In the coming weeks we'll be rolling out a revised format for our free newsletter - but this week we're bringing back the old school long text format as a tribute to where our weekly review started.
It's been a busy week in biotech. Glaxo, Novartis and Lilly engage in a multi-way asset swap and joint venture, Valeant teams up with Ackerman to big for Allergan, top biotech names report earnings, and Cytokinetics disappoints investors with trial miss once again. Let's go over the stories we've been watching, commenting on and trading this week.
Glaxo Smith Kline (NYSE:GSK) Novartis (NYSE:NVS) and Lilly (NYSE:LLY)
GSK and NVS announced a 3-way deal. Glaxo sold it's oncology assets to Novartis, Glaxo acquired Novartis' vaccines business, and the two companies have created a new joint venture company that will house Glaxo's consumer healthcare business.
Separately, Lilly announced that it is buying Novartis' animal health business.
Valeant (NYSE:VRX) and Ackman for Allergan (NYSE:AGN)
Valleant pharmaceutials and Hedge Fund manager Bill Ackman announced that they are teaming up in a hostile bid for Allergan. AGN has a market cap of some $42 billion, and has rebuffed Valleant in the past. Perhaps Valeant is thinking that teaming up with an activist hedge fund manager is a way to seal the deal.
Biotech Earnings Season
Q1 Earnings season is underway for top biotech names. As we predicted, Gilead's Sovaldi sales came in over $2 billion, topping all analyst estimates. While the quarter was very strong for GILD, this was largely expected, and did not serve to turn biotech sentiment around appreciably. Amgen missed consensus estimates and partially blamed the weather for weak Enbrel sales (huh?). Biogen-idec was mostly in-line with expectations, the Ticfidera launch is going well in both the US and EU, EPS came in a bit light but the company raised full year EPS guidance above analyst estimates indicating confidence in their performance for the rest of the year.
Celgene (NASDAQ:CELG) In-Licenses Crohn's Drug from Nogra
Celgene announced that it has in-licensed an oral anti-sense RNAi therapy for treating Crohn's disease from privately held Nogra Pharma. The new drug is phase 3 ready, although phase 2 data are yet to be published. interestingly, CELG paid $710 million for this compound and the bidding was said to be very competitive. While investors have little to go on to determine if the compound is a viable therapy for Crohn's disease, it is important to keep in mind that CELG has seen data that the public has yet to see.
While we do not know the exact timing of data release from the phase 2 trail for this new compound, we note that Digestive disease Week is May 3 - 6. Keeping an eye on CELG this week may be worthwhile.
Cytokinetics (NASDAQ:CYKT) Transmetiv misses in ALS
Cytokinetics announced Friday that it's therapy for ALS missed the primary endpoint and had mixed results on secondary endpoints in the phase IIb BENEFIT-ALS trial. This is a hge miss for CYTK and is the second time that CYTK has help stoke investor expectations only to deliver disappointing news. the same thing happened last September with disappointing data from the omecativ mecarbil trial.
On Wednesday, CYTK issued a press release announcing an investor breakfast immediately following their presentation of the BENEFIT-ALS data at this week's American Association of Neurology (AAN) conference. Many retail investors took this as a sign that the company had the data in hand, and that the data was positive because, after all, "You don't hold a breakfast to announce bad news".
It didn't help that Roth Capital Partners, a third tier wall street firm, pounded the table on Wednesday stating that the data could be a transformational event for the company and that CYTK should be owned ahead of the data.
While CYTK shot up over $13 on Thursday from a Monday open in the $9.90 range, experienced investors knew better than to hang on to shares of this company. At Red Acre, we advised our premium subscribers that a 44 move in the stock was likely, but that being on the sidelines for CYTK made sense due to previous data issues with this particular trial.
CYTK fell more than 64% when the trial miss was announced on Friday.
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