The Motley Fool: A Big Step Forward for Vertex Pharmaceuticals, Inc

There was no shortage of uncertainty and controversy around Vertex's (NASDAQ: VRTX  ) phase 3 trials for its cystic fibrosis (or CF) combo therapy. Bernstein analyst Geoffrey Porges was perhaps the most visible bear recently, asserting on June 16 that "the probability of failure in this trial is high". Now that Vertex has actually released the data, the bears are licking their wounds – the results of the TRAFFIC and TRANSPORT studies were not perfect, but a "B+" ought to be more than enough to get FDA approval, leading to upwards of $5 billion in incremental revenue.

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A Big Step Forward for Vertex Pharmaceuticals, Inc

The Motley Fool: Vertex Pharmacueticals Inc Approaching a Huge Fork in the Road

Orphan drugs are hot these days, so when an investor finds a biotech focused on orphan drugs that appears to be undervalued, it certainly merits further investigation. In the case of Vertex (NASDAQ: VRTX  ) , it all comes down to risk and a major upcoming clinical data release -- If Phase III studies reveal success for a new combination therapy for cystic fibrosis, these shares could easily head to $100 (or higher). If the trials are declared failures, though, the downside could be $25 per share or higher.

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Vertex Pharmacueticals Inc Approaching a Huge Fork in the Road

Investopedia: Vertex Building A Fortress In Cystic Fibrosis

It's not too often that you see a biotech company establish a truly differentiated product portfolio with multi-billion dollar potential and minimal competition, but Vertex (Nasdaq:VRTX) seems to be doing exactly that. This one-time specialist in virology is already well on the way to more than $5 billion in potential revenue, and could ultimately see nearly double that amount if clinical trials go the right way. This may ultimately put the company in the “nice problem to have” category of figuring out how to reinvest the proceeds and determining whether or not further investments in the hepatitis C program are worthwhile.

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Investopedia: Roche Delivering Leverage, But Needs Diversification

These remain good days for Swiss drug and diagnostics giant Roche (Nasdaq:RHHBY), as the company continues to see double-digit growth across most of its oncology franchise, with ongoing growth in diagnostics and early signs of additional operating leverage. While Roche's oncology pipeline looks solid, it's well worth asking if management has been too slow to move to bulk up other areas. Although Roche shares still look a little undervalued, M&A speculation is likely to remain in play for the foreseeable future, likely adding volatility to the shares.

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Seeking Alpha: Achillion May Be The Most Underrated Biotech Left

There are broadly two types of biotech investors - the Wile E. Coyote types who see bargains everywhere and charge bravely after them and the Roadrunner types that know better than to charge off a cliff and into thin air. Watch an episode or two and you'll see how the two types fare over time.

That bring me to Achillion Pharmaceuticals (ACHN) and an opportunity that looks so good, I keep wondering if it's just a false image painted on the mountainside. There have been some definite ups and downs across the sector in the race to develop new drugs for hepatitis C (HCV), but Achillion looks like the real deal. Success with Study 007 could point to a revenue opportunity of over $1 billion, while the recent addition of a nuc to the pipeline makes it a veritable one-stop shop for the next generation of HCV therapies.

All told, Achillion looks like it could easily be worth $16 today, with upside well into the $20s with good data and an ever-present possibility of a takeout. Investors need to ask themselves why this is seemingly the one biotech with good data to not participate in the sometimes-crazy biotech bull market of the last three years, but on balance this looks like a very promising biotech with value-driving events coming later this year.

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Achillion May Be The Most Underrated Biotech Left

Seeking Alpha: Achillion Back On The Hep C Roller Coaster Of Love

With an upgrade and an initiation at "Buy" on Wednesday morning, Achillion (ACHN) is back in the good graces of at least some biotech investors. I've been favorably inclined towards Achillion for a while now, thinking that its NS3 protease inhibitor sovaprevir (aka ACH-1625) and NS5a inhibitor (ACH-3102) gave it a better-than-average chance of being a player in the hepatitis C (HCV) market or, more likely, a target for a company that fears being left on the outside of this eventual multi-billion dollar market.

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Achillion Back On The Hep C Roller Coaster Of Love

Seeking Alpha: The Waiting May Be The Hard Part For Rigel Pharmaceuticals

More than once, I've made the point that one of the hardest parts of biotech investing is the interminable waiting periods between clinical data. In the absence of anything real to go on, stocks can get batted around by data from rivals, bullish or bearish sell-side reports, and bullish/bearish commentaries from writers like myself. While there is nothing new in hand to help determine if Rigel Pharmaceuticals' (RIGL) lead drug R788 will prove to be safe, effective, approvable, and commercially viable in the oral rheumatoid arthritis (RA) market, we are about six months closer to knowing and this stock remains an appealing speculation.

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The Waiting May Be The Hard Part For Rigel Pharmaceuticals

Seeking Alpha: Expense Control Is Good, But Merck's Catalysts Lie Elsewhere

Biopharma investing a big exercise in "hurry up … and wait"; there's a lot of space to fill between the major pivotal clinical data releases and FDA decisions, and while earnings reports are not trivial, they don't often impact the long-term story all that much. In other words, if you liked Merck (MRK) before, there's no reason not to now (and vice versa).

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Expense Control Is Good, But Merck's Catalysts Lie Elsewhere

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?

Seeking Alpha: Achillion Pharmaceuticals - Hope, Hype, And Hep C

I've followed biotech for a long time now, and I have a hard time thinking of an example of another addressable market like hepatitis C (HCV) where investor interest has just exploded in the space of about a year. Like antisense, monoclonal antibodies, RNAi, genomics, stem cells and every other hot property in biotech, there has been no end of hope, hype, and hucksterism. Although HCV is likely to grow into a very financially significant drug target in the coming years, it's worth wondering just how much of the frenzy today can be justified in long-term valuations.

In particular, I'm curious about Achillion Pharmaceuticals (ACHN) these days. I've watched this stock for a while now and came close to buying on multiple times in the pre-2010 pre-$2 level. I underestimated just how fast this market would heat up, though, and had to re-learn a painful lesson - sometimes, you snooze and you lose.

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Achillion Pharmaceuticals: Hope, Hype, And Hep C

Seeking Alpha: Merck Looks Likes A Name To Own In Drugs

Roche (RHHBY.PK) was a good name to own throughout 2011 in large part because so little was expected from the company. Investors still looking to position their portfolio for 2012 may want to consider Merck (MRK) for similar reasons. Not only does Merck have a pretty tolerable patent cliff over the next three years, but the company's pipeline may yet be undervalued and under-appreciated.

Q4 Results: Good Margins On So-So Sales
Merck's fourth quarter was more or less fine. Revenue grew 2%, but came in about 2% light of average Wall Street guesses. Januvia was quite strong (revenue up 42%) and Singulair did well for a drug that is long in the tooth (up 8%), but Remicade was a little weak and the company did have to swallow a 15% drop in sales of Vytorin. Animal health and consumer sales were up 7% and 5%, respectively, but are relatively small businesses for Merck.

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Merck Looks Like A Name To Own In Drugs

Investopedia: Bristol-Myers Pays To Patch Up A Gap

Companies developing treatments for Hepatitis C were the hottest story in biotech for 2011, and at least some of that momentum has spilled over into 2012. Bristol-Myers Squibb (NYSE:BMY) won a competitive bidding process for Inhibitex (Nasdaq:INHX) and will be acquiring this small early-stage biotech for $2.5 billion in cash.

The Deal
The two companies announced this deal over the weekend, whereby Bristol-Myers will buy Inhibitex for $2.5 billion, or $26 per share, in cash. This valuation offers a 163% premium to Friday's close for Inhibitex shareholders and a close to an incredible run that began at less than 25 cents per share in early 2009. Although this offer is lower than Gilead's (Nasdaq:GILD) $11 billion bid for Pharmasset (Nasdaq:VRUS), Pharmasset has more drug candidates in its pipeline and is further along in clinical trials. (For related reading, see Biggest Merger And Acquisition Disasters.)


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Investopedia: Is Third Time The Charm For Gilead?

When in doubt, buy somebody out. Gilead Sciences (Nasdaq:GILD) has been trying for quite some time to diversify its business beyond HIV therapy. With November 21, 2011's announcement of a massive deal for biotech Pharmasset (Nasdaq:VRUS), Gilead is making a bold move for dominance in hepatitis C and perhaps acknowledging its own shortcomings. The real question for shareholders, though, is whether the extreme competition in the Hep C market will whittle away the value of Pharmasset's pipeline and make this yet another expensive blunder by Gilead management.

The Terms of the Deal  
Gilead announced on November 21, 2011 that it will acquire Pharmasset for $11 billion in cash, valuing Pharmasset at $137 per share in cash. That price is an 89% premium to November 18, 2011's close and makes Pharmasset nearly twice as valuable as Vertex (Nasdaq:VRTX) - a biotech with an interesting new hepatitis C drug already on the market, but one recently beset by worries of prescription trends and future competition.

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Investopedia: Should Pfizer Forget R&D Altogether?

For quite a few years, I've been beating the drum that Big Pharma could not indefinitely cost-cut its way to prosperity. After all, if you fire all of the marketing reps and the scientists, you will certainly boost your margins, but where will tomorrow's growth come from? Pfizer (NYSE:PFE) clearly has some challenges ahead in refilling its pipeline, but perhaps more long-term value can come from pulling back on early-stage internal research and development (R&D), and using the money saved to buy compounds and companies that have already put in the time and money to show real promise.

A Surprisingly Strong Third Quarter 

A company like Pfizer shouldn't surprise people all that often (or by all that much), but surprise the Street the company did. Revenue rose 7% on a reported basis, and not only beat the average Wall Street guess by about 5%, but also surpassed the high end of the range. Real operating growth was a more sedate 1%, though, and U.S. revenue fell 3%.

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Investopedia: Merck's Penance Has Gone On Long Enough

By no means is Merck (NYSE:MRK) a perfect company or a perfect stock. Admittedly there are legitimate concerns about the company's pipeline, its ability to ameliorate a big upcoming patent cliff, and the long-term relationship between for-profit health care companies and the federal government. All of that said, this stock has been stagnant long enough and value-oriented investors should consider this name as a long-term revaluation play. (For more on value investing, read The Value Investor's Handbook.)


Decent Third Quarter Results 
To be sure, Merck is not going to blow anyone away with its top-line momentum. Merck posted 8% growth in reported sales growth this quarter, with growth more on the order of 3%, in constant currency terms. While Singulair remains a very significant drug with over 10% of sales, Januvia/Janumet is growing nicely into a number two platform and other newer compounds like Gardasil and Isentress are showing solid growth, as well.


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Seeking Alpha: Abbott May Be Doing The Right Thing At The Wrong Time

Health care conglomerate Abbott Labs (ABT) certainly knows how to bury a lede. With the tumult in the wake of the company's announced split in two, the company's quarterly earnings went by almost unnoticed. Perhaps that's just as well – too much is made of quarter-by-quarter performance, anyway. When it comes to this transformative move, though, investors might want to ask if this is really the right strategic move at this point in time.

Abbott To Humira – Thanks For The Cash, Now Get Out
Abbott will be splitting into two companies in a tax-free spin-off transaction. One company will continue Abbott's branded pharmaceutical business, while the other company (the one that will continue on as “Abbott”) will take everything else, including the branded generics business.

The branded drug business currently represents about 45% of the company's total sales, but over 60% of pre-tax profits. Of that, Humira (Abbott's incredibly successful monoclonal antibody for autoimmune diseases) is fully half. Unfortunately, Humira is getting a little long in the tooth and analysts have been incessantly worried about its future growth in the face of potential competition from compounds from Pfizer (PFE), Johnson & Johnson (JNJ), and Roche (RHHBY.PK), as well as threat of biosimilars (basically generic forms of biologic drugs).

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Abbott May Be Doing The Right Thing At The Wrong Time

Seeking Alpha: Roche May Be Hoping That Anadys Is Cheap Insurance

There is no question that hepatitis C treatments are garnering a great deal of attention from investors in biotech and pharmaceuticals these days. Investors seemingly can't wait to hear the latest clinical data from Pharmasset (VRUS) or the latest prescription data on Vertex's (VRTX) Incivek. So leave it to Roche (RHHBY.PK) then to draw everybody's attention back to a small hepatitis C drug developer that has been largely forgotten by many investors.

A Surprising Deal
Analysts and investors have been waiting for quite a while to see Anadys Pharmaceuticals (ANDS) either find a partner for setrobuvir and ANA773 or find a buyer for the entire company. As often seems to be case, few had Roche on the list of most likely partners, but it is Roche that has stepped up to buy the entire company.

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Roche May Be Hoping That Anadys Is Cheap Insurance

Seeking Alpha: Do Dendreon's Problems Matter To Your Biotech Portfolio?

There was no shortage of skeptics about the true market potential of Dendreon's (DNDN) Provenge cancer vaccine, but there were few credible prognosticators who predicted the magnitude of the disappointment in Provenge sales. What has been most interesting about the reaction to this shortfall, though, is how it blitzed the entire biotech sector. While the data gets sketchier the further back one goes, the post-Dendreon reaction Thursday (a bad day for the market overall), may have resulted in the worst single day in the history of the sector.

The question for investors, though, is whether or not the problems at Dendreon really have anything to do with their particular holdings. Though many investors may have sold their biotech stocks after the Dendreon news thinking that it's just too hard to figure out the eventual winners and losers (after all, FDA approval is supposed to the key to the vault), the reality is that nothing at all has really changed for the large majority of companies developing new drugs for diseases like hepatitis C, diabetes, or cancer.

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Do Dendreon's Problems Matter to Your Biotech Portfolio?

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.

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Seeking Alpha: Johnson & Johnson: Potential M&A Targets To Recharge Growth, Divert Investor Attention

There is no question that healthcare and personal care giant Johnson & Johnson (NYSE: JNJ) has been an active acquirer over the years – doing over 20 deals worth more than $40 billion in the last ten years alone. With the company struggling through a dry spell in organic growth and embarrassing itself with a series of product defect (and recall) announcements, it would seem likely that the company will once again lean on M&A to recharge its growth prospects and divert investor attention away from management's own poor recent record.

With that in mind, it seems appropriate to take a look at JNJ's menu of options and its potential shopping list.

A Few General Thoughts

There is nothing wrong with small deals or the acquisition of pre-revenue companies with promising products in the pipeline, but for purposes of this analysis I am only considering major, multi-billion-dollar deals that could meaningfully impact short-term revenue and earnings performance.

Based on what the company has done in the past, it would seem improbable that the company would look too seriously at areas like life sciences (thus excluding names like Thermo Fisher (TMO), Life Technologies (LIFE), or Illumina (ILMN)). Likewise, services would be a big change in strategy, so names like Lab Corp (LH) or Davita (DVA) are likely out, as are imaging or “big iron” companies like Varian (VAR).

Generally speaking, it would also seem that JNJ should target businesses with good emerging market exposure – JNJ has good overall non-US revenue exposure, but not so much in the faster-growing emerging markets.

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Johnson & Johnson: Potential M&A Targets to Recharge Growth, Divert Investor Attention