Savient Pharmaceuticals Inc (NASDAQOTH:SVNTQ)

CAPS Rating: 2 out of 5

A biopharmaceutical company engaged in developing and distributing pharmaceutical products that target unmet medical needs in both niche and broader markets.

Recs

8
Player Avatar zzlangerhans (99.73) Submitted: 1/22/2011 5:21:18 PM : Outperform Start Price: $10.24 SVNTQ Score: -75.84

I've been ignoring Savient since October when I accidentally closed the pick for a loss when on the cusp of victory. That's fortunate, because I probably would have green thumbed it weeks ago once Krystexxa became commerically available. But the share price has actually taken a nasty, counterintuitive 20% drop since sales began.

In September I frowned on the share price explosion after Krystexxa approval, writing "I thought Krystexxa’s approval was priced in at 15 and didn’t pay too much attention to the PDUFA this week. Ouchie when I saw the stock shoot up 35% on approval, opportunity lost. I guess some people didn’t think the 14-1 advisory panel vote was a virtually guaranteed approval. But the current share price over 20 seems to be froth over the company’s avowed pursual of a buyout. Will Krystexxa annual revenues approach the 500M or so necessary to justify a buyout at that price? My instinct tells me no. I’d look at a fairly long-term put on Savient if the share price floats up over 24."

I missed my opportunity as the share price maxed out at about 23 before plunging below 12 when the company reported that they could not find a buyer for themselves at the price they wanted. But this week I couldn't help noticing the ongoing degradation in Savient shares as they approach the single digits and decided to reassess the situation.

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.

As I am documenting in my blog, this is a GBMB buy under 10.

Report this Post 16 Replies
Member Avatar Euro247 (68.62) Submitted: 1/26/2011 1:39:14 PM
Recs: 0

Do you think there willl be a second offering to raise cash? I believe that weights heavily on the current pps

Member Avatar zzlangerhans (99.73) Submitted: 1/26/2011 5:18:16 PM
Recs: 1

They have a reasonable cash reserve already, which of course doesn't mean they won't need more if they plan to market Krystexxa themselves for any period of time. I see their strategy as more one of getting Krystexxa launched, booking some reimbursements, and keeping themselves quietly on the market at a slightly lower price. If no takers, a sceondary offering becomes more likely but I think they'd rather go that route at 15 than 10. If they do dilute now, I think the effect on share price will be short-lived if everyone is waiting to get that out of the way before they buy in.

Member Avatar zzlangerhans (99.73) Submitted: 1/27/2011 2:08:56 PM
Recs: 1

Bought 2000 shares at 9.85 today for the GBMB account.

Member Avatar explainstuff (95.97) Submitted: 1/30/2011 10:08:11 PM
Recs: 0

Hey, I see you have done extensive research on this one. Quick question:

This is what I found in yahoo previous earnings details:

Estimates (Dec)

(US$) 2008A 2009A 2010E 2011E 2012E
EPS (1.55) (1.51) (0.75) (0.66) 0.36
GAAP EPS (1.55) (1.51) (1.28) (0.66) 0.36
Change (YoY) -64.9% 2.6% 50.3% 12.0% NM

Free Cash Flow Yield* -9.6% -10.3% -7.5% -8.8% 0.6%

Observe that free cash flow yeild stays almost the same but EPS change YOY changes from -65 to +2 and then to +50.

This was the first thing I noticed when I was looking at the stock, and wanted to ask what is to be interpreted out of this. Do, you know of or aware of any one time items that were applied to all four quarter's earnings in 2010?

The main reason I'm concerned about is I know that SVNT put itself up for sale. I'm aware that many companies from an accounting perspective would want to skew the numbers a little to make it look rosy as if the company just turned profitable (books are neat) etc. Is this big change in EPS change a similar thing or did they have any sales to go with it?

Please respond with certain constructive analysis.

Thank you.

Member Avatar zzlangerhans (99.73) Submitted: 1/31/2011 3:56:24 AM
Recs: 1

I don't know what free cash flow yield is. You can't use standard metrics to analyze a baby biotech. Up to the present time, earnings are meaningless as they derive from collaboration revenue. The issue is the future profits from Krystexxa which won't be clear for several more quarters. Prior earnings have nothing to do with future earnings in this situation.

Member Avatar explainstuff (95.97) Submitted: 1/31/2011 1:33:55 PM
Recs: 0

My question wasn't about future earnings... I just wanted to know if they had any sales from previous quarters and if any, did they have to skew the sales/accounts receivables/ payable etc to turn/show in a profit just to make the picture look rosy.

Member Avatar Euro247 (68.62) Submitted: 2/1/2011 12:25:47 PM
Recs: 0

At least the cash issue has been resolved

http://finance.yahoo.com/news/Savient-Prices-200-Million-In-prnews-1429234243.html?x=0&.v=1

Don't see how this won't be moving up from here.

Member Avatar RallyCry (< 20) Submitted: 2/11/2011 12:32:05 AM
Recs: 1

My back of envelope math puts the potential preferred conversion of 200 MM in financing at 17.3 MM additional common shares and an additional 2.6 MM if the overallotment that was exercised per the 2/4 PR. I show 70.26 shares outstanding and assuming the drugs potential is realized and all shares are converted at $11.54. After March 31st the conversion can take place if the stock trades above 130% of the conversion price which is $15 for 20 out of 30 trading days, if the stock falls below 98% of the original value of the conversion rate per $1000 offered for 5 consecutive trading days, or if Savient calls the notes for redemption after Feb 1, 2015 or at maturity Nov 1, 2017 for a cash,stock, or a mix of both. The company is paying 4.75% per year on the note and would pay unpaid and accrued interest If they call it back. If 100% of notes are converted early, dilution to future earnings would stand at 9.95%.

Member Avatar ResearchLover (46.36) Submitted: 5/5/2011 3:49:36 PM
Recs: 1

Is today's reaction a buying opportunity then, or are there new doubts about how widespread the rollout of krystexxa will be from here on out?

Member Avatar carso295 (< 20) Submitted: 5/10/2011 5:36:16 PM
Recs: 0

I would like to understand the J code that is causing concern. do you know what the J code is?

Member Avatar Euro247 (68.62) Submitted: 5/25/2011 11:49:59 AM
Recs: 1

I refuse to give up on this company!!! I just don't see how a buyout is not imminent at these levels.

Member Avatar siri22 (< 20) Submitted: 7/16/2011 12:50:14 PM
Recs: 0

Dear zz, planning to buy in Monday at below 8, what do you, good idea?

Member Avatar siri22 (< 20) Submitted: 7/16/2011 12:57:02 PM
Recs: 0

P.S I am long depo,xnpt, just gambled and bought dcth @ 5.15

Member Avatar zzlangerhans (99.73) Submitted: 5/7/2012 3:38:23 PM
Recs: 1

Sold my 2000 shares today at 1.48 for a $16740 GBMB loss. Blech.

Member Avatar portefeuille (99.56) Submitted: 5/8/2012 12:56:03 AM
Recs: 0

Did your girlfriend tell you to keep a few shares?
SVNT is growing (or shrinking ...) into the major disaster position of my fund. Less than 2 "performance percentage points" left to lose, though ...

Blech can be quite useful ...
http://www.google.de/search?hl=de&q=blech&tbm=isch.

Member Avatar portefeuille (99.56) Submitted: 5/8/2012 9:40:18 AM
Recs: 0

Savient Pharmaceuticals Enters Into Definitive Financing and Debt Restructuring Agreements -> http://t.co/j9IrAg4x. People call that "buying time", I believe ...
I will sell a few shares this week ...

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