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Two more bottoms for the GBMB

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January 22, 2011 – Comments (19) | RELATED TICKERS: ALIM , SVNTQ

Alimera (ALIM) – market cap 281M, share price 9. Cash 55M, debt 0, burn 6-8M/quarter. The stock wasn’t hit too badly on news of a CRL for Iluvien in diabetic macular edema last December 27, but the selling seems to have ramped up this past week. Given that the CRL seemed fairly benign, citing only some manufacturing deficiencies and the absence of three year data from the phase III FAME study, continued downward movement seems unjustified. Final three year data was collected last October, too late for the NDA submission, but perfectly timed for a quick resubmission. Once this data is fully analyzed and the manufacturing issues have been addressed, there’s an upside of 15 or higher should the drug be approved in late 2011 or early 2012. While the FDA always has the prerogative to raise new safety or efficacy concerns on a resubmission, the lack of a request for new clinical trials bodes very well for the next PDUFA. The all-time low for the stock of 6.6 came during this past summer of European discontent, and will almost certainly not be revisited prior to PDUFA #2. A couple of notes of concern: Iluvien licensee pSivida has seen a similar share price drop over the last week, indicating that the decline may be due to more than just short-term chaos. Short interest remains high at 16%, although I am unsure if this accounts for those who covered after the CRL. I bought 2000 shares for the GBMB account at 9, but I still advise caution until downward momentum has clearly ceased.

 

Savient (SVNT) – market cap 717M, share price 10.2. Cash 78M, debt 0, burn 5-10M/quarter. The direction of this stock has surprised me numerous times, so it might not be best to follow me on this one. The most recent surprise was the huge run-up in September after the very predictable approval of Krystexxa, followed by the crash when the company was unable to sell itself in October. I had flirted with the idea of buying deep puts when the share price was at 24, but never went through with it. The company is progressing with their plans to market Krystexxa on their own. 8mg vials are being priced at $2300 wholesale for biweekly administration, for an indefinite duration. Since gout is a chronic disease and Krystexxa is a prophylactic treatment for those who have failed all other therapies, it would appear that Savient will be making about $60000/yr off each of these patients for the rest of their lives. Disagreement over the actual numbers of eligible patients leads to wildly disparate revenue estimates of $200M-$900M, the higher of which helped foment the excessive ballooning of the share price last fall. I have to say that in the ER I see horrible cases of gout that have been refractory to all approved treatments quite frequently. Alexion’s Soliris and Viropharma’s Cinryze have proven to be extremely effective money-makers for much smaller populations with chronic ailments, but the larger patient pool for Krystexxa may actually induce more pushback from American health insurance companies and eventually from European spending regulators. One must hope that Savient priced Krystexxa wisely to maximize profits and minimize the chances of denial. Even at the low end of revenue estimates the company seems underpriced at a cap of 717M. Sales began in December and there is a high likelihood that once large pharmas see insurance reimbursements beginning (and Savient lowers their price for a buyout) we will see this company belatedly acquired. In CAPS world, BravoBevo and translator999 came on board after the October crash (and are down substantially), and portefeuille is a long-time supporter through various profiles. The GBMB account will be buying below 10.

19 Comments – Post Your Own

#1) On January 22, 2011 at 9:37 PM, Valyooo (99.45) wrote:

The real question is, how much freakin lower can DSCOD go, and why didnt i take profits when I was up 60%?

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#2) On January 24, 2011 at 8:30 AM, FSaucy (99.91) wrote:

zz sorry I don't have much to add other than that you are the man and I appreciate your posts.  Its rare for someone on here to be so well versed in an industry and willing to share their thoughts on companies.

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#3) On January 24, 2011 at 12:57 PM, zzlangerhans (99.81) wrote:

#1) It could go to 0. You didn't take your profits because you were greedy.

#2) You clearly know your way around a stock. I enjoy sharing my thoughts but I should be measured by my results, not my opinions. Hopefully the GBMB will eventually demonstrate that I'm giving Fools thoughts worth trading on.

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#4) On January 24, 2011 at 3:38 PM, Momentum21 (48.41) wrote:

good luck my friend...

I like SVNT and I am just trying to get my head around the $60k per year implications but it definitely seems like a good bet at these levels based on the drug itself and acquistion potential.

Gout is brutal... 

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#5) On January 25, 2011 at 8:28 AM, darroj (29.73) wrote:

Thanks for the post zzlangerhans, and not bad timing, help is on the way!

 http://www.bloomberg.com/news/2011-01-25/savient-names-lilly-s-john-johnson-chief-executive-to-help-market-new-drug.html?cmpid=yhoo

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#6) On January 27, 2011 at 4:33 PM, Valyooo (99.45) wrote:

#3) Yes, I was being greedy...but weren't you as well?  Even more greedy than I who was willing to sell at a market cap of 100m whereas you are holding for 200m?

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#7) On January 27, 2011 at 5:53 PM, Valyooo (99.45) wrote:

By the way, I did in fact know my risk/reward while purchasing it..I know it could go to 0.

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#8) On February 01, 2011 at 11:58 PM, blue2fire (< 20) wrote:

I was wondering what you thought of OREX. Is there any recourse/opportunity for them to get this to market anywhere other than the US (i know Europe isnt possible) or an easier ride with their second treament even though they use the same troublesome ingredient?

 Would you buy at any price?

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#9) On February 02, 2011 at 11:49 AM, sentinelbrit (82.61) wrote:

#8) from what I've read, Orex and Vivus are dead. The FDA is not going to approve either drug because of the safety concerns - related to heart and blood pressure.

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#10) On February 02, 2011 at 2:01 PM, Momentum21 (48.41) wrote:

#9 - I would say that FDA approval in the near future looks doubtful. Dead is a strong word... : ) Matthew Herper (Forbes) has drawn quite a following from his opinions on this category.  

These drugs(OREX, VVUS, ARNA) just don't work well enough to justify any risk but I think there is room to speculate given the upside in this category. There is still hope...whatever that's worth. 

#8 ZZ might speculate on that hope but I doubt you see him buying and holding through any future FDA decision on obesity drugs.

I happen to be speculating with ARNA right now...with the understanding that the odds are very long. The OREX decision gives them more hope IMO since now they aren't viewed as having the worst odds of the 3. : )     

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#11) On February 03, 2011 at 11:07 AM, zzlangerhans (99.81) wrote:

Orexigen has cash, which means they aren't dead regardless of what happens with Contrave. I expect them to report about 88M in their next earnings statement. Today's market cap is 134M. The problem with trading Orexigen is the huge fluctuations that could occur short-term based on unpredictable developments.

Contrave at this point is most likely a liability. Most objective observers believe that the FDA safety concerns are overwhelming and that attempting to overcome them is an all-or-nothing gamble that will take years to reach fruition. Their second obesity drug candidate Empatic also contains buproprion, the same compound which underlies cardiac concerns for Contrave.There are no markets that can sustain profits for these drugs other than the USA and Europe.

In the short term three things could happen:

1. Orexigen releases information which appears to mitigate FDA concerns and the share price rises over 4 on irrational optimism. In this case I red thumb, as this will almost certainly be followed by a dilutive financing and rapid price degradation.

2. Orexigen states they will proceed with clinical studies to pursue Contrave approval. In this case I red thumb if the share price remains over 3, as cash will degrade and the company will eventually raise money and there is little in the way of positive catalysts on the horizon.

3. Orexigen states they will essentially abandon their anti-obesity pipeline and conserve cash, at which point they will become a cash play. At this point I might green thumb at a cash valuation of about 2.

All these scenarios see Orexigen as currently overvalued and a poor investment. The only thing that prevents me from red thumbing now is the possibility of scenario 1 on the next PR. 

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#12) On February 04, 2011 at 5:16 AM, 1337172979 wrote:

hey ZZ, are you going to write a pitch on your greenthumb on GNVC? I thought you hated the company!

Best

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#13) On February 04, 2011 at 10:12 PM, zzlangerhans (99.81) wrote:

Quit peeking at my limit orders.

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#14) On February 08, 2011 at 11:05 AM, mhy729 (29.83) wrote:

What's your take on the latest release regarding the phase III FAME study?  It looks like the market isn't in agreement with pSivida CEO Ashton's positive remarks.

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#15) On February 08, 2011 at 7:56 PM, zzlangerhans (99.81) wrote:

Toss up. My reading is that the data was good enough for a reasonable shot at approval on the second round. The company states the FDA was only looking for safety data at 36 months, but the share price has been dropping since the data was released showing weakening efficacy in the third year after placement of the implant. Nobody knows how the FDA will perceive the data, but I'm going to hold through the resubmission. I might double down on Alimera if it drops back down to 7, which I think is unlikely.

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#16) On February 16, 2011 at 11:34 AM, blue2fire (< 20) wrote:

Ouch!

DSCO hurt pretty badly today. I can only imagine that your day was a bit worse. Do you read anything between the lines here, why did they decide to raise the money at the worst possible moment?

Ill hold on to my holdings. I should theoretically double down but waiting for it to settle might work. 

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#17) On February 16, 2011 at 3:49 PM, zzlangerhans (99.81) wrote:

There's an active blog thread on DSCO which is probably a better place to get your question answered.

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#18) On February 16, 2011 at 5:17 PM, Momentum21 (48.41) wrote:

blue2fire (69.95) - I will give you my answer. 

You should be thrilled they raised money to continue the journey. There is never a good time to dilute your shareholders...it's just what needs to be done. If there is another delay and they run short on funds we will all be picking the lint out of our pockets. 

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#19) On February 24, 2011 at 5:56 PM, MyunderratedLife (89.82) wrote:

http://caps.fool.com/Blogs/requestion-biotech-assistance/544800

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