GENZ, MEDI, CATS ON A HOT TIN ROOF
What About Exelixis
Biotechnology sector closed mostly higher yesterday and the sentiment towards the sector is increasingly positive. Today is another day, though; it is starting on a negative note. Why? There are always reasons for the ups and the downs and the paralysis.
ASCO is coming.
For the three past years, the prestigious conference has been kidnapped by short-sellers, and the same might repeat this year. Still, the prestigious ASCO conference is the best reminder that the biotech sector should not be underestimated. It has provided the best selling novel biological cancer drugs, which are closing in on the traditional chemotherapies.
Bottom line, regardless of how far the critics go in their game of unfulfilled expectations, the long-lasting effect of ASCO will still be in favor of the firms that put on the market far-reaching cancer drugs such as Rituxan, Avastin, Tarceva, Vectibix, Erbitux, Velcade and all the many other biological products that are taking over the management of cancers.
In other news:
Genzyme (GENZ) decided to buy Bioenvision for $345 million, or $6.50 per share, in cash. Why? Why not? This is the logical question/answer. Genzyme is developing a promising drug, clofarabine, with Bioenvision. Of course buying the partner together with the drug for $345 million is smart.
Exelixis (EXEL) announced the initiation of a Phase 2 clinical trial of XL647 in patients with non-small cell lung cancer (NSCLC) who previously benefited from erlotinib or gefitinib or have a documented T790M mutation in the epidermal growth factor receptor (EGFR). The whole story is about treating patients whose cancers have become resistant to new drugs. The T790M mutation confers resistance to the inhibitory effects of erlotinib and gefitinib. In favor of Exelixis is that pre-clinical data indicate that its drug XL647 can potently inhibit this mutation and other mutant forms of EGFR.
XL647 is designed to simultaneously inhibit the activity of multiple receptor tyrosine kinases, including EGFR, HER2, and vascular endothelial growth factor receptor type 2 (VEGFR2).
(Read Prohost opinion on this firm in the E-Letters and N-Letters).
Biogen Idec (BIIB): This firm’s board of directors has authorized a $3 billion share repurchase through a modified “Dutch Auction” tender offer. The offer, commences tomorrow, for approximately 57 million shares. It represents about 16% of Biogen Idec’s currently outstanding common stock.
In the tender offer, shareholders will have the opportunity to tender some or all of their shares at a price per share not less than $47.00 or more than $53.00. The tender offer, which commences tomorrow, May 30, 2007, is expected to expire at midnight Eastern Time on June 26, 2007, unless extended. The modified “Dutch Auction” structure will allow shareholders to indicate how many shares and at what price within the specified range they wish to tender. Based on the number of shares tendered and the prices specified by the tendering shareholders, the Company will determine the lowest price per share within the range that will enable it to purchase up to 57 million shares, or such lesser number of shares as are properly tendered.
The Company will not purchase shares from a particular shareholder below the price stipulated by that shareholder but, in some cases, may purchase shares at prices above a shareholder’s indication. Instructions and an explanation of the terms and conditions of the tender offer are contained in the offer to purchase and related materials that are being mailed to shareholders.
The tender offer will not be contingent upon any minimum number of shares being tendered. However, it will be subject to the completion of financing as specified in the offer to purchase.
If completed, the stock repurchase will be funded through a combination of up to $1.5 billion cash and up to $1.5 billion of debt. Currently, Biogen Idec has limited debt and a core business that generates substantial cash flow from operations.
MedImmune (MEDI): Federal health officials said Tuesday that a warning issued to MedImmune over manufacturing issues at a United Kingdom plant shouldn’t significantly disrupt company production of its nasal spray flu vaccine.
Warning or no warning, the company is taken over at over $57. What is puzzling is that, knowing this fact, still some institutions are shorting the stock! Excluding gambling, the remaining explanations could be only one of two: Either those institutions have inside information that the take over deal will not occur, or those responsible for the shorting are irrational.
For the sake of our peace of mind, we sold MedImmune, we took our profit and enjoyed it. We hope you do the same
Yes, there is more news. We will comment on time, if any deserves comments.