In a report published on August 20, Gordon Haskett analyst Don Bilson noted that Mylan (MYL) once claimed that it could generate $800M of synergies from a deal with Perrigo (PRGO) and while that dollar figure may no longer be relevant, the same logic may still be reasonably intact. At that time, he’d also pondered whether Mylan’s failed attempt to acquire Perrigo in 2015-16 could be put back together given the troubles facing both companies. Gordon Haskett has flagged to investors that last night Perrigo postponed its investor event to discuss its long-term consumer growth strategies and key operational initiatives, previously planned as a conference call for September 25. Management had emphasized the event over 10 times on its earnings call just 3 weeks ago, the firm also noted.
Thursday, August 30, 2018
DaVita, peers under pressure as Calif. passes controversial dialysis bill
Shares of DaVita (DVA), Medical (FMS) and American Renal Associates (ARA) are slipping this morning after the California Assembly passed dialysis legislation SB 1156, a union backed bill that will cap commercial dialysis payments at lower Medicare rates and force charities to disclose donors of third-party payments. The bill would essentially create a single-payer for dialysis services in the state, but California’s Senate still has to vote it through again before it heads to Governor Jerry Brown’s desk. RISK TO DAVITA’S EARNINGS: After the California Assembly passed an amended version of Senate Bill 1156, which, among other things, requires that entities providing charitable premium assistance to identify and disclose to the health plan the details of each person assisted, JPMorgan analyst Gary Taylor told investors that he believes this bill could impair approximately half of DaVita’s California earnings, or about 10% of total corporate earnings. Furthermore, the analyst noted that he sees risk that other states could adopt similar legislation supported by insurers, employers and the Service Employees International Union. Taylor sees the issue as constituting significant binary event risk for DaVita shareholders, reiterating an Underweight rating and a $68 price target on the shares. RISK ‘SEEMS MANAGEABLE’: In a research note of his own after the California Assembly passed SB 1156, Baird analyst Matthew Gillmor told investors that he estimates the gross earnings risk to DaVita is about 8%. While the stock arguably prices in significant risk associated with SEIU legislative/ballot efforts, the analyst had been hopeful the industry would be successful in combating these initiatives. While his conviction level moves somewhat lower, Gillmor argued that the risk associated with SB 1156 “seems manageable.” The analyst reiterated an Outperform rating and $90 price target on DaVita shares. PRICE ACTION: In morning trading, shares of DaVita have plunged over 9% to $66.00, while American Renal and Fresenius Medical have dropped about 3% each to $21.64 and $51.52, respectively.
Cronos says securities offerings ‘underwritten by reputable banks’
Contacted by The Fly after short seller Citron Research placed a $3.50 price target on Cronos Group’s stock and said the company has been “deceiving the investing public by purposely not disclosing the size of its distribution agreements with provinces,” a spokesperson for Cronos said “we have no comment to short reports. I can assure you that our securities offerings have been underwritten by reputable banks and our respected advisors have done all the necessary due diligence under both U.S. and Canadian securities law.” In morning trading, shares of Cronos have dropped over 7% to $11.81.
Perrigo responding to investor input with revised call plans, says Wells Fargo
Wells Fargo analyst David Maris notes that clients have been asking why Perrigo shares are trading higher and whether there is any story behind the company delaying its planned investor event. Perrigo’s investor relations offered the explanation that “it was concluded that a comprehensive output of the New Perrigo is desired, including an in person forum, a long-term financial algorithm, case studies and/or details of specific growth actions,” reported Maris. He believes the explanation clearly shows they are simply looking to be responsive to investor input, adding that “stock trading in late-summer on the last day of a month can sometimes be more volatile than usual.” Maris maintains a Market Perform rating on Perrigo shares.
Merck’s HIV-1 treatments DELSTRIGO and PIFELTRO approved by FDA
Merck announced that the U.S. Food and Drug Administration has approved two new HIV-1 medicines: DELSTRIGO, a once-daily fixed-dose combination tablet of doravirine, lamivudine and tenofovir disoproxil fumarate; and PIFELTRO, a new non-nucleoside reverse transcriptase inhibitor to be administered in combination with other antiretroviral medicines. Both DELSTRIGO and PIFELTRO are indicated for the treatment of HIV-1 infection in adult patients with no prior antiretroviral treatment experience, and are administered orally once daily with or without food. DELSTRIGO contains a boxed warning regarding post-treatment acute exacerbation of hepatitis B infection. DELSTRIGO and PIFELTRO do not cure HIV-1 infection or AIDS. DELSTRIGO and PIFELTRO are contraindicated when co-administered with drugs that are strong cytochrome P450 (CYP)3A enzyme inducers as significant decreases in doravirine plasma concentrations may occur, which may decrease the effectiveness of DELSTRIGO and PIFELTRO. DELSTRIGO is contraindicated in patients with a previous hypersensitivity reaction to 3TC.
https://thefly.com/landingPageNews.php?id=2784275
Genentech Phase III HAVEN 3 study results published in NEJM
Genentech, a member of the Roche Group, announced that pivotal data from the Phase III HAVEN 3 study, which evaluated HEMLIBRA prophylaxis administered every week or every two weeks in adults and adolescents aged 12 years or older with hemophilia A without factor VIII inhibitors, were published in the August 30, 2018, issue of the New England Journal of Medicine. “In the HAVEN 3 study, HEMLIBRA showed a significant and clinically meaningful reduction in bleeds in people with hemophilia A without factor VIII inhibitors, while offering multiple subcutaneous dosing options,” said Dr. Johnny Mahlangu, Faculty of Health Sciences, University of the Witwatersrand and NHLS, Johannesburg, South Africa. “The publication of these results in the New England Journal of Medicine represents a major advance for hemophilia research and reinforces the potential of HEMLIBRA to change the standard of care for people with hemophilia A.” The Phase III HAVEN 3 study in people with hemophilia A without factor VIII inhibitors met its primary endpoint and key secondary endpoints. Earlier this year, the FDA granted Breakthrough Therapy Designation and Priority Review to HEMLIBRA for people with hemophilia A without factor VIII inhibitors based on data from the HAVEN 3 study. The FDA is expected to make a decision on approval by October 4, 2018. https://thefly.com/landingPageNews.php?id=2783729
Wednesday, August 29, 2018
Reality check for Hong Kong biotech IPOs as Ascletis slips
The Hong Kong Stock Exchange became a hot new destination for biotech companies this year when it relaxed its rules for early-stage, prerevenue biotechs. But the fate of Ascletis Pharma, the first to list there under the new rules, may serve as a wake-up call for other firms looking to follow in its footsteps.
After a month on the HKEX, Ascletis’ shares have dropped 44%, from HK$14 to HK$7.88. The Hangzhou, China-based company filed for its Hong Kong IPO in May, pricing at HK$14 on Aug. 1, the middle of its range. The offering raised $400 million and Ascletis was valued at $2 billion.
Ascletis has noted the movement in share price and that its “fundamentals remain very strong and unchanged since the IPO,” Reuters reported. The company has put together a pipeline of antivirals by raising $155 million in venture capital and then buying up assets from Western drug developers. Ascletis wants to spearhead a change in how hepatitis C is treated in China.
The stock’s slump could be chalked up to a relatively high pricing, said people involved in the IPO to Reuters. And who could forget the growing trade war between the U.S. and China?
The company, understandably, is putting a brave face on its performance, but investors and bankers spoke of bubbles bursting and said to expect lower valuations for future IPOs in Hong Kong.
“With a surge in China’s biotech industry in recent years, everyone has been a bit overexcited,” said Kevin Xie, who co-founded and heads the healthcare division at the investment bank China Renaissance, Reuters reported.
“As market conditions have become more challenging than a year ago and investor sentiment has cooled, many biotech firms will have to adjust valuations in both primary and secondary markets,” Xie said.
And it’s not a bad thing, said Jonathan Wang, senior managing director and co-founder of the Asia fund at healthcare investor OrbiMed Advisors.
“It’s actually good news to have everyone cooled down after months-long hype and excitement around the industry,” Wang, who also sits on an advisory panel to the HKEX, told Reuters.
Investors backing biotech companies regardless of high valuations “is very dangerous and could either create bubbles in the industry or depress it in the long term,” he said.
According to Reuters, there are at least 10 more biotechs aiming to go public in Hong Kong this year. Some of them even forwent plans to do so in the U.S. thanks to the new, friendlier rules for early-stage biotech companies. Grail might be one of them—according to a Bloomberg report in April, the company is considering raising another billion-dollar funding round before going public in Hong Kong.
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