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

Seeking Alpha: Weighing Out The Seattle Genetics Barbell

Looking at Seattle Genetics' (SGEN) value makes me think of a barbell, as the valuation is split between the near-term potential of the approved oncology drug Adcetris in maintenance and salvage indications in Hodgkins, anaplastic large cell, and cutaneous T cell lymphomas, and the longer-term potential of extending Adcetris into front-line therapy and the company's pipeline. As is, I think there's enough value in the existing Adcetris business to support a price in the mid-$20's, but it is clear that the real value lies in the longer-term opportunities.

I think Seattle Genetics deserves to trade in the mid-$40's today, but this could well be a frustrating stock to own. With most of the company's pipeline in early stages of development and partnered programs offering only modest royalties, I suspect investors may get impatient with the years-long wait for data from the front-line ECHELON trials and the Street's fixation on the quarter-to-quarter wobbles in Adcetris sales.

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Weighing Out The Seattle Genetics Barbell

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.

Read the full article at The Motley Fool:
Does Sanofi Need to Turn to M&A to Bulk Up Its Oncology Assets?

Seeking Alpha: Is ImmunoGen More Than T-DM1?

One of the crueler aspects of biotech is that investors can be right about a technology or drug, but still not make much money from it. Bad deals, bad management, and mismanaged expectations can sometimes do harm that even blockbuster drugs can't fix. While I don't think any of that applies to ImmunoGen (IMGN), I do wonder how much value lies in this company's Targeted Antibody Payload (TAP) technology (basically the company's own antibody drug conjugate approach).

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Is ImmunoGen More Than T-DM1?

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: AstraZeneca Sprinting To Fix Itself

British drug giant AstraZeneca (AZN) has recently been racing to fix the holes in its pipeline created by several high-profile clinical failures. The question for investors is whether the company is at risk of pulling a Wile E. Coyote and running right off the edge of the cliff. Although AstraZeneca has more work to do to fix the near-term outlook, long-term investors may have a brighter future now than just a few months ago.

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AstraZeneca Sprinting To Fix Itself

Seeking Alpha: Should Seattle Genetics Start Thinking More Like A Pharma Company?

Approval and launch hasn't quite meant Easy Street for Seattle Genetics (SGEN). Granted, the company now carries a $2 billion market cap and has doubled over the past two years, but there still seems to be a great deal of controversy about the true potential of its drug Adcetris and the subsequent fair value. Oddly enough, perhaps part of the answer is for Seattle Genetics to think a little more like a pharmaceutical company and a little less like a biotech.

Where Will Adcetris Go?
Arguing about market potential and peak sales is nothing new in biotech -- just review the debates at AEterna Zentaris (AEZS) or Vivus (VVUS) sometime -- but the spread in sell-side estimates for Adcetris still surprises me. I've seen expectations as low as $250 million to as much as $900 million. On the low end, it would assume that Seattle Genetics finds largely unmitigated failure in extending the label and usage; on the high end, it presupposes that almost everything goes right.

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Should Seattle Genetics Start Thinking More Like A Pharma Company?

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

Investopedia: Seattle Genetics - And Now The Hard Bit

This has been a tough year for biotechs. Compounding a lull in clinical news, the FDA continues to play a "catch me if you can" game of changing standards for approval. On top of that, pharmaceutical companies like Pfizer (NYSE:PFE) and Merck (NYSE:MRK) have shown relatively little interest in making major acquisitions without approved products in hand. In addition, independents like Dendreon (Nasdaq:DNDN) have shown that FDA approval is only one battle in the larger war.



With all of that in mind, then, how excited should investors be over word last last week that the FDA has approved Seattle Genetics' (Nasdaq:SGEN) Adcetris? Clearly this is good news (far better than a rejection, at least), and the FDA was rather lenient with the labeling. Still, investors should be cautious as post-approval can be a challenging time to own biotechnology stocks.

The FDA Roars, but Ultimately Says Yes
The FDA gave a thorough work-over to Seattle Genetics during the company's panel meeting, seeming to make it abundantly clear that the agency had issues with the company's application to sell Adcetris for relapsed/refractory Hodgkin's lymphoma, let alone another indication for anaplastic large cell lymphoma.

To read more, click below:
http://stocks.investopedia.com/stock-analysis/2011/Seattle-Genetics--And-Now-The-Hard-Bit-SGEN-DNDN-NVS-AMGN-BIIB-ALTH-PFE0822.aspx

Investopedia: Dendreon's Bull Story In Intensive Care

For Dendreon (Nasdaq:DNDN) bulls, the sky was going to be the limit. Provenge, a high-priced cancer vaccine shown to be effective in serious prostate cancer cases, was going to be a multi-billion dollar blockbuster, and Dendreon was going to ride it on the way to becoming the next Amgen (Nasdaq:AMGN), Biogen Idec (Nasdaq:BIIB), Centocor or Genentech.

And then came the second quarter results.


A Startling Turn of Events
Dendreon skeptics were certainly out there before August 3. The incredible rise in Dendreon's stock price on the back of a very expensive drug, which offered limited additional survival benefit and was the first ever of its kind, had shorts licking their chops. Even the analyst community (which is often quite bullish and positive as a general rule) had it skeptics. Analysts like Lucy Lu at Citigroup and Lee Lalowski at Credit Suisse, for instance, publicly wondered whether expectations were too high given the cost of Provenge and issues of doctor comfort with the therapy.

 

To read the full article, follow the link below: 

http://stocks.investopedia.com/stock-analysis/2011/Dendreons-Bull-Story-In-Intensive-Care-DNDN-JNJ-SGEN-HGSI-AMGN-BIIB0809.aspx

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.

To read the full piece at Seeking Alpha, please follow the link:
Do Dendreon's Problems Matter to Your Biotech Portfolio?

Investopedia: Vical Gets Some Validation

Investors in small-cap vaccine biotech Vical (Nasdaq:VICL) received some good news late on Thursday, as the company announced a licensing deal with a major Japanese pharmaceutical company. While this is a solid deal that will bring some more cash into the business, the real question for investors these days is whether Vical's candidate for metastatic melanoma can ultimately obtain FDA approval and then stand with the likes of Bristol-Myers' (NYSE:BMY) Yervoy in the market.

Astellas Steps Up  
While Vical's Allovectin-7 therapy for melanoma gets a lot of the press, Thursday's deal concerns the company's experimental TransVax product for cytomegalovirus (CMV) in transplant patients. Astellas Pharma (OTCBB:ALPMY.PK) has acquired worldwide rights to TransVax and will assume responsibility for its clinical development. In exchange, Vical gets a staggered up-front payment of $35 million in total, future potential milestones, royalty payments (if the drug makes it to market) and the option to co-promote the drug in the United States.

To read the complete story, please click below:
http://stocks.investopedia.com/stock-analysis/2011/Vical-Gets-Some-Validation-VICL-BMS-GSK-NVS-SNY-SGEN-DNDN-AMGN-AGEN0718.aspx

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

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.

To read the full piece, please go to Seeking Alpha:
Johnson & Johnson: Potential M&A Targets to Recharge Growth, Divert Investor Attention 

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...

Seeking Alpha: Clinical Data And Forest Labs Agree To Split The Risk

The tug of war between Clinical Data (CLDA) bulls and bears has ended in what has to be called a draw. Flying in the face of the bear argument that Clinical Data's recently-approved depression drug Viibryd is little more than a me-too drug with scant prospects, Forest Labs (FRX), a company that knows more than a little about depression drugs, has agreed to purchase the company for $30 a share in cash and up to $6 more in contingent payments.

Of course, bulls should not be limbering up for an unbridled victory lap either. At $30, the guaranteed part of Forest's bid represents a take-under to the tune of nearly $4 per share. Moreover, if Viibryd really takes the market by storm and becomes a $2 billion or even $3 billion a-year drug, this deal is hardly full and fair compensation.

To read the full piece, please go to:
http://seekingalpha.com/article/254167-clinical-data-and-forest-labs-agree-to-split-the-risk?source=mc_market

The MannKind Eulogy

I'm hardly the first (nor likely the last) to write what amounts to a eulogy for MannKind (Nasdaq: MNKD) after this week's earnings report and conference call. With too little cash on hand, too much still to do with respect to clinical studies, and a great deal of uncertainty about funding or partnering opportunities, it is clearly dark times for this company and its ongoing survival is hardly a sure thing.

Looking At The Balance Sheet

First thing's first, the company's earnings report was in some respects typical for a biotech – that is, the concern was all about the cash on hand and the cash burn. To that end, the company ended the period with $70 million in cash and still has access to a further $98 million drawdown.

In order to minimize the cash consumption and stretch out survivability, the company is cutting 41% of its workforce. At this point, MannKind is pretty much just be keeping the so-called “essential personnel” for getting Afrezza through the clinic and is putting the cancer vaccine programs on the backburner.

The End Of Easy Money?

None of that is terribly surprising. More concerning, though, was founder Al Mann's unwillingness to publicly commit himself to further funding of the company. MannKind exists in large part only because of Al Mann's wealth and if that spigot is now off the company is clearly looking at much more onerous funding terms in the future.

Honestly, I'm not sure how anyone could really be surprised by this. Self-made billionaires don't get that way because they're stupid or because they routinely throw money down bottomless pits. More to the point, there has to be a point of pain for even the most avid believer and Al Mann likely has to face a difficult decision about whether he wants to risk any more of his wealth (and the money he can give to his foundations) on what may be a doomed idea.

The Path To Go Forward

So where does the company go now? Management should be commended for being quite clear about what they think needs to be done to secure approval, and how long those steps will take. To wit, management laid out a clear path of about 15 months for a new submission. Assuming a decent FDA review period (and no particularly ridiculous delays for labeling decisions and what not), that would put the decision date at around the end of 2012/beginning of 2013.

Can MannKind get there without more money? All of the analysts seem to say “no”, saying that the company has enough money to get through the end of 2011, but not beyond that. I think that may be a little too negative – I think its *possible* (but NOT probable) that the company could stretch their funding beyond that, but a lot of it will have to do with just how large these final trials have to be to appease the FDA. One way or another, though, the company will need more resources to survive to launch day.

Partners?

It was also interesting to hear the company continue to talk about partnering prospects; suggesting that there were multiple parties with at least some level of serious interest. Obviously, the company didn't name names, or was management very willing to talk specifics about what sort of deal they would find acceptable.

In terms of deals, MannKind is really over a barrel right now. It is unlikely that any Big Pharma CEO or VP would put his butt on the line and give a large upfront cash payment to MannKind when Afrezza has already been subject to two Complete Response Letters. At this point, then, MannKind investors should probably look at examples like Arena's (Nasdaq: ARNA) deal with Eisai for Lorqess or the deal between Orexigen (Nasdaq: OREX) and Takeda – deals that committed the larger partners to very little in the way of upfront cash and with all of the upside to the biotech on the back end.

That is not to say that nobody places any value on Afrezza. Even with past failures in inhaled insulin, I could see Sanofi-Aventis (NYSE: SNY), NovoNordisk (NYSE: NVO) and Lilly (NYSE: LLY) all being interested in Afrezza as a way of rounding out (and protecting) their diabetes franchises. The sticking point, though, is price and the structure of the deal. Any company that offers MannKind more upfront cash than is necessary to get Afrezza through the FDA is going to have to explain itself to an angry shareholder base if/when Afrezza fails again. Likewise, I cannot imagine that any company not currently engaged in diabetes is going to touch this drug – why build out a sales force for a drug that may not get approved or find much commercial acceptance? 

What might a deal look like? If MannKind strikes a deal before FDA approval, I would expect a modest upfront cash payment – likely just enough to fund the remainder of the drug's development expenses, plus a milestone for approval – and a relatively large royalty on the backend. The sooner the company does the deal, the larger the upfront payment and presumably the smaller the backend royalty.

Unfortunately, the company does not have many other obvious options. The remainder of the company's pipeline is very early stage and likely not worth much in a sale. More to the point, I do not see any way that the company could sell its GLP-1 or cancer vaccine programs for enough cash to fully fund Afrezza through approval. So why bother? Why sell a future option for pennies on the dollar when those pennies won't really spell the difference between success and failure?

The Bottom Line

I've never been positive on inhaled insulin or MannKind and that's not changing today. I simply do not think the market is as large or promising as the bulls believe, and I base that on over a decade of following the diabetes market. Moreover, let's not forget that this is a company with a $500 million market cap and a $1 BILLION enterprise value. That is a pretty huge valuation for a very iffy product – Seattle Genetics (Nasdaq: SGEN) has what may be an incredible drug for lymphoma and trades at an EV of $1.3 billion,

I'm sure that anybody still owning MannKind today is not going to be easily swayed, and I don't really mean to change their mind. I just think that for me, MannKind does not make any sense as a stock when the company sports a billion-dollar valuation.

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.

For the complete piece, please go to:
http://stocks.investopedia.com/stock-analysis/2010/Time-For-Gilead-To-Open-Its-Wallet-GILD-VRUS-HGSI-SGEN-INCY-ALXN-TRGT0706.aspx