Nektar Therapeutics Offers A High-Potential But Controversial Pipeline

It has been a while since I updated my thoughts on Nektar Therapeutics (NKTR), and a lot has happened with this biotech over the past year, including a huge development deal with Bristol-Myers (BMY), mixed trial data at ASCO, and ongoing progress with additional compounds in the oncology pipeline. On top of all that, Nektar has a pain asset with potentially impressive upside, an exciting early-stage anti-inflammatory asset, and a significant amount of cash.

Nektar shares sold off hard after the disappointing ASCO results, but have since recovered 40%. At this price, I don’t necessarily think Nektar is seriously undervalued relative to the development risk. That’s a key caveat, though, as better clinical data on the NKTR-214 (or ‘214) melanoma program at the November SITC could restore some bullishness here and there is a lot of potential value in ‘214, NKTR-358, NKTR-262, and NKTR-255 that could be unlocked with future clinical successes.

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Nektar Therapeutics Offers A High-Potential But Controversial Pipeline

Roche Reports Positive Clinical Results, But The Market Is Unimpressed

Roche's (OTCQX:RHHBY) plans to leverage Tecentriq as its next cancer blockbuster and offset steep looming biosimilar sales erosion have been looking shakier and shakier as the company continues to post okay-but-great data from multiple trials, while chief rival Merck (MRK) continues to post strong Keytruda data. While two recent positive trial read-outs on Tecentriq in lung cancer and breast cancer are certainly welcome, they're not likely going to change the tide of sentiment, and management has work to do to convince the Street it's not an also-ran in the making.

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Roche Reports Positive Clinical Results, But The Market Is Unimpressed

Celldex Trying To Regroup With Its Early-Stage Assets

It was clear back in April that Celldex Therapeutics (CLDX) would be restructuring and realigning its priorities after the failure of its Phase III METRIC study of glembatumumab ("glemba") in triple-negative breast cancer, and after the first quarter earnings report, investors have a clearer picture of management's near-term plan.

Unfortunately, this new plan is still relying on assets that have either shown lackluster initial signs of efficacy (varlilumab or "varli") or are in very early stages of development. Assigning more than 10% odds of success to any of these programs based on the data seen to-date requires a leap of faith, but the good news (if you can call it that) is that the Street isn't assigning them much more value than that.

At this point, it really is about the data and management's ability to pull a rabbit out of its hat. Should the varli combo studies, or one of its other current clinical programs, show strong efficacy sufficient to support more robust odds of approval, the shares will likely react strongly and Celldex will be able to raise more cash on better terms. That's a long shot, and Celldex's poor drug development history shouldn't be ignored, but Celldex does at least still have multiple shots on goal and enough cash to get them at least to the point of early-stage data in human studies.

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Celldex Trying To Regroup With Its Early-Stage Assets

Roche Drifting Without Perception-Changing Data

Once tapped as the future belle of the ball due to its deep pipeline of potential add-on/combo oncology therapies, Roche (OTCQX:RHHBY) has continued to lag rivals like Merck (MRK) as investors grow more concerned that Roche's PD-L1 antibody Tecentriq will have trouble standing out from the crowd and become yet another disappointing offset to looming biosimilar erosion.

It's still early (a familiar fallback position for disappointed bulls), but Roche really needs strong data to close the gap with Merck's Keytruda, even if it is at least in part a perception gap. Roche could also really use another blockbuster or two from its pipeline, particularly one that doesn't have abundant competition. Although I continue to believe that the market is not giving Roche its due, the reality, for now, is that looming biosimilar-driven revenue erosion is a hard cloud for Roche to get out from under and it is likely to take time for perceptions to shift.

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Roche Drifting Without Perception-Changing Data

Celldex Nearly Back To Square One

Once again Celldex (CLDX) shareholders have had to come to terms with a major disappointment. Following the spring 2016 announcement that the company's lead drug Rintega had failed in Phase III, Celldex announced earlier this week that its pivotal METRIC study of glembatumumab (or "glemba") failed to show clinical benefit in the treatment of triple-negative breast cancer.

With these failures, as well as the lackluster results seen in other glemba studies and in studies of varlilumab (or "varli"), I believe Celldex is almost back to square one as a biotech, with a handful of unproven Phase I assets. Given the significant development timelines Celldex is looking at, as well as the high likelihood of future dilutive financing, it looks like a difficult road ahead for these shares. While today's price arguably does understate the potential of Celldex's remaining pipeline, only the most aggressive investors should really even consider dumpster-diving for this name.

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Celldex Nearly Back To Square One

Ono Pharmaceutical Needs To Reinvest Its Windfall

Ono Pharmaceutical (OTCPK:OPHLY) (4528.T) has a rare chance to reinvest in a bigger, brighter future, and management needs to execute, as the windfall from Opdivo won’t last forever. While this company has a strong history in manufacturing prostaglandin compounds, Ono has struggled to drive meaningful innovation from its own R&D, and although this Japanese pharmaceutical company can trace its history back roughly 300 years, it’s a small player in the overall Japanese (let alone global) pharmaceutical industry.

Ono currently looks slightly undervalued, but that is giving no credit to value-creation from the company’s cash hoard. While Ono has not historically done M&A, management has sounded more interested in pursuing deals as a way of gaining a foothold in the U.S. and reinvigorating its pipeline. Even so, investors need to consider the risk that growing competition in PD-1/PD-L1 antibodies and potential changes to Japanese drug pricing policy will hit the company’s overwhelmingly large driver of value.

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Ono Pharmaceutical Needs To Reinvest Its Windfall

Nektar Therapeutics Building A More Exciting Pipeline

As Nektar (NKTR) has gotten investors more excited about its pipeline, including a somewhat surprising success with its late-stage pain drug NKTR-181, the shares have done all right since the fall of 2016 – rising more than a third since then (in line with the SPDR S&P Biotech (XBI) and ahead of the iShares Nasdaq Biotechnology (IBB)). The shares don’t look so undervalued to me now, but there are still multiple drivers in the queue for key pipeline candidates that could drive meaningful value.

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Nektar Therapeutics Building A More Exciting Pipeline

A Year Later, It's Still 'Hurry Up And Wait' For Roche

I try not to spend too much of my writing time on well-known, well-covered names like Roche (OTCQX:RHHBY), but I do own the shares and it has been a year to the day since I've last written on this giant Swiss pharmaceutical company.

I thought the company was more or less in a holding pattern a year ago, and the shares have gone almost nowhere (on a net basis) since then, as positives like the launch and early acceptance of Ocrevus and the promising clinical data on emicizumab/ACE910 in hemophilia has been offset by progress with competitive biosimilars, mixed results from next-gen oncology compounds, and worries about lead immuno-oncology drug Tecentriq.

It's tempting to say, “Roche is Roche… and it'll all just work out in the end.” This is a well-regarded pharmaceutical company with a deep internal R&D effort that has not gone to the same excesses as some of its peers in attempting to cost-cut its way to prosperity. At the same time, we're all still learning as we go when it comes to immuno-oncology, and it is tough to say how Roche will stand against the likes of Merck (MRK), Bristol-Myers (BMY), and many others in the years to come.

I do still believe Roche is undervalued, but major upcoming updates (like Tecentriq in first-line non-small cell lung cancer) in the second half of 2017 and on into 2018 are key to the modeling assumptions that drive the fair value.

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A Year Later, It's Still 'Hurry Up And Wait' For Roche

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

Celldex Could Really Use Some Strong Data

Celldex Therapeutics (NASDAQ:CLDX) is still back on its heels after the deeply disappointing announcement earlier this year that the company's lead compound failed an interim futility analysis. While the company does have a deep pipeline of other immuno-oncology and oncology antibody-drug conjugate (or ADCs) candidates, the reality is that much of this pipeline is early-stage and the field is both brutally competitive and witheringly difficult.

Given the data that have come out on the company's pipeline candidates since my last update, as well as data from potentially competitive therapies, I'm not as bullish as I was before. I still think that Celldex is undervalued, but I'm more concerned about how glembatumumab (or "glemba") will perform in the real-world market, and I'm concerned that key pipeline IO drugs like varlilumab and CDX-1401/CDX-301 may not be effective enough to become major contributors.

Sifting through early-stage data demands a lot of "could's," "seems," and "may be's," so I don't exclude the possibility that additional studies will show greater benefit. Likewise, I think it's fair to say that Celldex is deep in Wall Street's doghouse and probably has a higher burden of proof now. All that said, while I do think Celldex should sport a double-digit fair value, I feel like the arrow is pointing the wrong way in terms of recent clinical trial releases.

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Celldex Could Really Use Some Strong Data

Despite Incremental News, Roche Still Largely In A Holding Pattern

Roche (OTCQX:RHHBY) has gone basically nowhere over the last three months, continuing a lingering trend of underperformance relative to Bristol-Myers (NYSE:BMY), Merck (NYSE:MRK), and AstraZeneca (NYSE:AZN) over the past year. Nothing has gone dramatically wrong for Roche, but concerns over biosimilars weigh much more heavily on Roche than on Bristol-Myers or Merck and the company is only just getting its toe in the water with immuno-oncology drugs.

The shares continue to look like a good, but not great, investment candidate. Roche has had some recent success in its non-oncology pipeline, but there's more work to do and a real concern for some investors that the company will suffer a "growth gap" in the time where biosimilar competition to Avastin, Herceptin, and Rituxan chews into revenue ahead of expected ramps of new drugs in oncology, hematology, and autoimmune disease. I believe there's alpha to be generated buying Roche in the low $30s (or below) and selling in the high $30s, but it will be some time yet before Roche can really break out of this dull stretch.

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Despite Incremental News, Roche Still Largely In A Holding Pattern

Seeking Alpha: Roche Still Waiting For The Big Push

Although Roche (OTCQX:RHHBY) hasn't been a terrible stock over the last three years, it's hard not to look at the performance of companies like Bristol-Myers (NYSE:BMY), Merck (NYSE:MRK), and Amgen (NASDAQ:AMGN) with some envy. In the case of the first two peers, Roche has been slower to get into the immuno-oncology game, as both Bristol-Myers and Merck have seen good initial successes with their PD-1 antibodies (and, in the case of Bristol-Myers, its CTLA-4 antibody as well). Roche has also had to withstand more than a little concern and skepticism regarding the company's ability to defend its lucrative oncology franchise from impending biosimilar competition and growing worries about pricing.

I do continue to believe, though, that Roche has an attractive future. While the company was somewhat late to the game in immuno-oncology, the company is bringing a lot to bear in terms of numerous combo therapy candidates. The company is also seeing some traction in its non-oncology franchise, with encouraging results in multiple sclerosis and hemophilia. Biosimilar competition and price resistance remain real risk factors, but I believe Roche's pipeline can support long-term free cash flow growth in the high single digits and a fair value in the mid-$30s.

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Roche Still Waiting For The Big Push

Seeking Alpha: Roche's Deep Pipeline And Strong R&D Platform Make For A Long-Term Winner

You're not going to often hear me say that earnings don't matter, but I don't believe that Roche's (OTCQX:RHHBY) reported financials are going to be the driving factor behind the share price performance in 2016 and 2017. I am expecting that investors will, instead, put more emphasis on the company's clinical trial performance, as data read-outs over the next two years will go a long way toward shaping the future of Perjeta, Gazyva, and atezolizumab.

My basic view of Roche remains that the company is well-placed to play a major role in the evolving field of immuno-oncology and that recent clinical successes in hemophilia, asthma, and multiple sclerosis give it a little more of a balanced mix. I'm looking for Roche to generate around 5% long-term revenue growth, largely on the back of oncology, with additional cash flow leverage pushing the FCF growth rate into the high single-digits. Discounted back, that supports a fair value just shy of $36 today.

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Roche's Deep Pipeline And Strong R&D Platform Make For A Long-Term Winner

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: Everything's Coming Up Roches

Given the hope and hype surrounding cancer immunotherapy/immuno-oncology (or IO), it almost seems anticlimactic when a Big Pharma company talks about earnings or drugs outside of the IO space. Roche (OTCQX:RHHBY) posted good results for the first half of 2015 and the company has recently reported some very encouraging data from drugs outside its core oncology franchise - a welcome respite from what had been a litany of failure that left the company's pipeline overly dependent upon oncology.

Roche doesn't look remarkably cheap right now, but there's a lot of uncertainty in some important value drivers. Depending upon what happens with pivotal studies, the oncology markets that Roche is targeting with its anti-PD-L1 antibody atezolizumab could be worth twice as much as I currently expect, though there will most definitely be fierce competition from Bristol-Myers (NYSE:BMY), Merck (NYSE:MRK), AstraZeneca (NYSE:AZN), and others. A more bullish assessment of the size of these end-markets in 2025 could take my target above $40, but I'm content to own Roche on the expectation of high single-digit to low double-digit annual returns.

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Everything's Coming Up Roches

Seeking Alpha: Celldex Therapeutics Still Looks Undervalued With Multiple Clinical Shots On Goal

Immunotherapy biotech Celldex Therapeutics (NASDAQ:CLDX) has continued to do well in a hot market for biotech, and an especially hot market for oncology immunotherapy companies. The shares are up another third or so over the last six months, as the company has continued to post encouragingly strong data from its studies of Rintega in glioblastoma multiforme (or GBM) and sign up partners for its t-cell co-stimulator varlilumab.

Rintega now represents about one-third of my estimated value for Celldex, with gemba making up closer to half. Varlilumab contributes relatively little today, but that could change significantly over the next year as early data from combo studies are expected. Combination therapy is likely to be the defining characteristic of immuno-oncology and with a broad (albeit early-stage) pipeline of IO assets, I believe Celldex is attractively positioned as a go-it-alone partner of choice or an M&A target for a larger pharma/biotech company that is lacking in homegrown IO candidates.

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Celldex Therapeutics Still Looks Undervalued With Multiple Clinical Shots On Goal

Seeking Alpha: Stronger First Quarter Sales Help Roche, But ASCO Probably Matters More

Swiss drug and diagnostics giant Roche (OTCQX:RHHBY) is in a challenging position today. On one hand, this remains the preeminent global oncology franchise with three incredible strong mature drugs and a deep pipeline. Roche is also a strong player in several diagnostics markets and has arguably done more than any other drug company to advance the companion diagnostics concept. The other hand is the uncertainty around the cash flow streams - many investors are worried about the prospect of generic competition for those "Big Three" oncology drugs, as well as the risk that Bristol-Myers (NYSE:BMY), Merck (NYSE:MRK), and AstraZeneca (NYSE:AZN) might not only beat Roche to the punch, but preclude the company from being a market share leader in oncology.

For my part, I think the push-pull of the Street has these shares more or less fairly priced. I'm content to own the fairly-priced shares of a great company, and I think Roche is exactly that. What's more, I see more potential to the upside from pipeline successes than downside risk to failures and generic competition. That said, I will once again repeat a complaint I've made multiple times regarding Roche - I'd like to see a stronger pipeline and R&D effort outside of oncology.

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Stronger First Quarter Sales Help Roche, But ASCO Probably Matters More

Seeking Alpha: Poor Pipeline Productivity Has Left Roche More Vulnerable

I bought Roche (OTCQX:RHHBY) years ago because I thought that the Street was overly concerned about near-term threats to the company's oncology portfolio and was overlooking the long-term potential of a true giant in oncology and an underrated player in global pharmaceuticals and diagnostics. I really can't complain about the performance since my early 2011 purchase, as Roche's 90%-plus gain has outstripped Novartis (NYSE:NVS), Johnson & Johnson (NYSE:JNJ), Glaxo (NYSE:GSK), Pfizer (NYSE:PFE) and Novartis . Of the stocks I was looking at at that time (when I decided to sell Johnson & Johnson), only Amgen (NASDAQ:AMGN) and Bristol-Myers (NYSE:BMY) have done better.

Since then, though, Roche has underwhelmed me with its R&D productivity. The company has done fine with its oncology drug development, but its repeated failures outside of oncology have left the company with a gap in its pipeline and vulnerability to potential price competition in immuno-oncology. Absent a more comprehensive re-think of its approach to R&D, it may be time to think about taking profits in this Swiss drug and diagnostics giant.

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Poor Pipeline Productivity Has Left Roche More Vulnerable

Seeking Alpha: With An Iffy Non-Oncology Pipeline, Roche Pays Up For InterMune

Roche (OTCQX:RHHBY) does a lot of things well. It is one of the largest players in oncology and markets three of the top ten best-selling drugs in the world. It also has a strong diagnostics business and a deep immuno-oncology platform. What Roche has not done so well, though, is develop new drugs outside of oncology, with notable recent failures in cardiology, diabetes, and CNS disease. Given those failures, and perhaps seeing an opportunity to leverage existing efforts in pulmonary/respiratory disease, Roche has stepped up with an expensive bid for InterMune (NASDAQ:ITMN).

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With An Iffy Non-Oncology Pipeline, Roche Pays Up For InterMune

Seeking Alpha: Risk And Reward Seem Pretty Balanced At Seattle Genetics

Oncology biotech Seattle Genetics (NASDAQ:SGEN) has had a bit of an interesting ride since I reviewed the company's prospects and valuation back in December. The shares moved up about 40% through February of this year on optimism for the company's deep portfolio of antibody drug conjugate (or ADC) compounds, not to mention biotech enthusiasm in general, before getting caught up in the great biotech washout and fears tied to the safety of lead drug Adcetris and changes to clinical trials. Add in some concerns about competition from immuno-oncology drugs and there's a lot to digest. When it is all said and done, not all that much has changed on a "net basis" in my view - Seattle Genetics doesn't look as compelling on a value basis, but there's significant upside if clinical trial read-outs de-risk the pipeline.

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Risk And Reward Seem Pretty Balanced At Seattle Genetics