If it were not for some M&A this would be a quiet start to the week. I suspect that in the end it will be pretty low on fundamental news given the holiday week but we are off to a good start. This should provide even more support to the trend and the broken record continues in that the trend is your friend. I would note that while both the XBI and IBB are in an impressive trend higher, the IBB looks like it will be breaking out into 52 week highs today. The XBI is approaching those levels but IBB will be the first to make new highs.
1. NVS is buying MDCO in what has been rumored for the past week or so. This is the third decent sized bolt-on deal by NVS this year alone and I suspect they do some more next year as well. This makes sense for MDCO as they can leverage their Entresto sales force making it easier to hit their NPV targets with this deal. I see this having more read-through for the RNAi stocks than for the heart disease stocks. I suspect AMRN will get some positive action but not a ton and the next big mover for AMRN will likely be the patent settlement (some point in 2020), label expansion, and continue sales ramp.
2. Is AMRN a takeout target? Potentially but it seems like they are more likely to partner the EU region as opposed to sell the company. Obviously there is a price for everything but I doubt anyone is will to pay what AMRN needs to sell the whole company. As I noted before I would prefer they keep the EU as it is a massive market for Vascepa but they does not seem to be their plan. Hopefully they get a really good deal and I would want to see something close to $500M upfront with 20% royalties on sales. At those levels it might be worth it but we certainly do not have the same information as management. In any case, I would not expect too much pin-action in AMRN on the MDCO news.
3. While I do not follow the company, CBAY announced another failure in NASH. It seemed like 2019 was set up to be the year of NASH but has seen failure after failure (GILD and CNAT to name some others). It is unclear how the sector moves forward in NASH but it does lead me to want and go back and look at ICPT. It seems like they might stand alone in NASH. ICPT had their NDA approved with a PDUFA on March 26th, 2020. Obviously there will be completion at some point, ICPT seems to have built a large lead given the failures of most other competitors. It is certainly worth a look back at ICPT.
4. As you know I bought a small position in ATNX for the SABCS presentation. It is part of the press packet and I strongly suspect that they show a statistically significant OS benefit. I sort of know why I have not really done a lot of work on this name as it is an oddly designed company. It is headquartered in Buffalo with offices around the world. It is investing a lot of money in a sterile injectable business (tiny profit margins). I do not understand why you are doing that as well as trying to be a clinical SMID. What is most odd is that the phase III that will be presented at SABCS was solely recruited and done in South America. Not a single American patient was dosed. That is a red flag.
5. I looked back and this was designed at the beginning to be in South America. Their early PRs did not explain why and I suspect it was for cost reasons. That being said all their subsequent trials are in the US but it leaves this odd one and one that has great results. The company has done what they could by having two independent reviews of the results so the results are pretty well confirmed but will the FDA approve a drug in the US with no US patients treated? The company talks about agreement with the FDA so they believe so but that is going to be a point of discussion for this company.
6. If these results are real and that means their pipeline of other oral chemo are real, then this is really undervalued. That seems to be the debate at this point. Where I get comfort is that VenBio and Perceptive made big bets on this name. They can be wrong but they are likely not stupid and looked closely at these issues. So I am going to hold through the data and re-evaluate after that point but I think this name will be a binary name in that people will either be asking why they did not own it (after a massive move in the next couple years) or asking why they owned it (after a massive collapse).
I will end it here and hope that everyone is having a good start to the week.
Disclosure: Long AMRN and ATNX
