Monday, December 31, 2012

Stocks DD Cites: Analyst firm on Spectrum


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

http://dawsonjames.com/portal/sppi_init_2012_11_26.pdf

Please note I have no relationship with this analyst firm or analyst

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Sunday, December 30, 2012

Stocks DD Cites: TARO Long Thesis by Value Investor Club


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

The below thesis was posted in valueinvestorclub.com by a poster miser861.   TARO VIC thesis


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Saturday, December 29, 2012

Stocks DD Opines: Herbalife - Post-Ackman presentation - questions to ask before taking long or short position


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

Before taking short or long position on HLF , here are some key questions to ask. Some key small hedge funds (Kerrisdale capital, Bronte Capital) took long positions in HLF in the $26. Personally , I am not convinced to take either long or short position in HLF. Here's why. But before that let me state unequivocally that I am in no way stating that HLF is non-compliant with any FTC regulations. I am just discussing here, if an investor can take long or short position based on what we know so far.

1. If FTC finds HLF to be in non-compliance(read the IF) and if it  has willfully violated regulations for years(read the IF), can it kill the company ? Or will HLF just end up in a monetary settlement with FTC ? Nobody can tell this. Ackman's presentation didn't have any past comparable examples of FTC regulatory actions. 

2. If HLF has to change it's business model to be in compliance with regulations, nobody can predict the quantum of impact those changes would have on it's future revenues. For example, if HLF has to make additional disclosures to it's distributors that would discourage many to join the HLF business opportunity knowing the "real" odds , how much would it impact the business ? Or, for example, if HLF has to ensure >50% has to be true retail(non-distributor or not bundled with business opportunity) sales, nobody knows the $ impact . So in these scenarios, nobody can value Herbalife until the scenario plays out. 

Unless you believe HLF is non-compliant with FTC regulations AND has willfully violated regulations and FTC will likely kill the company, there is NO WAY one can have the conviction that Ackman had when he said "we have basically shorted this all the way to zero". Even in this situation, the conviction that the stock will go to zero is not accurate (read point 4)

3. It is also possible that PE buyer may take the risk and do LBO of the company. Again nobody can tell what price it may happen. I personally believe this is less likely to happen until the cloud of uncertainty that Ackman has raised are to some extent cleared. However, it is clear the Herbalife brand is well known even outside the distributor network. For example, my Gym (nationwide business) Lifetime Fitness has Herbalife products all over.

4. Kerrisdale's position is that any FTC action is limited to US and HLF's US business is only 20% .  I think any US FTC action would have indirect cascading impact on regulators in other countries that HLF is operating, although this may not be immediate. Bill Ackman's other main point is once the distributors become aware of their "real" odds Herbalife sales (which per Ackman is mainly distributor sales) would plummet drastically.  But then again, we all know Amway is MLM company which is also running its business over 20 years in many countries. Just by putting a complicated 350 page presentation would definitely not educate would-be distributors from being involved with Herbalife.

In my opinion any cautious investor, should wait for the Jan 10th presentation from the company to hear the company's response. It is too speculative now to be long or short.


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Friday, December 21, 2012

Potential combo of Belinostat and Folotyn


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http://news.yahoo.com/spectrum-pharmas-blood-cancer-drug-meets-trial-goal-164551587--finance.html

QUOTE
MLV & Co analyst George Zavoico said Folotyn and belinostat have different mechanisms of action, and having two drugs for the same indication could be useful in cases of relapsed patients who develop resistance to one of them.
QUOTE

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Thursday, December 20, 2012

Stocks DD Cites: Ackman's Herbalife Short thesis


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

Ackman's web site on Herbalife -> http://factsaboutherbalife.com/

Ackman's 350 page presentation on Herbalife -> http://factsaboutherbalife.com/wp-content/uploads/2012/12/Who-wants-to-be-a-Millionaire.pdf

http://www.chicagotribune.com/business/sns-rt-us-ackman-herbalifebre8bj0w1-20121220,0,4824394.story

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Wednesday, December 19, 2012

Stocks DD Cites: SUN pharma has returned an astounding 32500% in 18 years


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

SUN pharma has returned 32500% in 18 years or annualized return of 1805% every year for the last 18 years or Compounded annual growth rate of ~38% for 18 years.

Source: http://www.sunpharma.com/images/presentation/SPIL%20Dec-12%20IR%20Presentation%20(USD).pdf




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Monday, December 17, 2012

Perrigo's FY 2013 guidance as a proxy to TARO


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

Perrigo's guidance for it's RX Topical business bodes well for its competitor TARO. Perrigo is guiding for 15-19% Growth year on year. This is after registering >30% Year-on-Year growth in the last 4 years. Hopefully, TARO's management will update it's guidance and trash the highly inaccurate June 14th estimates.




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Friday, December 14, 2012

Interesting yahoo thread on Belinostat(source unverified)


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

Link

QUOTE
Likelihood of FDA approval for belinostat, a histone deacetylase (HDAC) inhibitor, is "fifty-fifty," CEO Dr Rajesh Shrotriya told this news service at the 2012 American Society of Hematology Annual Meeting and Exposition.
Belinostat has a superior side-effect profile compared to other HDAC inhibitors available, Shrotriya said. Zolinza is very toxic, and Istodax causes significant bone marrow suppression among other side effects, he noted. Belinostat in comparison is the safest HDAC inhibitor, he added. Dr Enrique Ocio, hematologist, Hospital Universitario de Salamanca, Spain, countered that belinostat is no exception to the tolerability issues faced by HDAC inhibitors. Toxicity can be limited by lowering its dose, but in general the pivotal trial will have to show a robust toxicity profile for it to be approved, he noted. 
QUOTE

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Friday, November 30, 2012

Amarin Partnership put off ?


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After all this delay and 100's of seeking alpha posts on acquisition rumors, the much awaited decision on amarin's Partnership->http://www.theday.com/article/20121130/BIZ02/311309961/1044

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Friday, November 23, 2012

Stocks DD Cites: Apaziquone Update


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

My partner site Medicoinvestor had this interesting update on Apaziquone -> Link
 Time to recurrence is the key end point in the new phase 3 trial and pooled data from prior studies showed statistical significance of time to recurrence (p-value = 0.0076) on this end point. This is exactly the kind of sleuthing this blog intends to do. If you like this , I recommend you subscribe to our blogs for free to receive posts directly to your email.

Company's last PR on Apaziquone is here

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Tuesday, November 13, 2012

Sagent Pharma's leucovorin in the FDA shortage list!


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

My partner blog has an interesting story on why Fusilev sales(at least the current 31% market share) may likely sustain
http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fmedicoinvestor.com%2Fsagent-pharma-shortage-af-leucovorin%2F

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Monday, November 12, 2012

Spectrum Pharma's partner Topotarget maintains primary end point met in Belief trial


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

Here is Topotarget's conf call from today
Slide 4 of IR presentation has the below

QUOTE
BELIEF meets primary endpoint 
Primary endpoint – objective response rate of at least 20% – has been met
• Trial data being further analyzed and expected communicated Q4 2012
• Anticipated filing for belinostat NDA mid-2013
• If FDA accepts filing of belinostat NDA, Topotarget entitled to 1 million SPPI shares and double-digit million USD cash payment
• If FDA approves belinostat, Topotarget to receive double-digit million USD 
cash payment
QUOTE

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Saturday, November 10, 2012

Stocks DD Cites: Grand Slam files suit against TARO


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

http://www.scribd.com/doc/112809098/12-Civ-8195-Complaint

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Wednesday, November 7, 2012

Spectrum pharma - Bull case and the Bear case


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

Bull case (Disclosure: I am long SPPI)

Current Products
  • Fusilev - Sales will sustain or grow even with the entry of new Generic Leucovorin. 
    • Per the company's survey to Docs, around 60% of oncologists have NOT yet been contacted by the company sales force
    • More sales force(60 company sales people) selling Fusilev with Allos Acquisition. In addition they have CRO sales force.
    • COO, Ken Keller talked about new strategies(decentralization and region based sales & marketing) to increase Fusilev sales 
    • Fusilev is supported by sales/reimbursement support team unlike generic
    • Fusilev sales could be helped when their pilot study(protocol is ready) with Folotyn to treat Mucositis(grade 3 and grade 4) is completed. There is already 1 study with Folotyn and generic leucovorin where discontinuation rate decreased from 70%(?) to 0%.
    • Company's research with docs, suggests most Docs are prescribing Fusilev not because generic Leucovorin is not available.
    • Docs get a commission based on sales price. Hence docs are incentivized to prescribe higher priced Fusilev(compared to generic) which has its own J-Code.
    • 13% more accounts in Q3.
    • Currently fusilev occupies 31% of the market. So theoretically there is room for growth.
    • There may be a perception that Fusilev is purer. 1 clinical study shows slight improvement in tolerability over Generic leucovorin. Bulls also point out similar cases in the past (Brand Lexapro v Generic Celexa) , Brand Abraxane vs Generic  where the brand sales sustained even with existence of competition generic(not equivalent generic). As can be seen in these cases drug formulary had pre-authorization for the brand.
    • Fusilev sales ex-US is $180m/year with no shortage of generic leucovorin in Europe or Japan for >10 years.
    • Insurers are more focused on bigger drugs(>$1 billion dollar drugs) when it comes to containing costs. 
  • Folotyn sales will increase if Fusilev treats mucositis. Right now majority of patients discontinue from taking full treatment course.
  • Zevalin has growth and could become $100m/year product in 2014-2015
    • Zevalin EX-US is very low as Bayer (for whatever reason had stopped promoting for 4 years). So it has room for growth in Japan(where their partner has already started promoting) and the 4 European countries
    • In US, the removal of Radiologist license requirements so an oncologist can adminster Zevalin, will improve sales.
    • 15+ independently funded papers in upcoming ASH conference on Zevalin speaks to its strong efficacy/interest.
    • Longer term, results from the current and future clinical studies will improve sales
Future Products/Pipeline

  • Belinostat Dec data will highly likely be approvable. Here is the Topotarget's PR.
  • There is a very remote chance that FDA may accept combined data from Apaziquone. 
  • Continued progress on Phase 2(SPI-2012, SPI-1620 to be initiated in next 2 months) and Phase 1 drugs
Management and Company Philosophy

  • Management is very cost conscious and keeps a close tab on burn rate. For example, if Fusilev sales are impacted(unlikely IMO), this company will waste no time in adjusting its costs. Having their own CRO also helps in reducing costs and time.
  • More synergy savings from Allos acquisition
  • The 2 new recruits from Amgen have top notch experience in growing Billion dollar branded Oncology drugs: Ken Keller and his deputy.
Growing Cash can and will be used opportunistically

  • The company has an active Business development team hunting for opportunities, although they guided their plate is full now.
  • Excess cash could be used to buy-back shares
Downside Protection:
  • With effective cash balance of ~$162m(includes $90m AR minus $70m drawdown on credit) as of 09/30 and the fiscal discipline, and at least a few more quarters of Fusilev sales still left in the worst case, this company will very likely not need to raise capital and dilute shareholders. Also, Fusilev's current run rate is just $220m (with 31% market share)..so even with 15% market share Fusilev could still generate $110m/year.


Bear case:
1.  Fusilev sales would tank significantly to <100m/year(or <15% of the leucovorin market) after generic leucovorin supply shortage abates. 

  • Sagent Pharma introduced their generic in Q4. 
  • There is little differentiation between generic Leucovorin and Fusilev based on some study. 
  • Insurers may force oncologists to prescribe generic Leucovorin if there is no documented shortage issue in the generic. There are some insurance companies that require docs to require pre-authorization before prescribing Fusilev.
  • HR661 pending bill will increase price of generic so more generic companies will start making leucovorin and Fusilev sales  will tank.
2. No growth in Zevalin
3. No growth in Folotyn
4. Belinostat belief trial will fail
5. Apaziquone will never be approved by FDA
6. Will need to raise capital

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Saturday, November 3, 2012

Spectrum Pharma - Q3 holding changes


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

Deadline for reporting ends 11/15. So there will likely be more changes. This can be easily accessed on whalewisdom.com
Increased or added new position(sorted in descending order)

SET MANAGEMENT GROUP LP 121,190 $1,417,923 0.06% 0.04% 190 67,948
ARIZONA STATE RETIREMENT SYSTEM 47,800 $559,260 0.01% 0 1254 47,800
REGIONS FINANCIAL CORP 33,520 $392,184 0.01% 0 667 33,520
LOS ANGELES CAPITAL MANAGEMENT & EQUITY RESEARCH INC 93,840 $1,097,928 0.02% 0.02% 612 26,716
TRADEWORX INC. 19,943 $233,333 0.16% 0 263 19,943
STONEBRIDGE CAPITAL MANAGEMENT INC 18,275 $213,817 0.10% 0 154 18,275
SHELL ASSET MANAGEMENT CO 16,123 $188,639 0.00% 0 812 16,123
PROFUND ADVISORS LLC 11,446 $133,918 0.01% 0 1256 11,446
WORLD ASSET MANAGEMENT INC 10,549 $123,423 0.00% 0 1575 10,549


Reduced Position
(sorted in descending order)
OBERMEYER ASSET MANAGEMENT CO 0 $0 0 2.60% Sold All 559,660
TODD VEREDUS ASSET MANAGEMENT LLC 0 $0 0 0.06% Sold All 111,900
STRS OHIO 50,700 $593,190 0.00% 0.01% 1204 41,200
QUOTIENT INVESTORS, LLC 0 $0 0 0.17% Sold All 30,700
DENALI ADVISORS LLC 133,700 $1,564,290 0.28% 0.35% 94 28,500
PARAMETRIC PORTFOLIO ASSOCIATES LLC 0 $0 0 0.00% Sold All 24,186
MANULIFE ASSET MANAGEMENT (NORTH AMERICA) LTD 22,758 $266,269 0.00% 0.01% 1384 22,958
CHICAGO EQUITY PARTNERS LLC 0 $0 0 0.01% Sold All 11,575
FIRST QUADRANT L P/CA 0 $0 0 0.00% Sold All 4,800
DEKABANK DEUTSCHE GIROZENTRALE 39,200 $458,640 0.01% 0.01% 480 2,500
BANK OF NEW YORK MELLON CORP 745,379 $8,720,934 0.00% 0.00% 1685 2,258
NOMURA HOLDINGS INC 28,163 $329,507 0.00% 0.01% 1075 2,175
STATE BOARD OF ADMINISTRATION OF FLORIDA RETIREMENT SYSTEM 65,767 $769,474 0.00% 0.00% 1521 1,742
NAVELLIER & ASSOCIATES INC 26,808 $313,654 0.01% 0.01% 204 1,464





















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Stocks DD Cites: HK monetary authority continues to sell Hong Kong dollar


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

http://www.bloomberg.com/news/2012-10-23/hong-kong-dollar-trades-near-peg-limit-intervention-speculated.html
http://www.reuters.com/article/2012/11/02/hongkong-peg-idUSL3E8M22ON20121102
http://www.ft.com/cms/s/0/2143522a-24df-11e2-8924-00144feabdc0.html#ixzz2BGhutpb9
http://www.marketwatch.com/story/has-hong-kong-popped-its-bubble-2012-10-28  (Very good article)

QUOTE "We have no plans to change the Hong Kong dollar peg," Chan said in response to a question from a legislator. The 29-year-old peg has come under pressure recently, as the former British colony, along with other Asian centres, became favoured destinations for funds unleashed by major quantitative easing measures in the U.S., Europe and Japan
In the meantime, the most worrying aspect of the surge of funds into Hong Kong has been the effect on property prices, which have risen about 20 percent in the first nine months of this year, with even small and medium-sized units climbing some 21 percent. Fearful of the social impact, the city introduced new measures to curb runaway prices last Friday, including a 15 percent tax on overseas buyers and an increase of the stamp duty onshort-term transactions.
“The government is trying to do something about residential property price inflation, but it is very difficult against the backdrop of the money that is coming into Hong Kong,” said Cusson Leung, analyst at Credit Suisse. “We believe most of the investment demand will shift from the residential market to the commercial property market.”
During the past two weeks, the Hong Kong Monetary Authority sold a total of $3.5 billion worth of Hong Kong dollars into the market via nine interventions to curb the strength of the local currency.
QUOTE
My take: Aside from the property inflation, the consumer inflation is still very benign at <4%. The monetary authority's plan to restrict hot money from chasing properties should be pretty effective idea.  So it is my opinion, the authority will be able to continue to target policy on property inflation to ensure the easy USD money post-quantitative easing(from the HK exporters and overseas investors from mainland China) does not enter the Honk Kong property market. They could technically continue to sell HKD and buy and hold USD for as long as they want and maintain the current dollar peg rate.

Here is Ackman's Sept 2011 thesis on Hong Kong dollar-> http://stks.co/iEGm

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Thursday, November 1, 2012

TARO - More good news


Read, understand and consent to the blog's DISCLAIMER here before proceeding to read the article

2 significant news relevant to TARO happened this last week which will affect valuation of TARO shares. We have informed the special committee and the board of this significant development. Meanwhile as expected by most shareholders , TARO is on target to post yearly EBIDTA of $320m. This  is 53m higher than their low-ball EBIDTA estimates of $267m provided to Citi by Taro management (on June 14th 20120) for valuation of TARO shares. 

The ratification of EU-Israel trade is expected to increase the accessibility of TARO pharmaceuticals to EU markets. Right now, TARO's sales in EU is negligible.
This trade agreement will remove technical barriers to trade, cutting manufacturers' costs and enabling them to get their products to market faster

2)  Watson Pharma confirmed their expectations on the annual Synergy savings of $300m/year on it's Actavis acquisition.
This piece of news along with the Valeant-Medicis acquisition (anticipated $225 in annual synergy savings) would serve to indicate the value proposition the TARO acquisition could provide for a strategic acquirer like SUN. The special committee should take cognizance of this in evaluating fair value of TARO shares. For instance, if TARO acquisition results in $200m in synergy savings, this is equivalent to incremental value of ~$53 per TARO share above and beyond the intrinsic market value of TARO.
QUOTE
Watson continues to expect $300 million in annual cost synergy savings from the Actavis acquisition within three years. These synergies are comprised of SG&A, R&D, corporate, purchasing and raw material supply savings.
Expanded Global Geographic Footprint
The combined company has operations in more than 60 countries, with top 10 positions in more than 33 markets including the U.S., U.K., Canada, Australia, Nordics and Russia. With this global footprint, the combined company has an extensive platform for strong, future organic growth. The strongest growth regions for the new company will be the U.S., Central and Eastern Europe and Russia and in Southeast Asia and Australia. The Company is also the fastest growing generic pharmaceutical company in Western Europe, where growth is outpacing the overall market. The combined company will be geographically diverse, with approximately 40 percent of its revenues coming from outside of the U.S. 
Expanded Global Supply Chain
The Company has an expansive, diversified global supply chain with various technological capabilities, including the ability to manufacture more than 40 billion dosages worldwide. The combined company has the expertise to develop solid dosage, modified release, patch, gel, liquid, semi-solid and injectable products for all of its global markets.
QUOTE 

3) Meanwhile, TARO continues to shine and is well on its way to hit $320m in EBIDTA. 
http://finance.yahoo.com/news/taro-provides-second-quarter-fiscal-211500403.html

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Saturday, October 27, 2012

Amarin's Potential Suitors


Read,understand and consent to the blog's disclaimer here before proceeding

Amarin has been in negotiations for a potential transaction (likely an all cash-out acquisition) for a long time. I speculate below are some of the potential suitors.


Potential Suitor  Product to be replaced/protected Product sales in US
Glaxosmithkline Lovaza. Patent expires in 2013 Approx $1 billion
Abbott Fibrates Approx $1 billion
Abbott Niaspan failed to demonstrate improved CV outcomes over statin therapy Approx $1 billion
Pfizer Several generics entered Lipitor in June 2012 and eroded this franchise Approx $9b (2011)
Astrazeneca Crestor is still under Patent protection until 2016. A combination product of Vascepa and Crestor could protect this franchise before Crestor's patent expiry. Approx $5.7b (2011)


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