGBsliO4Jp1t7m4aQEu724gSUxeNxYGgz9yvTKpQ9Ts/s1600-h/RIGL.gif" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 284px; height: 150px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh2c4JraqglTA9eefn3K1roVPyvHfx8imLLBM7GYH18aHQuMLBo5eMCLjjKQQswlVcmmNZALpAwVRyhXk0XZKheTFZGClGBsliO4Jp1t7m4aQEu724gSUxeNxYGgz9yvTKpQ9Ts/s400/RIGL.gif" alt="" id="BLOGGER_PHOTO_ID_5357269307297140178" border="0" /></a><br /><br />Disclosure: The author does not have any positions in RIGL.<div><br /></div><div><a href="http://www.centiusnet.com">Centius Qi TM</a>, the first "All-in-Browser" Business Intelligence Software.</div><div>Join the <a href="http://community.centiusnet.com">Centius Community </a>to download free software</div>JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-64528988586067118742008-09-18T21:35:00.002-04:002008-09-18T22:09:53.670-04:00Celgene (CELG) is a bargain once againThe latest crash of the financial markets has created some great buying opportunities in the health care sector. You can almost pick any Biotechnology or Pharmaceutical stock and be guaranteed that it is undervalued today. The sell-off was steep and broad and took down good stocks with the bad. It certainly felt like some hedge funds were <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">desperately</span> liquidating anything in their portfolio. The financial stock selling was only <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">exasperated</span> by a crash in commodities to create a <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">avalanche</span> effect that may not be over yet.<br /><br />This has created a great buying opportunity in names such as <span class="blsp-spelling-error" id="SPELLING_ERROR_3">Amgen</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_4">AMGN</span>), <span class="blsp-spelling-error" id="SPELLING_ERROR_5">Genentech</span> (DNA), <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Genzyme</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_7">GENZ</span>) and <span class="blsp-spelling-error" id="SPELLING_ERROR_8">Celgene</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_9">CELG</span>) to name a few.<br /><br /><span class="blsp-spelling-error" id="SPELLING_ERROR_10">Celgene</span> recently reported great earnings report highlighted by a higher than expected sales from its Multiple <span class="blsp-spelling-error" id="SPELLING_ERROR_11">Myeloma</span> drug, <span class="blsp-spelling-error" id="SPELLING_ERROR_12">Revlamid</span>. Sales were up 80% from a year ago and translated to a very nice 26 cents per share earnings or double last year's numbers. This was slightly unexpected as analysts were widely expecting to see some signs of weakening of sales due to competition from <span class="blsp-spelling-error" id="SPELLING_ERROR_13">Velcade</span> from <span class="blsp-spelling-error" id="SPELLING_ERROR_14">Takeda</span> Pharmaceuticals ( acquired through <span class="blsp-spelling-corrected" id="SPELLING_ERROR_15">purchase</span> of <span class="blsp-spelling-error" id="SPELLING_ERROR_16">Millenium</span> Pharmaceuticals). The company also raised its full year guidance to $1.5 /share from $1.45.<br /><br />More recently, <span class="blsp-spelling-error" id="SPELLING_ERROR_17">Celgene</span> announced that its Small Cell Lung Cancer drug, <span class="blsp-spelling-error" id="SPELLING_ERROR_18">Amrubicin</span> was given fast track status by the FDA. <span class="blsp-spelling-error" id="SPELLING_ERROR_19">Amrubicin</span> is being currently tested against <span class="blsp-spelling-error" id="SPELLING_ERROR_20">GSK's</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_21">Hycamtin</span> in patients with refractory <span class="blsp-spelling-error" id="SPELLING_ERROR_22">SCLC</span>.<br /><br />But, the news have not all been positive for <span class="blsp-spelling-error" id="SPELLING_ERROR_23">Celgene</span>. The FDA recently published a report that <span class="blsp-spelling-error" id="SPELLING_ERROR_24">Revlimid</span> may have an association with Stevens Johnson. Stevens Johnson has been on the label of Thalidomide as a potential issue and since the two drugs are of the same class, having that warning added to the label should not cause drop in sales specially considering that Multiple <span class="blsp-spelling-error" id="SPELLING_ERROR_25">Myeloma</span> is a deadly disease.<br /><br /><img src="file:///C:/DOCUME%7E1/Ahmad/LOCALS%7E1/Temp/moz-screenshot.jpg" alt="" /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/_hLsahqNsnxY/SNMJu8uWi2I/AAAAAAAADB8/ISF9liWdvCc/s1600-h/celg+september+2008.gif"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="http://3.bp.blogspot.com/_hLsahqNsnxY/SNMJu8uWi2I/AAAAAAAADB8/ISF9liWdvCc/s400/celg+september+2008.gif" alt="" id="BLOGGER_PHOTO_ID_5247548692995935074" border="0" /></a><br /><span class="blsp-spelling-error" id="SPELLING_ERROR_26">Celgene</span> is trading at $64.3 with a market cap of about $29 Billion. It recently hit a high of $76 in August. The recent sell off due to the FDA warning and the financial crisis has created a great buying opportunity for a stock that can trade into the $80's next year.<br /><br /><span style="font-weight: bold;">Disclosure: </span> The author has no positions in <span class="blsp-spelling-error" id="SPELLING_ERROR_27">CELG</span> stock or options.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com4tag:blogger.com,1999:blog-34364080.post-23752355281375725342008-08-27T09:09:00.003-04:002008-08-27T09:26:14.111-04:00Byetta may not be the cause of recent deaths, stock reaction unjustifiedOn Tuesday August 26, <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Amylin</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_1">AMLN</span>) and its partner Eli <span class="blsp-spelling-error" id="SPELLING_ERROR_2">Lilly</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_3">LLY</span>) announced that four patients had died while on diabetes treatment <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Byetta</span>.<br /><br />Both <span class="blsp-spelling-error" id="SPELLING_ERROR_5">Amylin</span> (down 12%) and Lilly (down 1%) sold off in after hours following repeated headlines saying <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Byetta</span> responsible for death.<br /><br />The truth is no one knows what caused the death. The information released mentioned severe <span class="blsp-spelling-error" id="SPELLING_ERROR_7">pancreatitis</span> as a cause. Needless to say it is possible that <span class="blsp-spelling-error" id="SPELLING_ERROR_8">pancreatitis</span>, which happens with higher frequency on diabetic patients, was not caused by <span class="blsp-spelling-error" id="SPELLING_ERROR_9">Byetta</span>. Over a million patients have taken <span class="blsp-spelling-error" id="SPELLING_ERROR_10">Byetta</span> since it has been launched and the product has a good safety profile.<br /><br />One patient was morbidly obese while other patients had major other complications such as surgeries.<br /><br />I had previously recommended not to buy <span class="blsp-spelling-error" id="SPELLING_ERROR_11">Amylin</span> due to the lackluster uptake of <span class="blsp-spelling-error" id="SPELLING_ERROR_12">Byetta</span> and the inability of the management to manage expectations and earnings.<br /><br />This is yet another case of a panic driven sell-off with incomplete set of facts. Once the dust clears, there is a very good chance that <span class="blsp-spelling-error" id="SPELLING_ERROR_13">Byetta</span> will be cleared.<br /><br />I am recommending a short term long position in shares of Amylin (AMLN) which could be trading 10-20% higher in the weeks to come.<br /><br /><br />Disclosure: The author does not have any positions in AMLN of LLY.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com1tag:blogger.com,1999:blog-34364080.post-40883750022553655662008-08-12T21:16:00.000-04:002008-08-12T21:46:54.509-04:00Performance of Biotechnology Stock Blog PortfolioAnalyzing the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">performance</span> of my previous picks is by far my favorite part of writing this blog. It has on many occasions allowed be to learn from my mistakes.<br /><br /><br /><br /><br /><br />I have moved the numbers to <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">Google</span> docs so that they are easier to read. Here is a <a href="http://spreadsheets.google.com/pub?key=pjJtqSe9f7M6eeC9A-V9WTQ">link </a>to that spreadsheet.<br /><br /><br /><br /><img id="BLOGGER_PHOTO_ID_5233811053515119298" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_hLsahqNsnxY/SKI7bFpIGsI/AAAAAAAADAQ/Z37hFnvAnuU/s400/august2008.JPG" border="0" /><br /><br /><br /><br /><br />The bottom line return for this <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">portfolio</span> of picks is 14%. This is the average of all the picks assuming one would have invested equal amounts. This is not the <span class="blsp-spelling-error" id="SPELLING_ERROR_3">greatest</span> return over almost two years but here is how I plan to improve on that:<br /><br /><br /><br />The biggest mistake I made in the past two years was not being in two "HOT" stocks , <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Celgene</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_5">CELG</span>) and <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Alnylam</span>(<span class="blsp-spelling-error" id="SPELLING_ERROR_7">ALNY</span>). My reasoning for <span class="blsp-spelling-error" id="SPELLING_ERROR_8">Celgene</span> was valuation, which was true for some time but I failed to realize the latest recovery to M&A activity.<br /><br /><br /><br /><span class="blsp-spelling-error" id="SPELLING_ERROR_9">ALNY</span> was a tougher call to make as I was waiting to see more proof that their technology was going to work. Their recent successful partnerships have shown that other companies are <span class="blsp-spelling-corrected" id="SPELLING_ERROR_10">interested</span> in their <span class="blsp-spelling-error" id="SPELLING_ERROR_11">antisense</span> technology and the stock has seen a significant increase.<br /><p>In the buy-high-sell-low category, <span class="blsp-spelling-error" id="SPELLING_ERROR_12">Amylin</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_13">AMLN</span>) was a big disappointment. I have learned my lesson about calling winner products before the game is over.<br /></p>Another more general mistake is the lack of trades during obvious times of bottoms and tops. The remedy for this problem would require me to take time from other activities but I will try to make time to be more diligent on this.<br /><br /><br /><br />Finally, I have learned that small cap <span class="blsp-spelling-error" id="SPELLING_ERROR_14">biotechs</span> kill returns. Therefor, in real life, it is best to allocate a smaller investment size to small caps and pick more than one or two of them in case most fail to create any returns. My model portfolio gets hurt due to the equal weighting of all of the stocks.<br /><br /><br /><br />For the remainder of the year, I am continuing to be bullish on biotechnology and <span class="blsp-spelling-error" id="SPELLING_ERROR_15">pharmaceutical</span> sectors. I am adding <span class="blsp-spelling-error" id="SPELLING_ERROR_16">Alnylam</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_17">ALNY</span>), <span class="blsp-spelling-error" id="SPELLING_ERROR_18">Amgen</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_19">AMGN</span>), Seattle Genetics (<span class="blsp-spelling-error" id="SPELLING_ERROR_20">SGEN</span>) and Rigel (<span class="blsp-spelling-error" id="SPELLING_ERROR_21">RIGL</span>) to my model portfolio and I will write more about them in the future.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-74059189861421682832008-08-09T08:54:00.004-04:002008-08-09T09:40:20.119-04:00Panic selling in Biogen-Idec and Elan represent great buying opportunityIn July, <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Biogen</span>-<span class="blsp-spelling-error" id="SPELLING_ERROR_1">Idec</span> and Elan, who co-market the multiple sclerosis drug <span class="blsp-spelling-error" id="SPELLING_ERROR_2">Tysabri</span>, announced two new cases of <span class="blsp-spelling-error" id="SPELLING_ERROR_3">PML</span> a potentially deadly side effect. The stocks sold-off almost entirely. <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Biogen</span>-<span class="blsp-spelling-error" id="SPELLING_ERROR_5">Idec</span> lost about 30% of its market share while Elan has lost over two thirds of its value.<br /><br /><img id="BLOGGER_PHOTO_ID_5232504159368505858" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://4.bp.blogspot.com/_hLsahqNsnxY/SJ2Wz1jp6gI/AAAAAAAADAA/L_wlAV-ZMAw/s400/BIIB+august+08.bmp" border="0" /> <img id="BLOGGER_PHOTO_ID_5232504320121404850" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://4.bp.blogspot.com/_hLsahqNsnxY/SJ2W9MaIfbI/AAAAAAAADAI/moh0C8wlrQI/s400/eln+august+08.bmp" border="0" /><br /><br />I had previously recommended shares of <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Biogen</span>-<span class="blsp-spelling-error" id="SPELLING_ERROR_7">Idec</span> right after the buy-out rumors vanished and the stock was trading around 54. I had based that recommendation of the potential success of <span class="blsp-spelling-error" id="SPELLING_ERROR_8">Tysabri</span>.<br /><br />In August, both <span class="blsp-spelling-error" id="SPELLING_ERROR_9">biotech</span> companies announced no plans to take <span class="blsp-spelling-error" id="SPELLING_ERROR_10">Tysabri</span> off the market and I don't anticipate that FDA will force them to do so. <span class="blsp-spelling-error" id="SPELLING_ERROR_11">Tysabri</span> was voluntarily taken off the market in 2006, when the first case of death f<span class="blsp-spelling-error" id="SPELLING_ERROR_12">rom</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_13">PML</span> became public. This resulted in an investigation and a strong warning label in addition to physician training to look for signs of <span class="blsp-spelling-error" id="SPELLING_ERROR_14">PML</span>.<br /><br />Today, more than 30,000 patients are being treated with <span class="blsp-spelling-error" id="SPELLING_ERROR_15">Tysabri</span> with no better options. This however may change in the future as <span class="blsp-spelling-error" id="SPELLING_ERROR_16">other</span> companies, including <span class="blsp-spelling-error" id="SPELLING_ERROR_17">Genzyme</span> have MS products in the pipeline.<br /><br />Until then, both Elan and <span class="blsp-spelling-error" id="SPELLING_ERROR_18">Biogen</span>-<span class="blsp-spelling-error" id="SPELLING_ERROR_19">Idec</span> will continue to profit from <span class="blsp-spelling-error" id="SPELLING_ERROR_20">Tysabri</span> and their shares are undervalued at this time.<br /><br />Disclosure: The author does not have any positions in either <span class="blsp-spelling-error" id="SPELLING_ERROR_21">Biogen</span>-<span class="blsp-spelling-error" id="SPELLING_ERROR_22">Idec</span> or Elan.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-52405453943583714032008-07-08T21:32:00.006-04:002008-07-10T21:59:32.631-04:00Biotechnology sector has a rare explosive dayTuesday July 8, 2008 marked one of the most explosive upside days I have seen in the Biotechnology sector in quite some time. It comes at a great time when market sentiments are very negative and could lead to a little summer rally.<br /><br />As the list below shows, both the <span class="blsp-spelling-error" id="SPELLING_ERROR_0">BTK</span> and <span class="blsp-spelling-error" id="SPELLING_ERROR_1">NBI</span> indices both had about a 3.8% increase in volume with convincing volume in the big <span class="blsp-spelling-error" id="SPELLING_ERROR_2">biotech</span> names. If a 3% down day is conisdered a crash, a 3.8% up day could qualify as an explosion! Some of these stocks went up even much higher thatn the average for the sector!<br /><br /><br />BTK, NBI, BBH, DNA, AMGN, GENZ, GILD, BIIB, AMLN, CEPH<br /><br /><br /><br />In addition, there was quite a nice move in a lot of small and mid cap <span class="blsp-spelling-error" id="SPELLING_ERROR_4">biotechs</span> as well. The list below shows some of the names that I follow. I would be a little more careful about some of these smaller cap names as they could easily and quickly give back the gains they made today and more.<br /><br />VRTX, HGSI, GNBT, IMCL, ALNY, PTIE, SGEN, VPHM, VRUS, RIGL.<br /><br /><br /><br /><br /><p align="left"><br />Of course, one day does not make a trend. I am puzzled at the cause of this rather massive one day move in this sector. A short squeeze move is unlikely because the sector has not been down relative to other sectors. It is more likely that a <span class="blsp-spelling-error" id="SPELLING_ERROR_6">sector</span> rotation among big institutions has made investors realize the fundamental value that existed in the <span class="blsp-spelling-error" id="SPELLING_ERROR_8">Biotech</span> sector which I pointed out in my previous articles that can be found <a href="http://biotechnology-stock.blogspot.com/search/label/Biotech%20Index">here</a>.<br /><br />Either way, this move could easily reverse itself unless we see more conviction via a sustained upward move over a longer period.<br /><br />Bottom Line: Despite a potential profit taking sell-off in the next few days, this rally could have some potential to get the biotech sector to new highs.<br /><br /><span class="blsp-spelling-error" id="SPELLING_ERROR_9">JMHO</span>.<br /><br /><br /><br />Disclosure: The author has a long position in the <span class="blsp-spelling-error" id="SPELLING_ERROR_10">biotech</span> sector and therefor some of the stocks mentioned in this article.</p>JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-77631352722407913952008-06-29T22:17:00.001-04:002008-12-10T09:31:16.608-05:00AMAG Pharmaceutical's Ferumoxytol meets Phase III clinical trial end pointOn May 31st, AMAG Pharmaceutical announced results from a randomized phase III study of Ferumoxytol, an intravenous (IV) iron replacement therapy, in 31 patients with chronic kidney disease (CKD) stages 1-5 with functioning kidney transplants. The primary endpoint was the mean change in hemoglobin from baseline at Day 35.<br /><br />The following results were obtained (copied from business wire press release at Yahoo.com)<br /><br />For the primary endpoint, the mean change in hemoglobin from baseline at Day 35, there was a statistically significant greater mean (± standard deviation) increase in hemoglobin in patients receiving ferumoxytol compared with patients receiving oral iron (ferumoxytol 1.45 ± 1.27 g/dl vs. oral iron -0.09 ± 1.47 g/dl, p=0.035). There was also a statistically significantly greater mean increase in hemoglobin from baseline at Day 21 in patients receiving ferumoxytol compared with patients receiving oral iron (ferumoxytol 1.04 ± 0.97 g/dl vs. oral iron 0.23 ± 0.52 g/dl; p=0.035). A higher proportion of ferumoxytol-treated patients compared with oral iron-treated patients achieved a 1.0 g/dL or greater rise in hemoglobin at Day 21 (47.8% vs. 12.5%; p=0.108) and Day 35 (60.9% vs. 25.0%; p=0.113).<br /><br />These results may look good at first glance but there may be some analysts argue that the limited number of patients as well as lack of long term follow-up data and overall trial not representing actual clinical use patterns may cause FDA to ask for more data before approving the drug.<br /><br />Nevertheless, the company has signed a development and commercialization agreement ganting 3Sbio the rights to the Chinese market for $1 Million upfront payment and double digit royalties, tiered up to 25%.<br /><br />Interstingly, two analysts have "Buy" ratings and price targets of $99 and $80 on shares of AMAG. There is definitely a large world wide potential market for Ferumoxytol, however had the company designed the pivotal trial differently, it would have increased its chances of approval. Right now It is prudent to consider a higher chance for the FDA to ask for more data.<br /><br />Financially, the company is in decent shape with over $200 million in cash. It is noteworthy to mention that the company has had significant losses in its auction rate security portfolio that may or may nto continue to hurt its liquid assets.<br /><br />Shares of AMAG have been trading as low as $34.10 or a little over twice the amount of cash on hand.<br /><br /><br /><a href="http://3.bp.blogspot.com/_hLsahqNsnxY/SGmMVn0505I/AAAAAAAACVY/7DtPcKp5LE4/s1600-h/AMAG.bmp"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;" src="http://3.bp.blogspot.com/_hLsahqNsnxY/SGmMVn0505I/AAAAAAAACVY/7DtPcKp5LE4/s400/AMAG.bmp" border="0" alt=""id="BLOGGER_PHOTO_ID_5217855946381448082" /></a><br /><br />Disclosure: The author has no positions in AMAGJMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-30365776651255933432008-06-23T12:10:00.003-04:002008-12-10T09:31:16.714-05:00Exanatide's convenience may not be enough in a tough Diabetes market placeDiabetes is a tough market to compete in for any company. Insulin is the standard therapy for most patients with severe Diabetes. It is a naturally <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">occurring</span> hormone and it exists as both short acting and long acting therapy. It requires close monitoring as it may have dangerous side effects. This is the hurdle that any product entering the market has to pass. The new product would have to be safer and more efficacious than insulin to get wide acceptance. One of the serious side effects of any potent therapy is the drop of blood sugar levels below safe levels or hypoglycemia. If a product is equally safe and efficacious, it will have a tough time beating Insulin unless it is more convenient. This is an over simplification of the many problems these patients face but it may be useful as a set of guiding principles when picking a stock.<br /><br />In 2006 I suggested buying shares of <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Amylin</span> Pharmaceuticals (<span class="blsp-spelling-error" id="SPELLING_ERROR_2">AMLN</span>) because I thought <span class="blsp-spelling-error" id="SPELLING_ERROR_3">Byetta</span> with its unique mechanism of action would result in a good alternative to insulin. Here is a <a href="http://biotechnology-stock.blogspot.com/2006/11/amylin-gets-approval-for-byetta-in.html">link</a> to that recommendation. The price then was around $40 a share. After three years on the market, the product has not helped the share price and the stock is trading today around $26. Some of this lack of <span class="blsp-spelling-corrected" id="SPELLING_ERROR_4">performance</span> could be the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_5">management's</span> inability to turn a profit.<br /><br /><img id="BLOGGER_PHOTO_ID_5215123809120949826" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_hLsahqNsnxY/SF_XeTZWFkI/AAAAAAAACQk/YxGKL54TgGc/s400/amylin2008.bmp" border="0" /><br /><br />In June, <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Amylin</span> announced widely anticipated results of its long acting version of <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Byetta</span> called <span class="blsp-spelling-error" id="SPELLING_ERROR_8">Exanatide</span>. After one year of treatment, patients saw a significant drop in blood sugar levels and in weights. Analysts are applauding this result and despite heavy competition from Roche are recommending investing in <span class="blsp-spelling-error" id="SPELLING_ERROR_9">Amylin</span> at these levels.<br /><br />When I began writing this article, I was tempted to recommend shares of <span class="blsp-spelling-error" id="SPELLING_ERROR_10">Amylin</span> at these levels based on the potential of <span class="blsp-spelling-error" id="SPELLING_ERROR_11">Exanatide</span> to be a multi billion dollar product. Also. the recent failures of <span class="blsp-spelling-corrected" id="SPELLING_ERROR_12">inhaled</span> version of insulin removed some potential competitive <span class="blsp-spelling-error" id="SPELLING_ERROR_13">factors</span>. However, given the risks of <span class="blsp-spelling-corrected" id="SPELLING_ERROR_14">competition</span> from other similar products and regulatory hurdles involved, I will hold off on recommending investing in <span class="blsp-spelling-error" id="SPELLING_ERROR_15">AMLN</span> unless it is done with speculative money. I have learned over the last few years that large institutional money flows into Biotechnology stocks only after uncertainties and risks are removed. Just because a stock is cheap does not mean it will move higher any time soon.<br /><br />Another reason I am holding off on <span class="blsp-spelling-error" id="SPELLING_ERROR_16">AMLN</span> is the management factor. At some point, you just have to consider that great products are necessary but not sufficient in producing profits and therefore stock price gains. The promise of <span class="blsp-spelling-error" id="SPELLING_ERROR_17">Byetta</span> (whether imagined or real) never came to fruition. It is hard to identify the factor or factors that lead to these results, maybe the recommendations where made too early and could be filed under irrational <span class="blsp-spelling-corrected" id="SPELLING_ERROR_18">exuberance</span>. It is OK to try to hit home runs with stock picking if you realize that you will strike out a lot. Therefor, I recommend waiting until a winner emerges in this battle. By then, the results may be a single or a double but the higher probability of success would make it an investment grade decision instead of speculation,<br /><br />Diabetes is a tough market!<br /><br /><br /><br /><br />Disclosure: Author does not have any long positions in <span class="blsp-spelling-error" id="SPELLING_ERROR_19">AMLN</span>.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-44849855420764561752008-06-11T20:59:00.004-04:002008-06-30T21:52:48.495-04:00Despite a slow start, strong fundamentals will supprt the Biotech SectorBack in January, I wrote an article predicting a good year for the Biotechnology/<span class="blsp-spelling-error" id="SPELLING_ERROR_0">Biopharma</span> sector based on early performance vs. major indices. Here is a <a href="http://biotechnology-stock.blogspot.com/2008/01/wall-street-signals-point-to-good-year.html">link</a> to that article.<br /><br />Five months have passed since that post was published and I have written very few articles since. The markets have had a roller coaster ride. An ugly February-March period was rescued by Fed intervention and a short term rally that followed proved short lived.<br /><br />But enough with pointing out the obvious. It took a lot of discipline not to trade the short lived rally and I hope those who bought this rally locked in their gains before the sell-off. Desite this correction, I do not see any reasons to jump into this market with both oil prices and <span class="blsp-spelling-error" id="SPELLING_ERROR_1">unemployment</span> increasing.<br /><br />I still remain optimistic that Biotechnology and Pharmaceutical stocks will have good returns in 2008. The <span class="blsp-spelling-error" id="SPELLING_ERROR_2">ASCO</span> Cancer conference came and went with no major surprises. Both <span class="blsp-spelling-error" id="SPELLING_ERROR_3">AMGN</span> and DNA showed some good results. On valuation basis, I still Like <span class="blsp-spelling-error" id="SPELLING_ERROR_4">GENZ</span> as their diverse pipeline and solid track record puts fair value above $70. On the product side, I like VRTX's chances of turning Telepravir into a blockbuster drug in the near future. I expect Q2 earnings from most <span class="blsp-spelling-error" id="SPELLING_ERROR_5">biotech</span> companies to come in at or higher than expected due to solid sales and help from weak dollar.<br /><br />My view is still very negative on the broader market. I expect the CPI numbers in July to be near or higher than 4%. With short term interest rates below 3%, it does not give investors any reasons to invest in US markets while they can get real returns in Europe where interest rates are higher than inflation. This lack of capital flow <span class="blsp-spelling-error" id="SPELLING_ERROR_6">into</span> US may partially explain the poor performance of the <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Biotech</span> sector despite decent earnings. If the Fed starts to <span class="blsp-spelling-error" id="SPELLING_ERROR_8">acknowledge</span> the real inflation problem in US (which I <span class="blsp-spelling-error" id="SPELLING_ERROR_9">believe</span> started sometime around 2003 with real estate prices!) and raise the interest rates from their current "bank bail-out "levels, it should strengthen the dollar, stabilize commodities and restore investor confidence in US markets.<br /><br />Again, it seems like I am just pointing out the obvious.<br /><br />Bottom line: The <span class="blsp-spelling-error" id="SPELLING_ERROR_10">biotechnology</span> sector is fundamentally strong and may be temporarily under valued due to overall investor pessimism in US. The <span class="blsp-spelling-error" id="SPELLING_ERROR_11">BBH</span> is a great way to safely invest in the <span class="blsp-spelling-error" id="SPELLING_ERROR_12">Biotech</span> sector through an <span class="blsp-spelling-error" id="SPELLING_ERROR_13">ETF</span>.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-3678711623080094182008-04-01T21:35:00.005-04:002008-12-10T09:31:17.044-05:00Early data suggests Telaprevir may be helpful for patients who need it mostOn Monday March 31st, Vertex announced, through an abstract, the interim results of an open-label phase 2 trial for <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Telaprevir</span> for treatment of Hepatitis C. 26 of 32 patients who previously failed other therapies (81%) experienced rapid <span class="blsp-spelling-error" id="SPELLING_ERROR_1">virologic</span> <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">response</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_3">RVR</span>) after four weeks of treatment. Even though these rates may not be sustained in longer <span class="blsp-spelling-error" id="SPELLING_ERROR_4">term</span>, chances are a good portion of these patients will be cured.<br /><br />The release of these results have prompted analysts who disliked the company and the stock last week to all of a sudden change their minds. I was surprised at the timing of this news as I was expecting some results released in second half of this year.<br /><br />If you read through some of my past articles, you will find that I have violated almost every rule of investing when it comes to Vertex <span class="blsp-spelling-error" id="SPELLING_ERROR_5">Pharmaceutical's</span> stock (<span class="blsp-spelling-error" id="SPELLING_ERROR_6">VRTX</span>). In fact, I have even called my behavior stubborn, which always guarantees significant losses when trading or investing.<br /><br />But my fascination has always been with <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Telaprevir</span> not the stock or the company. I have always believed that this drug had the best potency, efficacy and side effect profile which would make it a standard therapy for Hepatitis C, a disease with poor standard of care therapy. I won't get into the biochemical details but this is not something easily reproducible by other pharmaceutical companies. This partially explains why other similar products have failed or have had major set backs in the clinic.<br /><br />Some people have blamed the recent <span class="blsp-spelling-corrected" id="SPELLING_ERROR_8">volatility</span> in the stock price on the management over promising results. In fact there has been some class action law suits filed. I am not a legal expert but I doubt they will serve any purpose besides costing the tax payers some money and making some lawyers rich. The law suits will end up getting thrown out of court andI wish someday the laws will change to stop these <span class="blsp-spelling-corrected" id="SPELLING_ERROR_9">ridiculous</span> and <span class="blsp-spelling-corrected" id="SPELLING_ERROR_10">destructive</span> behaviour!<br /><br /><br />The stock may fluctuate 50-60% in a year but the story remains the same. <span class="blsp-spelling-error" id="SPELLING_ERROR_11">Telaprevir</span> is the first <span class="blsp-spelling-corrected" id="SPELLING_ERROR_12">Hepatitis</span> C Protease inhibitor in Phase III clinical trials. It is the only drug to show significant improvement to standard of care in both treatment naive and non-<span class="blsp-spelling-corrected" id="SPELLING_ERROR_13">responding</span> patients and it will be the first one on the market as early as late 2009 (maybe!). It has the potential to becoming a multi-billion dollar drug, and for that <span class="blsp-spelling-error" id="SPELLING_ERROR_14">VRTX</span> should be valued no less than 5 billion dollars or about 50% higher than current price of $25.4. I am basing this on other blockbuster phase III products such as <span class="blsp-spelling-error" id="SPELLING_ERROR_15">Celgene's</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_16">Revlimid</span>.<br /><br /><br />Bottom line: Buy Vertex for the long term for a once in a lifetime return!<br /><br /><img id="BLOGGER_PHOTO_ID_5184470097282251394" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://2.bp.blogspot.com/_hLsahqNsnxY/R_LwFcEkuoI/AAAAAAAAB2Y/R0xbQlOdJ7s/s400/vrtx-april2008.png" border="0" /><br /><br /><br />Disclosure: The author has a long position in this company.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com2tag:blogger.com,1999:blog-34364080.post-37742111703473843562008-03-26T20:56:00.004-04:002008-12-10T09:31:17.313-05:00Lorcaserin's safety data should result in a good partnership deal for Arena PharmaceuticalsOn March 17<span class="blsp-spelling-error" id="SPELLING_ERROR_0">th</span>, Arena Pharmaceuticals (<span class="blsp-spelling-error" id="SPELLING_ERROR_1">ARNA</span>) reported that they will continue with phase III trials after an independent review of <span class="blsp-spelling-error" id="SPELLING_ERROR_2">unblinded</span> data showed no cardiac safety concerns for the weight loss drug, Lorcaserin. This was a rather important result for Arena because there had been concerns that it may have similar heart valve problems that plagued fen-<span class="blsp-spelling-error" id="SPELLING_ERROR_3">phen,</span> which targeted the same receptor. I have written in the past about the differences in the selectivity in these drugs which theoretically is enough to avoid the cardiac side effects (click <a href="http://biotechnology-stock.blogspot.com/2006/10/phase-ii-results-suggest-lorcaserin-is.html">here</a> to see that article). However, data released last week is the proof that the FDA needs to assure this product is safe. This also prooves that they have great scientists and good judgement.<br /><br />These results should also pave the way for a potentially lucrative partnership for Arena. The product is at least two years away from the market but it has blockbuster written all over it. Given the current challenges of product <span class="blsp-spelling-corrected" id="SPELLING_ERROR_4">development</span> at big pharmaceutical companies, I believe finding a partner and good terms may be easy. There is also a good chance that the company may get bought out because its valuations make the purchase more appealing to a big <span class="blsp-spelling-error" id="SPELLING_ERROR_5">pharma</span> partner.<br /><br />I had originally recommended this stock at $17.39 in 2006. I had assumed <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Lorcaserin</span>, then in phase II, would have a quicker path to market. Today at $6.94, and with <span class="blsp-spelling-corrected" id="SPELLING_ERROR_7">successful</span> safety results, <span class="blsp-spelling-error" id="SPELLING_ERROR_8">ARNA</span> is a great value. I anticipate a deal announced sometime this year (I also said the same thing in 2006, so this advice may not be worth much!). However, I resisted recommending to average down on this stock until safety data was out. Now that a lot of the risk is out, I recommend to average down or open a new position at these levels.<br /><img id="BLOGGER_PHOTO_ID_5182228266087660146" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_hLsahqNsnxY/R-r5JsEkunI/AAAAAAAAB14/dyDBbm_AiDY/s400/arna-march08.png" border="0" /><br />But don't expect a quick return on this investment. The <span class="blsp-spelling-error" id="SPELLING_ERROR_9">biotech</span> index has been getting hammered recently. I don't think this is due to fundamentals of <span class="blsp-spelling-error" id="SPELLING_ERROR_10">biotech</span> stocks. In fact DNA, <span class="blsp-spelling-error" id="SPELLING_ERROR_11">GENZ</span>, <span class="blsp-spelling-error" id="SPELLING_ERROR_12">BIIB</span> and a host of other stocks have <span class="blsp-spelling-corrected" id="SPELLING_ERROR_13">reported</span> decent earnings reports and good guidance for 2008. My guess is that this is a byproduct of <span class="blsp-spelling-error" id="SPELLING_ERROR_14">hedge fund</span> managers chasing commodities such as oil, wheat and gold for a quick return and selling all other assets to raise cash for their gambles. These are the same guys who were betting on the real estate bubble and the dot.com bubble in the past. Do you see a trend yet? Once the commodity bubble bursts money should return to fundamentally sound sectors such as the <span class="blsp-spelling-error" id="SPELLING_ERROR_15">biotech</span>.<br /><br /><br />Disclosure: The author does not have a position in ARNA at the time of publication of this article.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-48081191790894356242008-01-20T11:51:00.002-05:002008-12-10T09:31:17.416-05:00January 2008 Performance ReviewIt is time again to review past picks and to learn about my mistakes.<br /><br />The table below includes a list of my historical picks.<br /><br /><br /><br /><img id="BLOGGER_PHOTO_ID_5157614872142717586" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 418px; CURSOR: hand; HEIGHT: 204px; TEXT-ALIGN: center" height="233" alt="" src="http://2.bp.blogspot.com/_hLsahqNsnxY/R5OHZmZWopI/AAAAAAAABow/LBgyryaSscg/s400/performance+review+jan2008.jpg" width="445" border="0" /><br /><br /><span class="blsp-spelling-error" id="SPELLING_ERROR_0">ARNA</span> and <span class="blsp-spelling-error" id="SPELLING_ERROR_1">ALTU</span> stand out as worst performing picks. Interestingly they are both small cap picks, so this drop is not so unexpected. I am removing <span class="blsp-spelling-error" id="SPELLING_ERROR_2">ALTU</span> from my picks due to current conflicts of interest. <span class="blsp-spelling-error" id="SPELLING_ERROR_3">ARNA</span> (<a href="http://biotechnology-stock.blogspot.com/2006/10/phase-ii-results-suggest-lorcaserin-is.html"> link</a> to original post) has suffered because they have not announced a partner yet for its weight loss drug <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Lorcaserin</span>. This is probably because the pharmaceutical industry thinks that weight loss drugs <span class="blsp-spelling-error" id="SPELLING_ERROR_5">have litigation</span> liability and are waiting for more safety data. I still believe <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Lorcaserin</span> has a great chance to be successful because of its specific mechanism of action.<br /><br />On the upside, <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Pharmasset</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_8">VRUS</span>) has been a huge gainer. I did not expect it to do so well but their <span class="blsp-spelling-error" id="SPELLING_ERROR_9">HepC</span> trial drug is moving well in the clinic. Again, this is expected of small <span class="blsp-spelling-error" id="SPELLING_ERROR_10">biotech</span> companies.<br /><br />In 2007 I stayed away from Onyx (<span class="blsp-spelling-error" id="SPELLING_ERROR_11">ONXX</span>) and <span class="blsp-spelling-error" id="SPELLING_ERROR_12">Alnylam</span>(<span class="blsp-spelling-error" id="SPELLING_ERROR_13">ALNY</span>). I missed an opportunity in <span class="blsp-spelling-error" id="SPELLING_ERROR_14">ALNY</span> which has had a good performance ($17-$30.5) while <span class="blsp-spelling-error" id="SPELLING_ERROR_15">ONXX</span> has been moving sideways ($52-$50).<br /><br />I was first wrong about getting out of <span class="blsp-spelling-error" id="SPELLING_ERROR_16">Celgene</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_17">CELG</span>) at $51 based on valuations just watch the stock to go up to $70. However, poor <span class="blsp-spelling-error" id="SPELLING_ERROR_18">european</span> sales and a tactical purchase of its partner has <span class="blsp-spelling-error" id="SPELLING_ERROR_19">brought</span> the price down to a more <span class="blsp-spelling-error" id="SPELLING_ERROR_20">reasonable</span> price of $54. I like <span class="blsp-spelling-error" id="SPELLING_ERROR_21">CELG</span> at these levels but I believe 2008 will be a disappointing year for <span class="blsp-spelling-error" id="SPELLING_ERROR_22">CELG</span> stock as wall street will anticipate benefits from its buy-out and the level of competition for <span class="blsp-spelling-error" id="SPELLING_ERROR_23">Revlimid</span>.<br /><br />I am putting Rigel Pharmaceuticals (<span class="blsp-spelling-error" id="SPELLING_ERROR_24">RIGL</span>), Advanced Magnetics (<span class="blsp-spelling-error" id="SPELLING_ERROR_25">AMAG</span>) and <span class="blsp-spelling-error" id="SPELLING_ERROR_26">Regerneron</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_27">REGN</span>) on my watch list and I will write about them shortly.<br /><br />Finally, I have been a bit stubborn while holding on to Vertex (<span class="blsp-spelling-error" id="SPELLING_ERROR_28">VRTX</span>). I still believe <span class="blsp-spelling-error" id="SPELLING_ERROR_29">Telaprivir</span> is superior to other <span class="blsp-spelling-error" id="SPELLING_ERROR_30">HepC</span> products in the clinic and will be a blockbuster. I am recommending another long position here at $22 as I believe the start of phase III trials in first half of 2008 will drive the stock price much higher. Interestingly, Vertex has recently announced they will start clinical trials for a combination therapy with an existing <span class="blsp-spelling-error" id="SPELLING_ERROR_31">investigational</span> compound from another company. I speculate this <span class="blsp-spelling-error" id="SPELLING_ERROR_32">will be</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_33">Pharmasset's</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_34">VRUS</span>) polymerase inhibitor as their mechanisms of action may have a synergistic effect in weakening Hepatitis C virus.<br /><br /><strong>Disclosure: The author has long positions in some of the stocks mentioned above.</strong>JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-66049506957244456172008-01-08T17:59:00.002-05:002008-12-10T09:31:17.691-05:00Wall street signals point to a good year for Pharma and BiotechIt is hard to find any signs of <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">optimism</span> on wall street these days. <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Nasdaq</span> has had 8 consecutive down days and is down 8% to start the year, and most <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">investors</span> are ready to predict a bad year for the markets. Some of this sell off could be attributed to <span class="blsp-spelling-error" id="SPELLING_ERROR_3">redemptions</span> at hedge funds and mutual funds. But to me, this sell off feels a lot like flight from a US recession which has turned into a flight to anything foreign. It is true that the growth overseas (and down in South America) is much better than here in US, but it comes with a much higher set of risks.<br /><br />One source of domestic safe haven has always been <span class="blsp-spelling-corrected" id="SPELLING_ERROR_4">health care</span>. It is a well known recession proof play that has <span class="blsp-spelling-corrected" id="SPELLING_ERROR_5">benefited</span> from economic cycles. The <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Nasdaq</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Biotech</span> Index is flat for the year, outpacing the <span class="blsp-spelling-error" id="SPELLING_ERROR_8">Nasdaq</span>, and may signal a good year for Pharmaceutical and <span class="blsp-spelling-error" id="SPELLING_ERROR_9">Biotech</span> names. I had posed a Poll question on this blog asking the readers opinion on this sector in 2008. Interestingly, the overwhelming majority said that 2008 would be a great year for <span class="blsp-spelling-error" id="SPELLING_ERROR_10">pharma</span> and <span class="blsp-spelling-error" id="SPELLING_ERROR_11">biotech</span> stocks (look in the side bar for the poll results). 92% of the 14 responders predict a greater than 10% return for the sector in 2008 ( I know the sample size is tiny!). One obvious risk to this theory becomes the 2008 elections and whether a president from the democratic party would push for lower drug prices which would hurt the bottom line for the industry.<br /><br />The much publicized JP <span class="blsp-spelling-error" id="SPELLING_ERROR_12">morgan</span> health care conference has been a catalyst for a lot of stock movement in the past week. Merck (<span class="blsp-spelling-error" id="SPELLING_ERROR_13">MCK</span>) is up 3% , Eli Lilly (<span class="blsp-spelling-error" id="SPELLING_ERROR_14">LLY</span>) is up 5% and Glaxo Smith Kline (<span class="blsp-spelling-error" id="SPELLING_ERROR_15">GSK</span>) is up 6% for the year. These three stocks have momentum based on good product stories. Merck is continuing with its <span class="blsp-spelling-corrected" id="SPELLING_ERROR_16">successful</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_17">Gardasil</span> for prevention of cervical cancer, Lilly just got approval for once a day <span class="blsp-spelling-error" id="SPELLING_ERROR_18">Cialis</span> for erectile dysfunction and <span class="blsp-spelling-error" id="SPELLING_ERROR_19">GSK</span> is set to report some better news for its diabetes treatment <span class="blsp-spelling-error" id="SPELLING_ERROR_20">Avandia</span>.<br /><br />For <span class="blsp-spelling-error" id="SPELLING_ERROR_21">Biotech</span> names, my favorite name <span class="blsp-spelling-error" id="SPELLING_ERROR_22">Genzyme</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_23">GENZ</span>) had a solid 07 and just signed a deal to co-develop a cholesterol treatment with ISIS pharmaceuticals, <span class="blsp-spelling-error" id="SPELLING_ERROR_24">Biogen</span>-<span class="blsp-spelling-error" id="SPELLING_ERROR_25">Idec</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_26">BIIB</span>) increased its earning projections. <span class="blsp-spelling-error" id="SPELLING_ERROR_27">Celgene</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_28">CELG</span>) beat estimates and reiterated earnings in 2008.<br /><br />Even <span class="blsp-spelling-error" id="SPELLING_ERROR_29">Amgen</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_30">AMGN</span>) and <span class="blsp-spelling-error" id="SPELLING_ERROR_31">Genentech</span> (DNA) are participating in a strong first week of 2008 while coming off of their multi-year lows.<br /><br />This is the year that we may see the first Phase III clinical trial for a Hepatitis C protease inhibitor, Vertex's (<span class="blsp-spelling-error" id="SPELLING_ERROR_32">VRTX</span>) <span class="blsp-spelling-error" id="SPELLING_ERROR_33">Telepravir</span>. Others, such as <span class="blsp-spelling-error" id="SPELLING_ERROR_34">Pharmasset</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_35">VRUS</span>) and <span class="blsp-spelling-error" id="SPELLING_ERROR_36">Intermune</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_37">ITMN</span>) also have <span class="blsp-spelling-error" id="SPELLING_ERROR_38">HCV</span> products in the clinic which will make for an interesting race for this multi-billion dollar market.<br /><br />A safe way to invest in the <span class="blsp-spelling-error" id="SPELLING_ERROR_39">Biotech</span> sector would be to buy Merrill Lynch's <span class="blsp-spelling-error" id="SPELLING_ERROR_40">Biotech</span> Holders <span class="blsp-spelling-error" id="SPELLING_ERROR_41">ETF</span>(<span class="blsp-spelling-error" id="SPELLING_ERROR_42">BBH</span>) which is trading at $160, the lowest level since 2005.<br /><br /><br /><img id="BLOGGER_PHOTO_ID_5153256304970998386" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_hLsahqNsnxY/R4QLTmZWonI/AAAAAAAABog/LpoLOagwyDY/s400/BBH+january+2008.bmp" border="0" /><br /><strong><em>Bottom line:</em></strong> Positive headline news for the pharmaceutical industry will make it a great investment opportunity in 2008. Look for more deals including mergers and acquisitions and licensing to mark a good year for health care stocks in 2008.<br /><br /><br /><br /><br /><strong><em>Disclosure:</em></strong> The author has long option and stock positions in some of the above mentioned companies.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-23128987056355200512007-12-13T17:31:00.001-05:002008-12-10T09:31:18.030-05:00Biogen-Idec (BIIB), from one extreme to the other in no time!On <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Ocotber</span> 16<span class="blsp-spelling-error" id="SPELLING_ERROR_1">th</span>, shares of <span class="blsp-spelling-error" id="SPELLING_ERROR_2">Biogen</span>-<span class="blsp-spelling-error" id="SPELLING_ERROR_3">Idec</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_4">BIIB</span>) gained $13 to hit $82 based on rumors that the company had put itself up for sale. That day I recommended an aggressive sell because of the price tag and uncertainties around finding a possible suitor. (Here is the <a href="http://biotechnology-stock.blogspot.com/2007/10/take-profits-in-biogen-idec-biib.html">Link</a> to that article)<br /><br /><br /><br /><a href="http://4.bp.blogspot.com/_hLsahqNsnxY/R2G2XXHTMcI/AAAAAAAABPo/sW7Em6r5Jlo/s1600-h/biib_dec07.bmp"><img id="BLOGGER_PHOTO_ID_5143592761891697090" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; CURSOR: hand" alt="" src="http://4.bp.blogspot.com/_hLsahqNsnxY/R2G2XXHTMcI/AAAAAAAABPo/sW7Em6r5Jlo/s400/biib_dec07.bmp" border="0" /></a><br /><br />Today <span class="blsp-spelling-error" id="SPELLING_ERROR_5">Biogen</span>-<span class="blsp-spelling-error" id="SPELLING_ERROR_6">Idec</span> <span class="blsp-spelling-corrected" id="SPELLING_ERROR_7">announced</span> that it did not find a buyer and it was going to continue as a stand alone company. <span class="blsp-spelling-error" id="SPELLING_ERROR_8">BIIB</span> shares lost about $20 and was trading as low as $54, much lower than its share price before all the rumors began when the stock was in the $60s.<br /><br /><br /><br /><br /><br />I like <span class="blsp-spelling-error" id="SPELLING_ERROR_9">BIIB</span> once again based on valuations and oversold technical conditions. The company is expected to earn over $3 share in 2008 which puts the forward PE at a cheap 18. <span class="blsp-spelling-error" id="SPELLING_ERROR_10">Tysabri</span>, their expensive treatment for MS, will continue to gain momentum in 2008 and the company expects to have 100,000 patients enrolled by 2010.<br /><br /><br /><br /><br /><br /><br /><br /><br />Disclosure: The author has a long position in Biogen-Idec.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-1784722199958927292007-11-25T12:23:00.002-05:002008-12-10T09:31:18.540-05:00Onyx Pharmaceutical's (ONXX) success may pave the way for competitionOnyx Pharmaceutical (<span class="blsp-spelling-error" id="SPELLING_ERROR_0">ONXX</span>) is enjoying the rewards of its potential blockbuster, <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Nexavar</span>. On Monday, November 19<span class="blsp-spelling-error" id="SPELLING_ERROR_3">th</span>, FDA approved <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Nexavar</span>, already approved for Kidney Cancer, for treatment of liver cancer. The product did so well in <span class="blsp-spelling-corrected" id="SPELLING_ERROR_5">clinical</span> trials that the company and its partner Bayer had to <span class="blsp-spelling-corrected" id="SPELLING_ERROR_6">halt</span> the trials for ethical reasons to give <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Nexavar</span> to the control group as well.<br /><br /><br />Onyx's stock has been doing <span class="blsp-spelling-corrected" id="SPELLING_ERROR_8">tremendously</span> well. In 2007, it has raised more than 500% from about $10 to its current price of $53, but off of its 52 week high of $61.<br /><br /><p></p><br /><p><br /><img id="BLOGGER_PHOTO_ID_5136862947287656610" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://4.bp.blogspot.com/_hLsahqNsnxY/R0nNomDyaKI/AAAAAAAABKE/F3TL2l4yAYk/s400/onxx_nov07.png" border="0" /><br /></p><br /><br /><p></p><p></p><p>But is this a good time to buy the stock?</p><br />Let's first look at the revenues and stock valuations.<br /><br /><br />In the third quarter, <span class="blsp-spelling-error" id="SPELLING_ERROR_9">Nexavar</span> achieved global net sales of $104.6 million (half to Onyx). This included approximately $41 million generated in the United States and approximately $64 million outside the US. This growth reflects a 26% increase over the previous quarter's US sales numbers and a 30% quarterly increase in sales throughout the rest of the world. The majority of this sales and growth have come from kidney cancer and this growth is expected to moderate due to <span class="blsp-spelling-corrected" id="SPELLING_ERROR_10">competition</span> from Pfizer's kinase inhibitor, <span class="blsp-spelling-error" id="SPELLING_ERROR_11">Sutent</span>. The company and investors <span class="blsp-spelling-corrected" id="SPELLING_ERROR_12">believe</span> China could be a great source of growth with its growing middle class population. They expect the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_13">Chinese</span> to be able to afford a $4,000/month treatment. I am not sure I agree that there will be significant sales from china in the near term as I believe $4,000/month payment is hard for people who are the cheapest labor force in the world!<br /><br /><br />On the other hand, Onyx has the advantage of having a <span class="blsp-spelling-corrected" id="SPELLING_ERROR_14">pipeline</span>-in-a product. <span class="blsp-spelling-error" id="SPELLING_ERROR_15">Nexava</span>, a multi-<span class="blsp-spelling-error" id="SPELLING_ERROR_16">kinase</span> inhibitor of cell growth and proliferation, has been shown to be safe and effective in Kidney and liver cancers. The company is currently performing clinical trials to assess its performance in Small Cell Lung Cancer, Melanoma and Breast Cancer. Theoretically, a <span class="blsp-spelling-error" id="SPELLING_ERROR_17">mutli</span>-<span class="blsp-spelling-error" id="SPELLING_ERROR_18">kinase</span> inhibitor can slow down disease progression in all these disease if they rely on the same <span class="blsp-spelling-error" id="SPELLING_ERROR_19">kinases</span> for their growth as the ones inhibited by <span class="blsp-spelling-error" id="SPELLING_ERROR_20">Nexavar</span>.<br /><br /><br />Given its specific mechanism of action with flexibility to treat many types of cancer, <span class="blsp-spelling-error" id="SPELLING_ERROR_21">Nexavar</span> can become a huge blockbuster. However besides clinical challenges, the company may face increased competition from other companies. Almost every big <span class="blsp-spelling-error" id="SPELLING_ERROR_22">pharma</span> and many small biotechnology companies have been working on <span class="blsp-spelling-error" id="SPELLING_ERROR_23">kinase</span> inhibitors to treat cancer and immune diseases. <span class="blsp-spelling-error" id="SPELLING_ERROR_24">Nexavar's</span> success may have paved the way for the competition. <span class="blsp-spelling-error" id="SPELLING_ERROR_25">Statins</span> and HIV protease inhibitors come in mind as fields with many copy cat drugs.<br /><br /><br />In the short term , Onyx will be spending a lot of cash on all of these clinical trials to expand usage of <span class="blsp-spelling-error" id="SPELLING_ERROR_26">Nexavar</span> which will eat into its profits. Onyx has about $450 million in cash reserves and can afford to spend some money on these critical trials. I am guessing Bayer will pick up some costs as well. Onyx also has to share 50% of its revenues with Bayer which makes it more difficult to increase earnings per share. However, I believe the company has a great head start and will <span class="blsp-spelling-error" id="SPELLING_ERROR_27">have</span> market exclusivity for the next 3-5 years.<br /><br /><br />I believe the early surprise profits have attracted some hasty investors which has made <span class="blsp-spelling-error" id="SPELLING_ERROR_28">ONXX</span> overvalued in the short term with a market cap of $3 billion. In other words, the easy money has been made! The company will most likely post some losses in the coming quarters and we may see the stock drift lower. In addition of sales growth, the success of <span class="blsp-spelling-error" id="SPELLING_ERROR_29">Nexavar</span> in trials for treating other types of cancer will be a key to the stock movement in 2008. I would recommend to wait for a better buying opportunity in shares on <span class="blsp-spelling-error" id="SPELLING_ERROR_30">ONXX</span>.<br /><br /><br /><br /><em><strong>Disclosure</strong>:</em> The author does not currently have a position in <span class="blsp-spelling-error" id="SPELLING_ERROR_31">ONXX</span>.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com1tag:blogger.com,1999:blog-34364080.post-90247986700696150702007-10-21T19:18:00.002-04:002008-12-10T09:31:18.869-05:00Vertex's sell off is a great buying opportunity<a href="http://1.bp.blogspot.com/_hLsahqNsnxY/Rxvn47dEH7I/AAAAAAAABDo/iXaCLkz3j-I/s1600-h/vrtx.gif"></a><br /><br /><div>Vertex <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Pharmaceutical's</span> stock (VRTX)dropped about $5 or 14% to $30 on the news release that <span class="blsp-spelling-error" id="SPELLING_ERROR_2">Schering</span> Plough's Protease inhibitor <span class="blsp-spelling-error" id="SPELLING_ERROR_3">Boceprivir</span>, which had performed poorly in previous trials, showed that about 79% of patients achieved early response. As soon as this news came out( with no trial result detail) , an analyst from <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Cowen</span> and Co. downgraded Vertex due to concerns from competition.<br /><br />First of all, the size of this market (up to $4 billion annual estimated sales) makes competition less of a factor. Second, being first to market increases the probability of success of any product but it does not <span class="blsp-spelling-corrected" id="SPELLING_ERROR_5">guarantee</span> it. Third, the details of the <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Schering</span> trial will make us realize that Telaprevir is still argubly the best product with most clinical data. For example, in the <span class="blsp-spelling-error" id="SPELLING_ERROR_8">Boceprivir</span> trial, patients were primed with Peg-interferon and <span class="blsp-spelling-error" id="SPELLING_ERROR_9">ribavirin</span> before the start of triple drug therapy. Also, no long term sustainability of response rates are available beyond the original 12 week data mentioned in the abstract. Finally, the drop out rates due to side effects, the unknown methodology for calculation of percent responders as well the higher minimum detection limit of the <span class="blsp-spelling-error" id="SPELLING_ERROR_11">PCR</span> assay used to determine virus levels makes me question the strength of these results.<br /><br />I still believe <span class="blsp-spelling-error" id="SPELLING_ERROR_12">Telaprevir</span> is the front r<span class="blsp-spelling-error" id="SPELLING_ERROR_13">unner</span> to hit the market before any other new <span class="blsp-spelling-error" id="SPELLING_ERROR_14">HCV</span> <span class="blsp-spelling-corrected" id="SPELLING_ERROR_15">medications</span> and w<span class="blsp-spelling-corrected" id="SPELLING_ERROR_16">ill</span> capture a good percentage of the world wide market thanks to its partnership with J&J.<br /><br /><span class="blsp-spelling-error" id="SPELLING_ERROR_17">VRTX</span> stock is a great buy at these levels as I believe a blockbuster product in a multi-billion dollar market should value the company between $6-10 billion market cap once <span class="blsp-spelling-error" id="SPELLING_ERROR_18">Telaprevir</span> is in Phase III. Days like these, I am glad that the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_19">efficient</span> market theory, which is taught at every <span class="blsp-spelling-corrected" id="SPELLING_ERROR_20">fiance</span> school, is somewhat flawed for smaller companies and individual investors can take advantage of <span class="blsp-spelling-corrected" id="SPELLING_ERROR_21">under-priced</span> securities. As retail investors, we should recognize and plan for these events.<br /><br /><img id="BLOGGER_PHOTO_ID_5123944146670985154" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://3.bp.blogspot.com/_hLsahqNsnxY/RxvoDbdEH8I/AAAAAAAABDw/iT8GZZ6aCAw/s400/vrtx-oct2007.bmp" border="0" /><br />I had previously owned stocks and leaps in <span class="blsp-spelling-error" id="SPELLING_ERROR_22">VRTX</span>. Given this recent movement, I have added some medium term calls 2-6 months, to take advantage of a possible run after the earnings report and the release of more clinical trial results in November. However, given the <span class="blsp-spelling-error" id="SPELLING_ERROR_23">difference</span> of opinion by analysts and other shareholders who have sold their shares recently, I am holding on to some puts as a hedge.<br /><br /><strong>Bottom Line:</strong> Buy <span class="blsp-spelling-error" id="SPELLING_ERROR_24">VRTX</span> at these levels and hold for a long term for a possible 2-5 times returns in the next few years.<br /><br /><span class="blsp-spelling-corrected" id="SPELLING_ERROR_25">Disclosure</span>: The author owns shares and options in <span class="blsp-spelling-error" id="SPELLING_ERROR_26">VRTX</span>. </div>JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-91279534523418430082007-10-16T08:25:00.001-04:002008-06-29T20:44:15.695-04:00Take profits in Biogen-Idec (BIIB)The rumors of a buy out sent <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Biogen</span>-<span class="blsp-spelling-error" id="SPELLING_ERROR_1">Idec</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_2">BIIB</span>) shares up about $13 dollars to over $82 per share. I first recommended <span class="blsp-spelling-error" id="SPELLING_ERROR_3">BIIB</span> last year at $44.6 based on the potential success of <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Tysabri</span> in treating MS (<a href="http://biotechnology-stock.blogspot.com/2006_09_27_archive.html">link</a> to that article). As of today's price, the stock is up 84% and I am recommending to sell and to take any <span class="blsp-spelling-error" id="SPELLING_ERROR_5">profits</span> as I believe a buyout is far from certain and any changes to these speculations will send the stock back down to $70.<br /><br />Buying at these levels is definitely not recommended since the price is way too expensive based on fundamentals.<br /><br /><br /><br /><br /><strong>Disclosure: The author does not have a position in <span class="blsp-spelling-error" id="SPELLING_ERROR_6">BIIB</span> at this time.</strong>JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-79988101076436927452007-10-05T21:50:00.001-04:002008-12-10T09:31:19.171-05:00Genzyme (GENZ) stock breaks out on good news<span class="blsp-spelling-error" id="SPELLING_ERROR_0">Genzyme</span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_1">GENZ</span>) saw its shares break out last week from $62.5 to over $68 on higher than average volume. The weekly chart below demonstrates this movement and its significance as it broke a long term trend of lower highs that started in 2005.<br /><br /><br /><br /><img id="BLOGGER_PHOTO_ID_5118037436651605010" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 429px; CURSOR: hand; HEIGHT: 356px; TEXT-ALIGN: center" height="341" alt="" src="http://4.bp.blogspot.com/_hLsahqNsnxY/Rwbr7p7FDBI/AAAAAAAAArw/0k8vuG8CuRk/s400/GENZ-oct5.jpg" width="414" border="0" /><br /><br /><br />This move was catalyzed by the O<span class="blsp-spelling-error" id="SPELLING_ERROR_2">ctober</span> 4<span class="blsp-spelling-error" id="SPELLING_ERROR_3">th</span> vote by <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Bioenvision</span> shareholders to decide the fate of the sale of the company to <span class="blsp-spelling-error" id="SPELLING_ERROR_5">Genzyme</span>.<br /><br /><br /><br />In addition, on Friday, <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Genzyme</span> announced approval of <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Elaprase</span>, its enzyme replacement <span class="blsp-spelling-error" id="SPELLING_ERROR_8">therapy</span> to treat Hunter syndrome. The company is seeking approval in other countries as well.<br /><br /><br /><br />I believe this latest strong should be considered a great buying opportunity. The stock has had a strong move this week and may move sideways for some time but the charts signal a break out and the stock should move towards new highs. I have previously mentioned the low historical valuation of <span class="blsp-spelling-error" id="SPELLING_ERROR_9">GENZ</span> which was trading at 15.9 times 2008 earnings (click <a href="http://biotechnology-stock.blogspot.com/2007_09_22_archive.html">here</a> to see that article). I anticipate $80 price per share within 3-6 months.<br /><br /><br /><strong>Bottom line:</strong> Buy GENZ for the short and long term potential.<br /><br /><br />Disclosure: The author has a long position in this stockJMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-36247793539504173072007-10-03T19:32:00.002-04:002008-12-10T09:31:19.437-05:00Promising Future for Pharmasset's (VRUS) Hepatitis C Drug CandidatePharmasset (VRUS) is a clinical stage pharmaceutical company focused on developing antiviral medicines. Their research is focused on development of class of compounds known as nucleoside analogs. Nucleosides are the building blocks of DNA and RNA and used by virus proteins during replication and growth. The analog drug is a small chemical variation of the natural nucleoside which inhibits the activity of the enzyme leading to disruption in replication. This approach has the advantage of a high rate of success as the the natural nucleoside gives a great starting point for developing a drug in addition to a potentially low side effect profile and resistance to mutation. The disadvantages include limited potency and slow metabolism. Pharmasset has programs for treating Hepatitis B and HIV, but intrigues me the most is its Hepatitis C program. R7128 is a prodrug ( meaning it gets metabolized into the active drug after it enters the body) is an oral cytidine analog polymerase inhibitor of Hepatitis C virus. Last month, the company released positive preliminary of a phase I clinical trial which showed a 2.7 log reduction of viral load after 14 days in patients that have failed to respond to standard therapy. These results were strong enough for Pharmasset and its partner Roche to aggressively advance the product into further clinical trials to look into longer duration of therapy along with standard of care. There are other companies with polymerase inhibitors in the clinic for treatment of HCV including Gilead, Idenix and Viropharma. This class of drugs has shown to have toxicities in long term dosing. I believe HCV will eventually be treated with a combination of protease ( VRTX Telaprivir being the leading candidate), polymerase inhibitors as well as interferon with or without Ribavirin.<br /><br />Another reason why I like this company is its small size. The company has a market cap of nearly 300 million and any good data will make the stock move significantly. The company has 65 million in cash and Roche as a big pharma partner to take on the clinical costs. The stock had its IPO in April and has had almost a 50% rise.<br /><br /><br /><br /><br /><img id="BLOGGER_PHOTO_ID_5117277482481828066" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://4.bp.blogspot.com/_hLsahqNsnxY/RwQ4wgBvQOI/AAAAAAAAAnc/9L1Xal1J5Rc/s400/vrus-oct07.bmp" border="0" /><br /><br />I would recommend VRUS only as a buy with a long-term outlook. It will be very volatile but with patience and luck this stock could have significant returns in a few years.<br /><br /><strong>Disclosure: At this time the author does not have a position in VRUS. The author has a long position in VRTX.</strong>JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-14018872456806333262007-09-24T10:51:00.000-04:002007-09-24T11:01:31.613-04:00New Poll Feature on Biotechnology Stock BlogIn an attempt to have a more interactive blog and to hear more feedback from subscribers I have decided to add a Polling feature. You can find this tool on the right hand side of this page. I am hoping this tool will allow all of us to see the majority's response to a particular investment related topic and <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">compare</span> it to our own personal views. With 116 subscribers the results should be statistically significant. Also, you can suggest Poll questions by emailing me at <a href="mailto:arsaadat1@gmail.com">arsaadat1@gmail.com</a><br /><br />The first Poll question is a very general question regarding your sentiment on the Biotechnology sector in 2008. I happen to be very bullish (greater than 25% return). I am interested to see how the majority feels. Going <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">foreword</span>, I am thinking about asking questions regarding small cap or large cap <span class="blsp-spelling-error" id="SPELLING_ERROR_2">biotech</span> sectors and individual stocks.<br /><br />Again, your feedback is extremely beneficial.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com1tag:blogger.com,1999:blog-34364080.post-16798658380649738132007-09-22T15:45:00.001-04:002008-12-10T09:31:19.864-05:00First Annual Performance ReviewMy last performance review was in April of this year. I have not been writing much recently and not due to laziness. The reason for this lack of activity was my overall skepticism of the markets. Two sharp corrections <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">happened</span> this year in March and in August, from which the markets have strongly rebounded. The underlying <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">economy</span> however was extremely weak and it looked like we were going into a recession induced by a crisis in the housing market. The fed however decided to reduce interest rates earlier this month to avoid a recession. I believe this was a mistake. I don't think the Fed's job was to bail out bad hedge funds, bad loan under writers and consumers who made poor decisions by making borrowing cheap again. I believe the long term effects of this act will be increased inflation, higher long maturity bonds and a collapse in the dollar. I hope I am wrong!<br /><br />But the m<span class="blsp-spelling-corrected" id="SPELLING_ERROR_2"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">acroeconomy</span></span> is not the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_3">topic</span> of this blog. I should instead talk about how this will affect Biotechnology and Pharmaceutical stocks. Since <span class="blsp-spelling-error" id="SPELLING_ERROR_4"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">Biotechs</span></span> in general have low amounts of debt, the effect of lower costs of borrowing on profit margins will be minimal. For Big <span class="blsp-spelling-error" id="SPELLING_ERROR_5"><span class="blsp-spelling-error" id="SPELLING_ERROR_2">Pharma</span></span> however there will be significant increases in earnings due to lower costs of borrowing and a better foreign exchange rate due to weaker dollar. <span class="blsp-spelling-error" id="SPELLING_ERROR_6"><span class="blsp-spelling-error" id="SPELLING_ERROR_3">Biotech</span></span> is still a product driven not a consumer driven industry so the impact of the rate cuts will be minimal to the revenues of this industry.<br /><br />If I had to sum up 2007 ( to date) for <span class="blsp-spelling-error" id="SPELLING_ERROR_7"><span class="blsp-spelling-error" id="SPELLING_ERROR_4">Biotech</span></span> Stocks in one word it would be UNEVENTFUL. <span class="blsp-spelling-error" id="SPELLING_ERROR_8"><span class="blsp-spelling-error" id="SPELLING_ERROR_5">Charly</span></span> Travers from <span class="blsp-spelling-error" id="SPELLING_ERROR_9">Motley</span> Fool.com probably had the best prediction for <span class="blsp-spelling-error" id="SPELLING_ERROR_10"><span class="blsp-spelling-error" id="SPELLING_ERROR_6">Biotech</span></span> stocks in 2007. I don't have the link but he basically predicted a flat year due to lack of important product launches. Indeed the story this year was that most <span class="blsp-spelling-error" id="SPELLING_ERROR_11"><span class="blsp-spelling-error" id="SPELLING_ERROR_7">Biotechs</span></span> met their expectations but the lofty historical <span class="blsp-spelling-error" id="SPELLING_ERROR_12"><span class="blsp-spelling-error" id="SPELLING_ERROR_8">PEs</span></span> has shrunk.<br /><br />Last year, I had analyzed the PE to Growth ratios of some big <span class="blsp-spelling-error" id="SPELLING_ERROR_13"><span class="blsp-spelling-error" id="SPELLING_ERROR_9">Biotech</span></span> names and identified <span class="blsp-spelling-error" id="SPELLING_ERROR_14"><span class="blsp-spelling-error" id="SPELLING_ERROR_10">CELG</span></span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_15"><span class="blsp-spelling-error" id="SPELLING_ERROR_11">Celgene</span></span>) as the cheapest based on PEG analysis. It is interesting to visit those numbers again 12 months later to see if they tell a story. Click on the following image to see this analysis. The top table is the analysis done in 2006. The bottom table is the same analysis in 2007 and the colors show which stocks went up and down in that time.<br /><br /><br /><img id="BLOGGER_PHOTO_ID_5113125574701429906" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_hLsahqNsnxY/RvV4nqQLNJI/AAAAAAAAAms/hFQG6Lv5TsY/s400/biotech+PEG-sep2007.jpg" border="0" /><br /><br /><br /><br /><br /><br />Interestingly, <span class="blsp-spelling-error" id="SPELLING_ERROR_16"><span class="blsp-spelling-error" id="SPELLING_ERROR_12">CELG</span></span> is still the cheapest of these stocks with a PEG of 1.14. However, I am going with <span class="blsp-spelling-error" id="SPELLING_ERROR_17"><span class="blsp-spelling-error" id="SPELLING_ERROR_13">BIIB</span></span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_18"><span class="blsp-spelling-error" id="SPELLING_ERROR_14">Biogen</span></span> <span class="blsp-spelling-error" id="SPELLING_ERROR_19"><span class="blsp-spelling-error" id="SPELLING_ERROR_15">Idec</span></span>) and <span class="blsp-spelling-error" id="SPELLING_ERROR_20"><span class="blsp-spelling-error" id="SPELLING_ERROR_16">GENZ</span></span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_21"><span class="blsp-spelling-error" id="SPELLING_ERROR_17">Genzyme</span></span>) as my picks for 2008 because they have a more diversified portfolio of products with revenues than <span class="blsp-spelling-error" id="SPELLING_ERROR_22"><span class="blsp-spelling-error" id="SPELLING_ERROR_18">CELG</span> who is dependent on <span class="blsp-spelling-error" id="SPELLING_ERROR_19">Revlimid</span> for most of its revenue</span>. One bad earnings quarter and <span class="blsp-spelling-error" id="SPELLING_ERROR_23"><span class="blsp-spelling-error" id="SPELLING_ERROR_20">CELG</span></span>’s price could see a huge decline. I am most bullish on <span class="blsp-spelling-error" id="SPELLING_ERROR_24"><span class="blsp-spelling-error" id="SPELLING_ERROR_21">GENZ</span></span> because they have <span class="blsp-spelling-corrected" id="SPELLING_ERROR_25">consistently</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_26">beat</span> estimates but the stock is actually down from last year. So, If I have to make one pick for a large cap <span class="blsp-spelling-error" id="SPELLING_ERROR_27"><span class="blsp-spelling-error" id="SPELLING_ERROR_22">Biotech</span></span> in 2008 it is <span class="blsp-spelling-error" id="SPELLING_ERROR_28"><span class="blsp-spelling-error" id="SPELLING_ERROR_23">GENZ</span></span>. I also can not expect too many bad years from DNA (<span class="blsp-spelling-error" id="SPELLING_ERROR_29"><span class="blsp-spelling-error" id="SPELLING_ERROR_24">Genentech</span></span>) so I will recommend that as well. I don't like GILD (Gilead), according to a PEG of 2.5, they are overpriced. Finally, <span class="blsp-spelling-error" id="SPELLING_ERROR_30"><span class="blsp-spelling-error" id="SPELLING_ERROR_25">AMGN</span></span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_31"><span class="blsp-spelling-error" id="SPELLING_ERROR_26">Amgen</span></span>) had a tough year. They have a great <span class="blsp-spelling-error" id="SPELLING_ERROR_32"><span class="blsp-spelling-error" id="SPELLING_ERROR_27">pipleline</span></span> and will make a come back but I am staying away until I see poof that things are better.<br /><br /><br /><br /><br /><br /><span class="blsp-spelling-error" id="SPELLING_ERROR_33"><span class="blsp-spelling-error" id="SPELLING_ERROR_28">CELG</span></span> is in interesting stock which affected the performance of my picks this year. The table below shows an update of my historical <span class="blsp-spelling-error" id="SPELLING_ERROR_34"><span class="blsp-spelling-error" id="SPELLING_ERROR_29">biotech</span></span> and non-<span class="blsp-spelling-error" id="SPELLING_ERROR_35"><span class="blsp-spelling-error" id="SPELLING_ERROR_30">biotech</span></span> picks.<br /><br /><br /><br /><p><img id="BLOGGER_PHOTO_ID_5113127619105862818" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_hLsahqNsnxY/RvV6eqQLNKI/AAAAAAAAAm0/vWtYAOlflqQ/s400/performance-+Sept+2007.jpg" border="0" />I have highlighted some <span class="blsp-spelling-corrected" id="SPELLING_ERROR_36"><span class="blsp-spelling-error" id="SPELLING_ERROR_31">intersting</span></span> results from the portfolio First, the overall return on the stock component is much lower than the two <span class="blsp-spelling-error" id="SPELLING_ERROR_37"><span class="blsp-spelling-error" id="SPELLING_ERROR_32">Biotech</span></span> indices. In the past 12 months, my stock portfolio yielded a 10% return while <span class="blsp-spelling-error" id="SPELLING_ERROR_38"><span class="blsp-spelling-error" id="SPELLING_ERROR_33">NBI</span></span> index had a return of 15% and the <span class="blsp-spelling-error" id="SPELLING_ERROR_39"><span class="blsp-spelling-error" id="SPELLING_ERROR_34">BTK</span></span> (large caps) returned an impressive 25%. I blame all of this <span class="blsp-spelling-error" id="SPELLING_ERROR_40">under performance</span> on getting out of <span class="blsp-spelling-error" id="SPELLING_ERROR_41"><span class="blsp-spelling-error" id="SPELLING_ERROR_35">CELG</span></span> too early. It was a rather costly mistake. One that I hope I will not repeat. I was also <span class="blsp-spelling-error" id="SPELLING_ERROR_42"><span class="blsp-spelling-error" id="SPELLING_ERROR_36">bady</span></span> hurt by lack of performance in my small cap <span class="blsp-spelling-error" id="SPELLING_ERROR_43"><span class="blsp-spelling-error" id="SPELLING_ERROR_37">biotech</span></span> names (<span class="blsp-spelling-error" id="SPELLING_ERROR_44"><span class="blsp-spelling-error" id="SPELLING_ERROR_38">Altus</span></span> and Arena) but I like both in the long term. I should also mention that I stayed away from good small cap stocks such as <span class="blsp-spelling-error" id="SPELLING_ERROR_45"><span class="blsp-spelling-error" id="SPELLING_ERROR_39">ALNY</span></span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_46"><span class="blsp-spelling-error" id="SPELLING_ERROR_40">Alnylam</span></span>) which would have been helpful to my returns.</p><p></p><p>On the bright side, the options helped me get some additional returns. In the past I was not able to quantify their impact. However, going forward I can accomplish this by calculating the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_47">return</span> on underlying collateral required for a naked option. Trading wisely with options could improve any <span class="blsp-spelling-error" id="SPELLING_ERROR_41">por</span><span class="blsp-spelling-error" id="SPELLING_ERROR_48"><span class="blsp-spelling-error" id="SPELLING_ERROR_42">tfolio's</span></span> return and protect against <span class="blsp-spelling-error" id="SPELLING_ERROR_49">volatility</span> so I am going to keep investing with both options and stocks.</p><br />The Non-<span class="blsp-spelling-error" id="SPELLING_ERROR_50"><span class="blsp-spelling-error" id="SPELLING_ERROR_43">Biotech</span></span> stocks had a much nicer return for a few reasons. This was mostly due to the fact that I was not exposed directly to any <span class="blsp-spelling-error" id="SPELLING_ERROR_51">sub prime</span> stocks such as the investment banks, regional banks, construction or mortgage brokers. I was also helped greatly by returns in <span class="blsp-spelling-error" id="SPELLING_ERROR_52"><span class="blsp-spelling-error" id="SPELLING_ERROR_44">GME</span></span> (<span class="blsp-spelling-error" id="SPELLING_ERROR_53"><span class="blsp-spelling-error" id="SPELLING_ERROR_45">Gamestop</span></span>) and MA (<span class="blsp-spelling-error" id="SPELLING_ERROR_54"><span class="blsp-spelling-error" id="SPELLING_ERROR_46">Mastercard</span></span>) which I still like going <span class="blsp-spelling-corrected" id="SPELLING_ERROR_55">foreword</span>. I will add shares of <span class="blsp-spelling-error" id="SPELLING_ERROR_56"><span class="blsp-spelling-error" id="SPELLING_ERROR_47">GOOG</span></span>(Google) and (<span class="blsp-spelling-error" id="SPELLING_ERROR_57"><span class="blsp-spelling-error" id="SPELLING_ERROR_48">AAPL</span></span>) for tech names as well as shares of TIE (<span class="blsp-spelling-error" id="SPELLING_ERROR_58"><span class="blsp-spelling-error" id="SPELLING_ERROR_49">Titanim</span></span> Metals) and COP ( <span class="blsp-spelling-error" id="SPELLING_ERROR_59"><span class="blsp-spelling-error" id="SPELLING_ERROR_50">Conoco</span></span> Phillips) to get exposure to commodities that get helped with weak dollar. Lastly, I like exchanges <span class="blsp-spelling-error" id="SPELLING_ERROR_60"><span class="blsp-spelling-error" id="SPELLING_ERROR_51">CME</span></span> (Chicago Mercantile Exchange) and <span class="blsp-spelling-error" id="SPELLING_ERROR_61"><span class="blsp-spelling-error" id="SPELLING_ERROR_52">NMX</span></span>( <span class="blsp-spelling-error" id="SPELLING_ERROR_62"><span class="blsp-spelling-error" id="SPELLING_ERROR_53">Nymex</span></span>) as increased commodity and futures trading and volatility in addition to consolidation in the industry will help both exchanges.<br /><br /><strong>Bottom line</strong>: 2007 was a lackluster year for <span class="blsp-spelling-error" id="SPELLING_ERROR_63"><span class="blsp-spelling-error" id="SPELLING_ERROR_54">biotech</span></span> sector and I look forward to a better 2008 because of increase in <span class="blsp-spelling-corrected" id="SPELLING_ERROR_64">product</span> development. I expect <span class="blsp-spelling-error" id="SPELLING_ERROR_55">GENZ</span>, <span class="blsp-spelling-error" id="SPELLING_ERROR_56">BIIB</span> and DNA to outperform their peers. I am still very bullish on <span class="blsp-spelling-error" id="SPELLING_ERROR_57">VRTX</span> as well.<br /><br />My goal is to improve on my picks and the timing of my trades in order to beat the <span class="blsp-spelling-error" id="SPELLING_ERROR_58">Biotech</span> indices in 2008.<br /><br /><strong><em>Disclosure:</em> The author holds long positions and actively trades in stocks recommended in this article and their options.</strong>JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com2tag:blogger.com,1999:blog-34364080.post-36929383320062117812007-08-18T14:18:00.001-04:002008-12-10T09:31:20.048-05:00Biotech sector, the posterchild for volatility, shows resilience in chaotic marketsBack In March, I wrote about my expectations for a painful and drastic downturn in April and May (<a href="http://biotechnology-stock.blogspot.com/2007/03/march-madness-may-continue-into-april.html">link</a> to that article). I was wrong. The Dow, the <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Nasdaq</span> and S&P <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">continued</span> to new highs while the <span class="blsp-spelling-error" id="SPELLING_ERROR_2">biotech</span> sector was flat despite posting solid Q2 earnings. Timing was not my only mistake. In my past experience, <span class="blsp-spelling-error" id="SPELLING_ERROR_3">biotech</span> stocks, specially ones with no earnings, have been hammered in bad markets and I expected that to happen again. But to my surprise, <span class="blsp-spelling-error" id="SPELLING_ERROR_4">biotechs</span> have been rather strong in an otherwise market that could be described as chaotic. This volatility has extended to include sectors and companies that do not have direct relationships to the real estate or mortgage industry (Boeing is a great example of this). I am guessing hedge funds that are in trouble are forced to sell stocks that have performed well to cover margin calls or redemptions.<br /><br />Beside the <span class="blsp-spelling-error" id="SPELLING_ERROR_5">subprime</span> mess, there are signs of an economic slow down. Auto sales have been significantly down while retail sale have been just OK. The unemployment numbers are still low but are showing signs of deterioration. These are all good reasons to stick with large cap multi national companies of S&P and healthcare related stocks. Historically, pharmaceutical companies have been nicknamed defensive because their earnings are somewhat immune to economic downturns. I don't think this time around will be any different. I would recommend mixing a few good biotech names (CELG, BIIB, GENZ, AMLN) with good big pharma names such as (WYE, ABT, JNJ), maybe a good medical device company (ISRG, HNSN) and a couple of long shots (ALTU, VRTX, PDLI) into the Healthcare portion of any portfolio, which should be overweighted at this stage.<br /><br />Those who like bottom fishing and have a long-term outlook should consider Amgen's (AMGN) poor performance this year as an opportunity to buy at good value. Despite problems with blockbuster Anaresp, the company is taking measures to sustain earnings with cost cutting measures and posesses a great pipeline of products in clinical stage.<br /><br />For the short term traders, the following chart shows a strong correlation between MACD and price movement of the Nasdaq Biotech index (^NBI). In April oft this year and August of last year, when MACD histogram turned positive and the short term MA line crossed over the long term, it signaled a buy. I would watch for this in the next few weeks as a good signal to get in. It looks like the index is now roughly half way between 860 (resistance) and 760 (support). Unless the index crosses over resistnace, there is significant chance of sideways or a down side move.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://2.bp.blogspot.com/_hLsahqNsnxY/Rsh82rbR5AI/AAAAAAAAAUs/sJeQB2O_FQk/s1600-h/NBI+august.png"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="http://2.bp.blogspot.com/_hLsahqNsnxY/Rsh82rbR5AI/AAAAAAAAAUs/sJeQB2O_FQk/s400/NBI+august.png" alt="" id="BLOGGER_PHOTO_ID_5100463856809010178" border="0" /></a><br />Bottom line: Lack of panic selling in small, mid and large biotechs may indicate that momentum players and value players are lining up to buy these stocks in anticipation of a minor to severe downturn in the economy. It is perhaps a good time to overweight this sector in your portfolio.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-1416245663023764392007-05-31T22:36:00.000-04:002008-12-10T09:31:20.223-05:00Altus Pharmaceuticals (ALTU) is showing clinical and financial progress<div><br />Altus Pharmaceuticals (ALTU) is a small cap (~$400M) market cap biopharmaceutical company with a unique crystallization technology that amongst other things allows for better purity and longer half life for other wise rapidly broken down proteins and enzymes. This technology is very difficult to master and creates a natural barrier to entry even beyond patent expiration. I have previously written about ALTU when the stock was trading around $18 back in November 2006 (<a href="http://biotechnology-stock.blogspot.com/2006/11/altus-pharmaceuticals-altu-long-term.html">link</a>).<br /><br /><br />Since then Altus has signed a development and commercialization agreement with Genentech (DNA) (link) for ALTU-238 a longer acting version of human growth hormone currently in phase II clinical trials with a $2 billion market.<br /><br /><br />On May 10th, Altus announced initiation of a phase III clinical trial for ALTU-135, an enzyme replacement therapy for Cystic Fibrosis. To fund this large and expensive trial, Altus had a stock offering earlier this year which raised about $89 Million dollars.<br /><br /><br />Altus' pipeline contains other promising pre-clinical products including ALTU -237 (oral)for kidney stones and ALTU-236 (oral) for phenyloketonurea.<br /><br /><br />Altus has a high probability of success mostly because of their first two products are improved versions of existing products, which lowers the degree of difficulty because they do not have the burden of a proof-of-principal that a novel medicine must overcome.<br /><br /><br />For some strange reason, Altus' financials do not reflect the new money raised through public offering. The correct balance sheet cash should be closer to $200 million. The company is undervalued with a market cap of only $413 million at $13/share with about $6/share in cash, a partnership with Genentech and two products in or near phase III. I expect the stock to rise to $20-25 by year end as more clinical trial data becomes available or a new phase III is started </div><div>for ALTU-238.<br /></div><img id="BLOGGER_PHOTO_ID_5070919496138303826" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_hLsahqNsnxY/Rl-GajPtKVI/AAAAAAAAADQ/4LcxI_jW14w/s400/altu-may07.png" border="0" /><br /><br />Disclaimer: The author has an investment position in ALTU.JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0tag:blogger.com,1999:blog-34364080.post-23331129540370756352007-05-16T09:01:00.001-04:002008-12-10T09:31:20.611-05:00Vertex Pharmaceutical's (VRTX) Telaprivir is effective, but path to market needs clarificationOn April 14th, Vertex Pharmaceuticals release highly anticipated Phase II clinical trial (PROVE1) results of its Hepatitis-C treatment Telaprivir. The results of the interim analysis are shown in the table below. The full press release with additional information can be found <a href="http://www.vrtx.com/Pressreleases2007/pr041407.html">here</a>.
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<br />The results look impressive as they show a rapid response in Telaprivir treated patients vs. plaebo in the first 4 weeks. However, the interpretation of results at 12 weeks becomes questinable due to lack of statistical significance. Analysts were focusing on a small subset of 20 patients who were to receive the Vertex drug for just 12 weeks and then be checked 20 weeks later for signs of relapse. Here is the quoted text from the press release regarding those 20 patients:
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<br />"<em>Analysis of PROVE 1 Patients who Finished All Treatment at 12 Weeks.</em> Seventeen of 175 patients received at least one dose of telaprevir in “Arm D” of the PROVE 1 study (telaprevir + peg-IFN + RBV). According to the study protocol, patients in Arm D were eligible to stop all treatment at week 12 if they met on-treatment criteria, including the achievement of RVR (<10>The one obvious conclusion that can be made from looking at this data is that the number of patients are too low to make any extrapolation on percent responders. The other conclusion is that 12 week therapy may not be sufficient to reach undetectable levels in a significant portion of the patients. However, the fact that more patients respond to longer periods of treatment with standard of care ( SOC is Interferon + Rivbavirin) suggests that patients on SOC + TVR may also benefit from this increase. The company has already started Phase II ( Prove 2 and 3) trials with larger number of patients with regimens of at least 24 weeks. This means longer clinical trials, higher costs of trials and lower chance of a quick approval and launch in 2009. This would explain lack of a upward stock movement after the release of the results. </div><div>The other issue of higher incidence of drop outs should not be a significant issue. Since, this was a trial most patients and physicians are careful with side effects. In practice and after approval, it is safe to assume more patients will be encouraged to withstand the side effects (severe rash which exists in SOC and can be treated).
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<br /></div><div>VRTX has also released their quarterly financial report and as expected they spent a significant amount of money on materials for phase III clinical trials which are expected to begin in Q4. Even after paying down some long term debt, VRTX still has a hefty $655 million in cash and short term securities which should be enough to fund the launch of Telaprivir.
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<br />Since the release of earnings and clinical trial results the stock has been trading between $30 and $32. I waited a few weeks before writing this post to see the reaction of the market to the data. The reaction of investors since then has been of cautious optimism. The stock seems to have found a support at $30, but if there is a large sell-off in the market, VRTX will see more volatility than stocks with earnings. The data has clearly shown that Telaprivir is safe and is an improvement to existing therapy, giving it a high probability of becoming a blockbuster. The rest of Phase II data, which are scheduled to be released in November will determine the inevitable path to market. The stock should end the year higher than these levels and has a minor probability of a significant downside given the size and unmet need of HepC market.
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<br />JMHOhttp://www.blogger.com/profile/01825507844005241388noreply@blogger.com0