The Motley Fool: Is Incyte Corporation Overvalued?

One of the secrets to successful stockpicking in the biotech sector is adequately valuing and pricing the risk/reward profile of a company's pipeline. Almost every biotech looks cheap if an investor just assumes that everything will work as planned, but the reality is that only a small percentage of pipeline prospects live up to their potential. In the case of Incyte (NASDAQ: INCY  ) , this company does have a solid product in Jakafi, but it seems as though the Street is already factoring in a fair bit of success for the company's early stage pipeline.

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Is Incyte Corporation Overvalued?

The Motley Fool: Does Sanofi Need to Turn to M&A to Bulk Up Its Oncology Assets?

It's hard to say that there's anything particularly wrong with Sanofi (NYSE: SNY  ) today. Like most of its big pharma peers, revenue growth remains a challenge (sales were down 7% as reported in the third quarter and up less than 1% in constant currency), and investors are worried that generics, biosimilars in this case, will chew into Sanofi's lucrative diabetes franchise. Even so, the shares are near an all-time high, and investors who've owned these shares for a few years aren't exactly hurting.

Even so, one of the pillars of the bear thesis is that Sanofi hasn't done enough to position itself in some of the more attractive markets within branded pharmaceuticals. Sanofi's deal with Regeneron for its anti-PCSK9 antibody was a pretty good deal for Regeneron, and Genzyme's rare disease drugs contribute less than 10% of the total revenue base.

Most specifically, though, Sanofi is weak in arguably the hottest area in pharma: oncology. Given recent pipeline failures and weak positioning in immunotherapies, it's worth asking if Sanofi may turn to M&A to appease investors worried that Sanofi's fortresses in diabetes and vaccines and emerging opportunities in cholesterol and multiple sclerosis aren't enough.

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Does Sanofi Need to Turn to M&A to Bulk Up Its Oncology Assets?

Seeking Alpha: The Occultation Of Rigel Pharmaceuticals

Investors in Rigel Pharmaceuticals (RIGL) got another very much unwanted dose of bad (or at least confusing) data on Thursday, with disappointing OSKIRA-4 Phase 2 data on fostamatinib. While there are additional studies still under way and scenarios under which this drug could still make it, Rigel Pharmaceuticals is well on its way to being one of my worst biotech calls, and the risk on this stock is definitely running high.

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The Occultation Of Rigel Pharmaceuticals

Seeking Alpha: YM BioSciences's Strange Journey Comes To A Strange Conclusion

Nothing about YM BioSciences (YMI) was ever easy or entirely normal, so I suppose it's no great surprise that this company's final story is a more than a little bit out of the norm. Although it was not surprising to see that YM BioSciences got a buyout bid, the fact that it is Gilead Sciences (GILD) stepping up for the deal certainly surprises me.

The Deal To Be
Assuming that the deal goes through as announced, Gilead will be acquiring YM BioSciences for $2.95 per share in case. That's a bill of about $510 million for Gilead, though YMI's cash on hand of about $125 million offsets the net price by a meaningful amount. As a development-stage biotech, YMI has no revenue or profits, though I would think Gilead should be able to make use of at least some of YMI's accumulated tax losses.

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YM BioSciences's Strange Journey Comes To A Strange Conclusion

Seeking Alpha: The Wait Goes On At YM Biosciences

It's not uncommon for biotechs to go quiet for long stretches of time, particularly when they are basically one-product companies with little incremental data on the way. In the case of YM Biosciences (YMI), though, shareholders have reason to be a little edgy about the lack of news. Not only has the company been cagey in discussing its plans for pivotal trials of its lead drug CYT387, but partnership discussions have supposedly been ongoing for most of the year so far. While I'm cautiously optimistic that YM Biosciences does have a real winner in myelofibrosis, it may well be hard for this stock to outperform without the seal of approval represented by a Big Pharma partner.

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The Wait Goes On At YM Biosciences

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: YM Biosciences' Cheap Valuation Doesn't Make Sense

Having spent the better part of two decades investing in biotechs, I know better than to take any "it seems too good to be true" story at face value. And yet, when I dig into YM Biosciences (YMI) I'm legitimately puzzled at the skepticism, lack of support, and low valuation of this biotech. While one-drug stories are indeed risky and YMI has a formidable competitor to deal with, the current valuation on this stock seems more like a worst-case scenario in a biotech market that generally leans toward being much too optimistic.

CYT387 And Anemia - The Axis Around Which The Story Revolves
Right now it seems like all of the bear-vs-bull debate essentially boils down to whether or not YMI's lead compound CYT387 can demonstrate the ability to reverse/reduce anemia in myelofibrosis patients. If it can, the drug is underestimated and the stock is too cheap; if it cannot, fair value may not be all that much higher (but more on that later).

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YM BiOSciences' Cheap Valuation Doesn't Make Sense

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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Abbott Labs Showing Meaningful Growth

Abbott Labs (NYSE:ABT) has always been a little different as a medical technology company, with a  history of zigging when other companies zag. For now, that somewhat contrarian philosophy is paying off, as Abbott is one of the very few large-cap medical technology companies to be showing any meaningful growth. 

The Quarter That Was
Abbott came through with 12% revenue growth in the third quarter (or 13% if foreign currency effects are reversed). Pharmaceuticals is still overwhelmingly the largest business at Abbott, and this unit grew more than 23% due in large part to the acquisition of Solvay. Without this deal, growth was probably in the very low single-digits. Elsewhere, the nutritional business was disappointing (down more than 2%) due to a recall, while the diagnostics business was basically on target (up about 2%), and the vascular business was strong (up almost 20%).

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Time For Gilead To Open Its Wallet

When you see a person or company referred to as a "one-trick pony", it is supposed to be an insult, or at least a serious criticism. But what if that one trick is really, really good?

That is the dilemma for investors considering adding shares of Gilead Sciences (Nasdaq: GILD) to their portfolios. Gilead has one of the best HIV portfolios in the world, and that contributes about 77% of the company's revenue. But can this company continue to grow and attract institutional investors with just one stellar business?

Not Too Many Comparables 
If you look around at the large-cap biotech companies and pharmaceutical companies that are Gilead's most logical peers, you notice something important - none of those other companies are quite as dependent on a single disease. Amgen built itself with a focus on hematology, but it has since expanded into cancer, osteoporosis and inflammatory disease. Genzyme has a broad focus on rare diseases, Biogen Idec is diversified across several categories, and though Celgene is focused keenly on cancer, different types of cancer are often treated like completely different diseases.

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Sanofi's Going Shopping?

According to a rumor posted on Bloomberg, Sanofi-aventis (NYSE: SNY) is supposedly closing in on a "major" acquisition in the U.S. Equally supposedly, the talks are in early stages, so plenty could go wrong.

It certainly has the ring of truth, though. Since coming into the top spot, Sanofi's CEO has led the company to 25 acquisitions costing $17 billion (also according to Bloomberg). That's pretty good work for two year's time. Most of those deals were small, though, and added drugs to the pipeline with a long march towards approval. Because of that, the company is still facing some pretty serious revenue hits from upcoming generic competition.

So, even though it's still an early-stage rumor, why not play around with who Sanofi might buy?

First, I'm going to put a range of $20B - $50B on the most Sanofi might be willing to pay.

At that level, Bristol-Myers Squibb (NYSE: BMY) and Lilly (NYSE: LLY) could both be doable, though with little premium. Bristol, though it has an interesting oncology portfolio, has the same problem as Sanofi as the companies are partnered on drugs about to go generic. Likewise, Lilly could see up to 40% of its sales go to generics between now and 2013.

Gilead (Nasdaq: GILD) would give the company a great franchise in HIV/AIDS and an okay pipeline outside of virology (mostly cardiopulmonary). Genzyme (Nasdaq: GENZ) would not make much sense as I don't think Sanofi wants to focus on rare disease. Biogen Idec (Nasdaq: BIIB) is definitely interesting. The company has a strong MS franchise and a good cancer drug, as well as a pretty good collection of Phase 3 candidates and an irritating activist investor (Icahn).

Below that level, you're looking at names like Human Genome Sciences (Nasdaq: HGSI), Amylin (Nasdaq: AMLN), and Incyte (Nasdaq: INCY). HGSI and Amylin would cost less than $10B, and Incyte probably less than $4B. All three have a lot going for them, with interesting drugs very close to the market, but are they big enough? Maybe ... Human Genome has great technology and a good cancer pipeline, and Amylin would definitely expand the company's diabetes business. Incyte, likewise, has a great portfolio and would give Sanofi a host of options, though minimal revenue contribution.

So... my guess(es)? I think Biogen, and Amylin are the best bets. Gilead makes a lot of sense, but a take-out of Gilead would probably cost more than Sanofi wants to spend.

Disclosure - I own shares of Amylin.