Roche Pays Up To Enter The Gene Therapy Space

Gene therapy is an increasingly viable therapeutic approach and Roche (OTCQX:RHHBY) very much wants to be a part of that. While this Swiss drug giant doesn’t try to do everything in the pharmaceutical space, management does try to keep the company well-placed in the most promising new therapeutic areas. To that end, the company decided to spend $4.3 billion of its shareholders’ capital to acquire Spark Therapeutics (ONCE) and its gene therapy platform.

I believe Roche is approaching the Spark deal as a true technology/platform acquisition, particularly given the company’s IP assets and its early positioning in eye diseases, hemophilia, CNS, and rare disease – all areas of interest to Roche. While the near-term results of Spark’s SPK-8011 in hemophilia A will certain impact initial sentiment on this acquisition, I believe Roche is looking at the long game with this deal.

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Roche Pays Up To Enter The Gene Therapy Space

Roche Delivers Some Clinical Wins, But Skepticism Remains Largely Intact

Even though Swiss drug giant Roche (OTCQX:RHHBY) has managed to deliver a series of largely better-than-expected clinical trial results, you wouldn’t really know it from the share price. Despite a lot of skepticism going into the IMPower 150 read-out for Tecentriq in first-line lung cancer, Roche’s successful result seems to not to have done much to resolve questions and concerns about how it will stack up with rivals like Merck’s (MRK) Keytruda. So too with the very positive results from the HAVEN 3 study of Hemlibra.

As IMPower 150 was only the first, and arguably the riskiest, of five front-line Tecentriq trials in lung cancer, I think Roche is in a good position going into further read-outs in 2018. Likewise, I believe Roche has a long-term winner with Hemlibra even as gene therapy approaches look to gain meaningful share in the hemophilia space. At a minimum, then, I would argue that Roche has established three strong new drug platforms (Tecentriq, Hemlibra, Ocrevus) with blockbuster potential on top of a very robust R&D pipeline.

I believe Roche is undervalued up into the mid-$30s. Competition from biosimilars is going to do its damage to near-term reported financial results, but the market has known about this for some time. With Roche having, at least in my opinion, reestablished credibility that it can develop meaningful new therapeutics, I believe the shares are undervalued today on the basis of both its existing business and the potential pipeline contributions over the next decade.

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Roche Delivers Some Clinical Wins, But Skepticism Remains Largely Intact

Seeking Alpha: Amicus Therapeutics Still A "Show Me" Story

When investors are keen on a sub-sector within biotech, as they have been relatively recently for immuno-oncology, RNAi, and liver disease, companies and their stocks often get the benefit of the doubt, with gaudy sales forecasts and approval odds well in excess of historical norms. On the flip side, and in a case like Amicus Therapeutics (FOLD), once investors have largely written off a company it can be very hard to regain their interest and confidence.

To be very clear, I believe Amicus still has a difficult road ahead of it. The data on lead compound migalastat are not clean and sufficient evidence of efficacy to drive approval (and/or market adoption) is no guarantee. Likewise, the company's 3-in-3 strategy to get three rare disease enzyme replacement therapies (or ERTs) into the clinic over the next three years is ambitious but high-risk. These shares do still appear to be undervalued, but I can frankly understand why many investors may conclude that there are better reward-to-risk opportunities elsewhere in biotech.

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Amicus Therapeutics Still A "Show Me" Story

The Motley Fool: BioMarin Pharmaceutical, Inc.-- Is This Orphan Drug Specialist Overvalued?

It's not easy to develop treatments for rare diseases, but it is hard to argue with the rewards. Prior to its acquisition by Sanofi (NYSE: SNY  ) , Genzyme had already established itself as an important player in enzyme replacement therapies, and Shire (NASDAQ: SHPG  ) and Alexion (NASDAQ: ALXN  ) have both gone on to find meaningful success with treatments that serve tiny patient populations, but carry huge price tags.

BioMarin (NASDAQ: BMRN  ) very much deserves to be in this conversation, as the company has one of the broadest portfolios and pipelines for rare diseases. BioMarin's pipeline definitely has clinical risk and I don't think investors should just assume that payers will always go along with the pricing these companies want. The biggest issue may be overall expectations, though, as BioMarin is going to have to become extremely profitable and deliver exceptional revenue growth just to meet current expectations.

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BioMarin Pharmaceutical, Inc.: Is This Orphan Drug Specialist Overvalued?

Seeking Alpha: Clovis Oncology Has An Exciting Pipeline And A Reasonable Valuation

There aren't many cheap biotechs left out there, at least not among the higher-quality ideas. To be sure, arguing that Clovis Oncology (CLVS) is undervalued after a better than 250% rise over the past year is going to strike some as ridiculous. Even so, I believe the company has multiple exciting pipeline opportunities that make this still a name worth investigating further. Although I'm a little concerned that the Street's expectations for clinical success are ahead of industry norms, early-stage data have been quite encouraging.

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Clovis Oncology Has An Exciting Pipeline And A Reasonable Valuation

Seeking Alpha: Amicus Takes A Certain Step Back For An Uncertain Step Forward

I'll happily grant that the best path between two points isn't always a straight line, but with all of the ups and downs (mostly downs) from Amicus (FOLD) over the past year, I can understand if investors no longer want to wait around to see if this recent strategic retrenchment proves a sound move for the long-term.

With lead drug migalastat unlikely to make it to market as a monotherapy, little data on combo therapy in Fabry's, and a one year delay in the Pompe program, not to mention Glaxo (GSK) bowing out of the migalastat program, bears have a lot to chew on. I'm somewhat more bullish on the acquisition of Callidus, though, and I think the market may be overlooking signs that migalastat could still be viable as part of a combo therapy. Amicus shares could still be worth as much as $4 today, but investors should note that this is a very high-risk/high-uncertainty opportunity.

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Amicus Takes A Certain Step Back For An Uncertain Step Forward

Seeking Alpha: Don't Fold On Amicus Therapeutics Just Yet

It's hard enough to pick winners in biotech, but when companies try to explain away bad trial data with "don't look at that, look at *this*" post hoc analysis, all manner of alarms and sirens should go off in investors' heads. And yet, for every rule there is an exception, and I think Amicus Therapeutics (FOLD) may just be that rare exception. While I realize that hope and belief are more suited to theology than biotechnology, I do believe that Amicus's lead drug is effective and safe, and I hope that a 12-month follow-up of its pivotal study will be able to demonstrate that sufficiently for the FDA to grant approval.

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Don't Fold On Amicus Therapeutics Just Yet

Seeking Alpha: If Investors Won't Buy Shire, Big Pharma Should

Given the premium that Novo Nordisk (NVO) enjoys for its very strong position within diabetes care, you might think that a company with strong positions in two significant pharmaceutical areas would enjoy an even bigger premium. That's not the case for Shire (SHPG), though, and investors may have an opportunity here to take advantage of one of the few bargains in the pharma space. Moreover, with Big Pharma likely on the prowl for add-on deals, Shire's relative value may make it an appealing target.

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If Investors Won't Buy Shire, Big Pharma Should

Seeking Alpha: AstraZeneca Suspends The Buyback: Let The M&A Speculation Commence

With new CEO Pascal Soriot just getting comfy in the CEO chair at AstraZeneca (AZN), he lost little time in making a mark on the company. On Monday, the large (but struggling) but British drug company announced that it would suspend its buyback pending a "review of the company's strategy". While it certainly makes sense that the new CEO may just as soon keep $2 billion on hand (the company has completed $2.3 billion of an approved $4.5 billion buyback) for the time being, there are widespread assumptions that this is prelude to a larger deal.

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AstraZeneca Suspends The Buyback: Let The M&A Speculation Commence

Seeking Alpha: Nothing Wrong With A Quiet Quarter At Pfizer

Big Pharma companies rarely move their stock in a significant positive direction with earnings, so a quite quarter at Pfizer (PFE) is perfectly fine. It's worth noting, though, that brutal cost-cutting measures are paying off in terms of excellent operating margins. If Pfizer can wring success out of its maturing late-stage pipeline, this could once again be a full-fledged blue-chip stock.

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Nothing Wrong With A Quiet Quarter At Pfizer

Seeking Alpha: How Much Further Can Rare Diseases Carry BioMarin?

Investors have long known that there can be huge money in rare diseases, and over the years they have rewarded stocks like Genzyme (now part of Sanofi (SNY)) and Alexion (ALXN) accordingly. As another player in the rare disease space, BioMarin (BMRN) already sports a nearly $4 billion market cap, but with a lot of key clinical data coming in the next few quarters, it's worth exploring how much more could be left in the tank.

The Businesses In Hand
BioMarin is a somewhat rare biotech in that it already has four drugs approved and on the market.

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How Much Further Can Rare Diseases Carry BioMarin?

Is Another Wave of Biotech M&A On The Way?

There is an old joke among sell-side research analysts that if you are going to make predictions, you should make a lot of them to increase your odds that you will make at least a few correct guesses. With that in mind, I am predicting that we are going to start seeing a wave of acquisitions in the biotech space as larger companies need to recharge their pipelines and better leverage their infrastructure and smaller companies find it increasingly onerous to launch drugs on their own. 

Sanofi Goes for the Esoteric 
Sanofi-aventis (NYSE:SNY) announced a relatively small deal on Wednesday, telling investors that the company is buying privately-held TargeGen for $75 million in cash. Should TargeGen's compounds hit certain milestones (in other words, if the drugs work), the payout could increase to up to $560 million.

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