Seeking Alpha: Roche Could Be A Victim Of Its Own Success

Roche (OTCQX:RHHBY) (ROG.VX) hasn't done all that well in the market of late, with the shares down about 6% over the past year. Then again, that's not so bad in the larger context - Pfizer (NYSE:PFE) and Bristol-Myers (NYSE:BMY) have done significantly better (both up about 11%), but Novartis (NYSE:NVS), Merck (NYSE:MRK), and AstraZeneca (NYSE:AZN) have performed just as poorly or worse than Roche.

This market performance forms an interesting contrast with the news that Roche has been reporting. The company continues to advance one of the deepest oncology/immuno-oncology portfolios, and the company's efforts outside of cancer have achieved some notable successes of late in hemophilia and multiple sclerosis.

Even so, the question remains as to whether this will be enough to push the company back to double-digit earnings growth. Not only are politicians taking a harsher tone on drug pricing, but Roche faces significant challenges from biosimilars and intense competition in oncology. I continue to believe that Roche is a high-quality, well-run drug company, but Roche's success not only makes it a prime target for its competition but also makes it harder for the next generation of blockbusters to do more than simply maintain what the company already has.

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Roche Could Be A Victim Of Its Own Success

Seeking Alpha: Alnylam Pharmaceuticals Keeping Multiple High-Potential Programs Moving Forward

The biotech sector has gotten a little "interesting" since drug pricing re-emerged as a tempting target for political soundbites and investors started looking back on just how far the sector has come in terms of valuation and multiples. Alnylam Pharmaceuticals (NASDAQ:ALNY) has taken its share of drubbing, with the shares down about 20% since my last piece on concerns about the implications of potential drug pricing reforms on its largely orphan drug-focused pipeline, as well as concerns relating to the company's Phase III revusiran program.

I wasn't thrilled with the valuation back in June, but I think the combination of the share price performance and the company's clinical updates makes for a more interesting opportunity today. Time will tell whether my estimates and model are reasonable, conservative, or aggressive, but I do see significant value-add potential over the next six months as more information comes out on programs like ALN-CC5, ALN-AT3, ALN-GO1, and the core TTR platform.

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Alnylam Pharmaceuticals Keeping Multiple High-Potential Programs Moving Forward

Seeking Alpha: Steady, Albeit Not Spectacular, Progress At Accuray

Patience may be a moral virtue, but it's not a particularly compelling investment thesis. To that end, Accuray (NASDAQ:ARAY) is most definitely making progress from an operational standpoint, and is operationally outperforming its much larger rivals Varian (NYSE:VAR) and Elekta (OTCPK:EKTAY), but the pace of the progress is likely stifling the enthusiasm of would-be new investors.

I continue to hold Accuray as a small position in my portfolio because I think the company has turned the corner and remains meaningfully undervalued. Not only has the company improved its Tomo platform to a point where it is a legitimate standalone option, but the company's CyberKnife system is well positioned to take advantage of growing adoption of stereotactic radiosurgery and stereotactic body radiation therapy. With a fair value range of $9 to $12, there is still meaningful upside if, or when, investors become more comfortable that the company is establishing a more consistent pace of order and revenue growth and a credible road to profits and free cash flow.

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Steady, Albeit Not Spectacular, Progress At Accuray

Seeking Alpha: Is Microsemi Courting The Winner's Curse?

I've written pretty regularly on Microsemi (NASDAQ:MSCC) for Seeking Alpha, and this has long been a semiconductor stock that I've liked (and own in my own portfolio). Along the way, I've often mentioned that additional M&A felt like a "when, not if" question given Microsemi's past success in using deals to broaden its product, market, and technology exposures. I wasn't expecting something quite as dramatic as the company's bid for PMC-Sierra (NASDAQ:PMCS), but this is a deal that otherwise fits Microsemi's pattern of diversification, cost synergy, and market expansion.

I believe that PMC-Sierra can be a good deal for Microsemi, but I openly acknowledge that Skyworks (NASDAQ:SWKS) will prevail in the end if that company decides that it simply cannot afford to let PMC-Sierra slip away. I also believe, though, that Microsemi has more to gain in terms of synergies and market diversification. Last and not least, while Skyworks' all-cash deal is definitely a lower-risk proposal for PMC-Sierra shareholders, Microsemi's offer appears to me to give PMC-Sierra shareholders more long-term upside.

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Is Microsemi Courting The Winner's Curse?

Seeking Alpha: Neurocrine Biosciences Has The Flash And The Cash

It wasn't all that long ago that I last updated my thoughts on Neurocrine Biosciences (NASDAQ:NBIX), but the company has made a few noteworthy moves since then that are worth mentioning. Neurocrine remains a very promising biotech on multiple levels. First, the company has two late-stage compounds that each have more than $1 billion in revenue potential. Second, the company has recently shown that it can, in fact, add new compounds to its pipeline. Third, the company has quite a bit of cash on hand, ending the last quarter with nearly half a billion dollars. Last and not least, there remain multiple upcoming events that can attract attention and drive positive sentiment.

The "but" is valuation. It's hard to recommend any development-stage biotech unless the potential gains are such that it's worth overlooking the industry's generally poor track record (most biotechs never develop a commercial product). I do think that Neurocrine is undervalued, and my underlying assumptions may prove conservative, but investors may want to hope for another biotech sector freakout that could push the price down 20% or more.

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Neurocrine Biosciences Has The Flash And The Cash

Seeking Alpha: Plum Creek's Value Finally Realized, But Weyerhaeuser Has Some Work To Do

I've been relatively bullish on Plum Creek Timber (NYSE:PCL) for a while, arguing (maybe stubbornly) that the shares were valued too cheaply in the public market relative to private market timberland transactions and the potential cash flow and value to be realized from timber and land sales as the U.S. housing market recovers.

It would seem that Weyerhaeuser (NYSE:WY) had at least a somewhat similar view of the situation, as the two companies have announced a merger that will see the two companies merge in an all-stock deal that will leave Weyerhaeuser shareholders with 65% of the combined company. Together, these two companies will own over 13 million acres of timberland, offering even more exposure to a housing recovery but also creating an opportunity for Weyerhaeuser to drive more value from Plum Creek's assets.

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Plum Creek's Value Finally Realized, But Weyerhaeuser Has Some Work To Do

Seeking Alpha: Lundbeck Executing Where It Can, But The Biggest Drivers Are Risky

As I've written in the past, I think being a little reluctant to sell out of a good position is far from the worst trait an investor could have. To that end, while I saw less value left in the shares of Danish drug company H. Lundbeck (OTCPK:HLUYY) (LUN.CO) than I would have liked back in August, I was hesitant to sell ahead of potential upside in the cost-cutting program.

Since that last article, Lundbeck shares have logged solid double-digit appreciation and outperformed most pharmaceutical peers. Moreover, the company has provided some evidence that the cost-cutting efforts will drive better profit improvements than the sell-side initially expected. That said, the valuation argument is even harder to make now, and the prime drivers of further outperformance are both risky and at least a few months off.

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Lundbeck Executing Where It Can, But The Biggest Drivers Are Risky

Seeking Alpha: Lexicon Pharmaceuticals Produces Another Positive Surprise

This has been quite the year for Lexicon Pharmaceuticals (NASDAQ:LXRX), as long-suffering shareholders have finally seen the stock do well on the back of optimism about the company's oral treatment (telotristat etiprate) for the GI effects of carcinoid syndrome and its progress into Phase III testing of its SGLT-1/SGLT-2 inhibitor sotagliflozin for Type 1 diabetes. Now the company has achieved a more surprising success, with Friday's announcement of a partnership with diabetes giant Sanofi (NYSE:SNY) to develop and commercialize sotagliflozin for both Type 1 and Type 2 diabetes.

Lexicon investors (or at least most of them) had pretty much written off the chance of a major partnership more than a year ago, as the company had been shopping the drug to partners for about two years without reaching any sort of agreement. Now, though, the $1 billion-plus potential of sotagliflozin in Type 2 diabetes is at least back on the table as a point of discussion.

There are still plenty of unknowns here to confound valuation. What sort of pricing will the company get for telotristat etiprate? Will it become the go-to choice for patients getting inadequate relief from somatostatin analogs? Does Sanofi have the marketing muscle to drive meaningful market share with a drug that will be quite late to market? Will sotagliflozin show any distinctive efficacy or safety aspects in large-scale studies (good or bad) that will impact its market potential? Will the company choose to rejuvenate its internal drug development programs? These are all important questions, but I would nevertheless argue that Lexicon remains meaningfully undervalued today.

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Lexicon Pharmaceuticals Produces Another Positive Surprise