Summary
Tax experts say new rules will not derail Pfizer-Allergan deal.
Agenus has an extensive pipeline and partnerships.
Depomed falls sharply as Horizon withdraws offer.
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Dr. De’s Opening Thoughts: New tax rules and the Pfizer-Allergan deal
Last year when several inversion deals were announced, the Obama administration reacted to it by introducing new tax rules that would discourage such deals. The move from the Treasury Department had an immediate impact as AbbVie (NYSE:ABBV) backed out of its bid to acquire Shire Plc (NASDAQ:SHPG) despite the huge breakup fee.
Not much about inversion deals has been heard since then even though M&A activity in the healthcare sector reached record levels this year. Until recently that is. Pfizer (NYSE:PFE) and Allergan (NYSE:AGN) have been in takeover talks since last month. The deal if completed would be not just the biggest inversion deal but also one of the biggest deals in the healthcare sector. Not surprisingly, the Treasury Department has decided to act.
According to the Wall Street Journal, the Treasury Department introduced new measures to discourage U.S.-based companies from entering into inversion deals. The question is whether the new rules will deter Pfizer. If tax experts are to be believed then probably not. Speaking to the Financial Times, Steve Rosenthal, Senior Fellow at the Tax Policy Center, said that the changes won’t affect the Pfizer-Allergan deal at all.
While bringing in new tax rules to discourage inversion deals is a short-term measure, what the U.S. really needs is an overhaul of its entire tax system. The tax system does put U.S.-domiciled companies at a disadvantage. In fact this was something Treasury Secretary Jack Lew acknowledged. The Financial Times quoted the Treasury Secretary as saying,
“There is only so much the Treasury department can do to prevent these tax-avoidance transactions. Only legislation can decisively stop inversions.”The administration has been working with Congress in an effort to reform our business tax system and address the issue of corporate inversions.”
Focus Ticker: Agenus
Agenus (NASDAQ:AGEN) is a small cap biotech biotech with an extensivepipeline, which the market is currently significantly undervaluing. AGEN has three platform technologies; an antibody platform, which includes its proprietary Retrocyte Display technology; heat shock protein-based vaccines; and saponin-based vaccine adjuvants.
The extensive immuno-oncology portfolio includes Prophage, which is in late-stage clinical development in newly diagnosed glioblastoma multiform or dGBM. The Prophage series vaccines work by programming the immune system to attack only the specific cells that express the mutant antigens. In July 2014, AGEN had reported final data analysis from the Phase II study of Prophage in ndGBM. The study showed that patients with ndGBM who received the Prophage autologous cancer vaccine with the standard of care treatment lived almost twice as long as expected.
According to the American Cancer Society, there will be an estimated 22,850 new cases of the brain and other nervous system cancers in the U..S. in 2015. There remains a significant unmet need in GBM. AGEN is currently planning the next phase of the ndGBM trial.
AGEN’s portfolio also consists of the Checkpoint Antibody Platform and the QS-21 Stimulon Adjuvant. Earlier this year, GlaxoSmithKline’s (NYSE:GSK) Malaria vaccine candidate, which consists of AGEN’s QS-21 Stimulon, received positive opinion from European regulators.
Apart from the impressive pipeline, AGEN has also struck partnerships with the likes of Incyte (NASDAQ:INCY) and Merck & Co.’s (NYSE:MRK). When you consider all of this and AGEN’s current market value, the stock looks significantly undervalued. On Thursday, AGEN closed at $4.66. At the end of the September quarter, the company had nearly $200 million in cash on its balance sheet. So the market is essentially valuing AGEN’s extensive pipeline and partnerships at just around $2.50 per share.
Sector News
Horizon Pharma Withdraws Offer for Depomed- After a California courtblocked its bid, Horizon Pharma (NASDAQ:HZNP) has withdrawn its hostile takeover offer for Depomed (NASDAQ:DEPO). DEPO shares rose more than 3% in after-hours trading on Thursday after Horizon withdrew its offer. But the stock dropped in pre-market hours today. At last check, DEPO was down 12.33%.
AstraZeneca and Sanofi to Share Proprietary Compounds- British drug maker AstraZeneca (NYSE:AZN) and French drug maker Sanofi (NYSE:SNY) have agreed to share 210,000 of their proprietary chemical compounds with each other. The Wall Street Journal said in a report that the deal involves giving access to compounds that are usually closely guarded. Further the two companies are free to develop any of the shared compounds without any financial obligation to each other, the Journal said in its report.
Eli Lilly and Merck Expand Oncology Collaboration- Eli Lilly (NYSE:LLY) and Merck & Co. announced the extension of their existing collaboration to evaluate the safety and efficacy of the combination of LLY’s ALIMTA(NYSE:R) and Merck’s KEYTRUDA(NYSE:R) in a pivotal Phase III study in first-line nonsquamous non-small cell lung cancer (‘NSCLC). Merck will sponsor the study, which will be open to patients with NSCLC in the first-line setting regardless of PD-L1 status. The two companies did not provide the financial details of their collaboration.
AMAG Pharmaceuticals Drops on CRL for Makena- AMAG Pharmaceuticals (NASDAQ:AMAG) shares fell more than 10% on Thursday after the companyreceived a Complete Response Letter (‘CRL) from the FDA for its application seeking approval for a single-dose vial of Makena to reduce the risk of preterm birth in certain at-risk patients. The FDA has requested additional information in the CRL. The company said that it is working with its manufacturer to address the issue raised by the FDA in the CRL.
Vital Therapies Receives FDA Guidance- Vital Therapies (NASDAQ:VTL)announced the receipt of written responses from the FDA to its Type C meeting request on the planned VTL-308 Phase III clinical trial. Based on FDA’s suggestion, the company has included an event-driven feature into the trial design consistent with the primary endpoint of overall survival. The company said that its VTL-038 remains on track and clinical sites are in the process of opening, with enrollment of the first subject expected in the first half of 2016. Final data from the trial is expected to be announced in mid-2018.
Mallinckrodt Board Authorizes Additional $500 Million for Buyback Program- Mallinckrodt’s (NYSE:MNK) Board has authorized an additional $500 million to the company’s existing share repurchase program. The company hadannounced the repurchase plan in January this year. The $500 million authorized by the Board adds to the roughly $200 million remaining under the repurchase plan.
Teva Reports Positive Top-Line Results for Asthma Candidate- Teva Pharmaceutical (NYSE:TEVA) announced positive top-line results from three Phase III trials evaluating the efficacy and safety of fluticasone propionate/salmeterol, an ICS monotherapy delivered via a MDPI in adolescent and adult patients with asthma. Top-line data showed that the three studies met their primary endpoints. The studies also showed similar overall safety profiles as compared to therapies in the corresponding drug classes.
Aeterna Zentaris Commences Patient Enrollment in Confirmatory Phase III Trial of Macrilen- Aeterna Zentaris (NASDAQ:AEZS)announcedthat the first patient has been enrolled in its confirmatory Phase III clinical study to demonstrate the efficacy of Macrilen.
NovaBay Announces Restructuring- NovaBay Pharmaceuticals (NYSEMKT:NBY) announced a corporate restructuring to focus on the commercialization of its prescription Avenova(R) Lid and Lash Cleanser. The company said that it is also taking steps to reduce operating expenses with the goal of achieving positive cash flow from operations by the end of 2016.As part of the restructuring, the company’s Chairman Mark M. Sieczkarek has taken up the position of interim President and CEO, effective immediately. NBY also announced its third-quarter results, posting revenue of $1.2 million and a net loss of $0.07 per share. The company’s loss for the quarter was in-line with the consensus forecast, while revenue beat expectations.
Dermira Completes Patient Enrollment for Second CIMZIA Phase III Trial- Dermira (NASDAQ:DERM) announced the completion of patient enrollment for the global CIMPASI-1 clinical trial of CIMZIA in adult patients with moderate-to-severe chronic plaque psoriasis. The first clinical trial completed enrollment in September this year. Enrollment in the third and final trial is ongoing. Top-line safety and efficacy data from the Phase III program is expected to be announced in 2017.
VBL Therapeutics Announces New Data for VB-111- VBL Therapeutics (NASDAQ:VBLT) announced the presentation of new data on its lead oncology product VB-111. The data showed significant improvement of 12 month overall survival with VB-111 in recurrent Glioblastoma multiforme (OTCPK:RGBM) compared to pooled data from four different Avastin studies. The data was presented at the 20th Annual Scientific Meeting and Education Day of the Society for Neuro-Oncology (‘SNO). VBL-111 is currently in Phase III trial. The Phase III GLOBE Study, which commenced in August 2015, is comparing VB-111 in combination with Avastin to Avastin alone in rGBM patients. I hadinitiated coverage on VBLT in August this year, with a risk-adjusted fair value of $15.80.
MediciNova to Commence Clinical Trial for MN-001 in NASH- MediciNova (NASDAQ:MNOV) announced that it is initiating a clinical trial to investigate MN-001 for the treatment of hypertriglyceridemia in NASH patients. Paul J. Pockros, MD, Division Head of Gastroenterology and Hepatology at Scripps Clinic will be the principal investigator. The trial will be primarily conducted at U.S. medical centers within SC Liver Research Consortium (SCLRC).
Cancer Genetics Obtains Non-Dilutive Funding- Cancer Genetics (NASDAQ:CGIX) announced that it has received preliminary approval for a $1.2 million gross tax credit from the New Jersey Business Tax Certificate Transfer (‘NOL) Program for the year 2015. The company expects to receive $1.1 million in net cash after expenses.
Drug Approvals
Amgen’s (NASDAQ:AMGN) Kyprolis(R) for combination use in the treatment of patients with relapsed multiple myeloma has been granted approval in the European Union. The European Commission approved the drug in combination with lenalidomide and dexamethasone for the treatment of adult patients with multiple myeloma who have received at least one prior therapy.
Deals
Pfizer Gets U.S. Rights for Cellectis’ UCART19- Pfizer has secured the U.S. rights for Cellectis’ (NASDAQ:CLLS) UCART19, a TALEN® gene-edited allogeneic Chimeric Antigen Receptor T-cell (CAR-T) immunotherapy. Pfizer secured the rights through an exclusive global license and collaboration agreement with Servier, which exercised its option to acquire the exclusive worldwide rights to further develop and commercialize UCART19. UCART19 is about to enter Phase I development for chronic lymphocytic leukemia (‘CLL) and acute lymphoblastic leukemia (‘ALL). As per the agreement between Pfizer and Servier, the two companies will work together on a joint clinical development program for UCART19 and share development costs. Pfizer will be responsible for potential commercialization of UCART19 in the U.S. The financial terms of the Servier and Pfizer agreement were not disclosed.
Celladon and Eiger Sign Merger Agreement- Celladon (NASDAQ:CLDN) and Eiger BioPharmaceuticals have entered into a definitive merger agreement under which stockholders of Eiger would become majority owners of CLDN. The operations of both companies will be combined. If the transaction is completed, Celladon will be renamed Eiger BioPharmaceuticals.
Secondary Offerings
No secondary offerings to report.
IPOs
No IPOs to report.
Insider Transactions
Emergent BioSolutions Insider Sells- Fuad El-Hibri, Chairman at Emergent BioSolutions (NYSE:EBS) sold 17,871 shares at $37.50.
Otonomy Insider Sells- Orbimed Advisors LLC, director at Otonomy (NASDAQ:OTIC) sold 138,398 shares in two separate transactions. Orbimed sold 127,300 shares at $28.60 and 11,098 shares at $28.81.
Loxo Oncology Insiders Buy- Avi Z. Naider, director at Loxo Oncology (NASDAQ:LOXO) bought 3,773 shares at $26.50. The total value of the transaction was $99,985. Aisling Capital III LP, a 10% owner in the company bought 265,000 shares at $26.50. The total value of the transaction was $7.02 million.
Neothetics Insider Sells- Kenneth W. Locke, Chief Scientific Officer at Neothetics (NASDAQ:NEOT) sold 6,098 shares at $8.30. The total value of the transaction was $50,619.
Incyte Insider Sells- Paul A. Friedman, director at Incyte sold 225,000 shares in two separate transactions. Friedman sold 100,000 shares at $111.96 and 125,000 shares at $115.33.
Ophthotech Insider Sells- Nicholas Galakatos, director at Ophthotech (NASDAQ:OPHT) sold 1500 shares in two separate transactions. Galakatos sold 500 shares at $60 and 1000 shares at $60.
Seattle Genetics CEO Sells- Clay B. Siegall, President & CEO at Seattle Genetics (NASDAQ:SGEN) sold 87,473 shares at $45.40. The total value of the transaction was $3.97 million.
Big Movers
NYSE- Valeant Pharmaceuticals International (NYSE:VRX) was the best performing biotech stocks on the NYSE. VRX closed 15.70% higher. Mallinckrodt ended the day 4.29% higher. Puma Biotechnology (NYSE:PBYI) shares ended the day 4.24% lower.
NASDAQ- KaloBios Pharmaceuticals (NASDAQ:KBIO) shares ended the day 402.42% higher. Arcadia Biosciences (NASDAQ:RKDA) shares ended the day 37.50% higher. PTC Therapeutics (NASDAQ:PTCT) shares ended the day 13.15% lower. aTyr Pharma (NASDAQ:LIFE) shares closed 10.11% lower.
NYSEMKT- Palatin Technologies (NYSEMKT:PTN) shares ended the day 7.69% higher.
OTC- Amarantus Bioscience Holdings (OTCQX:AMBS) closed 1.79% lower.
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