Biotechnology
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MRNA $73
08 Nov 2023 |
Investors view Moderna as simply a COVID play; that is a mistake
A few months ago, we reported on a joint venture between American biotech Moderna (MRNA $73) and German biotech Immatics NV (IMTX $10) to develop a line of cancer vaccines and therapies using the former's revolutionary mRNA technology. Consider the impact such a development could have on humanity—not to mention Moderna's future in the industry. Investors, however, remain myopically focused on the company's COVID vaccine and its dwindling sales. Granted, it was the coronavirus vaccine that transformed Moderna into one of the most profitable biotechs in the world (it is now debt free), but we are more excited about the future of mRNA technology than we are concerned about the precipitous drop in Spikevax (formerly known as COVID-19 Vaccine Moderna) sales. The world is ready to move on from the pandemic, and investors mistakenly view this firm as a one-trick pony. The massive inflow of cash from the COVID vaccine has allowed the firm to greatly increase its R&D department, and at least fifteen new products—four for rare diseases—are set to launch over the coming several years. This past July, Moderna submitted its RSV vaccine for approval in the United States and Europe, and an enhanced formulation of the flu vaccine is geared for approval in 2024. Early-stage clinical studies have begun on vaccines for HIV, Lyme disease, and the Zika virus. There are as many as 50 new pipeline candidates which should be in the clinical development stage by 2028. Moderna's intellectual property is strong, and we love the strategy of teaming with other biotechs and big pharma companies for the development of its products. For example, in a joint project with Merck (MRK $104), the company has a melanoma vaccine in phase 3 trials. From the treatment of cancer and rare diseases to a transformational new line of vaccines, Moderna's future looks bright. Investing in biotech companies is not for the faint of heart, as trial results can send a company's shares soaring or make them crater. But this biotech, with its unique IP and no debt on its books, looks to be a standout. We would place a fair value of $200 on the shares. |
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MRNA $105
IMTX $12 12 Sep 2023 |
Are cancer vaccines on the horizon? Moderna thinks so
It sounds like something straight out of science fiction, but Moderna (MRNA $105) is working to make it a reality. The $40 billion Cambridge, MA-based drug company has announced an agreement with German biotech firm Immatics NV (IMTX $12) to develop a line of cancer vaccines and therapies. The $1 billion small-cap will receive $120 million up front in a deal that could grow to nearly $2 billion, plus royalties. For Moderna, the project represents the next stage in its revolutionary mRNA technology, which proved its efficacy during the pandemic. For its part, Immatics is engaged in the research and development of T-cell redirecting immunotherapies for the treatment of cancer. The collaboration will merge the two platforms with the goal of developing a line of novel oncology therapies. Initially, cancer vaccines will be given to people who already have the disease, with the hopes that the body’s own immune system can be turned into a cancer-killing machine to prevent recurrence. By presenting tumor-specific antigens to the immune system, it will recognize them as a threat and destroy cells displaying the trait without harming healthy cells in the surrounding area. The ultimate goal would be the development of vaccines to be given to people with a high risk of the disease, but who are currently healthy. The combination of mRNA technology and the T-cell immunotherapy platform holds incredible promise in this area. The agreement between these two firms is subject to antitrust clearance in the US. In the past, we would put the odds of approval at near 100%; in the current climate, however, we put those odds at around 80%. While Immatics would be a purely speculative play on the part of investors (it brought in just $182 million in revenue last year, though $40 million did flow down as profit), Moderna looks extremely attractive at its current price. There has been an odd point of view that the company is overly reliant on its COVID vaccine for sales, which is extremely myopic. We believe many analysts cannot wrap their minds around the promise of mRNA technology and the potential growth it could bring to this company. Furthermore, Moderna operates with no debt on its books—a remarkable feat for a biotech. We would place a fair value of $210 on the shares. |
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BIIB $277
29 Sep 2022 |
Biogen was down 18% year to date, then some good news sent shares soaring 40%
We are having a serious case of déjà vu with respect to $40 billion biotech firm Biogen (BIIB $277). Last summer, shares of the firm spiked some 55% on the back of positive news regarding its experimental Alzheimer’s drug, aducanumab. In the ensuing year, shares plunged 50%—from over $400 to under $200—on doubts about the therapy’s efficacy, despite FDA approval. This week it was a new Alzheimer’s drug from the firm, lecanemab, which moved shares of the firm back up some 40% in one session. Lecanemab, which was co-developed with Japanese biotech firm Eisai (ESALY $58), slowed cognitive decline in early-stage sufferers who were enrolled in the companies’ Phase 3 Clarity trials. Unlike the prior drug’s trials, which brought a good dose of skepticism from critics, these most recent results were universally hailed by the medical community. With the drug’s potential blockbuster status over the coming years, analysts were quick to upgrade shares of Biogen, though price targets remained relatively close to the day’s trading range. Among the 32 major houses covering the stock, 18 have Outperform or Buy ratings, while the other 14 have a Hold rating. The median price target on the shares is now $267. Advances in the field of Alzheimer’s have been few and far between for the past two decades. Lecanemab holds a lot of promise, though we must now wait and see what type of support, via Medicare and insurance coverage, it will receive. We do believe, however, that the drug has the potential to generate over $1 billion in annual sales for Biogen. |
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BIIB $267
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In the war against Alzheimer's, a momentous day is coming
(31 May 2021) After a 12-month span in which most well-known health care stocks notched some impressive gains, one well-respected drug manufacturer seems to have been left behind. Biogen (BIIB $267), which has a solid bench of proven performers—like Tysabri for MS and Rituxan for cancer—and a decent pipeline of new therapies, is down 12.90% over the course of the past year. Something big is about to happen, however, that will (probably) move the shares sharply one way or the other, and send a critically-important signal on where we stand in the fight against Alzheimer's. Next Monday, the 7th of June, the US Food and Drug Administration will decide whether or not to approve the use of Biogen's Alzheimer's therapy, aducanumab. It is not just Biogen which will be watching the decision closely, it is also the families of the over six million sufferers of this terrible disease. Considering it has been nearly twenty years since an Alzheimer's therapy has been approved, a positive ruling would be an enormous win against what has been a very elusive disease. There have been some oddly positive indicators that this drug will finally win approval, such as the very unique step of the FDA preparing a briefing document alongside Biogen on aducanumab. The stakes are high: generics have been slowly eating away at the company's anchor drugs, while approval of this Alzheimer's therapy would add immensely to the company's sales outlook for years to come. Our best guess? Investors should consider buying some shares at their current price of $267 in anticipation of a huge win. |
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JAZZ
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Jazz Pharmaceuticals PLC to acquire medical cannabis company GW Pharma for $7B
(05 Feb 2021) Jazz Pharmaceuticals (JAZZ $150) is an $8 billion biotech focused in the neurosciences, including sleep disorders, and oncology, including hematologic and solid tumors. The company has a solid and growing revenue stream, and positive net income going back ten years—no small feat for a mid-cap biotech. GW Pharmaceuticals PLC (GWPH $214) is a $6.7 billion biopharma company which develops and markets cannabis-based therapies, such as the first epilepsy drug derived from the marijuana plant. This past week, the Ireland-based Jazz announced it would be acquiring the UK-based GW for approximately $7 billion in a mix of cash, debt, and newly-issued Jazz stock. This is a bold move for the company, considering the deal is worth about 90% of its own market cap and that GW hasn't turned a profit since 2012, but management believes that GW's Epidiolex drug for the treatment of epilepsy will be a billion-dollar blockbuster. Shares of Jazz were trading off about 8% on the news, while the deal sent GW Pharma shares soaring nearly 45% based on the premium paid for the acquisition. It's a bold bet, but one we like—a lot. The drop in price of JAZZ shares makes the stock even more attractive. In a crazy market where investors are bidding up to buy companies which have never turned a profit, here is a company with explosive potential that has operated in the black for a decade. |
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SRPT
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One disappointing clinical trial highlights the risks of biotech investing
(11 Jan 2021) Going into the new year, Serepta Therapeutics (SRPT $87) was a $14 billion biotech darling trading around $180 per share. With a pipeline of 40 or so therapies in various stages of development, the company is a holding in a number of top biotech funds. Then came disappointing—not disastrous—clinical trial data for SRP-9001, an experimental gene therapy for Duchenne muscular dystrophy (DMD), a genetic disorder that progressively weakens the muscles of children—generally boys, with symptoms usually appearing before age five. One might expect a small pullback in the share price from the news; instead, SRPT shares plunged over 50% in one session. It should be noted that Sarepta markets and sells two other DMD treatments which are unaffected by the SRP-9001 trial, and remains the only company with approved treatments for certain DMD patients. One noted biotech analyst lowered his price target for SRPT shares from $200 to $143, but maintained his Outperform rating on the company. Another investment firm we track places a fair value of $357 on the shares. The company, which saw a meteoric rise in sales from $5 million in 2016 to $500 million TTM, has yet to turn a quarterly profit. While a lack of income is not uncommon for early-stage biotechs, this case does point to the need for investors to perform their own fundamental research rather than relying on the number of stars in a stock report or an analyst's lofty price targets. One of the many screeners we use is designed to highlight stocks with certain characteristics which have sudden drops in share price. This has been a great contrarian tool for identifying sound companies at undervalued prices. A big price drop, however, must be accompanied by a number of positive attributes which portray a good buying opportunity. Those attributes are not in place with Sarepta, at least based on the metrics in our screener. If an investor does not wish to perform the research, the best way to take advantage of a promising industry is through a thematic or industry-specific ETF. For biotechs, we use the SPDR S&P Biotech ETF (XBI $147), which is one of the 21 holdings in the Penn Dynamic Growth Strategy. |
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MRNA
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Following in Pfizer's footsteps, Moderna brings us another step closer to controlling the pandemic
(16 Nov 2020) It truly is remarkable when you think about it. Biotech Moderna (MRNA $99) enrolled 30,000 participants one month ago for a Phase 3 trial on a vaccine to prevent a virus the world didn't know about a year ago. The group of 30,000 was split in two, with half receiving a placebo and half receiving the vaccine. There were 95 confirmed cases of Covid among the participants during the trial period: 90 in the placebo group and five in the vaccine group. Those stunning results led to Moderna's claim of a 94.5% efficacy rate and its application to the FDA for emergency use of the therapy. Shares had a double-digit rally on the news, and the week opened with a bang—just as it had done on the previous Monday thanks to Pfizer's equally-stunning results. As could be expected, the naysayers tried to throw cold water on the incredible advance, reminding us that we have a long way to go from a trial to a vaccine waiting for us in our physician's office. We disagree. Yes, there is a tragic second wave of the virus straining our health care system and killing Americans. But the same lightning-speed urgency that is bringing us these vaccines in record time will also be in place with respect to the creation and delivery of hundreds of millions of their doses. By this coming spring, we expect virtually every American who wants to get the double-dose vaccine (and that number needs to be around 60% or more of the population) to be able to set an appointment and do so. And despite the focus on vaccines, Gilead's Veklury (remdesivir) was just approved by the FDA as a Covid treatment, with a number of other therapies going through the trial stage. Expect a flourishing US economy to return by the middle of next year as the lockdowns and closures become a thing of the past. In the next issue of The Penn Wealth Report, we discuss the latest on the vaccine front, plus a look at some of the ancillary players in the battle which are not being given the credit they are due. |
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PFE
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The markets were waiting for a pandemic breakthrough; Pfizer delivered
(09 Nov 2020) After the past several Mondays leading into this week, we almost dreaded taking a look at the futures. At first glance, we couldn't believe our eyes: the Dow was up in excess of 1,500 points and the S&P was trading higher by about 160 points—5%+ gains for each. We fully expected a vaccine breakthrough in November, and had been positioning portfolios for the "re-opening" trade, but even we didn't expect the markets to show this level of enthusiasm. Our Park Hotels and Resorts (PK $14) position, for example, opened up 36% on the day, while Nordstrom (JWN $16) and Six Flags (SIX $30) were trading over 20% higher. Not far behind was the catalyst for this massive move: Pfizer (PFE $40), which we opened in the Penn Global Leaders Club on the 9th of March as the Dow was falling 2,014 points in one session, was trading higher by 15% after announcing a 90% effectiveness rate in its Covid vaccine. The news the world was waiting for finally came to fruition. How good is 90%? Considering the flu vaccine has a 40-60% efficacy rate, and vaccines which have eradicated diseases in the past were between 90% and 95% effective, this is a major breakthrough. Pfizer CEO Albert Bourla didn't mince words in his comments to CNBC's Meg Tirrell: "It is a great day for science, it is a great day for humanity...it is overwhelming." We agree. It didn't take long for the cynics and naysayers to remind everyone that it would take months and months to roll out this vaccine to the public (what a depressing life a cynic must lead), but this is truly a historic breakthrough. Light is now visible at the end of the tunnel, and markets had every reason to celebrate. |
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JNJ
MNTA |
Johnson & Johnson to buy biotech Momenta Pharma for $6.5 billion
(20 Aug 2020) One year ago, Momenta Pharmaceuticals (MNTA $12-$52-$40) was a $1.2 billion small-cap biotech with few standout therapies which might attract investors' attention. The company's work, however, did catch the eye of a much larger competitor: pharma giant Johnson & Johnson (JNJ $151) just agreed to buy the firm for $6.5 billion in cash. The catalyst for the acquisition was Momenta's experimental drug nipocalimab, a potential therapy for use in a number of autoimmune diseases. These disorders, which include type 1 diabetes, multiple sclerosis, and rheumatoid arthritis, cause either abnormally low or high activity within a person's immune system. Specifically, nipocalimab has shown promise in treating a rare blood disorder affecting fetuses and newborns. Despite the current focus on finding vaccines and therapies for Covid-19, big pharma has put a high priority on tackling autoimmune diseases, as this deal demonstrates. Somewhat surprisingly, this is the biggest acquisition in the pharma industry year-to-date, with Sanofi's recent $3.4 billion acquisition of US biotech Principia Biopharma coming in second. For investors, selecting the right micro- or small-cap biotech can be like finding a needle in a haystack, as unsuccessful trials often result in massive drops in a firm's share price. For investors looking for the next potential small- or mid-cap biotech to be acquired, the best bet is generally a focused biotech ETF with good management and a penchant for lower market caps. The SPDR® S&P Biotech ETF (XBI $112), a member of the Penn Dynamic Growth Strategy, is a good example. |
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GILD
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Gilead will begin human trials on inhaled version of remdesivir
(23 Jun 2020) Drug giant Gilead (GILD $60-$75-$86) made news a few months ago with its Covid-19 treatment remdesivir, a therapy which was showing promise in patients inflicted with the malady. Now, the biotech says it is ready to begin human trials of an inhaled version of the therapy, first in healthy adults, and soon (hopefully August) in healthier, non-hospitalized patients with the virus. Remdesivir is currently given intravenously, as a pill form of the drug would cause a chemical imbalance within the body. A successful inhaled version would mean patients could take the drug earlier in its progression, and from the comfort of their own homes. Remdesivir helps block the virus from taking over healthy cells and replicating itself in the body. We took our profits on GILD after the shares ran up to our $77 price target after news of the therapy first broke. The news with respect to both Covid therapies and vaccines continues to move at breakneck speed, which is another reason we remain bullish on the economy for the second half of the year. |
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BMRN
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Stock of the Day: BioMarin Pharmaceutical Inc.
(17 Apr 2020) BioMarin Pharmaceutical (BMRN $78-$83-$102) is a US-based biotech which focuses on rare-disease therapies. It arguably holds monopolies in a number of rare-disease niche markets, and has formed alliances with larger biotech firms to develop, manufacture, and market a number of potentially life-saving drugs. The company’s approved drugs have been granted orphan-drug status, meaning they have seven years of market exclusivity in the US, and ten years in the European Union. The company’s operating revenue has increased every year for the past decade, with sales of $1.1 billion in 2016 (steadily up from $121 million a decade ago). With profitability probable in 2017, BMRN is on the short list of takeover candidates in the industry. The company's share price has been hanging out in the 52-week low range for some time—well off of its $150 per share peak back in July of 2015. |
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GILD
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Penn member Gilead surges after hours following virus drug trials
(17 Apr 2020) Penn Global Leaders Club member Gilead Sciences (GILD $61-$84-$86) surged more than 15% after hours on news that the company's Covid-19 antiviral drug remdesivir appears to be showing promise in the University of Chicago's phase 3 drug trials. According to healthcare publication STAT News, most of the patients on the drug had "rapid recoveries in fever and respiratory symptoms" and were discharged in under a week. The university recruited 125 patients with the virus for the late-stage trials, 113 of whom were severely sick with the condition. This drug may well be a game changer. It's nice that one of our pharma holdings developed the drug; but it is enormous that a potential blockbuster was developed this quickly. |
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XBI
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Cancer death rates in the US drop most on record on back of advances in treatment and early detection. (08 Jan 2020) According to new data compiled by the American Cancer Society, the death rate from the disease dropped 2.2% in the one year period between 2016 and 2017 (the most recent data available), representing the largest one-year drop on record. The most impressive declines came in the areas of lung cancer and melanoma, helped by successful new therapies from firms such as Roche (RHHVF $326) and Bristol-Myers Squibb (BMY $64). Strong progress was also noted in the areas of prostate, breast, and colorectal cancers, primarily driven by new diagnostic tools from the likes of Exact Sciences (EXAS $100), maker of the Cologuard® colon cancer screening kit, and Illumina (ILMN $330), which is developing a broad cancer profiling test. Most impressively, the total death rate linked to cancer has fallen by nearly one-third over the past generation. Changes in lifestyle behavior, such as a reduction in smoking rates, were also cited in the study. We are entering the golden age of cancer treatment and, dare we say, cancer cures thanks to the "fifth pillar" of cancer care—gene therapy and immunotherapy. In this weekend's Penn Wealth Report, we will name our favorite biotech company engaged in this exciting new frontier, but here's our favorite basket of biotech holdings: the SPDR® S&P Biotech ETF, symbol XBI.
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SNY
THOR MRK ARQL |
Two little-known biotech firms skyrocket after offers from big pharma. (09 Dec 2019) The battle to develop the next generation of cancer-fighting therapies is entering a new phase, and that is a good thing in the herculean effort to eradicate the disease. French drugmaker Sanofi (SNY 40-$46-$47), attempting to regain lost ground, has agreed to buy cancer biotech firm Synthorx (THOR $11-$67-$27) for $2.5 billion, sending the latter's shares up 169%. Synthorx's lead product candidate is THOR-707, a therapy designed to kill tumor cells. On a related note, Sanofi just announced that it would be ending its research into diabetes and cardiovascular diseases in an effort to sharpen its focus on oncology. Not to be outdone, $226 billion US pharma giant Merck (MRK $71-$89-$89) announced its intent to buy small-cap biotech ArQule (ARQL $2-$20-$12) for $2.7 billion, sending shares of the Massachusetts-based firm up 103%. Merck said the deal will expand its oncology pipeline into targeted therapies used to fight blood cancers. ArQule's stated objective is to discover, develop, and commercialize novel small molecule drugs in areas of high unmet needs. These deals pale in comparison to Bristol-Myers Squibb's (BMY) purchase of Penn Global Leaders Club member Celgene (formerly CELG) last month for $74 billion. While Celgene is no longer a publicly-traded company, we do own its acquirer, BMY, within the Penn portfolios. Within the health sciences space we also own Amgen (AMGN), Biogen (BIIB), Gilead (GILD), and AbbVie (ABBV). Look for plenty of more deals to come as the major pharma giants battle it out for the title of lead cancer-fighting drugmaker. Sneak preview: Health Care is one of the sectors we are overweighting for 2020.
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BIIB
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Penn New Frontier holding Biogen jumps 37% following announcement that it would seek approval for Alzheimer's drug. (22 Oct 2019) When we purchased $50 billion biotech star Biogen (BIIB $216-$293-$344) on 21 March, it had just fallen 27% on news that the company was abandoning its Alzheimer's treatment aducanumab (AD ju CAN uh mab). The news led to a slew of downgrades, but we had followed the company intimately and strongly believed the Street was overreacting. We immediately added it to the Penn New Frontier Fund. Lo and behold, what treatment is Biogen is planning to submit to the FDA for approval? Yep, aducanumab. While we certainly could not have foreseen this reversal of fortune, we'll take the 37% gain notched by BIIB within hours of the announcement. The therapy, which the company plans to submit for marketing application in early 2020, is an antibody that attacks the amyloid protein which builds up in the brain of people with the disease. When we purchased the stock, we mentioned that a Goldman Sachs analyst had been projecting sales of $12 billion if the therapy made it to market. For the 5.5 million Americans suffering from this terrible disease, we pray it does. We believe the March setback of aducanumab was somewhat of a wake-up call for Biogen to increase its stable of pipeline drugs, both through mergers and organic development of new therapies. That appears to be underway, and we see the fair value of BIIB shares at $350, conservatively.
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BIIB
2019.03.21 |
Biogen falls 27% after it abandons Alzheimer's drug. The saddest part of this story is not the drop in the share price of a company, but the setback for Alzheimer's sufferers. US biotech firm Biogen (BIIB $249-$235-$389) closed Wednesday's trading session at $321 per share; it opened Thursday around $235 per share—nearly a $100 drop. This loss of one-quarter of the company's market cap is tied to the announcement that the firm will halt trials of its Alzheimer's treatment Aducanumab (AD ju CAN uh mab) after an independent group's analysis showing that the trials were unlikely to yield tangible results. There was enormous promise built up around this product, with a Goldman Sachs analyst projecting sales of $12 billion once it was on the market. BIIB CEO Michel Vounatsos, in a written statement, said that this (ending of the trials) confirms "the complexity of treating Alzheimer's disease and the need to further advance knowledge in (the field of) neuroscience." The surprise announcement led to a slew of Biogen downgrades. This was a terrible setback, but we believe the Street overreacted to the news. BIIB had a P/E ratio of 15, which dropped to 10.5 after the massive drop in the share price. On the low side, we value Biogen at $350 per share—a 50% upside for investors.
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BIIB
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Biogen spikes on positive Alzheimer's drug trial. Biogen (BIIB $249-$344-$371) spiked around 17% on Friday's open after a Phase II trial of the company's BAN2401 drug showed a significant slowing in the progression rate of Alzheimer's in patients involved in the study. The antibody works by attaching itself to the amyloid plaques believed to cause the disease, and then reducing their amount. Another BIIB Alzheimer's drug will enter Phase III trials in 2020. Despite the run-up in share price, the biotech still has a p/e ratio of just 21. Last year, Biogen earned $2.5 billion of net income on $12 billion in sales.
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SAGE
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Sage Therapeutics surges nearly 20% on FDA decision. This is not your father's FDA. Under the leadership of Dr. Scott Gottlieb, the US Food and Drug Administration is as "pro-patient" (meaning anti-trial lawyer) as it has ever been. The focus is now on helping companies get viable drugs into the hands of desperate patients as quickly as possible. What happened to mid-cap biotech Sage Therapeutics (SAGE $60-$173-$196) today is a great example of the agency's renewed focus. Sage spiked nearly 20% after news that company representatives met with the FDA and received approval for expedited development of SAGE-217, a drug for depression, major depressive disorder, and postpartum depression. This is a fascinating drug in that it could potentially be used on an "episodic" rather than ongoing basis. In other words, it is fast-acting and targeted enough for patients to use when they are having episodes, rather than requiring a build-up in a patient's system over time.
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TKPYY
SHPGF |
In largest Japanese takeover ever, Takeda will buy European biotech Shire for $62 billion
(08 May 2018) It is a deal valued at $62 billion, pulled off by a company with a market cap half that size. Japanese drug manufacturer Takeda Pharmaceutical (TKPYY $20-$21-$31) announced plans to acquire European biotech Shire PLC (SHPGF $41-$52-$62), best known for its stable of rare disease drugs, for $66.21 per share—half of that in cash and the other half in Takeda shares for each Shire share owned. Shareholders need to agree on the deal (they will) which will create the eighth-largest drug company in the world. The deal had better pay off relatively quickly after the close, as Takeda will borrow massive amounts of money to pull it off at the asking price. When done, shares of the combined company will list on the Tokyo Stock Exchange. |
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AIMT
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Aimmune Therapeutics ready to launch its revolutionary (at least to us) peanut allergy therapy
(27 Mar 2018) Few people who do not have severe, life-threatening allergies can fully understand the scope of this problem. Parents worried that their allergic kids might accidentally ingest something that contains hidden amounts of the peanut protein. The swelling of the throat. The potential for anaphylactic shock leading to death. The same could be said for those suffering from shellfish, eggs, or other allergens. Now, it appears that Aimmune Therapeutics (AIMT $16-$31-$42), a company seeded with funds from concerned parents, is prepared to send real help. Aimmune has developed an immunotherapy capsule, the contents of which are to be sprinkled on common, non-allergic foods and digested, which will ultimately reduce the most severe reactions to the allergen. After this first successful launch, the company will work on a release for those allergic to eggs, walnuts, milk, and shellfish. AIMT came public in 2015 at $16 per share. |
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AIMT
DBVT |
Peanut allergy-focused biotech poised to shine after Orlando allergy meeting this weekend
(02 Feb 2018) Peanut allergies are a deadly-serious problem for the millions of Americans who suffer from the malady. After biotech DBV Technologies (DBVT $20-$22-$51) reported a failure in its peanut allergy therapy trial last year, its stock plummeted from $48 to $23 virtually overnight. Now, $2 billion competitor Aimmune Therapeutics (AIMT $16-$34-$42) may have struck gold with the trials of its oral biologic, AR101. The company declared success with its latest round of trials, and will outline the details in Orlando this Sunday at the annual meeting of the American Academy of Allergy, Asthma, and Immunology. Based on their report, look for shares of AIMT to take off next week. |
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AMGN
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Notice to Clients/Members regarding Amgen's recent share buyback offer
(16 Feb 2018) We own biotech firm Amgen (AMGN $152-$184-$201) in the Penn Global Leaders Club (position #2 of 40). Since we purchased the company, it has risen 30%. Recently, Amgen sent out a share-buyback notice to shareholders, offering to purchase their positions at a price of not less than $175 and not more than $200. We love the fact that the company is repurchasing over 50 million of its own shares—it shows management's confidence in the company going forward, and a belief that the shares are undervalued. As for the offer, we maintain our buy opinion on the firm, with a fair value of over $200 per share, meaning we certainly wouldn't take the company up on their offer to buy our shares. (Note: this is for informational purposes only. For Clients of Penn Wealth Management, no action is required; for others, consult your investment professional if you are an Amgen shareholder, as this is not a solicitation to buy or sell any position.) |
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CELG
JUNO TEVA |
Celgene to buy Juno Therapeutics for $9 billion
(22 Jan 2018) Penn Global Leaders Club member Celgene (CELG $95-$103-$147) is a major global biotech firm with dominance in the blood cancer treatment arena. With a generic form of the company's blockbuster multiple myeloma drug Revlimid® coming from Teva (TEVA $11-$21-$38) in 2022, Celgene has been rapidly trying to bolster its stable of blood cancer drugs. To that end, the company formally announced Monday that it would buy Juno Therapeutics (JUNO $19-$86-$74) for $9 billion—the $80 billion biotech's largest acquisition to date. The deal will add a strong lineup of lymphoma therapies to Celgene's pipeline. Juno busted through its $74, 52-week high at Monday's open on the news, jumping 27%. |
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CELG
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Celgene falls double digits after the biotech firm halts clinical trial on promising drug
(20 Oct 2017) One of the most anticipated new drugs in Celgene's (CELG $97-$122-$147) pipeline was mongersen (also known as GED-0301), an investigational therapy being developed for the treatment of Crohn's disease (CD). Celgene saw so much promise in the therapy that it paid $710 million to buy the firm which originally developed it. On Thursday, the phase 3 study of mongersen was abruptly halted after independent monitors declared a finding of clinical futility for the compound. In a statement, Celgene said it would not begin a second phase 3 study, effectively killing the would-be blockbuster. We still like the company's pipeline, but its stock took a 10% hit on the news. |
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PDLI
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Under the Radar: PDL BioPharma
(27 Sep 2017) Founded in 1996, the former Protein Design Labs, Inc. changed its name to PDL BioPharma (PDLI $2-$3-$4) in 2006. Headquartered in Incline Village, Nevada, this $522 million small-cap has a laser-like strategic focus: “provide a significant return to shareholders by acquiring and managing a portfolio of companies, products, royalty agreements, and debt facilities in the biotech, pharmaceutical, and medical device industries. Think “biotech intellectual property.” The company zeroes in on the quality of a potential target’s income generating assets, and that company’s dominant position in focused, niche markets. Quite remarkably for a company of this size and in this industry, PDLI has turned a profit every year since 2008. Management gave us a warm, fuzzy feeling yesterday when they announced the company would be buying back around $25 million of its own shares in the open market. PDLI has a P/E ratio of 7.5. Again, pretty remarkable for a company of this size in this industry. |
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GILD
KITE |
Gilead to buy Kite Pharmaceutical for $11.9 billion
(28 Aug 2017) Shares of Kite Pharnaceutical (KITE $40-$179-$143) surged 30% in early Monday trading after Gilead (GILD) agreed to pay $11.9 billion for the cancer treatment developer. Kite specializes in developing custom-made cancer treatments specifically geared to target a patient’s disease. Specifically, the company has been working in an emerging area of cancer treatment which trains a patient’s own immune cells to attack tumors. Gilead was also up (2%) on the news, which is somewhat rare—typically the acquirer takes a short-term hit after a deal is announced. |
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SHPG
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Stock of the Day: Shire plc hits 52-week low after CFO leaves
(21 Aug 2017) Dublin-based Shire plc (SHPG $139-$141-$209) is a $43 billion biotech focused on specialty drugs for rare diseases, as well as conditions such as ADHD and binge-eating disorders. Like many of its brethren, the company’s share price has been beaten down as of late. On Monday came word that CFO Jeff Poulton was leaving Shire to join Boston-based plant technology start-up Indigo Ag (think better yields through scientifically-modified seeds). That news sent the stock plummeting below its 52-week low, hitting $139.36 before rebounding slightly. This company’s assets alone are worth $200 per share, in our opinion, and the stock could easily be trading in the $250 range again before long. The company has made a number of smart acquisitions over the past few years, and is more-than-likely within 10% of a multi-year trough. |
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BMRN
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(14 Aug 2017) Stock of the Day: 14 Aug 2017: BioMarin Pharmaceutical, Inc.
BioMarin Pharmaceutical (BMRN $78-$83-$102) is a US-based biotech which focuses on rare-disease therapies. It arguably holds monopolies in a number of rare-disease niche markets, and has formed alliances with larger biotech firms to develop, manufacture, and market a number of potentially life-saving drugs. The company’s approved drugs have been granted orphan-drug status, meaning they have seven years of market exclusivity in the US, and ten years in the European Union. The company’s operating revenue has increased every year for the past decade, with sales of $1.1 billion in 2016 (steadily up from $121 million a decade ago). With profitability probable in 2017, BMRN is on the short list of takeover candidates in the industry. The company's share price has been hanging out in the 52-week low range for some time—well off of its $150 per share peak back in July of 2015. |
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INCY
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(Stock of the Day, 18 May 2017) Incyte's drug success puts them in league with the big boys. Biotech company Incyte (INCY 72-$129-$153) may not be a household name, but their immuno-cancer drug's success may change that. The stock was up 7% Thursday after Epacadostat, a drug which helps the immune system identify hidden cancer cells, proved as effective as Merck's Keytruda and BMY's Opdivo. Incyte's focus is on small molecule drugs designed to treat unmet medical needs, primarily in the oncology field. It's market cap is $26 billion, compared to Merck's $175 billion and Bristol-Myers' $90 billion.
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NKTR
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(20 Mar 2017) Nektar Pharma soared 42% Monday on pain pill news. Mid-cap biotech ($3.454 billion) gem Nektar Pharmaceuticals (NKTR $11-$22-$20) soared 40% on Monday after revealing the results of a phase three study of its pain-relief pill currently known as NKTR-181. In a study of 600 patients, the drug significantly reduced chronic lower back pain for those who had not been previously treated with an opioid. Average pain scores over the course of the 12-week study dropped by 65% for the patients given the drug, rather than a placebo. This is fantastic news for the company and its drug, which could displace Oxycodone if results like this continue, but let's also keep in mind that the company has -$1.10 in earnings per share, and the stock price was sitting at $70 per share on 31 Mar 2000. Nonetheless, the company has survived all of these years (it was founded in 1990), and is sitting in the sweet spot for a potential launch.
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GILD
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(24 Jan 2017) Gilead hammered in Q4 on hep C drug. Gilead Sciences (GILD $70-$70-$103) slipped to a 52-week low amid Wall Street concerns over the company's hepatitis C drugs Harvoni and Sovaldi. For the same quarter in 2015, these two drugs were collectively responsible for 58% of total product sales; one year later the combined total was just 36%. The company's woes are the patients' benefit: the drop in sales has a lot to do with shortening treatment times.
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