Leaders of top technology companies were speaking out in force this week, led by the Steve Jobs takedown of Adobe’s Flash and Eric Schmidt of Google’s “do no evil” remark about internet privacy. Lloyd Blankfein of Goldman Sachs was the only non-tech executive to make the top ten in Alacra Pulse’s sampling of quotes from the executives most quoted in the traditional and alternative media in the last week. (Click on image to enlarge.)
DENDREON Corp (DNDN)
The FDA’s landmark approval of Dendreon’s prostate cancer vaccine, Provenge, has been warmly welcomed by analysts. After being rejected three years ago, the approval of the drug marks a significant breakthrough for cancer treatment and research. The vaccine, which allows a patient to use their own immune system to fight the disease, could also bring in huge profits for the Seattle-based biotech company.
Analysts rushed to raise the firm’s stock target price and revenue forecasts as sales for the drug could easily top $1 billion a year. Needham & Company lifted Dendreon’s price target to $62 from $38 and maintained their “buy” rating. (StreetInsider) Brean Murray Carret & Co analyst Jonathan Aschoff upped its price target to $65 from $50 and forecast annual Provenge sales of $1.45 billion in 2013 based on a higher-than-expected price, with peak sales topping $2 billion. (Reuters)
Provenge may reap annual sales of $4.3 billion by 2020, said Canaccord Adams analyst George Farmer, and its clearance will benefit more than a dozen other companies developing drugs in the emerging field of cancer immunotherapy, said Joseph Pantginis, an analyst with Roth Capital Partners. “…Its truly a landmark event,” he said. (Bloomberg)
With several other cancer vaccines in the pipeline, Dendreon is now the “anchor tenant” that Seattle’s biotech community has lacked, said David Miller, president of Biotech Stock Research. “This is huge for Seattle,” he said. (Seattle Times)
The approval of Provenge was also huge for SAC Capital, which made about $100 million in one day on Dendreon, according to Business Insider.
BRISTOL-MYERS SQUIBB (BMY)
Awaiting regulatory approval for at least five experimental drugs, Bristol-Myers Squibb CEO Lamberto Andreotti said the company’s ambitious plans for new drugs will prevent it from seeing earnings decline after their patents expire for Plavix and Avapro in 2012. (BNET)
The Cardiovascular and Renal Advisory Committee suggested that the FDA should approve Bristol-Meyers’ Belatacept, used for patients with kidney transplants. A decision is expected on May 1, and Leerink Swann analyst Seamus Fernandez is forecasting $650 million in sales by 2016. Expand the pool to other transplant organs and Fernandez’s estimate could prove conservative, according to BNET’s David Phillips.
In March, Bristol and announced that the FDA has accepted for review an investigational fixed dose combination of onglyza and metformin HCL, extended-release tablets as a once-daily treatment for Type 2 diabetes in adults. A decision by the FDA is expected October 29 this year.
Bristol’s phase III results for Ipilimumab in metastatic melanoma and Sprycel for the first-line treatment of chronic myeloid leukemia have been accepted for presentation by the American Society of Clinical Oncology. Results of a Phase III study of Dapagliflozin for the treatment of Type 2 diabetes are planned for presentation at the American Diabetes Association scientific sessions and new data for Belatacept will be presented at the American Transplant Congress. (Drugs.com)
An advanced stage 2 study also showed that Apixaban, an oral blood thinner being co-developed with Pfizer (PFE) may have lower bleeding risk compared to enoxaparin, or Lovenox, a similar drug currently on the market and sold by French drug maker Sanofi-Aventis (SAN).
In the second half of 2010, Bristol and Pfizer are on track to seek regulatory approval in Europe for the prevention of blood clots in patients undergoing orthopedic surgery.
With $10 billion in cash, Tim Anderson, analyst at Sanford Bernstein said in a note last month that although Bristol-Meyers has continued to say it would only pursue smaller acquisitions, “We continue to wonder whether a larger transaction might ultimately occur.” (BNET)
Pfizer currently has three new biotech projects in mid-stage development, according to the Wall Street Journal. The pharma giant is trying to create improved versions of its best-selling biotech drugs, also known as biologics – large and complex molecules derived from living cells, rather than the small chemical molecules that form traditional drugs.
Two of the drugs are meant to become improvements on Rituxan, a treatment for certain blood cancers and rheumatoid arthritis. The drug is also being co-marketed by Roche Holding (RO) and Biogen Idec (BIIB). The third one seeks to reduce the number of injections needed for arthritis medicine like Enbrel, a drug co-marketed by Amgen (AMGN).
POZEN Inc. (POZN)
Pozen announced Friday that the FDA has approved its Vimovo arthritis drug. Vimovo is a fixed-dose combination of enteric-coated naproxen, a pain-relieving non-steroidal anti-inflammatory drug (NSAID) and immediate release esomeprazole, a proton pump inhibitor (PPI), under investigation for the treatment of the signs and symptoms of osteoarthritis (OA), rheumatoid arthritis (RA) and ankylosing spondylitis (AS) in patients who are at risk of developing NSAID-associated gastric ulcers.
Analyst Jonathan Aschoff of Brean Murray, Carret & Co. projects that annual worldwide Vimovo sales could peak at $800 million, generating about $80 million in royalty revenue for Pozen. By comparison, Pozen’s revenue from royalties and milestone payments totaled $32.2 million for all of last year. (Drugs.com)
Pozen shares have nearly doubled since the beginning of March, driven largely by anticipation of a positive outcome for Vimovo. However, they took a dip prior to the announcement on fears the FDA approval would not be forthcoming.
Pozen said it will get an immediate $10 million milestone payment from partner AstraZeneca(AZN) with more to come.
This post was based on an Advanced Search of Alacra Pulse:
Industry: pharmaceuticals, biotech
Street Pulse: include any analyst comment
Keywords: FDA OR pipeline (select Boolean)
Date: past 7 days
AOL, Dell and AIG top the list of large and well-known companies that came under pressure during the latest week. The following sampling of companies under duress was compiled from a search of traditional and alternative media outlets using Alacra Pulse. (Click image to enlarge.)
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Hewlett Packard’s purchase of Palm Inc was among a number of technology sector developments drawing comment from analysts this week. Also commented upon: Goldman Sachs’s legal troubles, Aetna’s strong earnings, Ford Motor Company’s impressive recovery, and the expected merger of United Airlines and Continental Airlines. The following ranking of comments from the analysts most widely quoted in traditional and alternative media was derived from a search using Alacra Pulse. (Click on the image to enlarge.)
Strong results from Dow Chemical and others indicate the petrochemical sector is gaining steam as the economic recovery takes hold around the world.
Gerson Lehrman Group’s Michael Milam believes the recession has come to a close for basic chemical manufacturers. He points to early earnings releases as evidence: “For Sinopec Shanghai Petrochemicals, operating income increased more than 100% over 1Q09.”
Milam also noted that Royal Dutch Shell’s (RDSA) first quarter earnings from chemicals were $313 million compared to a loss of $74 million in 1Q09, while BP’s (BP) petrochemical production volumes from international operations were up almost 40% compared with 1Q09 and 12% over 4Q09.
Commenting on Dow Chemical’s (DOW) strong first quarter earnings, P.J. Juvekar, a New York-based analyst at Citigroup Global Markets, said “Basic plastics vastly exceeded our expectations.” He rates the shares “buy.” Hassan Ahmed, a New York-based analyst at Alembic Global Advisors, echoed his claim. “Basic plastics were even better than most were forecasting” (Bloomberg)
Dow Chemical is a Credit Suisse top pick. Analysts wrote, “we remain convinced that DOW offers the best risk/reward profile of the large cap names in the chemical space owing to its cyclical exposure, operating and financial leverage, rich R&D pipeline and relatively cheap valuation.” Credit Suisse has an “outperform” rating on DOW shares and a price target of $39.00 (Benzinga)
Zacks maintained its “neutral” recommendation on Dow, though the company reported EPS of 43 cents for the first quarter of fiscal 2010, up from 18 cents the previous quarter and 11 cents a year before. Zacks remains concerned about the impact of economic slowdown in North America on Dow, as about 36% of its revenue comes from the region.
Charles Neivert, a New York-based analyst at Dahlman Rose & Co., raised his rating on Eastman Chemical Company (EMN) shares to “buy“ from “hold“ following Eastman‘s results. “Eastman’s first-quarter performance gives us confidence that the company can continue to drive earnings significantly.” he wrote. (BusinessWeek)
Westlake Chemical Corp. (WLK) has also seen a rise. In late March, JPMorgan upgraded the stock, boosting the rating to “overweight” from “neutral,” with expectations that rising prices for ethylene and polyethylene should up Westlake’s profit margins. (Canadian Business) But UBS initiated coverage of the company in January with a “sell” rating and a target price of $20.
But Gerson Lehrman’s Milamadds a caution: “The good news should be tempered with the caution that the Platt’s index of petrochemical feedstock prices is up sharply, meaning that chemicals manufacturers will be paying more for their raw materials. This could potentially squeeze profits if they are unable to pass along increased feedstock prices in their finished product prices.”
Avram J. Davis
We are pleased to make available a complimentary download of Global Data’s comprehensive 53-page study of the sector. The report provides detailed information on M&A, Equity/Debt Offerings, Private Equity, Venture Financing and Partnership transactions and provides detailed comparative data by deal types, segments, and geographies. Additionally, the report provides information on the top financial advisory firms in the alternative energy industry.
- The industry recorded 220 deals of all types worldwide in March 2010 compared to 228 deals in February 2010.
- North America registered a decrease of 22% with 100 deals in March 2010, while Rest of World, Europe and the Asia-Pacific recorded increases of around 37%, 17%, and 14% respectively.
- The solar, biopower, hydro, energy efficiency and geothermal energy markets registered a decrease in the number of deals in March 2010 reporting 60, 44, 26, 18, and 13 deals respectively, compared to 73, 47, 29, 22, and 16 deals in February 2010.
- Asset financing, including project and tax equity financing, bond and lease financing and self-funded projects, accounted for 46% of the total deals in March 2010.
Mergers and acquisitions (M&As) in the alternative energy market reported a huge decrease in deal value and the number of deals in March 2010. The deals decreased from 34 deals worth $9 billion in February 2010 to 30 deals worth $528.8 million in March 2010.
- Credit Suisse ranked as the top financial advisor by providing advisory services for five M&A deals worth $980.7 million between October 2009 and March 2010.
- Asset financing registered a decrease in deal value and the number of deals, reporting 101 deals worth $11.5 billion in March 2010 compared to 106 deals worth $21.7 billion in February 2010.
- Capital raising, including equity and debt offerings, reported a decrease in deal value from $10.4 billion in February 2010 to $9 billion in March 2010, a decrease of 13% in value terms. However, the number of deals reported an increase of 20% in March 2010 recording 36 deals compared to 30
deals in February 2010.
- The private equity (PE) and venture capital (VC) market witnessed an increase in deal value and a decrease in the number of deals in March 2010. The market reported 30 deals worth $682.1 million in March 2010 compared to 38 deals worth $513.5 million in February 2010. Further, partnership
transactions recorded an increase of 15% in March 2010, reporting 23 deals compared to 20 deals in February 2010.
Alternative Energy Monthly Deal Analysis: M&A and Investments Trends – April 2010 has been made available free of charge to Research Recap users for 30 days by special arrangement with Global Data, an Alacra content partner. After 30 days, the report will revert to its regular Alacra Store price of $1000.00)
For additional free research reports from the Alacra Store click here
A new working paper from Harvard attempts to identify the impact of government spending on the private sector by using changes in congressional committee chairmanship as a source of exogenous variation in state-level federal expenditures. The paper shows that fiscal spending shocks appear to significantly dampen corporate sector investment and employment activity.
The central finding of this paper is that positive shocks to the seniority of a state’s congressional delegation cause large and persistent increases in government allocated funding to the states, and significant retrenchment on the part of the corporations headquartered in the state.
This retrenchment appears to be a response to the large and persistent increase in federal funding that the state receives following the shock. Following the appointment of a senator to the chair of a powerful committee, we estimate that his state experiences, on average, a 40-50 percent increase in its share of congressional earmark spending, and a 9-10 percent increase in its share of total state- level government transfers. At the same time, firms residing in the state cut their capital expenditures by 8-15 percent, reduce R&D by 7-12 percent, and increase payout by 4-13 percent. Employment and sales growth are also impacted, as corporations scale back employment growth by 3-15%, and sales growth falls by up to 15%.
These corporate reactions follow both Senate and House committee chair changes, are present among large and small firms and within large and small states, are partially reversed when the congressman resigns, and are most pronounced among geographically concentrated firms. The effects are economically meaningful and the mechanism—entirely distinct from the more traditional interest rate and tax channels—suggests new considerations in assessing the impact of government spending on private sector economic activity.
from Do Powerful Politicians Cause Corporate Downsizing? by Lauren Cohen, Joshua Coval, Christopher Malloy
After Hewlett-Packard’s (HPQ) purchase of Palm Inc., could security software company McAfee (MFE) be next? Friedman Billings Ramsey analysts David Hilal and Daniel Ives think so, according to Bloomberg. “The addition of McAfee would significantly strengthen the company’s presence in security and develop a competitive edge” on rival Cisco Systems Inc., they wrote in a note. Ives has rated McAfee “outperform” since the end of September, though the stock has fallen 2.5 percent since then.
Joe Kunkle, founder of OptionsHawk.com, said “McAfee is trading on rumors that Hewlett Packard is looking to acquire the company.” He added, “These rarely turn out to have truth but this one has some bullishness to it because traders are buying calls out in June when May still has four weeks of trading left.”
But McAfee’s valuation might be infected, as thousands of computers recently were paralyzed when a faulty McAfee software update confused a Windows file for a virus. Rob Enderle of Enderle Group in Silicon Valley said the glitch would likely significantly damage the company. “Customers don’t forget this stuff any time soon. This is going to hurt McAfee.”
It also won’t help that McAfee missed Wall Street’s estimates in its first-quarter results announced today. “We experienced delays in the closing of certain large deals, modest growth in the midmarket segment and foreign currency headwinds that were greater than we anticipated,” explained CEO Dave DeWalt.
Earlier this month, ThinkEquity LLC reiterated a “buy” rating for McAfee. Analysts Jonathan Ruykhaver and Aleksandr (Alex) Zukin wrote, “Overall, within the enterprise, we sense that improvements in deals’ size and closure rates amidst an increasing cybersecurity threat environment has driven continued share gains. Within the consumer market, we believe McAfee remains well-positioned for share gains as well, given positive PC refresh cycle and strong OEM/ISP channels.” (Benzinga)
Matt Murphy, a partner at Kleiner Perkins Caufield & Byers, said he expects the number of software deals to be close to the 2007 level due to pent-up demand. Now’s a good time to look at deals, says Tor Braham. The head of technology mergers and acquisitions for Deutsche Bank AG said, “Private-equity funds have raised a lot of money before the financial crisis and there’s pressure on them to spend it before those commitments expire. And companies may be anxious to buy to fill holes where R&D budgets have been cut, said Robert Ackerman, founder and managing director of Allegis Capital in Palo Alto, California. (Bloomberg)
Bob Evans at InformationWeek suggests several M&A transactions that would be attractive strategic deals. Among the mergers he thinks should happen: Salesforce.com-Sybase, Dell-Extreme Networks, Cisco-BMC, Accenture-HCL, IBM-Juniper, Oracle-Arista, HP-Teradata, EMC-NetApp, and SAP-Informatica. His craziest idea? Microsoft should buy Red Hat.
FBR’s Hilal has an even longer list of potential enterprise software M&A deals.
Meanwhile, Apple, Inc, (AAPL), recent acquirer of Intrinsity and Siri, continues to come under pressure to use some of its massive $40 plus billion cash reserves on more acquisitions or return it to shareholders.
Avram J. Davis
Kaufman Bros analyst Shaw Wu was close to the money on Hewlett Packard’s (HPQ) acquistion of Palm Inc (PALM) announced Wednesday. As noted in a prior PulseCheck, Wu said Palm was at risk of becoming a “take-under” target, meaning it may fetch “a price that is below its current share price. Palm sold for $5.70, close to its recent trading range and well below the $18 it has reached in the last year.
RBC Capital’s Mike Abramsky was both hero and goat: he got the acquirer right, but the price was around half the $10-$14 he thought Palm could fetch.
On the other hand, several analysts thought Palm would have trouble attracting any buyer at all.
And while it seems unlikely that Palm will drag a giant like HP down as Om Malik argued, analysts do see the company facing challenges with Palm.
Larry Magid at The Huffington Post writes that the deal “strikes me as a bold but possibly misguided move to give HP the technology it needs to compete with Apple, Google and Research in Motion (BlackBerry) not just with smartphones but possibly iPad-like tablet computers.”
“I am very surprised at this,” Gartner analyst Ken Dulaney told eWEEK. “I am puzzled from what I’ve picked up — that they [HP] wants to use WebOS on tablets and netbooks. I don’t know why they’d go after that market. I don’t see much upside in this.”
But Altimeter’s Michael Gartenberg, among others, is more positive on the deal: “At a time when the mobile platform market has become very crowded, this is an important event that now puts HP/Palm as a major player in the mobile market.”
Microsoft, Apple, Google and RIM should all be concerned, argues Erik Sherman at BNET: “This must be particularly worrying for Microsoft because, for the first time, the major customer will deliver personal computers without needing its operating systems. In fact, HP has just made itself a competitor.”
Furthermore, HP plans to extend webOS to “other” devices – read that as tablets, netbooks, and maybe even lightweight laptops, which is a real problem for Microsoft, Apple, and Google.
HP’s Todd Bradley, formerly of Palm, discusses HP’s plans for Palm in this Q&A.
Find many more analyst comments on the deal at Alacra Pulse.
As Spain’s sovereign debt rating gets downgraded by Standard & Poor’s to AA from AA+, the Economist Intelligence Unit analyzes the prospects for the country reducing its growing debt burden in its May Country Report for Spain.
Selected excerpts on fiscal policy:
The public finances will remain deeply in deficit in 2010-11. Following a deficit of 11.4% of GDP in 2009, as a result of expansionary fiscal policy as well as
lower revenue owing to the economic downturn, the deficit is forecast to worsen slightly in 2010, to 11.5% of GDP, as tax revenue remains weak and unemployment continues to rise.
Following the announcement of its austerity plan and Stability Programme in early 2010, the government is expected to pursue a sharply austere budget in 2011. We forecast that the deficit will improve slightly, to 9.5% of GDP, as the economy registers positive growth and as further spending cuts—and probably more tax increases, despite their unpopularity—are implemented.
We forecast that public debt will rise from 55.2% of GDP at end-2009 to 77% of GDP at end-2011. Although the government is now recognising the need for restraint, concerns remain over the financing of future deficits.
Given that substantial new bond issuance is planned by a large number of industrialised countries, coupled with remaining worries over Greece’s ability to service its debt, investor concerns over Spain’s ability to meet its debt obligations could mean that it faces funding difficulties and/or higher long-term interest rates.