Big Pharma – Where Are We Now?
by Pharmboy - April 28th, 2012 8:49 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
In this article, please revisit an article written two years ago titled, "The Calm Before the Storm." This article focused on the patent cliff that was looming in the pharmaceutical industry, that was later picked up by the New York Times and several other bloggers! Subsequent articles were written about big pharma company's revenue streams, and the pros and cons of of their later stage pipelines. Other articles have also attempted to identify smaller biotechs with the potential to reap big rewards, because these biotechs are possible acquisition candidates by the big pharma companies that need to fill their coffers with new, multi-billion dollar drugs - the so called "blockbusters."
Forbes has an informative article that projects three different revenue scenarios in in the pharmaceutical industry. Forbes's last figure (below) shows what companies will best weather the storm by combining "total company revenues."
In the 'Storm' article, it is noted that pharma growth rates should be growing less or starting to stall into 2014 due to the patent cliffs (see Table 1). A few examples of slow growing revenue streams are (2010 -2011): Pfizer $67.1B to $67.4B; Merck $46B to $48B, JNJ $62B to $62B, and AMGN $15.1 to $15.5. The industry is still ripe for consolidation based upon forward earnings, and the numbers of blockbusters will be dwindling. The industry is taking on more risk in therapy areas that are unmet medical needs, but have fewer patients to treat – thus higher prices will ensue. Monoclonal antibodies (mAb) for cancer and other 'biologics' fit this pricey niche area.
| Company | Drug | Indication | Sales in $B (2009) | Patent Expiration |
| Pfizer/Eisai | Aricept | Alzheimer’s | 1 | 2010 |
| Merck | Cozaar | Hypertension | 3.6 | 2010 |
| Pfizer | Lipitor | Cholesterol | 12.5 | 2011 |
| JnJ | Levaquin | Antibiotic | 1.5 | 2011 |
| Sanofi/BMS | Plavix | Anticoagulant | 9.3 | 2011 |
| AstraZeneca | Seroquel | Antipsychotic | 4.9 | 2011 |
| Lilly | Zyprexa | Antipsychotic | 4.9 | 2011 |
| Merck | Singulair | Asthma | 4.7 |
…
Facebook
Twitter
LinkedIn 
del.icio.us
DiggPharmboy in Technically Speaking
by Pharmboy - April 24th, 2012 3:28 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Excerpt from Stock World Weekly, Technically Speaking, April 22, 2012.
Courtesy of Pharmboy
That was a nice selloff – one that we have been waiting for, and there may be more to come! This gives us an opportunity to start easing into a few more positions that are already in our virtual portfolio. The virtual portfolio had a few options that we sold and that expired worthless this month: the PLX $5 April 2012 puts, and the INFI $5 April 2012 puts.
Protalix BioTherapeutics, Inc. (PLX, $6.78) has an FDA decision coming up, and we have several positions in it still open. I’m waiting for the decision. For those that like to gamble on risky events, the May $7.5 calls make a good risk/reward for $0.80 cents. I like selling the $10 calls for $0.25 cents, which limits the upside, but also reduces the cost to $0.55 cents for the spread.
OPKO Health, Inc. (OPK, $4.99) is another biotech I like at current prices. Scott Brown at Sabrient has also featured OPK as an insider buying play in Stock World Weekly’s April 1 issue:
“Scott sent in two long trade ideas for this week’s newsletter. First, Scott likes OPKO Health Inc. (OPK, $4.73) because of the repeated insider buying of the stock. “55 buys this year … almost daily.” Scott shared an interview with Dr. Phillip Frost, OPKO’s Chairman and CEO, on Seeking Alpha, by John Eastman. Here’s the introduction:
“‘OPKO Health Inc. Is a pharmaceutical and diagnostics company headquartered in Miami, FL that develops and commercializes novel and proprietary technologies that include molecular diagnostics tests, vaccines to diagnose, treat, and prevent neurological disorders, infectious diseases, oncology, and ophthalmologic diseases. The company works in the United States, Chile, and Mexico and is headed by Phillip Frost, M.D…’ Continue reading the interview with Dr. Frost here.”
OPK’s CEO continues to accumulate shares, and the stock is trading at around $5. I think selling the September $5 call and put for $1.20 combined, coupled with the purchase of shares, has a good risk/reward profile.
As for other new trades:
Vertex Pharmaceuticals (VRTX, $36.58) was already a winner once, and I think the time is ripe to start scaling in for owning shares of this company longer term. I like selling one…
VVUS and ARNA
by Pharmboy - April 11th, 2012 4:04 am
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
By Pharmboy at Phil's Stock World
Excerpt from Stock World Weekly, Tightening the Screws
I expect the market to continue pulling back. But biotechs should mostly hold their ground. There are a few catalysts coming up, including with the companies Vivus and Arena. Both companies have been focusing on the obesity market. VVUS has Qnexa (a combination pill of phentermine and topiramate) and ARNA has Lorqess (a novel 5-HT2c receptor agonist).
Catalyst 1 – Vivus's stock (VVUS, $22.53) rocketed up on the PDUFA thumbs up (PDUFA = Prescription Drug User Fee Act – a group of doctors and experts meet to express their opinion about a drug). The FDA usually follows the experts’ recommendation, but not always. The FDA has yet to rule. A ruling should happen on or before April 17, 2012.
For VVUS, I like playing for a failure, as the risks to me outweigh any benefits. A very conservative GAMBLE is buying an April 2012 $20/$19 bull put spread for $0.30 or less.
Catalyst 2 – Arena (ARNA, $3.07) had a strong run from the $1.20 range, and now trades at $3.
ARNA has a PDUFA date set for June 27, 2012. If VVUS gets approval, ARNA should fair well. If VVUS is rejected, ARNA still has a chance to do well due to its drug having a different mechanism, as well as due to the patent life on its molecule.
For ARNA, I like playing a July 2012 $2.50/$3.50 bull call spread for $0.35 or less.
Trades on these companies are all- or- none scenarios – i.e., RISKY.
Let’s Review: My Favorite Biotechs
by Pharmboy - March 24th, 2012 6:53 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Good day PSW Members! It has been a while since the last post, but biotech plays have been active in chat, as well as in Stock World Weekly with new trades, and updating existing ones. I must say that the biotechs and pharma are doing well in my portfolio! This article is mainly for the many new members that have joined the PSW chat over the past few months, as many of us oldie' but goodies are in the stock plays below in some form or another.
It remains my belief that the next few years are going to be big years for biotechs. Pharma has expiring patents, and the big players continue to scour the landscape for up and coming companies and therapies. One we played was MITI, and that was a nice winner for a longer term hold. At PSW, buying and selling biotechs as day trades is not the style, as we invest in companies for longer term holds, or play them into major events, then reduce our risks/exposers using options and hedging strategies.
At the end of January, Infinity Pharma (INFI) dropped like a rock and we jumped an a conservative buy write that was a bit too conservative (bought the stock and sold the April $8/7 strangle). INFI's stock is now above where it was when it dropped, amazing but this is how we like to enter biotechs, as if we bought at $10, well, it may not have recovered…..but that is water under the bridge now. The company has 3 development candidates described below:
- Saridegib (also known as IPI-926) is a novel, potent, oral molecule that inhibits Smoothened, a key component of the Hedgehog pathway. The chemical is semi-synthetic derivative of the alkaloid cyclopamine. The hedgehog pathway was noted in the Curis article here.
- Retaspimycin hydrochloride (also known as IPI-504) is an intravenously administered, potent and selective heat shock protein 90 (Hsp90) inhibitor. HSP90 is a chaperone to other proteins – in other words, they help in the folding or unfolding of proteins as they are being made or broken down. Think of them as the arm in a car assembly line that aid in the production or destruction of the automobile. In cancer, HSP90 helps stabilize proteins that are upregulated in cancer.
…
Biotech Investing for 2012
by Pharmboy - January 18th, 2012 1:09 am
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Finding new and exciting Biotech companies that target novel mechanisms is like trying to find a needle in a haystack. Sure there are many companies working on cutting edge science, but investing in those companies to reap the rewards of their work is a very dangerous game. More often than not, companies fail because the mechanism does not pan out, the compound(s) do not have pharmacokinetics (get into the body or last very long in the body), or an adverse event happens that knocks years off a development timeline. In addition, the stock can be manipulated by market makers so investors don't know which way is up. I approach investing in biotechs as a long term prospect. I continue to like our current portfolio of biotech companies (join in chat for many of those plays), and we continually add/subtract shares and sell/buy options on the vacillations of the market to reduce our cost basis. I believe our virtual biotech portfolio is well positioned with many companies that have upside potential.
I am starting to dive into the pipelines of a few companies that went IPO last year, and there is one sticks out at me, Endocyte.
Endocyte (ECYT) has six programs in various stages of clinical trials. The company was founded in 1996, has no marketed products, but boasts a pipeline of cancer/inflammatory disease candidates with companion diagnostics.
First, understanding what the company's drugs do is important, then diving into the pipeline will make some sense.
Folate (water soluble Vitamin B9) is needed for DNA synthesis, DNA repair, and DNA methylation as well as to act as a co-factor in biological reactions. In essence, it helps cells grow and multiply. Now, scientists (chemists) are good at manipulating and mimicking biological systems, and Endocyte has drugs that incorporate folate with vinca akloids attached to them (called a 'Trojan Horse' process). The folate-drug complex binds to the folate receptor (FR) that is over-expressed on the cell surface of many cancers and is subsequently taken into the cell (endocytosis). Molecules as diverse as small radiodiagnostic imaging agents to large DNA plasmid formulations have successfully been delivered inside FR-positive cells and tissues. Endocyte has one type of folate-drug delivery system for different cancer types.
Endocyte's lead drug is EC145 which targets the…
The Skinny on the Hepatitis C Market
by Pharmboy - December 19th, 2011 3:33 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
For the past few years at Phil’s Stock World, many of my articles have focused on cancer therapies or the robust (or not so robust) big pharma pipelines. I have not delved into many specific diseases, their mechanisms, and potential treatments. Two of the hottest areas in the industry right now are fibrosis and hepatitis C. In the fibrosis area, large deals are being made for early stage compounds in scientifically plausible, but unproven mechanisms (Gilead’s purchase of Arresto Biosciences for $225M, Bristol-Myers buying Amira Pharmaceuticals for $325M). Fibrosis will be a topic for another write-up. The area where there is a flurry of activity is in the treatment of hepatitis C. Vertex and Merck received approval for their new drugs in May 2011, Incivek and Victrelis, respectively, where Roche bought Anadys Pharmaceuticals for $230M, and Gilead is purchasing Pharmassett for $11B!
Hepatitis C (HCV) is a viral disease that is spread by blood to blood contact, and it primarily affects the liver. The infection is often asymptomatic, but chronic infection can lead to scarring of the liver and ultimately to liver cirrhosis. Liver cirrhosis can lead to liver failure and/or other complications, including liver cancer or life-threatening esophageal and gastric varices.1 There is no known cure or vaccine for HCV, and an estimated 180M people are infected . The shear number of infections makes it an attractive market for pharmaceutical companies, and thus there are many drugs being clinically tested.
Figure 2. HCV Infections
After an HCV infection, the disease enters an acute phase and subsequently, a chronic phase. During the acute phase, people often have flu-like symptoms, decreased appetite, fatigue,abdominal pain, jaundice, and itching. The acute phase is considered less than 6-months. The chronic phase (50-80% of those infected) of the disease is noted by higher liver enzymes (ALT/AST), and is often discovered when people are going through a routine checkup. The liver is often inflamed, and cirrhosis and fibrosis could also begin to set in. Of those that are in the chronic phase of the disease, approximately 20–50% do not respond to treatment. There is a very small chance of clearing the virus spontaneously in chronic HCV carriers (0.5% to 0.74% per year).
Figure 3. Common Genotypes
Like many viruses, hepatitis C has…
YM Biosciences – Friend or Foe
by Pharmboy - November 29th, 2011 12:55 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
YM BioSciences Inc. (AMEX: YMI) develops, markets, and commercializes hematology and cancer-related products in the drug development arena. Below is the 1 year chart showing their ascension into the $3.7 range, then precipitous drop off to almost $1.
On the financial side, as of September 2011, the company had about $76M in cash, and was burning about $25M/yr. The thing that we need to be aware of is that the company has filed a preliminary short form base shelf prospectus and a registration statement on Form F-10 (July 2011) for another $125M over the next 2 years, with the Canadian securities regulatory authorities and the US Securities and Exchange commission, respectively.
Over the past few years, the company has placed stock and warrant offerings for shares in the $1.20 to $1.60 range, so there is more to come – hence my not wanting to overpay.
A bit of history, in October 2009, YM BioSciences agreed to acquire all of the issued shares and options in Cytopia by scheme of arrangement. YM would exchange 1 common share for every 11.737 Cytopia shares, which would lead to the issue of 7.2 million new YM shares. This represented a share price of $0.1659, a premium of 58% over the trading price of Cytopia shares on the ASX at that time. Following the acquisition Cytopia shareholders would own 11% of YM. This is where CYT387 came from (see below).
On the scientific side of things, the company has many drugs in the pipeline that, if they come to fruition, could give the stock and company a bit of up side. First, it has one drug on the market, nimotuzumab, which is an EGF receptor-targeting humanized IgG1 mAb, for the iv infusion treatment of cancers of epithelial origin. Many of the cancers are still in trial, including breast, lung, prostate, esophageal, head and neck and pancreatic cancers. The drug is co-marketed with several other companies and brings in about $1M in revenue for the company.
The Company’s flagship product is CYT-387 (in Phase 2), a small-molecule JAK1/JAK2 tyrosine kinase inhibitor, for the potential oral treatment of myeloproliferative disorders (MPD), including myelofibrosis (MF), polycythemia vera (PV) and essential thrombocythemia (ET). JAK stands for Janus Kinase, and is a receptor that is activated by a signal from interferon,…
Welcome to the World (Of Biotech)
by Pharmboy - October 28th, 2011 1:09 am
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
What a show we have been having in the markets. From 10% down one month, to 20% up the next, it is truly a spectacle to behold.
In my small world, biotechs are a fantastic investment, but the area is saturated with complex targets (aka any kinase inhibitor – see below), unknown mechanisms of action (cough! cough! ITMN), and mismanagement (DCTH anyone?), but there are always diamonds in the rough that catch the eye of a scientist (me). We are heavily invested in big pharma (i.e., MRK, BMY, GSK) for their dividend yields and pipelines, and we have our speculative plays for growth (CRIS, SGEN, IMGN, PLX, DEPO, MITI, YMI, etc). At this point I think it is prudent to trim some winners and losers, so that we can focus on a few more that may warrant our attention in the coming year.
I have begun to reduce OPK (winner) and DCTH (loser). The paired loss is a bit more than I would like, as DCTH has not shown us any love due to mismanagement and setbacks. I find the technology very sound, but the way things have been handled, I would rather move to something that may have more upside, keeping 1/2 of my position in DCTH to recover any future upside. OPK is supported by the CEO (he owns a lot of stock), but there is nothing in the immediate future that excites me at this time, so why not take some off the table and let the rest run to see how/where the stock goes.
Immunogen (IMGN) is on a tear, and we have been in and out of them since ~$5. SGEN is the comparator here for stock price, and Seattle Genetics (SGEN) trades at a premium due to: 1. no partner (takeout candidate?), and 2. their drug is approved. That is where I believe IMGN can go….time will tell. I am adding to IMGN slowly, selling calls and puts along the way.
Ariad (ARIA) is also on a roll. The company has the best in class mTOR inhibitor (Ridaforolimus for bone sarcomas), and MRK has taken over all clinical development. ARIA have a few new drugs in the pipeline, and they have a Phase 3 candidate unlicensed (Ponatinib), and this one is another drug that could…
PSW Does Las Vegas
by Pharmboy - October 17th, 2011 4:45 pm
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Here’s an excerpt from the Week Ahead section of Stock World Weekly ~ the part about the trip to Las Vegas, as reported on by Pharmboy. ~ Ilene
Tips for Investing in a Wild Market
Phil’s Stock World had its first annual members’ meeting in Las Vegas over the Columbus Day weekend. Pharmboy submitted his notes on the adventure, so if you missed all the fun, you can still read about some of the more educational topics, in “PSW Does Vegas” below:
“First a very special thanks to PSW members Savi and LVModa for their time and efforts in making this happen.
“Twenty-four members gathered in Las Vegas to talk about trading strategies, eating, and a bit of poker. We met at Nobu for dinner, and then gathered at the Stratosphere for two friendly tables of Texas Hold ‘em.
“Sunday started off with the first thing that Phil has preached from the beginning, start small and plant your trees to get the fruit in the future. Phil typically notes the video, ‘The Man Who Planted Trees.’
Here are six points to consider when investing in an unpredictable and volatile market.
Point 1: The best way to make money is to save… If you can save $10/day, every day, and earn 5% per year for 20 years, you will have $170K saved up. As you increase this amount throughout your days, that savings will grow. Plant the trees early, and the fruit will come. Remember, this is a long-term strategy.
Point 2: One needs to have a plan – when you go to the store, you have a plan on what to buy. When you trade, have a plan. We always plan the next move in the stocks or options we own. Study the chart, if it moves to a certain level, have a plan on what you will do next. And if you are called away, and make a profit, be happy. There is nothing wrong with making 5% in a month. That is 60% per year! That blows away the market.
Point 3: Invest in what you know. Pharmboy is a scientist, and hence he invests in what he knows – biotechs and pharmaceutical companies. Follow a few companies that you know or want to know, and do your…
Biotech Trading Verses Investing 101
by Pharmboy - October 10th, 2011 11:40 am
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Courtesy of Pharmboy of Phil’s Stock World
Biotechs are the life-blood of the pharmaceutical industry. These small companies take risks that many larger pharmaceutical organizations would not usually make (scientists call it bureaucracy). Those risks come with a high failure rate, and therefore investing in biotechs is not for the faint of heart.
There are many investment house boutiques that offer input on biotech investing. I recently noticed that several writers at SeekingAlpha have combined their writing powers and started a biotech investing page (and even Adam Feuerstein gave them a plug). It’s not that I find other authors wrong in their analysis, as many are quite good. What I find hard to swallow is the amount of money one can spend on buying a single service (as an example) for just investing in biotechs. At Phil’s Stock World, not only is there a biotech component, but many other trading strategies are present for a longer term portfolio that uses options and hedging strategies. Also, at PSW, Phil, Optrader and many others are here almost every day to answer questions. I am tooting a horn here at PSW, as it’s a very good investing community, where many people in different walks of life come together and share their experiences, but I digress.
We are coming to the end of the year, with three months left, and lots of holidays to make our way through. Many of our biotechs have done little to nothing the past few months. In Las Vegas over the past few days, our discussions were centered around investing and some trading (it is really called gambling, no?). Some biotechs are investments, some are trades on binary events. We have been selling calls and puts on some, reducing our exposure to others, and otherwise just waiting for data.
Let’s revisit a few of our old picks, as well as look at upcoming events that will move some stocks for better or worse.
Investments
Seattle Genetics (SGEN) – we played them for the approval, and we did not get the huge pop we expected, but the buywrite strategy worked just fine. This is one I would hold on to, as I believe they will not be around forever. Buying the stock in here and selling the December $20…
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(