Shares of cannabis stocks are in focus after Canadian marijuana producer Tilray (TLRY) announced approval by the U.S. Drug Enforcement Administration to import a cannabinoid study drug into the U.S. from Canada. DEA APPROVAL: On Tuesday, Tilray announced that the U.S. DEA has granted approval to import a cannabinoid study drug into the U.S. for a clinical trial at the University of California San Diego Center for Medicinal Cannabis Research examining its safety, tolerability and efficacy for Essential Tremor. Tilray is providing a cannabinoid formulation for the trial in capsule form, which will allow researchers to test an investigational drug product containing two active ingredients extracted from the cannabis plant, cannabidiol and tetrahydrocannabinol. The study is expected to begin in early 2019 with financial support from Tilray and the International Essential Tremor Foundation. Essential Tremor is a neurological movement disorder characterized by involuntary and rhythmic shaking. ‘PROMOTIONAL AND MISLEADING’: Following the announcement, short-seller Citron Research tweeted, “$tlry has now crossed to promotional and misleading They announce that they are supplying cannabis to an already arranged study that does not involve them. No collaboration Low float a promo is a dirty combo for.” The tweet comes after Citron announced a short position in Tilray on September 4 via Twitter, saying, “Citron LOVED $TLRY at $26 but now we are SHORTING stock. Cowen lowered est and still raised tgt $62 only shows “RETAIL INVESTORS GONE MAD” and forgot $TLRY went public at $17 – 6 weeks ago. We would expect an equity raise at these levels. By far most expensive in space.” Citron also issued a report on September 12, which said, “Since August 15, US marijuana stocks Tilray and Cronos (CRON) have significantly outpaced the performance of their Canadian traded peers. Due to federal regulation, US listed stocks cannot have any operations in the US without losing their listings, whereas Canadian listed stocks can have US operations. The US will be the largest cannabis market in the world. Today, the California market is over 5x larger than all of Canada. Despite obvious logic, we’ve seen US retail investors pile into the US listed marijuana stocks…Lastly, over the past week Citron has received hundreds of emails from investors ranging from anti-Semitic to threats on family, but NOT one of them could justify the price increases with any analysis whatsoever. We have been publishing for 17 years and this is generally a sign of a retail bubble.” WHAT’S NOTABLE: On Monday, Bloomberg reported that Coca-Cola (KO) is monitoring the nascent cannabis drinks industry and is in talks with Canadian marijuana producer Aurora Cannabis (ACBFF) to develop the drinks. Aurora Cannabis announced Tuesday it responded to a request from the Investment Industry Regulatory Organization of Canada regarding reports on potential partnerships with beverage companies. “The company’s policy is not to comment on speculative media reports. The company does confirm that it engages in exploratory discussions with industry participants from time to time. At this time the company confirms there is no agreement, understanding or arrangement with respect to any partnership with a beverage company,” the company said. CANNABIS STOCKS: Publicly-traded companies in the space include Cronos Group, Canopy Growth (CGC), Tilray, Cannabis Science (CBIS), Innovative Industrial Properties (IIPR) and Aurora Cannabis. PRICE ACTION: Tilray surged roughly 20% to $144.55 in morning trading.
Tuesday, September 18, 2018
Teva Has Early Results of Debt Tender Offer; Elects Early Settlement
Teva Pharmaceutical Industries Limited (NYSE: TEVA) announced today the early tender results in connection with its previously announced tender offers (the “Offers”) to purchase for cash for a combined aggregate purchase price (exclusive of accrued and unpaid interest) of up to $400 million (the “Maximum Amount”) a portion of the following series of notes issued by finance subsidiaries of Teva and guaranteed by Teva:
- 1.700% Senior Notes due 2019, CUSIP 88167A AB7 / ISIN US88167AAB70, issued by Teva Pharmaceutical Finance Netherlands III B.V. (the “Priority 1 Notes”);
- 0.375% Senior Notes due 2020, ISIN XS1439749109, issued by Teva Pharmaceutical Finance Netherlands II B.V. (the “Priority 2 Notes”), and
- 2.250% Senior Notes due 2020, CUSIP 88166H AD9 / ISIN US88166HAD98, issued by Teva Pharmaceutical Finance IV, LLC (the “Priority 3 Notes” and together with the Priority 1 Notes and Priority 2 Notes, the “Notes”).
Teva is engaging in the Offers to reduce its total debt and decrease its overall interest expense. Teva expects to fund the Offers with available cash on hand.
Subject to the terms and conditions of the Offers, Teva expects that it will accept for purchase Notes validly tendered and not validly withdrawn at or prior to the Early Tender Time for a combined aggregate purchase price (exclusive of accrued and unpaid interest) equal to the Maximum Amount. The settlement for the Notes accepted by Teva in connection with the Early Tender Time is expected to take place on Thursday, September 20, 2018 (the “Settlement Date”). The amount of each series of Notes that is to be purchased on the Settlement Date will be determined in accordance with the acceptance priority levels and the proration procedures described in the Offer to Purchase, dated September 4, 2018 (the “Offer to Purchase”), subject in each case to the Maximum Amount and the applicable Tender Cap. It is expected that Priority 1 Notes will be subject to a proration factor of approximately 50% and Priority 2 Notes will be subject to a proration factor of approximately 21%. The Company will purchase approximately $300 million aggregate principal amount of the Priority 1 Notes and approximately €89.8 million aggregate principal amount of the Priority 2 Notes. No Priority 3 Notes will be purchased pursuant to the Offers. Payments for Notes purchased will include accrued and unpaid interest from and including the last interest payment date applicable to the relevant series of Notes up to, but not including, the Settlement Date.
The Withdrawal Deadline has passed and has not been extended. Notes tendered pursuant to the Offers may no longer be withdrawn, except as required by law.
The Offers will expire at 11:59 p.m., New York City time, on October 1, 2018, unless extended or earlier terminated (as it may be extended or earlier terminated, the “Expiration Time”). However, as Teva intends, subject to the terms and conditions of the Offers, to accept for purchase the Maximum Amount on the Settlement Date, further tenders of Notes prior to the Expiration Time will not be accepted for purchase.
Thermo Fisher Scientific Expands Genome Editing IP Portfolio
Thermo Fisher Scientific, Inc., the world leader in serving science, has licensed CRISPR technologies from the Broad Institute and ERS Genomics (foundational University of California IP) to bolster its genome editing intellectual property (IP) portfolio. Under the terms of the licenses, Thermo Fisher is granted global non-exclusive rights to products, tools and services for research.
“As one of the most enabling technology platforms in the life sciences today, genome editing holds the promise to further unravel the function of DNA elements and genes and to set in motion the development of new drugs and therapies, including cell therapies,” said Helge Bastian, vice president and general manager of synthetic biology at Thermo Fisher. “These licenses expand our industry-leading genome editing capabilities and demonstrate our continued commitment to enabling our customers to unleash the technology’s full potential in their research programs.”
When combined with previous licenses from ToolGen, Inc., Thermo Fisher now holds one of the most complete CRISPR IP portfolios. This supports an industry-leading CRISPR product line that includes Invitrogen TrueCut Cas9 Protein v2.0, Invitrogen TrueGuide Synthetic gRNAs and Invitrogen LentiArray CRISPR Libraries.
In addition to its CRISPR IP portfolio, Thermo Fisher also holds exclusive rights to the Tal Effector Nuclease (TALEN) IP portfolio. The powerful TALEN genome editing technology complements CRISPR, enabling Thermo Fisher to provide a wide selection of product and service solutions to help customers advance their research programs.
“The combination of CRISPR and TALEN technologies provides a complete genome editing toolbox that moves researchers closer to the promise of delivering on the potential of synthetic biology,” said Jon Chesnut, Thermo Fisher’s senior director of R&D for synthetic biology.
For more information on Thermo Fisher’s Genome Editing products and services please visit: www.thermofisher.com/genomeediting
Europe Regulator Validates Bristol Application for Multiple Myeloma Combo
Bristol-Myers Squibb Company (NYSE: BMY) today announced that the European Medicines Agency (EMA) has validated the Company’s type II variation application for Empliciti (elotuzumab) in combination with pomalidomide and low-dose dexamethasone (EPd) for the treatment of adult patients with multiple myeloma who have received at least two prior therapies, including lenalidomide and a proteasome inhibitor (PI), and have demonstrated disease progression on the last therapy. Validation of the application confirms the submission is complete and begins the EMA’s centralized review process.
“Given the need for new treatment options for patients with multiple myeloma, we look forward to working closely with the EMA as they review this application,” said Fouad Namouni, M.D., head, oncology development, Bristol-Myers Squibb. “It is our hope that this new Empliciti-based combination will soon become available for patients in the European Union with multiple myeloma, whose disease progressed on lenalidomide and a PI.”
The application is based on data from ELOQUENT-3, a randomized Phase 2 study evaluating the EPd combination versus pomalidomide and dexamethasone (Pd) alone in patients with relapsed or refractory multiple myeloma (RRMM). Data from this study were presented at the 23rdCongress of the European Hematology Association in June.
Bristol-Myers Squibb and AbbVie are co-developing Empliciti, with Bristol-Myers Squibb solely responsible for commercial activities.
Changes to Pharmacy Industry Coming as DOJ Approves Cigna-Express Scripts Deal
In March, U.S. insurer CIGNA Corporation announced it was acquiring pharmacy benefits manager Express Scripts for approximately $52 billion. On Monday, the Department of Justice (DOJ) approved the merger.
The New York Times reports, “These combinations of powerful health insurance companies with the country’s dominant pharmacy benefit managers are occurring as established players in the health care sector are frantically searching for ways to fend off potential interlopers like Amazon, whose tentative forays into the pharmacy business have already shaken up the industry.”
Insurer Aetna is also in the process of merging with CVS Health, a $69 billion deal announced in December 2017. The DOJ is still reviewing that deal, although it is expected to be approved. CVS has 9,700 retail pharmacies and 1,100 walk-in clinics, but the significance of the deal is its pharmacy benefits manager enterprise. In 2016, it generated net revenue of $177.5 billion.
Cigna is offering $48.75 in cash and 0.24334 shares of stock of the combined company for each share of Express Scripts. This totals $96.03 per share, a premium of about 31 percent on top of Express Scripts’ closing price at the March announcement. The total transaction has a value of $67 billion, including $15 billion in Express Scripts’ debt.
Once the deal is finalized, Cigna shareholders will have about 64 percent of the combined company, with Express Scripts shareholders in control of the remaining 36 percent. Once the deal closes, the combined company is expected to have about $41.1 billion in debt. Cigna plans to fund the cash part of the deal with a combination of its own cash, Express Scripts debt and new debt issuance. It has debt financing from Morgan Stanley Senior Funding and The Bank of Tokyo-Mitsubishi UFJ.
Mergers in this area being blocked is not unprecedented. In early 2017, courts blocked a proposed merger between Cigna and Anthem, valued at $48 billion. And another judge blocked a deal between Aetna and Humana worth $37 billion.
Express Scripts is the largest PBM in the U.S., handling drug plans for more than 80 million people, including the U.S. Department of Defense.
Many are interpreting the deal as a realization by these established companies that their business models need to change as customers and the government demand better drug price controls. Insurers and pharmacy benefit managers are middlemen for employers and governments, and, The New York Times notes, “the proposed mergers are an attempt to convince their customers that they are working to reduce costs.”
Not only has the possible entry of Amazon into the pharmacy business worried the industry, but Berkshire Hathaway’s Warren Buffet, Amazon’s Jeff Bezos and JP Morgan Chase’s Jamie Dimon created a joint venture to cut healthcare costs and improve services. Atul Gawande is the chief executive officer of the joint venture. The three companies have 840,000 to 1.2 million employees worldwide and many industry-watchers believe that whatever the unnamed company comes up with may have a ripple effect throughout the industry.
The New York Times notes that the approval of this new deal signals “an acceptance of so-called vertical mergers in which companies, although in the same broad line of business, do not directly compete…. Federal officials emphasized that they did not believe the merger would damp competition in the pharmacy business.”
“Quality health care and competitive pricing for health care services and pharmaceutical drugs is critical to U.S. consumers,” stated an assistant attorney general, Makan Delrahim, in a statement on Monday.
Universal Health upgraded to Buy on accelerating growth at BofA/Merrill
As previously reported, BofA/Merrill upgraded Universal Health to Buy from Neutral and raised its price target to $155 from $128. Analyst Kevin Fischbeck expects the company’s psych business to reaccelerate and reach its 5% growth goal as it nears the Department of Justice settlement and easier comps in 2H. The analyst also expects Universal’s acute care business to continue to perform better given exposure to higher growth markets.
Eli Lilly price target raised to $112 from $107 at Barclays
Barclays analyst Geoff Meacham raised his price target for Eli Lilly to $112 and maintains an Overweight rating on the shares. The analyst continues to like Lilly’s positioning in the second half of 2018 and 2019 given its “differentiated growth profile.” Trulicity is poised to continue growth regardless of the REWIND data outcome, Meacham tells investors in a research note titled “Remaining Bullish Ahead of REWIND.”
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