Friday, December 31, 2010
Tuesday, December 28, 2010
Novartis' "Ilaris" Appears to Have Application for Treating Gout Flares
According to a recent report by Deutsche bank equity analysts, Novartis already has recieved approval for its drug Ilaris. The company currently has a P3 trial underway for an additional indication for Ilaris for juvenile arthritis, but the DB analyst appears to see potential for up to $500 million in sales for this drug for
Ilaris currently is approved for CAPS (Cryopyrin-Associated Periodic Syndromes). Now, I have NEVER heard of such a thing, and I watch both "Mystery Diagnosis" on Discovery Health (about to become the Oprha Winfrey network), and I also watch House. I have also been a big watcher of ER and Chicago Hope, and that one in Seattle with all those dopey girls who can't decide which guy they like. About 12 seconds with Google, though, yields information that CAPS is a group of genetically-based autoimmune-related inflammatory "syndromes."
Oh, wait, no wonder I never heard of it! It used to be known as "Hereditary Periodic Fever Syndromes." That explains everything!
But seriously, Ilaris already has been approved and is on the market. The P3 trial for juvenile arthritis is underway, and it is yet another chink in the armor of Krystexxa.
That's it for now
aa/Jay Hains
Ilaris currently is approved for CAPS (Cryopyrin-Associated Periodic Syndromes). Now, I have NEVER heard of such a thing, and I watch both "Mystery Diagnosis" on Discovery Health (about to become the Oprha Winfrey network), and I also watch House. I have also been a big watcher of ER and Chicago Hope, and that one in Seattle with all those dopey girls who can't decide which guy they like. About 12 seconds with Google, though, yields information that CAPS is a group of genetically-based autoimmune-related inflammatory "syndromes."
Oh, wait, no wonder I never heard of it! It used to be known as "Hereditary Periodic Fever Syndromes." That explains everything!
But seriously, Ilaris already has been approved and is on the market. The P3 trial for juvenile arthritis is underway, and it is yet another chink in the armor of Krystexxa.
That's it for now
aa/Jay Hains
SVNT Commences Overdue CEO Search
This afternoon after the close of the market, SVNT announced that it will search for a CEO.
In my view, this serves as the denouement (I had to check the dictionary on spelling that) for SVNT's second failed attempt to sell itself in the past two years. Sucha record should be a cause for shame among the members of the Board of Directors, in my view. I doubt that the company will EVER take publicly again about SVNT being "for sale." In my opinion, if SVNT ever does get sold, it will be a deal announced figuratively "in the dead of night."
With the company searching for a CEO, it is clear that a new direction for SVNT is in the offing, but it is a direction that has been pretty obvious to long-time SVNT-watchers ever since the humiliating announcement almost two months ago that there was no buyer "at this time."
Instead, SVNT will need to rebuild its credibility one prescription at a time. To use an automotive metaphor: "the rubber is hitting the road, now we need to wait and see if it gets an traction."
In my view, this serves as the denouement (I had to check the dictionary on spelling that) for SVNT's second failed attempt to sell itself in the past two years. Sucha record should be a cause for shame among the members of the Board of Directors, in my view. I doubt that the company will EVER take publicly again about SVNT being "for sale." In my opinion, if SVNT ever does get sold, it will be a deal announced figuratively "in the dead of night."
With the company searching for a CEO, it is clear that a new direction for SVNT is in the offing, but it is a direction that has been pretty obvious to long-time SVNT-watchers ever since the humiliating announcement almost two months ago that there was no buyer "at this time."
Instead, SVNT will need to rebuild its credibility one prescription at a time. To use an automotive metaphor: "the rubber is hitting the road, now we need to wait and see if it gets an traction."
Sunday, December 26, 2010
ALIM Gets "Complete Response Letter" from FDA on Iluvien
On Christmas Eve, the FDA played the role of Grinch for ALIM And PSDV shareholders by issuing a Complete Response Letter (CRL) for ALIM's Iluvien application. It seems that both ALIM and PSDV shares will decline at least 25% on Monday when trading resumes, as it is likely to take 9-12 months for ALIM & PSDV to reach the point where an FDA decision again is imminent, as was the case for the past month or so. While this clearly is a nasty setback, it is not a "death sentence," and it cannot even be said that it was completely unexpected. Let's dissect why this is the case.
Firstly, the issuance of a CRL is not a rejection of the application. A CRL reflects a decision by the FDA that approval is not possible at the current time. The CRL also provides the company filing the application with the opportunity to remedy the issues that the FDA notes as deficient in the letter itself. The FDA's procedures provide for the company to have a meeting in person with FDA personnel within a specified period of time during which the company will get further specific information about what it must do to gain approval.
In the current case, the FDA noted manufacturing irregularities at more than one of ALIM's contract manufacturers. The FDA will, in short order, tell ALIM and those contract manufacturing organizations what it observed that must be corrected.
Secondly, the FDA decided that 24 months of trial data was insufficient to allow it to approve Iluvien at the current time. The FDA requested that the company provide 36 months of data and additional statistical analysis of the data. The company already has the 36 month data, as the 36-month timeframe ended in December 2010. The FDA did NOT request or require any additional trials to be done, an event that would have been as close to a "rejection for cause" as seemingly possible.
ALIM will hold a conference call at 8:30 a.m. tomorrow morning to discuss its way forward from this point.
The company's FDA application and "Priority Review" were two steps forward, in my view. The CRL is "one step back."
Firstly, the issuance of a CRL is not a rejection of the application. A CRL reflects a decision by the FDA that approval is not possible at the current time. The CRL also provides the company filing the application with the opportunity to remedy the issues that the FDA notes as deficient in the letter itself. The FDA's procedures provide for the company to have a meeting in person with FDA personnel within a specified period of time during which the company will get further specific information about what it must do to gain approval.
In the current case, the FDA noted manufacturing irregularities at more than one of ALIM's contract manufacturers. The FDA will, in short order, tell ALIM and those contract manufacturing organizations what it observed that must be corrected.
Secondly, the FDA decided that 24 months of trial data was insufficient to allow it to approve Iluvien at the current time. The FDA requested that the company provide 36 months of data and additional statistical analysis of the data. The company already has the 36 month data, as the 36-month timeframe ended in December 2010. The FDA did NOT request or require any additional trials to be done, an event that would have been as close to a "rejection for cause" as seemingly possible.
ALIM will hold a conference call at 8:30 a.m. tomorrow morning to discuss its way forward from this point.
The company's FDA application and "Priority Review" were two steps forward, in my view. The CRL is "one step back."
Tuesday, December 21, 2010
Breakout Move Today in PSDV; ALIM Lags
Today PSDV staged a "breakout performance" with the stock up by $0.75/share to $6.64 as I write this, a gain of more than 10%. Trading volume has swelled to almost 300,000 shares just shy of 2 p.m. (NY time), already more than 2x the average daily volume (last 50 days) of about 125,000 shares per day. The weekly chart for PSDV is a thing of beauty with a very lengthy "rounding bottom" formation (please refer to your copy of "Edwards and Magee" on that) with this week's price representing a breakout. Given the TIMING of this breakout, just before the FDA deadline for ALIM's application for Illuvien, I think it is particularly auspicious.
Interestingly, shares of ALIM are lagging, despite today's trading volume of more than 400,000 shares nearing 5x the average daily volume over the past 50 days. There are several reasons why ALIM may be lagging. One is that ALIM went public only last spring and so there are fewer money managers and portfolio managers that know about it. In my view, that is not a strong argument, however, since any PMs that know PSDV likely know the ALIM story very well, too. A second reason for ALIM's lagging share price may be that it is seen, at this point, as a "one trick pony" and any event short of approval this month by the FDA might be perceived as requiring them to raise some additional capital in the near term due to ongoing "cash burn" during the FDA review process. In my view, that isn't a great argument, either.
In my view, ALIM is being unfairly left behind here.
Readers can look back at some of the earlier posts here on the AfterSVNT blog about ALIM and PSDV to get the background story. Suffice it to say that rumors of the FDA acting on the Iluvien application prior to Christmas make alot of sense to me, since it is hard to believe that the FDA commissioners themseves are going to be in town and meeting on the day before New Year's eve.
Happy Hunting and best wishes to my readers and fellow investors/speculators.
aa/Jay Hains
Interestingly, shares of ALIM are lagging, despite today's trading volume of more than 400,000 shares nearing 5x the average daily volume over the past 50 days. There are several reasons why ALIM may be lagging. One is that ALIM went public only last spring and so there are fewer money managers and portfolio managers that know about it. In my view, that is not a strong argument, however, since any PMs that know PSDV likely know the ALIM story very well, too. A second reason for ALIM's lagging share price may be that it is seen, at this point, as a "one trick pony" and any event short of approval this month by the FDA might be perceived as requiring them to raise some additional capital in the near term due to ongoing "cash burn" during the FDA review process. In my view, that isn't a great argument, either.
In my view, ALIM is being unfairly left behind here.
Readers can look back at some of the earlier posts here on the AfterSVNT blog about ALIM and PSDV to get the background story. Suffice it to say that rumors of the FDA acting on the Iluvien application prior to Christmas make alot of sense to me, since it is hard to believe that the FDA commissioners themseves are going to be in town and meeting on the day before New Year's eve.
Happy Hunting and best wishes to my readers and fellow investors/speculators.
aa/Jay Hains
Wednesday, December 15, 2010
Sparton Also Bags Another Large Defense R&D contract
Sparton has been getting quite a few good looking sonobuoy R&D contracts lately. Check out the press releases on the company's web site or under Yahoo! Finance's new section.
Today, the combination of the news on the real estate sale and the new R&D contract seemed to give the stock quite a pop of volume and the stock moved up nicely.
Jay Hains/aa
Today, the combination of the news on the real estate sale and the new R&D contract seemed to give the stock quite a pop of volume and the stock moved up nicely.
Jay Hains/aa
Tuesday, December 14, 2010
Sparton (SPA) Bags $4.5 Million in Real Estate Sale
SPA management continues to execute on those things that are within its ability to control. The sale of the company's last piece of unused real estate (in New Mexico) for $4.5 million is another example of this. As a result of this sale, it seems to me that SPA's cash balance for 11FQ2 (ends December 31) could well be back above the $30 million level (almost exactly $3.00 per share) after internally-generated FCF is included. That would compare to $27.3 million (Bloomberg basis) in 11FQ1. There is also some "restricted cash" related to environmental liabilities that either is or will soon be available to count as cash on hand.
Meanwhile, the current quarter has seen several nice sonobuoy R&D contracts let by the Defense Department. This should provide a solid backlog level going forward for the company's defense segment.
Given the economic environment, though, the company's operations are not without headwinds. The Medical Division had a weak performance in the September quarter, in my view, given the additional revenue gained from the August 2010 acquisition of Delphi. In addition, the EMS division continues to struggle with margin issues in what is without a doubt a naturally tough business even in good times. Nevertheless, decent performance at those divisions should allow SPA to generate a very nice amount of FCF given my expectation of continued strong results at the defense division.
On the 11FQ1 earnings conference call, management reiterated that it continues to look at many potential acquisitions, but that thew company intends to remain very disciplined in deploying the company's very hard-earned cash and capital resources.
With the stock at $8 currently, and cash likely at around $3.00 per share, the business is available for the equivalent of about $5.00 per share. By comparison, I expect the company to be generating on the order of $0.80 per share in FCF in the current fiscal year, with the potential to generate $1.00 per share in FCF in FY2012 (ends June 30, 2012) visible before long. That leaves the stock at its current level still quite cheap, in my view.
Jay Hains/aa
Meanwhile, the current quarter has seen several nice sonobuoy R&D contracts let by the Defense Department. This should provide a solid backlog level going forward for the company's defense segment.
Given the economic environment, though, the company's operations are not without headwinds. The Medical Division had a weak performance in the September quarter, in my view, given the additional revenue gained from the August 2010 acquisition of Delphi. In addition, the EMS division continues to struggle with margin issues in what is without a doubt a naturally tough business even in good times. Nevertheless, decent performance at those divisions should allow SPA to generate a very nice amount of FCF given my expectation of continued strong results at the defense division.
On the 11FQ1 earnings conference call, management reiterated that it continues to look at many potential acquisitions, but that thew company intends to remain very disciplined in deploying the company's very hard-earned cash and capital resources.
With the stock at $8 currently, and cash likely at around $3.00 per share, the business is available for the equivalent of about $5.00 per share. By comparison, I expect the company to be generating on the order of $0.80 per share in FCF in the current fiscal year, with the potential to generate $1.00 per share in FCF in FY2012 (ends June 30, 2012) visible before long. That leaves the stock at its current level still quite cheap, in my view.
Jay Hains/aa
Monday, December 13, 2010
From the Division of Market Insanity Department
Take a look at the chart on tiny New Energy Technologies (NENE) on the OTC Bulletin Board.
It is a six bagger from the $0.50 level a couple of months ago.
The company claims to have invented a technology that allows for a photo-voltaic solar thin film to be sprayed onto regular glass at room temperature thereby converting the glass into a generator of electricity, even if only exposed to artificial lighting.
This brings back memories of Paul McCartney and Wings performing "Maybe I'm Amazed."
It is a six bagger from the $0.50 level a couple of months ago.
The company claims to have invented a technology that allows for a photo-voltaic solar thin film to be sprayed onto regular glass at room temperature thereby converting the glass into a generator of electricity, even if only exposed to artificial lighting.
This brings back memories of Paul McCartney and Wings performing "Maybe I'm Amazed."
Friday, December 10, 2010
Alimera: Less Than 2 Weeks Until PDUFA Date of December 30
Apparently, there will be no Advisory Committee meeting for Alimera's Iluvien retinal insert treatment for diabetic macular edema, the leading cause of blindness among diabetes sufferers. This is encouraging for approval by the full FDA on December 30th.
The fact that Alimera's application was granted "Priority Review" status on August 30th, shortening the review period by 4 months (from 10 months to 6 months) is encouraging for approval.
The fact that Bausch & Lomb already has gained approval for Retisert, a retinal insert using the same steroidal treatment in the same dose as Ilubien for a related condition, uveitis, provides additional comfort that Iluvien will gain approval from the full FDA on December 30th.
According to the company, 50% of people that suffer DME need treatment bilaterally (i.e. both eyes). The company estimates that about 250,000 diabetes patients per year in the United States alone develop DME.
Analysts at CS estimate that treatment with Iluvien will be priced at approximately $6,000 per eye.
If Alimera's Iluvien can capture a 20% share of a 250,000/year market that's 50,000 patients per year needing 75,000 procedures per year (remember, half the people need both eyes treated). At $6,000 per treatment, then Illuvien can generate $450 million annually in revenue.
Assuming an 85% gross margin, ALIM would earn $382.5 million in gross profit. After deducting $62.5 million for SG&A expenses, ALIM would be left with $320 million in "operating profits."
As best as I can determine, ALIM's technology source, NASDAQ-traded Psivida (PSDV) is entitled to 20% of ALIM's pretax profitability. The scenario noted above would divert about $64 million per year from ALIM to PSDV, leaving ALIM with $256 million in pretax income. That leaves ALIM with about $70 million in after-tax income.
Currently, ALIM's market capitalization is less than 2x this potential level if profitability.
PSDV's $100 million market cap also is less than 2x its potential pretax royalty stream.
Apparently, the market believes either that the probability of approval is low or that the product is unlikely to gain wide acceptance by retina specialists and patients in the process of losing their vision.
Am I missing something?
The fact that Alimera's application was granted "Priority Review" status on August 30th, shortening the review period by 4 months (from 10 months to 6 months) is encouraging for approval.
The fact that Bausch & Lomb already has gained approval for Retisert, a retinal insert using the same steroidal treatment in the same dose as Ilubien for a related condition, uveitis, provides additional comfort that Iluvien will gain approval from the full FDA on December 30th.
According to the company, 50% of people that suffer DME need treatment bilaterally (i.e. both eyes). The company estimates that about 250,000 diabetes patients per year in the United States alone develop DME.
Analysts at CS estimate that treatment with Iluvien will be priced at approximately $6,000 per eye.
If Alimera's Iluvien can capture a 20% share of a 250,000/year market that's 50,000 patients per year needing 75,000 procedures per year (remember, half the people need both eyes treated). At $6,000 per treatment, then Illuvien can generate $450 million annually in revenue.
Assuming an 85% gross margin, ALIM would earn $382.5 million in gross profit. After deducting $62.5 million for SG&A expenses, ALIM would be left with $320 million in "operating profits."
As best as I can determine, ALIM's technology source, NASDAQ-traded Psivida (PSDV) is entitled to 20% of ALIM's pretax profitability. The scenario noted above would divert about $64 million per year from ALIM to PSDV, leaving ALIM with $256 million in pretax income. That leaves ALIM with about $70 million in after-tax income.
Currently, ALIM's market capitalization is less than 2x this potential level if profitability.
PSDV's $100 million market cap also is less than 2x its potential pretax royalty stream.
Apparently, the market believes either that the probability of approval is low or that the product is unlikely to gain wide acceptance by retina specialists and patients in the process of losing their vision.
Am I missing something?
Saturday, December 4, 2010
Atrion (ATRI) Mentioned as Buffet-style stock in Barron's Online Article
In its "Stocks to Watch" column (click on the title of this post to go to the article: you likely will need a password to Barron's), Barron's online highlighted the musings of Credit Suisse strategist Victor Lin, as he sought to divine what Warren Buffet would buy in the current market if building a portfolio from the ground up. I have, though, reproduced the article on the Yahoo! message board for Atrion which is populated by a very intelligent group of long-timers
Without further comment about any of the names chosen, the article listed Atrion (ATRI) as one of those stocks, including it properly in the Healthcare sector. The methodology focuses on each company's earnings record, management, and return on invested capital.
As a side note, ATRI this week declared a special dividend of $3 a share to supplement the company's regular $0.42/share quarterly dividend. The shares are trading hands these days in the upper $160s, having traded this past week at over $170. ATRI's $3 special dividend comes on top of the $6 special dividend paid early in 2010 which was declared in late 2009. ATRI paid in excess of $10 in cash dividends per share in 2010 but remains debt free and cash-rich.
I expect ATRI earnings to slightly exceed $10 a share in 2010, as full diluted e.p.s. for the first nine months of 2010 were $7.65 per share. In 2011 I anticipate earnings in the $11.50-$11.75/share range.
The thinly-traded shares have been one of the past decade's great performers, backed by consistently superior operating and financial performance and shareholder-friendly activities.
Without further comment about any of the names chosen, the article listed Atrion (ATRI) as one of those stocks, including it properly in the Healthcare sector. The methodology focuses on each company's earnings record, management, and return on invested capital.
As a side note, ATRI this week declared a special dividend of $3 a share to supplement the company's regular $0.42/share quarterly dividend. The shares are trading hands these days in the upper $160s, having traded this past week at over $170. ATRI's $3 special dividend comes on top of the $6 special dividend paid early in 2010 which was declared in late 2009. ATRI paid in excess of $10 in cash dividends per share in 2010 but remains debt free and cash-rich.
I expect ATRI earnings to slightly exceed $10 a share in 2010, as full diluted e.p.s. for the first nine months of 2010 were $7.65 per share. In 2011 I anticipate earnings in the $11.50-$11.75/share range.
The thinly-traded shares have been one of the past decade's great performers, backed by consistently superior operating and financial performance and shareholder-friendly activities.
Subscribe to:
Comments (Atom)