3 Biotech Companies to Watch This Summer
Jun 21st 2013 9:42AM
Updated Jun 21st 2013 9:44AM
The news flow from biotech companies might slow down during the summer, but it won't stop. In fact, a few biotechs are expecting news that could move their stock substantially. Here are three biotech companies to keep your eye on while you're hanging out at the beach.
Up for sale
After Elan failed to convince its shareholders that its new business model was the right one, the biotech company formally put itself up for sale last Friday.
I figured it would take a couple of months for the bankers to start dropping hints as to who might be interested. Instead, it we got the first one in less than a week, as Reuters reported Wednesday that Forest Labs was mulling a bid according to "people familiar with the situation." I expect we'll get a lot more unnamed sources paraphrased in articles as the summer progresses and as Elan's bankers try to get the most bidders to the table.
Royalty Pharma previously offered $13 per share plus $2.50 in contingent value rights if Tysabri hits certain milestones. Since management wasn't willing to accept that offer, we can assume an acquisition offer will have to be higher than that.
My guess is that any offer that Elan gets, will probably similarly contain a CVR, which allows the two sides to agree to disagree to the potential upside, while still getting the deal done. The only question now is whether Elan can find someone willing to pay a base price above the current market price.
A take-under -- where CVR helps make up the price difference -- is certainly an option and is the biggest risk to owning the stock beyond Elan not being able to find a bidder altogether.
VIVUS will launch fights on two fronts this summer.
The biotech company's obesity drug Qsymia now has direct competition from Arena Pharmaceuticals and Eisai's recently launched Belviq. I continue to think there's plenty of room for both drugs on the market; obesity is an epidemic after all. But in the short term, it's going to be interesting to see if the launch of Belviq cuts into Qsymia sales.
VIVUS will also be waging a proxy war against the largest shareholder, First Manhattan, which is trying to unseat the board at the company's annual meeting on July 15. First Manhattan claims that Qsymia's slow launch is because the board doesn't have the commercial expertise.
I'm not sure if VIVUS' shareholders will buy it, and even if they do, it's not clear that a change will make a material difference on the launch. Nevertheless, the fight will be a distraction for the next month, which certainly isn't going to help with the biotech company's launch.
Last clinical trials!
MannKind has been developing its inhaled insulin product Afrezza for years. The FDA rejected the drug-device combo in 2010, requesting additional information on the clinical utility of Afrezza.
The biotech company resubmitted, requesting approval of a new smaller device called Dreamboat. At the time, it seemed like a good idea after Pfizer's bulky inhaled insulin device, Exubera, stumbled out of the block and never recovered. Something that was even more discrete than an asthma inhaler -- compared to Exubera, which looked more like a bong -- seemed like a good idea.
Unfortunately, the FDA wasn't convinced that the new Dreamboat inhaler would have the same clinical outcomes as the MedTone that was used in the clinical trials, so the FDA asked for additional trials.
Those two phase 3 trials are set to read out in the middle of August. MannKind is somewhat in a no-lose situation, because the worst thing that happens is that the trials fail and it reverts back to the MedTone device. That seems unlikely, though, given the data to date.
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