Mixed Data From ESMO Sets Up The Next Fight For Exelixis

Nothing has ever been easy for Exelixis (EXEL) or its shareholders, but few biotechs can boast multiple drug approvals, let alone building to nearly $1 billion in revenue and positive free cash flow. While the company has established strong efficacy for its primary drug Cabometyx, combo therapy with Pfizer’s (PFE) rival tyrosine kinase inhibitor (or TKI) Inlyta and Merck’s (MRK) Keytruda has been taking share in the critical renal cell carcinoma (or RCC) market, and there’s ample uncertainty as to whether the most recent data on Exelixis’s own combo will be enough to drive Cabometyx past that $1 billion threshold.

I would describe myself as “cautiously bullish” on the prospects for Exelixis and Cabometyx in first-line RCC. The data from the CheckMate-9ER study weren’t as clean and unequivocal as bulls could have hoped, but they certainly didn’t shut the door on meaningful long-term revenue growth. With a risk-adjusted fair value of $29, driven largely by my expectation of $2.4 billion in peak U.S. revenue in RCC, I do think there’s enough upside to merit a closer look at this name.

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Mixed Data From ESMO Sets Up The Next Fight For Exelixis

Ipsen Needs Its Big Swing In Oncology To Connect

Given that I'm looking for French drugmaker Ipsen's (OTCPK:IPSEY) (IPN.PA) free cash flow to grow at mid-teens rate over the next 10 years, I don't think my estimates are all that conservative, but it still isn't enough to get me too excited about these shares. I do think there is a chance that the marketing partnership with Exelixis (NASDAQ:EXEL) can outperform and I definitely think that the company's opportunity in neuroendocrine tumors in the U.S. has historically been overlooked, but the company has a pretty wretched history of internal R&D and its M&A exploits have been no better.

I believe that it's generally not a good idea to invest in specialty pharma companies that lack strong internal R&D efforts (call it my "Valeant hypothesis" if you like), and I think the market has largely dialed in the value of this business. While I do see avenues for outperformance, I also see execution and competitive risks, as well as the concern that the company will squander future cash flows.

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Ipsen Needs Its Big Swing In Oncology To Connect

The Motley Fool: Should Roche Buy Exelixis?

Investors in Roche (NASDAQOTH: RHHBY  ) and Exelixis (NASDAQ: EXEL  ) saw a bit of positive news Monday, when Roche announced that its phase 3 combo study of MEK inhibitor cobimetinib (licensed from Exelixis) and BRAF inhibitor Zelboraf met it primary endpoint. No details were supplied, other than that the company is moving forward with regulatory filings in the U.S. and EU.

Although this combo therapy is not likely to move the needle too far for Roche, it could be significant for Exelixis and talk is now circulating that Roche may buy the company to capture full economics on the drug.

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Should Roche Buy Exelixis?

The Motley Fool: Exelixis Inc's Comet Fails To Dazzle

Astronomers have grown very cautious over the years about predicting which comets will brighten the night skies, as all too many have failed to live up to expectation. Small biotech Exelixis'  (NASDAQ: EXEL  ) own comet, the COMET-1 study of cabozantinib in metastatic castration-resistant prostate cancer, likewise has failed to live up to the most optimistic hopes. Although the stock's 25% drop on Wednesday may seem like an overreaction, the reality is that the company badly needed a winner and the absence of an early halt due to efficacy suggests that the company could face a tough battle in getting market share in the prostate cancer space.

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Exelixis Inc's Comet Fails To Dazzle

Seeking Alpha: For Dendreon There's A Little Light, But A Lot Of Tunnel

Volatile biotech Dendreon (DNDN) has been a painful lesson for some investors that there's a big difference between good technology and a good stock. The company deserves, and gets, plenty of credit for developing the first-ever cancer vaccine, but serious questions about efficacy, cost-benefit, competition and intrinsic profitability have lingered from the moment of approval Now that repeated sales disappoints have knocked the stock down significantly over the past year, the stock may at last be priced with more rational expectations in mind.

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For Dendreon There's A Little Light, But A Lot Of Tunnel

Seeking Alpha: Celldex Therapeutics - A Potential Triple With Data On The Way

Investors are not exactly suffering for a lack of choice in oncology-related drug and biotech plays. From giants like Roche (Nasdaq: RHHBY.PK) to pure-plays like Celgene (Nasdaq: CELG) and emerging names like Medivation (Nasdaq: MDVN) or Seattle Genetics (Nasdaq: SGEN), investors could spend all day reading up on companies focused on developing drugs for the multi-billion-dollar oncology market.

Amidst all that interest, Celldex Therapeutics (Nasdaq: CLDX) has to some degree fallen into the cracks and gone unheralded. With a Phase 3 drug for brain cancer, a potential Phase 3 candidate in breast cancer, and a relatively deep pipeline, it would seem that Celldex deserves more than a sub-$100 million enterprise value. Surely there are risks and tribulations ahead, but risk-tolerant investors may want to consider these shares before trial data and partnerships move the stock from these levels.

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Celldex Therapeutics: A Potential Triple With Data On The Way

Seeking Alpha: Accuray Has to Turn Short-Term Pain Into Long-Term Gain

If the first six months are any indication, Accuray's (ARAY) acquisition of TomoTherapy hasn't really pleased anybody. Investors have seen steady erosion in their position value, while clinicians seem unimpressed or even confused about the purported benefits of this tie-up. All of that said, these are early days. Accuray already seems to be effecting a turnaround in the Tomo service operations and given the overall med-tech weakness in 2011, it may well be too soon to declare this merger and this company a failure.

Bad News First – A Tough Market Getting Tougher
Accuray is a small fish in a tough pond. Radiation therapy systems are large, expensive commitments for hospitals to make and that makes it all the more difficult for a small would-be player like Accuray to unseat established giants like Varian (VAR). Moreover, difficult financial markets have not helped hospital capital budgets and reimbursement pressures continue to constrain the radiation market.

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Accuray Has To Turn Short-Term Pain Into Long-Term Gain

Investopedia: Dendreon's Chinese Water Torture

Sometimes a notable scientific and technological achievement nevertheless fails as a commercially viable product. With another disappointing quarter in the books and little evident momentum, all but the staunchest Dendreon (Nasdaq:DNDN) bulls have to be entertaining some nagging doubts that the cancer vaccine Provenge is ultimately never going to be the blockbuster that they hoped. Certainly it's not yet over for Provenge, but doctor enthusiasm is decidedly muted and there is a growing roster of promising alternatives for prostate cancer.

Q3 Results - As Expected on Sales, But Poor Margins  
With Wall Street, it's always one thing or another. Dendreon actually met its (lowered) revenue guidance, but with an unexpected boost of about $3 million in royalty revenue from Merck (NYSE:MRK) for the hepatitis drug Victrelis. Provenge sales were up about 28% on a gross basis and 30% on a net basis, and up a bit less than 6% sequentially for the last month of the quarter.

Read the full piece at Investopedia:
http://stocks.investopedia.com/stock-analysis/2011/Dendreons-Chinese-Water-Torture-DNDN-MRK-PFE-JNJ-SNY-MDVN-EXEL-TRMS1103.aspx

Seeking Alpha: Exelixis' Curious And Risky Strategy

The FDA was not created to fulfill the role of parent or God, but by and large it is nevertheless a good idea to do as the agency suggests. That makes the decision of small oncology biotech Exelixis (EXEL) to proceed with a clinical trial design that the FDA does not agree with a curious one. While Exelixis may indeed succeed in this approach and bring cabozantinib to the market fairly quickly, it is a risky strategy that bring a lot of volatility to these shares.

No SPA
Clinical trial design and FDA policies are admittedly confusing to the uninitiated, so here is the simple version of what is going on with Exelixis. The company had hoped to get the FDA to sign off on a Special Protocol Assessment (SPA) for its Phase 3 study of cabozantinib in very sick advanced prostate cancer patients, but the FDA has elected not to do so.

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Exelixis' Curious And Risky Strategy

Investopedia: Should Biotech Investors Go Where Institutions Won't?

Some investors find safety in numbers, while others dream of discovering the next big thing long before the big institutions. When it comes to biotech investing, though, investors may want to consider just how wise it is to invest where the big institutions fear to tread. While nobody has a fail-safe method of identifying the best biotech stocks, it seems like investing in biotechs with minimal institutional support is a gamble that just isn't worth taking. 

Framing the Problem 

The biggest problem with biotech, and the biggest reason why there can be such outsized gains for investors in the industry, is that nobody truly knows if a drug will work (or be approvable) until very late in the process. Pick the right stock, Alexion (Nasdaq:ALXN) in the late 1990s, and the rewards can be enormous. Pick the wrong stock, say Essential Therapeutics or Shaman Pharmaceuticals, and it can result in a big (if not total) loss of capital. 

A few biotechs manage to muddle along, posting just enough promising early trial data to keep accessing the capital markets, but for the most part investing in biotechs with no approved drugs is a binary outcome. With that sort of expected outcome tree, it clearly makes sense for investors to use all resources at their disposal to winnow the list of credible investment candidates, and institutional support may be one metric to consider.

To read the full piece, please click the link to Investopedia:
http://stocks.investopedia.com/stock-analysis/2011/Should-Biotech-Investors-Go-Where-Institutions-Wont-ALXN-YMI-ZIOP-ONTY-MNKD-NEOP-MELA0707.aspx

Investopedia: More To Merck Than Meets The Eye?

The past few years have been a rough stretch for pharmaceutical companies, as patent expirations and a lack of exciting new products have led to lower revenue growth, rampant mergers and extensive restructuring. With a relatively manageable patent cliff and some interesting new products, Merck (NYSE:MRK) may be worth a second look from value-oriented investors.

A Solid Franchise in Cardiology and Inflammatory Disease
Like virtually all of the major pharmaceutical companies, Merck sells a large number of branded pharmaceuticals but focuses most of its attention on a few particular segments. For Merck those areas of focus include cardiology (with drugs like Zetia and Vytorin), immunology (Singular and Remicade) and diabetes (Januvia and Janumet).

Although Merck has had some issues developing its own late-stage pipeline, the acquisition of Schering-Plough helped address some of those issues. At the same time, the company has restructured its operations and in doing so it has given its salesforce the ability to act with more independence - a move that could pay dividends in the long run.

To read the full article, please click the link below:
http://stocks.investopedia.com/stock-analysis/2011/More-To-Merck-Than-Meets-The-Eye-MRK-VRTX-BMY-ABT-LLY-NVO-PFE0622.aspx

Investopedia: A Dull ASCO And The Usual Sell-Off

There is an undeniable cycle to nature. Leaves turn color and fall, birds migrate across continents, and stocks fall after the annual American Society of Clinical Oncology (ASCO) meeting. Making matters perhaps a bit worse this year, there were very few presentations that really stood out and not an abundance of positive news for investors to process. As is so often the case, though, there was a lot of buying momentum into the meeting and Wall Street is once again playing out the "buy the rumor, sell the news" meme.


The Best in Show - YMI and Exelixis
The most interesting presentations arguably belonged to YM BioSciences (AMEX:YMI) and Exelixis (Nasdaq:EXEL). It is also par for the course, though, that neither presentation was completely "clean" and investors still have a lot of questions about the future of the respective drugs.

For YMI, it was all about Phase 1/2 data from the JAK-2 inhibitor CYT387 in myelofibrosis. Myelofibrosis is a rare condition and one that frequently leads to an enlarged spleen and/or anemia. This relatively small study showed good spleen response and suggested benefit in counteracting anemia. Unfortunately, this is the prime question about CYT387 - is the anemia benefit "real"? If so, this could be a drug worth hundreds of millions of dollars, but investors are just going to have to wait for further studies to confirm (or disprove) this benefit. On an encouraging note, the company seems to be taking a very smart approach to the clinical development of the drug. (For more, see Measuring The Medicine Makers.)


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http://stocks.investopedia.com/stock-analysis/2011/A-Dull-ASCO-And-The-Usual-Sell-Off-YMI-EXEL-NEOP-INCY-BMY-NVS-CELG0607.aspx

Seeking Alpha: Battered But Unbroken Biotechs

Disappointment is a fact of life with biotech investment. While clearly some companies do go on to become Amgen (AMGN) or Gilead (GILD), the roughly 85% failure rate for new experimental drugs means that most companies will eventually fail … or do little more than struggle along from disappointment to disappointment while using even the slightest glimmers of hope to shake down shareholders for more capital.

Despite that somewhat morbid lead-in, the reality is that some biotechs do recover after periods of disappointment and malaise. Current successes like Alexion (ALXN) and Celgene (CELG) had their trials by fire and came back to handsomely reward those who took a chance on them during the dark days. In fact, history has shown that sometimes the best time to buy is after the initial enthusiasm has been wrung out of a stock and management has earned some credit hours from the school of hard knocks.

To read the full piece at Seeking Alpha, please click here:
http://seekingalpha.com/article/255516-battered-but-unbroken-biotechs?source=mc_all

Please note: I mistakenly listed "Glaxo" as Nektar's partner on the inhaled pneumonia drug, when it should be (is) Bayer. That correction should get made promptly...

Will Adaptive Design Change the BioPharma World?

I wrote the following for Investopedia, and it was published today. 
I'm actually pretty interested in seeing what, if any, reaction I get to this. I really do believe this is one of the bigger ideas that could emerge in biopharma over the next few years, but it is an idea that you scarcely hear about outside of occasional panels and forums at industry conferences and meetings. 

I hope you find it interesting. 

Every so often a good idea comes out way ahead of its time. Fuel cells actually predate the gasoline engine, the Apple (Nasdaq:AAPL) Newton is the almost-forgotten iPad/iPhone predecessor, and Nikola Tesla sketched out plans for concepts like wireless energy transfer and airplanes that could take off vertically in the 1920s.  

Adaptive clinical trial design may ultimately belong on this list as well. Although the idea of changing pharmaceutical drug trials in response to data generated within the trial has been around for at least 10 years, the idea may finally be on the cusp of being realized. Should this concept become more commonplace, it could be a major step forward for biotechnology and pharmaceutical companies.

Read the full column at: 
http://stocks.investopedia.com/stock-analysis/2010/Will-Adaptive-Design-Change-The-BioPharma-World-AMGN-GILD-ITMN-EXEL-LLY-PFE-PRXL0513.aspx